Barbara Allen v. R & H Oil & Gas Company, Farrar Oilfield Service and Equipment Co., and Tri-State Oil Services, Inc., Tri-State Oil Services, Inc.

DeMOSS, Circuit Judge,

dissenting:

There is much in the majority opinion with which I agree, but there is more with which I disagree, particularly the ultimate conclusions of the majority regarding removability. I write therefore to register my dissent.

I agree with the majority that the beginning point in determining the propriety of removal of a case from state court to federal court is to look at the “face of the complaint” in state court and apply the “facially apparent” test. Looking at the amended complaint last filed in state court before the notice of removal, I conclude that the complaint was on its face not removable for the following reasons:

a.All of the defendants in this case are corporations. Under 28 U.S.C. § 1332 (e)(1) “a corporation shall be deemed to be a citizen of any state by which it has been incorporated and of the state where it has its principal place of business”. The allegations of the amended complaint state that each corporate entity is a “Louisiana corporation”, but there is otherwise no allegation as to the state “by which it has been incorporated”. Furthermore, one of the defendants, Farrar Oilfield Service and Equipment Co., Inc., is expressly alleged in the amended complaint to have a “principal place of business in the State of Mississippi”. That allegation makes this corporate defendant a citizen of the State of Mississippi, which breaks the complete diversity between all plaintiffs and all defendants required under 28 U.S.C. § 1332 and violates the requirement of 28 U.S.C. § 1441 (b) that none of the defendants be a citizen of the state in which such action is brought.

b. The amended complaint shows that it was filed on May 20, 1993, and contains express allegations that the well blowout and fire which was the source of plaintiffs’ damage claims occurred on the afternoon of May 29,1990. The plaintiffs’ conclusory allegations of injury and damage on the face of the complaint must be evaluated through the common sense filter of the lapse of almost three years of time between the occurrence of the casualty and the filing of the complaint.

c. The amended complaint does not contain any express allegation as to the monetary amount of any damages, either actual or punitive.

d. Exhibit A to the amended complaint sets forth the names of all the various plaintiffs, consisting of approximately 143 family groups of adults and minor children who are appearing through their mothers and next friends. All of these plaintiffs are alleged to be citizens of the State of Mississippi. Other than the grouping of these plaintiffs in family groups by last name, there are no allegations in the amended complaint that there is any family relationship between and among all of the plaintiffs. There are no allegations establishing any criteria for a class action by all the plaintiffs. There is no allegation that all of the plaintiffs are joint owners of any property nor that any group of the plaintiffs are joint owners of any property. There is no allegation that all of the plaintiffs are partners in any business activity nor that any group of the plaintiffs are partners in any business activity. There is no allegation that any of the plaintiffs are shareholders of any corporate entity which was the owner of any damaged property. And, there is no allegation that any of the plaintiffs joined as plaintiffs in this lawsuit pursuant to an agreement to share recoveries to which they might individually be entitled with any other plaintiffs.

On its face, therefore, the original complaint was not removable because it did not demonstrate complete diversity between plaintiffs *1338 and defendants and it did not allege that there was at least $50,000 in controversy in the lawsuit.

I agree with the language of the majority opinion which indicates (i) that it is well settled “that the removing party bears the burden of establishing the facts necessary to show that federal jurisdiction exists,” Gaitor v. Peninsular & Occidental S.S. Co., 287 F.2d 252, 253-54 (5th Cir.1961); (n) that when the original state court complaint does not specify the dollar amount in controversy, “the removing defendant must prove by a preponderance of the evidence that the amount in controversy exceeds $50,000”; De Aguilar v. Boeing Co. (De Aguilar I), 11 F.3d 55, 58 (5th Cir.1993); and (iii) that multiple plaintiffs are not permitted to add together “separate and distinct demands, united for convenience and economy in a single suit” to meet the requisite jurisdictional amount, Snyder v. Harris, 394 U.S. 332, 336 , 89 S.Ct. 1053, 1057 , 22 L.Ed.2d 319 (1969). I turn now to an analysis of whether the removing defendants satisfied their burden of proving the jurisdictional facts.

The notice of removal in this case was filed by one of the defendants, Tri-State Oil Services, Inc. In its removal petition Tri-State made the following allegations:

a. That the case was removable because of complete diversity between plaintiffs and defendants and because there was at least $50,000 in controversy;

b. That each of the three corporate defendants “was a corporation organized under the laws of the State of Louisiana, but had ceased to engage in any business activity” at the time of filing suit;

c. That “upon information and belief Farrar [one of the defendants] has not been served with a summons and copy of the complaint”; and

d. That “R & H [another defendant] is currently unrepresented by counsel but joins in this notice of removal”.

The notice of removal was signed in behalf of Tri-State Oilfield Service, Inc. by its counsel of record, but contains no signature blank in behalf of defendant R & H. Likewise, the truth of the facts alleged in the notice of removal are not attested by any affidavit. The notice of removal did contain a statement that defendants “reserve the right to file additional support for this notice of removal by way of affidavits, memorandum and argument”, but, the record does not contain any further affidavits dealing with jurisdictional facts. The plaintiffs timely filed a motion to remand to the state court asserting that there was no showing that the amount in controversy exceeded $50,000. At this point, it seems to me, that there should have been some tender of evidence upon which the district court could have resolved the disputed jurisdictional facts. Both plaintiffs and defendants submitted memoranda of authorities in support of their respective positions, but I can find nothing in the way of a transcript of oral testimony, nor are there any affidavits or other summary judgment type evidence in the record to resolve the disputed jurisdictional facts. In my view the following jurisdictional facts are unresolved:

a. What happened to the defendant Farrar? Was Farrar ultimately served in the state court proceeding? If so, its join-der would be required in the notice of removal.

b. What does the allegation in the notice of removal that all defendants have “ceased to engage in any business activity” mean? Have these corporate entities been dissolved? If so, who are the parties to whom assets and liabilities were passed on dissolution and what is the residence of such successors? If they have not been dissolved, where is the principal place of business of each corporation? Proof of these facts regarding corporate status and activity requires at the very least an affidavit of a corporate officer. The general allegations of counsel in the notice of removal are not sufficient.

c. What is the nature and extent of the property damage and personal injury sustained by each of the plaintiffs?

d. As between the three defendants, which entity had the operational control and decision-making responsibility of the well site, which would put that entity under a duty to conduct its operations with due regard for the safety of others and render it liable for a gross negligence and *1339 reckless disregard finding? If that entity was Farrar and Farrar has never been served, then Farrar was not before the district court and no punitive damages could be awarded.

All of these jurisdictional facts have been left essentially unresolved. While there was some sort of a “hearing” before the magistrate judge at which the parties were permitted to argue their positions, no transcript was made of that hearing and no party makes reference to any testimony tendered at that hearing. The magistrate judge made no specific findings of fact nor conclusions of law, but simply entered an “Order Overruling Motion to Remand” which stated:

The court having heard and considered the plaintiffs’ motion to remand, briefs and arguments of counsel and authorities cited finds that each individual plaintiff maintains a cause of action for punitive damages and that under the circumstances and authorities the motion to remand is not well taken and should be denied. (Citing cases.)

The cases cited in the magistrate judge’s memorandum were two federal district court decisions (one published, one not published) from the Southern District of Mississippi dealing with jurisdictional amounts in declaratory judgment actions by an insurance carrier against its insured where there is the potential of a punitive damage claim based on bad faith by the carrier in dealing with the claim. Allstate Ins. Co. v. Hilbun, 692 F.Supp. 698 (S.D.Miss.1988), and Atlanta Cas. Co. v. Jones, No. J90-0459(L) (S.D.Miss. Feb. 11, 1991). The third ease cited by the magistrate judge, Lailhengue v. Mobil Oil Corp-, 775 F.Supp. 908 (E.D.La.1991), has some factual similarities to the present case (claims for damages from refinery explosion to nearby residents), but relates to a casualty which occurred in Louisiana and would be governed by Louisiana punitive damages law.

The plaintiffs applied for review of the magistrate judge’s ruling by the district judge. In deciding not to review the magistrate judge’s order, the district court based its decision on the following conclusions of law:

a. “That in this case, aggregation of punitive damages is proper in determining the issue of whether the amount in controversy requirement for jurisdiction has been satisfied”;

b. ‘While their claims for compensatory damages are separate and divisible, the court, giving due consideration to the nature and purpose of punitive damages, concludes that the same cannot be said as to plaintiffs’ punitive damages claim. Punitive damages are sought for a single wrong to the plaintiffs who thus have a common and undivided interest in punitive damages award”; and

e. That the “magistrate judge’s implicit conclusion that aggregated punitive damages could well exceed $50,000 can certainly not be characterized as ‘clearly erroneous’ or ‘contrary to law’.” (Emphasis added.)

The district court offered no statutory or common law support for any of these conclusions.

During the pendency of this lawsuit, the Mississippi Legislature adopted a statutory provision dealing with punitive damages, Miss.Code Ann. § 11-1-65 (Supp.1994). The relevant provisions of that statute were made expressly applicable to this and all other eases pending as of July 1, 1993. Nonetheless, neither the magistrate judge’s order nor the district court’s order evaluates the impact of the Mississippi statute on jurisdiction in this case. The majority opinion makes only a passing reference to this statute stating that it “codified” Mississippi law regarding punitive damages. The majority, however, gives no substantive consideration to the terms and provisions of this statute in arriving at its conclusions that Mississippi regards punitive damages as an “individual award in function only,” and that, without regard to any showing of compensatory damage, puni-tives can be relied upon to satisfy the jurisdictional amount in this case. Because I believe that Erie requires federal courts to give controlling effect to state law in cases where our jurisdiction could be based solely on diversity of citizenship, and because I believe the Mississippi punitive damage statute cannot possibly be interpreted to support *1340 the conclusion reached by the majority in this case, I turn to a detailed examination of that statute. 17

Section 11-1-65 actually changes Mississippi law in at least two important ways. First and most importantly, the statute requires proof by “clear and convincing evidence” of the conduct which is made the subject of punitive damages. While this heightened proof requirement may not be determinative by itself of the availability of punitive damages in this case, it clearly indicates that the recovery of punitive damages will be tested by proof over and above the previously applicable preponderance of the evidence test. Second, the Mississippi statute on punitive damages contemplates a bifurcated process for dealing with actual or compensatory damages, on the one hand, and punitive damages, on the other. Note that the statute expressly requires that the trier of fact “shall first determine whether compensatory damages are to be awarded and in what amount, before addressing any issues related to punitive damages”. § 11 — 1— 65(l)(b) (emphasis added). It further states that “if but only if’ compensatory damages have been awarded, the court shall commence an evidentiary hearing to determine whether punitive damages may be considered. If the court then determines that punitive damages may be submitted to the trier of fact, then the trier of fact determines “whether to award punitive damages and in what amount”. § 11 — 1—65(l)(d). In addition, the Mississippi statute expressly defines factors which the trier of fact may consider in determining whether to award punitive damages and the amounts thereof, which include the nature and extent of damages sustained by the claimant, as well as the financial condition of the party against whom punitive damages are sought. Finally the Mississippi statute on punitive damages calls for a review by the court to determine the reasonableness of the punitive damages and requires the court to consider “mitigation” of punitive damages by considering civil penalties levied against the defendant for the same conduct in other actions. 18

It is important also to note what the Mississippi statute on punitive damages does not say. Nowhere in the statute is there anything that says that there shall be only one single claim for punitive damages arising out of any one set of circumstances. 19 There is nothing in the statute that says that if more than one person sustains compensatory damages from a casualty, all of such persons shall have a joint or common claim against the party guilty of punitive damage conduct. Nowhere in the statute is there any language that says that a punitive damage award would be shared on a per capita basis nor on a pro rated damage basis between several parties who each sustain compensatory damage out of a single casualty. To the contrary, the overall thrust of the Mississippi statute on punitive damages is that each claimant, who proves that he suffered compensatory damages and who proves by “clear and convincing” evidence that a defendant has committed conduct authorizing the recovery of punitive damages, is entitled to a submission to the jury of a punitive damage claim; and subject to the court’s review of the reasonableness of the jury’s finding, that individual is entitled to the recovery of those punitive damages. Furthermore, nowhere does the statute use the words “joint”, “common”, “collective”, which are the key words relied upon by the district court and the *1341 panel majority to justify aggregation of all punitive damage claims by all plaintiffs. Likewise, there is no Mississippi Supreme Court case involving facts similar to the mass tort situation involved in this case where the Mississippi Supreme Court has concluded that there is some jointness, eollectiveness or commonality to the claims of the multiple plaintiffs in such actions. Accordingly, from my review of the Mississippi cases and statute on punitive damages, I come to the following conclusions:

a. Under Mississippi law, punitive damages are dependent upon and appurtenant to the existence of a recovery of compensatory damages; 20

b. Absent an express holding of the Mississippi Supreme Court that punitive damage claims of multiple plaintiffs are to be determined on a joint or common basis, the plain reading of the Mississippi punitive damage statute contemplates that the punitive damage claim of each claimant will be separate and distinct, just as the compensatory damage claims of that claimant are separate and distinct;

c. Given the bifurcated procedure for first determining compensatory damages and then determining punitive damages, which is mandated by the Mississippi punitive damage statute, each plaintiff in a multi-plaintiff case who was found to have suffered compensatory damage would be entitled to a separate submission of his claim for punitive damages, rather than a blanket submission of a single issue of punitive damages as to all such plaintiffs; because otherwise, the jury would be deprived of the opportunity to evaluate the differences in character and amounts of compensatory damage which would almost certainly exist between the multiple plaintiffs and which the Mississippi punitive damage statute requires to be considered as an element of fixing each claim of punitive damages. On the other hand, the blanket submission of a single issue as to all punitive damages, as inferred by the majority, would result in a lump sum award of a single amount of punitive damages but with no basis in the statute nor in Mississippi common law as to the formula by which such lump sum award would be divided amongst the various multiple plaintiffs. Some may say that the best policy is to divide a lump sum punitive damage award on a per capita basis and others may say that the best way to divide a lump sum punitive damage award is in the proportion of the amount of each individual claimant’s compensatory damages to the total of all compensatory damages. But, in any event, the choice is a legislative choice which the Mississippi Legislature did not make in the Mississippi punitive damage statute; and it is a choice which the courts need never reach if they read the Mississippi statute as requiring separate jury findings as to the punitive damages of each individual plaintiff in a multi-plaintiff suit, as it seems to so plainly say.

This is not a class action. Each of the plaintiffs have joined in the original complaint in each of their respective names to assert what the majority clearly recognizes are their respective “separate and distinguishable” claims for compensatory damages. Had there been no allegations regarding punitive damages, Snyder v. Harris would clearly be the controlling law and removal from state court to federal court would be valid only as to each plaintiff whose compensatory damages were determined to likely exceed $50,000. The face of the original complaint in state court certainly does not expressly quantify these compensatory damages of each plaintiff and the burden therefore fell upon the removing defendants to demonstrate by a preponderance of the evidence the nature and extent of each plaintiff’s injuries and the likely amount of compensatory damages for such injuries. The defendants wholly failed to satisfy this burden. Rather, the defendants focused the attention of the magistrate judge and the district judge on the general allegations regarding punitive damages. Here again, the face of the original complaint contained no *1342 express allegation as to the amount of punitive damages which each plaintiff was claiming; and, therefore, the burden fell upon the removing defendants again to establish by a preponderance of the evidence that the quantum of punitive damages which each plaintiff could reasonably expect to receive would produce an amount in controversy exceeding $50,000 when added to the compensatory damage of each respective plaintiff. This burden the defendants wholly failed to satisfy. Rather, the removing defendants argued and the district court concluded that punitive damages are not “separate and divisible” as to each plaintiff, but rather constitutes some sort of a single claim for a “single wrong” in which all plaintiffs have “a common and undivided interest”. Additionally, the district court concluded that the “implicit conclusion” of the magistrate judge “that aggregated punitive damages could well exceed $50,000” was not “clearly erroneous”. All of these determinations were made by the district court “based simply upon conclusory allegations” in the original complaint or the notice of removal which the panel majority recognizes was not proper. But brushing aside the trial court’s errors and applying “common sense” to the task of interpreting “the face of the complaint”, the panel majority concludes: (1) “the total claim [singular] for punitive damages [plural] is more likely than not to be for $50,000 or more” and (2) “if the plaintiffs [plural] were successful in their [plural] punitive damages [plural] claim [singular], they [plural] would collect more than $50,000”. In my opinion, those conclusions by the majority are in direct conflict with Mississippi statutory and ease law in that they purport to make all plaintiffs participate in one single punitive damage claim; and through the semantical device of labeling a punitive damage claim a collective claim for jurisdictional amount purposes, the panel majority avoids the clear mandate of the United States Supreme Court that in suits involving multiple plaintiffs, the jurisdictional amount is to be determined as to each plaintiff, without aggregating claims among the plaintiffs. I respectfully dissent.

. See generally John F. Corlew, An Historical Overview of Punitive Damages in Mississippi, 63 Miss.LJ. 583 (1994).

. While these last two statutory provisions, specifying factors to be considered in computing punitive damages, may not be applicable to this case, they are indeed codifications of binding Mississippi precedent. See, e.g., C & C Trucking Co. v. Smith, 612 So.2d 1092 (Miss.1992).

. Interestingly, the original house bill, which ultimately became § 11-1-65 contained the following provision in Section 3(d)(iii):

(iii) Only one (1) award for punitive damages may be made against a defendant for the same act, decision, omission or course of conduct.

(H.B. No. 1270, Regular Session, 1993). But this subpart (iii) was deleted by the Judiciary Committee and does not appear in the final bill as passed. To my mind, this is conclusive that the Legislature intended that there be multiple claims for punitive damages, such as those allegedly arising out of the well explosion in this case.

. This same conclusion was reached by another panel of this court in the case of Greer v. Burkhardt, Inc., 58 F.3d 1070 (5th Cir.1995), where on facts and legal proceedings which reached final judgment prior to the adoption of the Mississippi punitive damages statute, the panel reviewed several Mississippi Supreme Court cases and concluded that "in a case of zero actual damages, we believe that Mississippi law does not allow him any punitive damages,"