Guglielmino v. McKee Foods ( 2007 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CARLO GUGLIELMINO; BRIANT CHUN- 
HOON,
No. 05-16144
Plaintiffs-Appellants,
v.  D.C. No.
CV-05-00620-VRW
MCKEE FOODS CORPORATION, A
OPINION
TENNESSEE CORPORATION,
Defendant-Appellee.

Appeal from the United States District Court
for the Northern District of California
Vaughn R. Walker, District Judge, Presiding
Argued and Submitted
August 15, 2007—San Francisco, California
Filed October 9, 2007
Before: Diarmuid F. O’Scannlain, Michael Daly Hawkins,
and Kim McLane Wardlaw, Circuit Judges.
Opinion by Judge O’Scannlain;
Concurrence by Judge O’Scannlain
13573
GUGLIELMINO v. MCKEE FOODS CORP. 13575
COUNSEL
Edward S. Zusman, San Francisco, California, argued the
cause and filed briefs for the plaintiffs-appellants. Kevin K.
Eng, San Francisco, California, was also on the briefs.
William H. Pickering, Chattanooga, Tennessee, argued the
cause and filed a brief for the defendant-appellee. Anthony A.
Jackson, Chattanooga, Tennessee, R. Brian Dixon, San Fran-
cisco, California, and Michael Hoffman, San Francisco, Cali-
fornia, were also on the briefs.
13576 GUGLIELMINO v. MCKEE FOODS CORP.
OPINION
O’SCANNLAIN, Circuit Judge:
We must decide the proper burden of proof to be borne by
the removing defendant when plaintiffs move to remand the
case to state court and their complaint alleges damages less
than the jurisdictional threshold for diversity cases but does
not specify a total amount in controversy.
I
Briant Chun-Hoon and Carlo Guglielmino (collectively
“the Distributors”) are distributors of McKee Foods’
(“McKee”) bakery products to retail stores. Although the pre-
cise meaning of the term “distributor” is at issue in the under-
lying case, roughly stated, the Distributors purchase bakery
products (such as Little Debbie snack cakes) from McKee;
they deliver the purchased products to local retail stores; they
stock the retail shelves and are responsible for arranging, dis-
playing and advertising the products; and they must remove
from the shelves damaged goods or goods that are beyond
their sell-by date. In addition, the Distributors contend that
McKee requires them to buy a specific quantity of product
and further makes them financially responsible for any dam-
aged, stale, or old product.
The Distributors filed a complaint against McKee in Cali-
fornia Superior Court on January 3, 2005, on behalf of a puta-
tive class of persons who entered into “Distributorship
Agreements” with McKee. The complaint alleged that McKee
had violated various wage and hour laws by treating its dis-
tributors as independent contractors instead of employees.
Specifically, the complaint alleged that McKee: (1) violated
California Labor Code by failing to pay its distributors over-
time wages; (2) intentionally defrauded its distributors; (3)
made negligent misrepresentations to its distributors; (4)
breached its Distributorship Agreements and other oral and
GUGLIELMINO v. MCKEE FOODS CORP. 13577
written agreements with its distributors; and (5) violated the
California Business and Professions Code by committing
unlawful, unfair and fraudulent business practices against its
distributors. In addition, in its sixth cause of action, the com-
plaint sought a declaratory judgment that the distributors of
McKee products are, in fact, employees of McKee and not
independent contractors.
In paragraph four of the complaint, under the heading “Ju-
risdiction and Venue,” it is alleged that “[t]he damages to
each Plaintiff are less than $75,000. In addition, the sum of
such damages and the value of injunctive relief sought by
plaintiff in this action is less than $75,000.” In its “Prayer for
Relief,” however, the complaint sought, among other things,
damages under statutory and common law, punitive and
exemplary damages (as to the fraud count), an accounting of
other moneys due to plaintiffs, attorneys’ fees, payments of
back taxes and benefits, a declaration of the respective rights
and obligations of the distributors and of McKee, an injunc-
tion prohibiting McKee’s unfair business practices, and such
other relief as the Court deemed proper.
On February 10, 2005, McKee filed a notice of removal to
the United District Court for the Northern District of Califor-
nia pursuant to 28 U.S.C. §§ 1441 and 1332. The removal
notice stated that “[a]lthough the Complaint affirmatively
attempts to allege that the damages suffered by each Plaintiff
are less than $75,000.00 . . . , the categories of damages actu-
ally claimed by Plaintiffs, if recoverable, would be signifi-
cantly in excess of the $75,000.00 minimum amount in
controversy (exclusive of interest and costs) required to
invoke diversity jurisdiction.” The notice of removal
attempted to calculate the damages suffered by the Distribu-
tors and concluded that economic damages for Hoon would
total roughly $76,000 (without including attorneys’ fees, back
taxes, or punitive damages), and that for Guglielmino sepa-
rately, economic damages (prior to including attorneys’ fees,
back taxes, or punitive damages) would total roughly
13578 GUGLIELMINO v. MCKEE FOODS CORP.
$150,000. Thus, McKee’s calculations purported to show an
amount in controversy sufficient to invoke federal jurisdic-
tion.
On March 14, 2005, the Distributors filed a motion under
28 U.S.C. § 1447 for an order remanding the action to state
court. Although they did not dispute that the plaintiffs were
diverse from McKee, they challenged McKee’s calculations
of the amount in controversy and sought to show that less
than $75,000 was at stake. Hoon and Guglielmino each also
filed affidavits stating: “I am not seeking damages in excess
of $75,000.”
The district court, Chief Judge Vaughn Walker presiding,
issued an order denying the Distributors’ motion to remand on
May 3, 2005. The order explained that there were three possi-
ble standards for the removing defendant’s burden of proof:
(1) that the plaintiff “might recover” in excess of the jurisdic-
tional amount; (2) that the plaintiff is “more likely than not to
recover” in excess of the jurisdictional amount (the “prepon-
derance of the evidence standard”); and (3) that the plaintiff
is “legally certain to recover” in excess of the jurisdictional
amount. The order also explained that no Ninth Circuit prece-
dent was directly on point, because the complaint specified
that damages were below the jurisdictional threshold yet did
not demand a specific amount. Ultimately, the district court
decided that the “preponderance of the evidence” standard
should be applied: the defendant has the burden to show that
the allegations in the complaint set forth an amount in contro-
versy that is “more likely than not” greater than $75,000.
Applying such standard, when (1) economic damages were
accounted for, (2) attorneys’ fees (measured by a “conserva-
tive” estimate of 12.5% of economic damages) were added,
and (3) punitive damages (“conservatively estimated” at a 1:1
ratio to economic damages) were added, the district court
determined that the amount in controversy for both plaintiffs
was in excess of the jurisdictional threshold.
GUGLIELMINO v. MCKEE FOODS CORP. 13579
The district court’s order was “quick to note” that if the
more stringent “legal certainty” test was applied, then McKee
would not have carried its burden.1 It reached this conclusion
because it could not be certain that plaintiffs would recover
any attorneys’ fees or punitive damages. Therefore, because
it determined that a question of law — namely the burden of
proof standard — was dispositive of the remand motion, and
because it felt that resolution of the question might “substan-
tially advance the termination of the litigation,” the district
court certified its order for interlocutory review pursuant to 28
U.S.C. § 1292(b).
Thereafter, and within the ten days provided by 28 U.S.C.
§ 1292(b), Guglielmino petitioned this Court for permission
to pursue an interlocutory appeal, which we granted.
II
A
[1] The question certified for interlocutory review is
“[w]hat is defendant’s burden of proof when plaintiffs move
to remand pursuant to 28 U.S.C. § 1447(c) and their state-
court complaint specifies that their damages are less than the
jurisdictional requirement?”
As Chief Judge Walker may have anticipated, we have
identified at least three different burdens of proof which
might be placed on a removing defendant under varying cir-
cumstances. In Sanchez v. Monumental Life Ins. Co., 102 F.3d
398 (9th Cir. 1996), we noted that when a complaint filed in
state court alleges on its face an amount in controversy suffi-
1
The district court noted that the “legal certainty” test had been applied
in a similar, though slightly distinguishable, factual circumstance by the
Eleventh Circuit. See Burns v. Windsor Ins. Co., 31 F.3d 1092 (1994). It
deemed the legal question “sufficiently close” and “determinative” that it
decided to certify the question for interlocutory appeal.
13580 GUGLIELMINO v. MCKEE FOODS CORP.
cient to meet the federal jurisdictional threshold, such require-
ment is presumptively satisfied unless it appears to a “legal
certainty” that the plaintiff cannot actually recover that
amount. Id. at 402 (discussing Garza v. Bettcher Indus., Inc.,
752 F. Supp. 753, 755-56 (E.D. Mich. 1990); see also St. Paul
Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288-89
(1938) (stating that when a complaint filed pleads more than
the jurisdictional amount “the sum claimed by the plaintiff
controls if the claim is apparently made in good faith” and
that “[i]t must appear to a legal certainty that the claim is
really for less than the jurisdictional amount to justify dis-
missal”).
The second situation we have identified is where it is
unclear or ambiguous from the face of a state-court complaint
whether the requisite amount in controversy is pled. In such
a circumstance, we apply a preponderance of the evidence
standard. Sanchez, 102 F.3d at 404 (“[T]he removing defen-
dant bears the burden of establishing, by a preponderance of
the evidence, that the amount in controversy exceeds [the
jurisdictional amount]. Under this burden, the defendant must
provide evidence establishing that it is ‘more likely than not’
that the amount in controversy exceeds that amount.”). We
have since applied the preponderance holding in Sanchez to
complaints filed under the Class Action Fairness Act
(“CAFA”) that do not specify a particular amount in contro-
versy. Abrego Abrego v. Dow Chemical Co., 443 F.3d 676,
683 (9th Cir. 2006) (per curiam).2
Finally, in our recent decision in Lowdermilk v. U.S. Bank
National Ass’n, 479 F.3d 994 (9th Cir. 2007), we held in the
CAFA context that when a state-court complaint affirmatively
2
In Abrego Abrego, we noted that if “the complaint alleges damages of
less than the jurisdictional amount, ‘more difficult problems are pre-
sented,’ as to which there is no binding precedent in this circuit.” Id. at
683 n.8 (quoting 14C Charles Alan Wright et al., Federal Practice and Pro-
cedure § 3725, at 84).
GUGLIELMINO v. MCKEE FOODS CORP. 13581
alleges that the amount in controversy is less than the jurisdic-
tional threshold, the “party seeking removal must prove with
legal certainty that CAFA’s jurisdictional amount is met.” Id.
at 1000.3 Two animating principles informed our judgment in
Lowdermilk. The first is that federal courts are courts of lim-
ited jurisdiction which we will strictly construe. Id. at 998.
The second principle is that the plaintiff is “master of her
complaint” and can plead to avoid federal jurisdiction. Id. at
998-99. Thus, in Lowdermilk, by adopting “legal certainty” as
the standard of proof, “we guard[ed] the presumption against
federal jurisdiction and preserve[d] the plaintiff’s prerogative,
subject to the good faith requirement, to forgo a potentially
larger recovery to remain in state court.” Id. at 999.
[2] Therefore, because we have recognized varying burdens
of proof depending on the situation and the nature of the
plaintiff’s complaint, we must as a threshold matter determine
precisely what Guglielmino’s complaint alleged.
B
The complaint in this case is hardly a paragon of clarity. In
the Jurisdiction and Venue section, it is alleged that “[t]he
3
McKee contends that Lowdermilk’s “legal certainty” standard applies
only in the CAFA context. It points out that CAFA has discarded the rule
— still applicable in traditional diversity settings such as this case — that
closes the removal period one year after a complaint is filed. See 28
U.S.C. § 1453(b) (“A class action may be removed to a district court of
the United States in accordance with section 1446 (except that the 1-year
limitation under section 1446(b) shall not apply.”). We acknowledge that
the one-year removal period presents a significant potential for “games-
manship” in that a plaintiff can wait until the removal period has closed
and then amend their complaint to seek higher damages. See Lowdermilk,
479 F.3d at 1002 (noting that “CAFA mitigates some of the potential for
[pleading] abuse by eliminating the one-year removal limitation.”).
Whether CAFA’s elimination of the closure period is a sufficient distin-
guishing characteristic of those causes of action to justify a different bur-
den of proof, and whether Lowdermilk itself can be read so narrowly, are
questions that we leave for another day and another court.
13582 GUGLIELMINO v. MCKEE FOODS CORP.
damages to each Plaintiff are less than $75,000. In addition,
the sum of such damages and the value of injunctive relief
sought by plaintiff in this action is less than $75,000.” In the
complaint’s Prayer for Relief, however, no mention is made
of a total dollar amount in controversy. Instead, the complaint
seeks: (1) an Order certifying this action as a class action; (2)
damages under statutory and common law; (3) punitive and
exemplary damages; (4) an accounting of moneys due to the
plaintiffs; (5) attorneys’ fees and costs; (6) payment of back
taxes and benefits; (7) notice of the right to recission and res-
titution to similarly situated distributors; (8) a declaration of
the rights and obligations between the distributor-class and
McKee; (9) an injunction prohibiting further unfair business
practices by McKee; (10) pre-judgment interest; (11) the costs
of suit; and (12) “such other and further relief as this Court
deems just and proper.”
Even if we assume that relief in the form of common law
and statutory damages, exemplary and punitive damages,
recission and restitution, a declaratory judgment, and an
injunction prohibiting further unfair business practices consti-
tutes a “sum . . . less than $75,000,” that is not all that the
complaint seeks. Section 1332(a)’s amount-in-controversy
requirement excludes only “interest and costs” and therefore
includes attorneys’ fees. Indeed, the Distributors’ complaint
seeks attorneys’ fees claimed to be authorized pursuant to
California Code of Civil Procedure sections 1021.5 and 1036,
Civil Code 1780(d), and relevant sections of the Labor Code.
Lowdermilk, 479 F.3d at 1000 (“[W]here an underlying stat-
ute authorizes an award of attorneys’ fees, either with manda-
tory or discretionary language, such fees may be included in
the amount in controversy.”) (quoting Galt G/S v. JSS Scandi-
navia, 142 F.3d 1150, 1156 (9th Cir. 1998)).4
4
There was dispute in Lowdermilk between the majority and dissent
whether the complaint included attorneys’ fees within its allegation that
the total amount claimed was less than CAFA’s $5 million jurisdictional
threshold. The complaint in Lowdermilk apparently read “ ‘THE AGGRE-
GUGLIELMINO v. MCKEE FOODS CORP. 13583
[3] Beyond attorneys’ fees, the complaint also seeks the
back payment of health benefits and taxes as well as an
accounting of moneys due to the Distributors and other simi-
larly situated class members. Although these allegations seek
payment of sums from McKee, they do not fall comfortably
within the realm of “damages” and are not labeled as such in
the Prayer for Relief. Nonetheless, because the recovery of
these sums would entail a payment by McKee, we are con-
vinced that they must be included within any amount-in-
controversy calculation. See Ridder Bros. v. Blethen, 142 F.2d
395, 399 (9th Cir. 1944) (holding that for purposes of calcu-
lating amount in controversy, “[t]he value of the thing sought
to be accomplished by the action may relate to either or any
party to the action”) (internal quotation omitted)).
[4] Thus, because the allegation in the Jurisdiction and
Venue section is not repeated in the Prayer for Relief and
does not take account of attorneys’ fees, accounting of mon-
eys, or payment of back taxes and benefits, the complaint fails
to allege a sufficiently specific total amount in controversy.
The uncertainty which is inherent in the Distributors’ Prayer
for Relief places this case within the Sanchez line of cases,
and we therefore apply the preponderance of the evidence
burden of proof to the removing defendant. Sanchez, 102 F.3d
at 404.
III
[5] The district court applied a preponderance of the evi-
dence standard and determined that, “conservatively estimat-
GATE OF CLAIMS DOES NOT EXCEED 5 MILLION DOLLARS . . .
In paragraph 4, under a heading ‘JURISDICTION AND VENUE,’ it says
the ‘[t]he aggregate total of the claims pled herein do [sic] not exceed five
million dollars.’ ” 479 F.3d at 1003 (Kleinfeld, J., dissenting) (quoting the
complaint). The majority obviously read these sections of the complaint,
and their reference to “aggregate total of claims,” to include everything
sought, including attorneys’ fees. In contrast, here the complaint does not
use the word “claim” but instead references only “damages and injunctive
relief,” within neither of which attorneys’ fees comfortably fit.
13584 GUGLIELMINO v. MCKEE FOODS CORP.
ed,” both named plaintiffs’ allegations met the requisite
$75,000 amount-in-controversy threshold. See Exxon Mobil
Corp. v. Allapattah Services, Inc., 545 U.S. 546, 559 (2005)
(holding that when a well-pleaded complaint contains “at least
one” claim that satisfies the amount-in-controversy require-
ment, supplemental jurisdiction may be exercised over the
claims of other parties). The Distributors do not challenge the
district court’s factual findings on appeal that under the pre-
ponderance standard, this case was properly removed to fed-
eral court. We therefore see no need to address any argument
that the district court’s calculations were clearly erroneous.
[6] Accordingly, because the Distributors’ complaint is
unclear and does not specify “a total amount in controversy,”
the proper burden of proof in this case is proof by a prepon-
derance of the evidence. Because that is the standard the dis-
trict court applied in denying the motion to remand this case
to state court, the judgment of the district court is
AFFIRMED.
O’SCANNLAIN, Circuit Judge, specially concurring:
While we have faithfully applied our precedents to resolve
the case before us, I write this special concurrence to note my
difficulty with the varied and inconsistent burdens of proof
that we place upon defendants who seek to exercise their stat-
utory right of removal under 28 U.S.C. § 1441. In particular,
I disagree with the imposition of a “legal certainty” burden on
a party seeking to invoke federal jurisdiction, rather than seek-
ing to defeat it. See St. Paul Mercury Indemnity Co. v. Red
Cab Co., 303 U.S. 283, 288-89 (1938). In my view, in all
cases where removal to federal court is challenged in any
appropriate way, it is incumbent upon the party seeking fed-
eral jurisdiction to prove the facts giving rise to such jurisdic-
tion by a preponderance of the evidence. See McNutt v.
GUGLIELMINO v. MCKEE FOODS CORP. 13585
General Motors Acceptance Corp., 298 U.S. 178, 189 (1936).
Only then, and only by proof to a legal certainty, can a party
defeat the exercise of federal jurisdiction which those estab-
lished facts support. If we had applied such a uniform rule,
this would be an easy case that would not be here on interloc-
utory appeal.
I
A
Based on my view that a uniform burden of proof is
required, I find myself in respectful disagreement with our
holding in Lowdermilk v. U.S. Bank National Ass’n, 479 F.3d
994, 1000 (9th Cir. 2007), that, at least in the context of the
Class Action Fairness Act (“CAFA”) and perhaps beyond,
when a plaintiff alleges a specific amount in controversy less
than the jurisdictional threshold, a removing defendant must
prove to a “legal certainty” that the threshold is not exceeded.
In my view, this test—which inverts the “legal certainty” test
of St. Paul Mercury, 303 U.S. at 288-89, by placing such bur-
den on the party seeking to assert rather than defeat federal
jurisdiction—places too high a barrier in the path of defen-
dants seeking to remove a case which it believes belongs in
federal court.
In my view, the preponderance of the evidence standard
should apply in any case where there is a challenge to the
jurisdictional facts of the party seeking to assert federal juris-
diction. This rule is followed in the Fifth, Sixth, Seventh and
Eighth Circuits. See De Aguilar v. Boeing Co., 47 F.3d 1404,
1411 (5th Cir. 1995); Rogers v. Wal-Mart Stores, Inc., 230
F.3d 868, 871 (6th Cir. 2000) (relying upon Gafford v. Gen-
eral Elec. Co., 997 F.2d 150 (6th Cir. 1993)); Meridian
Security Ins. Co. v. Sadowski, 441 F.3d 536 (7th Cir. 2006);
In re Minn. Mut. Life Ins. Co. Sales Practices Litig., 346 F.3d
830, 834 (8th Cir. 2003).
13586 GUGLIELMINO v. MCKEE FOODS CORP.
In De Aguilar, “the plaintiffs, in a bold effort to avoid fed-
eral court . . . specifically alleged that their respective dam-
ages will not exceed the jurisdictional amount.” 47 F.3d at
1410-11. The Fifth Circuit, noting that the majority of states
do not limit damage awards to the ad damnun amounts pled
in the complaint, adopted the preponderance of the evidence
test: “[T]he plaintiff’s claim remains presumptively correct
unless the defendant can show by a preponderance of the evi-
dence that the amount in controversy is greater than the juris-
dictional amount . . . The defendant must produce evidence
that establishes the actual amount in controversy exceeds [the
jurisdictional amount].” Id. at 1412. Then, after a defendant
meets this burden, removal is proper unless the plaintiff can
show that it is legally certain that his or her recovery will not
exceed the amount stated in the original complaint. Id. (citing
St. Paul Mercury at 303 U.S. 288-89).
Similarly, in Meridian, the Seventh Circuit attempted to
organize and to clarify its removal law into a coherent whole.
Judge Easterbrook, writing in Meridian, explained that
“[w]hat the proponent of jurisdiction must ‘prove’ is con-
tested factual assertions . . . Jurisdiction itself is a legal con-
clusion, a consequence of facts rather than a provable ‘fact.’ ”
441 F.3d at 540-541 (emphasis in original). The Meridian
opinion thus emphasized that jurisdictional facts must be dis-
tinguished from jurisdictional conclusions: contested facts
have been established only when they are proved by a prepon-
derance of the evidence. Id. at 542.1
Concluding, Judge Easterbrook described the appropriate
methodology as follows:
1
In Lowdermilk, in adopting our “legal certainty” burden, we stated that
“[t]he Seventh Circuit’s decision in Brill v. Countrywide Home Loans,
[427 F.3d 446, 448 (7th Cir. 2005)] is not to the contrary.” Lowdermilk,
479 F.3d at 999 n.6. After the Seventh Circuit’s decisions in Meridian and
Oshana v. Coca-Cola Co., 472 F.3d 506, 511 (7th Cir. 2006), it is clear
that our decision in Lowdermilk in fact conflicts with the Seventh Circuit’s
reasoning.
GUGLIELMINO v. MCKEE FOODS CORP. 13587
[A] proponent of federal jurisdiction must, if mate-
rial factual allegations are contested, prove those
jurisdictional facts by a preponderance of the evi-
dence. Once the facts have been established, uncer-
tainty about whether the plaintiff can prove its
substantive claim, and whether damages (if the
plaintiff prevails on the merits) will exceed the
threshold, does not justify dismissal. Only if it is “le-
gally certain” that the recovery (from plaintiff’s per-
spective) or cost of complying with the judgment
(from defendant’s) will be less than the jurisdictional
floor may the case be dismissed. Once ‘jurisdictional
facts’ have been proved by a preponderance of the
evidence standard, federal jurisdiction may be
defeated only by meeting St. Paul’s legal certainty
test.
Id. at 543.2
B
Thus, in both the Fifth and Seventh Circuits, even where
the plaintiff alleges damages less than the jurisdictional
amount, a preponderance of the evidence standard applies:
when the facts supporting jurisdiction (i.e., that a claim is
worth more than $75,000) are established as more likely than
not, federal jurisdiction is proper unless the “opponent” of
2
Judge Easterbrook’s formulation and, in particular, his explanation of
the role of jurisdictional facts, finds support in older case law of our cir-
cuit. See Uston v. Grand Resorts, Inc., 564 F.2d 1217, 1218 (9th Cir.
1977) (noting that the proponent of jurisdiction “ha[s] the burden of estab-
lishing the jurisdictional facts once they were challenged in an appropriate
way”); accord Taylor v. Portland Paramount Corp., 383 F.2d 634, 639
(9th Cir. 1967) (“The question is one of jurisdiction, and we think that we
should apply the rules laid down in McNutt v. General Motors Acceptance
Corp., that the trial court is not bound by the pleadings and that the party
asserting jurisdiction has the burden of establishing it if his allegations are
challenged in any appropriate manner.”) (emphasis added).
13588 GUGLIELMINO v. MCKEE FOODS CORP.
federal jurisdiction can show to a legal certainty that jurisdic-
tion is not proper.
This formulation of the respective burdens, as Judge
Easterbook intimated, serves to harmonize the Supreme
Court’s decisions in McNutt and St. Paul Mercury.3 It cor-
rectly places the burden of establishing the jurisdictional facts
on the party seeking federal jurisdiction. It then allows the
party seeking to defeat federal jurisdiction to show that, not-
withstanding the proponent of jurisdiction’s facts, recovery
cannot exceed the jurisdictional threshold.
C
In addition to being faithful to Supreme Court precedent,
the preponderance standard strikes the proper balance
between a plaintiff’s desire to remain in state court and a
defendant’s statutory right to remove. As the De Aguilar court
noted, imposing a more stringent burden may “fail[ ] ade-
quately to protect defendants from plaintiffs who seek to
manipulate their state pleadings to avoid federal court while
retaining the possibility of recovering greater damages in state
court following remand.”4 47 F.3d at 1411. Yet at the same
time, the standard is not empty rhetoric: the preponderance
burden “forces the defendant to do more than point to a state
law that might allow the plaintiff to recover more than what
3
In McNutt, the Supreme Court stated that “[i]f [a party’s] allegations
of jurisdictional facts are challenged by his adversary in any appropriate
manner, he must support them by competent proof. And where they are
not so challenged the court may still insist that the jurisdictional facts be
established or the case be dismissed, and for that purpose the court may
demand that the party alleging jurisdiction justify his allegations by a pre-
ponderance of evidence.” 298 U.S. at 189.
4
There is little doubt in my mind that Chief Judge Walker was correct
in observing that Guglielmino’s disclaimer of “the jurisdictional amount
is not so obviously the product of counsel’s specific assessment of his cli-
ent’s case.” Instead, “the complaint here simply maintains — almost too
conveniently — that plaintiffs’ damages ‘are less than $75,000.’ ”
GUGLIELMINO v. MCKEE FOODS CORP. 13589
is pled. The defendant must produce evidence that establishes
that the actual amount in controversy exceeds [the jurisdic-
tional amount].” Id.; see also McNutt, 298 U.S. at 189 (noting
that the limits of federal jurisdiction “precludes the idea that
jurisdiction may be maintained by mere averment or that the
party asserting jurisdiction may be relieved of his burden by
any formal procedure”). In this way, plaintiffs and defendants
are placed on equal footing in seeking a federal courtroom.
II
Further, there are practical concerns with Lowdermilk’s
“legal certainty” burden. For one thing, it may put defendants
in neighboring states within this circuit to different burdens of
proof based on nothing more than differing state codes of
pleading. Some states do not allow any mention of damages
in state court complaints. Thus, in those states, it may never
be possible to plead with the specificity required that damages
are less than the jurisdictional threshold. In other words, in
these states, the complaint will always be silent, triggering the
less demanding preponderance of the evidence inquiry of San-
chez v. Monumental Life Ins. Co., 102 F.3d 398 (9th Cir.
1996). Or, conversely stated, plaintiffs in these states will
never see the benefit of Lowdermilk’s deferential standard.
See Valdez v. Allstate Ins. Co., 372 F.3d 1115, 1117 (9th Cir.
2004) (noting defendants’ frustration that Ariz. R. Civ. P. 8(g)
bars plaintiffs from stating a dollar amount or figure for dam-
ages); see also Gaus v. Miles, 980 F.2d 564, 566 (9th Cir.
1992) (discussing Nev. R. Civ. P. 8(a) which provides that
“[w]here a claimant seeks damages of more than $10,000, the
demand shall be for damages ‘in excess of $10,000’ without
further specification of amount.”).5
5
The Advisory Committee Note to Nev. R. Civ. P. 8(a) explains, “[i]n
1971, a restriction was inserted to prohibit allegation of specific amounts
of damages in excess of $10,000. This was principally to eliminate
adverse publicity that results from extravagant claims of damage, and does
not restrict counsel in the presentation of their case nor the court or jury
on the amount it may award.”
13590 GUGLIELMINO v. MCKEE FOODS CORP.
In my view, the availability of federal jurisdiction should
not be subject to such vagaries of state pleading law. See, e.g.,
Carlsberg Resources Corp. v. Cambria Sav. and Loan Ass’n,
554 F.2d 1254, 1261 (3d Cir. 1977) (refusing to adopt a rule
which “would make diversity jurisdiction, in situations such
as the one at hand, largely dependent upon the vagaries of
state law.”).
In addition, it is unclear how the legal certainty burden is
to be applied against a defendant seeking to establish federal
jurisdiction. What type of proof can satisfy such a burden?
The very able district judge in this case ran into this very
problem when, in alternatively applying the legal certainty
test, he calculated the amount of punitive damages and attor-
neys fees “in controversy” as zero, because “the court cannot
say that plaintiffs will recover any particular amount of attor-
neys fees or punitive damages.” Does this mean that punitive
damages, because they are inherently speculative, will never
count towards the total amount in controversy under the legal
certainty burden? If not, what type of proof suffices to reach
the necessary quantum of a legal certainty?6 By inverting the
St. Paul Mercury test and applying it against a party seeking
federal jurisdiction, we raise these practical problems to
which there are no easy answers.
6
In the days of the St. Paul Mercury decision, plaintiffs could sue for
less by stating an amount claimed. See Singer v. State Farm Mut. Auto.
Ins. Co., 116 F.3d 373, 375 (9th Cir. 1997) (“At common law, a statement
of the amount claimed was required, and was an upper limit on recovery.”)
(citing Benjamin J. Shipman, Common Law Pleading, 223, 487-89 (3d ed.
1923)). In most jurisdictions, however, the common law rule no longer
prevails and the ad damnum clause does not set forth an upper limit on
recovery. Nonetheless, the St. Paul Mercury legal certainty test might still
be met by those seeking to defeat federal jurisdiction. One obvious way
to meet this burden is to show that recovery under the theory alleged is
capped by statute. Or, alternatively, the party might file a binding stipula-
tion, prior to removal, that it will not seek more in recovery than the juris-
dictional threshold. With the legal certainty standard inverted and
projected onto those seeking to establish federal jurisdiction, such strata-
gems are of no help or comfort.
GUGLIELMINO v. MCKEE FOODS CORP. 13591
III
If our court applied a single, consistent burden of proof
which a removing defendant must confront, this interlocutory
appeal would never have been certified. The preponderance of
the evidence standard strikes the correct balance between a
plaintiff’s right to remain in state court and a defendant’s stat-
utory right to remove an action which meets the diversity
requirements. In my view, yet recognizing that binding circuit
precedent is to the contrary, such a preponderance standard
should be applied in all cases where the jurisdictional facts of
the party seeking to invoke federal jurisdiction have been
properly challenged.