Guerrero v. State Farm Mutual ( 1999 )


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  •            IN THE UNITED STATES COURT OF APPEALS
                       FOR THE FIFTH CIRCUIT
                 _________________________________
    
                              No. 98-50683
                   _________________________________
    
    
    DIANA GUERRERO,
    
                      Plaintiff-Appellant,
    
              v.
    
    STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, also known
    as State Farm Insurance Company, also known as State Farm
    Insurance Companies,
    
                      Defendant-Appellee.
    
                  ---------------------------------
            Appeal from the United States District Court
                  for the Western District of Texas
                            (SA-98-CV-234)
                  ---------------------------------
                             May 20, 1999
    
    Before GARWOOD, BARKSDALE, and BENAVIDES, Circuit Judges.
    
    PER CURIAM:*
    
         Diana Guerrero appeals from the judgment of the
    
    district court dismissing her suit against State Farm Mutual
    
    Automobile Insurance Co. (“State Farm”) seeking benefits
    
    under an uninsured/underinsured motorists insurance policy
    
    issued to Guerrero by State Farm.       Guerrero contends that
    
    the district court erred both in its refusal to remand the
    
    case to the Texas state courts and in its application of
    
    Texas state law in granting State Farm’s motion to dismiss.
    
    Because the district court had no evidence before it showing
    
    *
     Pursuant to 5TH CIR. R. 47.5, the court has determined that
    this opinion should not be published and is not precedent
    except under the limited circumstances set forth in 5TH CIR.
    R. 47.5.4.
    that the parties were diverse, we find that it erred by
    
    asserting federal jurisdiction over this case.
    
         On January 23, 1998, Guerrero filed a suit against
    
    State Farm in a Texas district court in Bexar County.       She
    
    alleged that State Farm had improperly denied her
    
    underinsured motorist benefits for injuries sustained during
    
    a January 1994 automobile accident.       On March 23, 1998,
    
    State Farm filed a Notice of Removal in the United States
    
    District Court for the Western District of Texas.       State
    
    Farm claimed that removal was proper under 28 U.S.C. § 1441
    
    because the federal district court had original jurisdiction
    
    over the case based on diversity of citizenship.       State Farm
    
    affirmatively alleged that Guerrero was a citizen of Texas,
    
    that State Farm was incorporated and had its principal place
    
    of business in Illinois, and that the amount in controversy
    
    exceeded $75,000.
    
         On April 23, 1998, Guerrero moved to have the case
    
    remanded back to state court.       She contended that removal
    had been improper because State Farm’s principal place of
    
    business was Texas and diversity was therefore lacking.1         In
    
    
    1
     In addition, Guerrero made two other jurisdictional
    arguments in her motion to remand which she renews on
    appeal: (1) that the amount in controversy did not satisfy
    the $75,000 statutory requirement, and (2) that the parties
    were not diverse because State Farm, as an insurance company
    against which a “direct action” had been filed, must be
    deemed a citizen of the state in which Guerrero is a
    citizen. The district court did not reach these claims.
    Although the resolution of these arguments is not necessary
    to our decision here, as they relate to the court’s subject
    
                                    2
    support of this argument, Guerrero entered into evidence
    
    copies of pages from Texas telephone books showing State
    
    Farm’s extensive Texas telephone listings and an affidavit
    
    from a legal assistant to Guerrero’s attorney describing his
    
    
    
    matter jurisdiction, we have examined them and note that
    neither is meritorious.
         The amount in controversy did exceed the $75,000
    statutory requirement contained in 28 U.S.C. 1332(a). “[I]n
    addition to policy limits and potential attorney’s fees,
    items to be considered in ascertaining the amount in
    controversy when the insurer could be liable for those sums
    under state law are inter alia penalties, statutory damages,
    and punitive damages . . . .” St. Paul Reinsurance Co. v.
    Greenberg, 
    134 F.3d 1250
    , 1253 (5th Cir. 1998). Here,
    Guerrero’s original petition sought contractual damages
    which could reach a maximum of $50,000, as well as
    attorney’s fees, punitive damages, and penalties under both
    the Texas Insurance Code and the Texas Deceptive Trade
    Practices Act (“DPTA”). Because either the Insurance Code
    or the DPTA could provide for trebling any contractual
    damages awarded Guerrero, see Tex. Ins. Code Ann. Art. 21.21
    § 16(b)(1); Tex. Bus. & Com. Cod. Ann. § 17.50(b), the
    $75,000 amount in controversy requirement was clearly met in
    this case.
         Neither does the language in § 1332(c)(1) which states
    that “in any direct action against the insurer of a policy
    or contract of liability insurance . . . such insurer shall
    be deemed a citizen of the State of which the insured is a
    citizen . . .” defeat diversity between State Farm and
    Guerrero. The purpose of the “direct action” provision in
    § 1332(c)(1) was to prevent an injured party from gaining
    diversity over a non-diverse tortfeasor by directly suing
    the tortfeasor’s out-of-state insurance company instead of
    the tortfeasor. See Evanston Insurance Co. v. Jimco, Inc.,
    
    844 F.2d 1185
    , 1188 (5th Cir. 1988). The section was thus
    not intended to thwart diversity in suits between an insured
    and the insured’s own insurance company. See Myers v. State
    Farm Ins. Co., 
    842 F.2d 705
    , 707 (3d Cir. 1988); Andrew M.
    Campbell, Construction and Application of 28 USCS §
    1332(c)(1), Establishing Citizenship of Insurer in Diversity
    Action Against Such Insurer Where Insured Is Not Joined as
    Party Defendent, 119 A.L.R. Fed. 135, 171-77 (1994).
    Section 1332(c)(1)’s “direct action” provision is thus
    inapplicable to this suit between Guerrero and her insurance
    company, State Farm, and does not defeat diversity here.
    
                                 3
    research showing that State Farm has more offices and gross
    
    revenues in Texas than in Illinois.    In its response to
    
    Guerrero’s motion to remand, State Farm again stated that
    
    its principal place of business was Illinois but provided no
    
    evidence relevant thereto.
    
         On May 27, 1998, the district court entered an order
    
    denying Guerrero’s motion to remand.    Two sentences long,
    
    the order made no legal or factual findings regarding any of
    
    the arguments in Guerrero’s motion.    On June 8, 1998, State
    
    Farm filed a motion to have Guerrero’s claims dismissed on
    
    the merits.    On July 7, the court entered an order
    
    dismissing Guerrero’s claims with prejudice.    Guerrero
    
    timely appealed.
    
         On appeal, Guerrero argues that the district court
    
    erred in denying her motion to remand this case back to
    
    state court.   She contends that, by asserting jurisdiction,
    
    the district court necessarily and improperly found that
    
    State Farm’s principal place of business was not Texas.     We
    
    review a district court’s determination of a corporation’s
    
    principal place of business for clear error.    See Village
    
    Fair Shopping Center Co. v. Sam Broadhead Trust, 
    588 F.2d 431
    , 433-34 (5th Cir. 1979).
    
         A federal court may assert jurisdiction under 28 U.S.C.
    
    § 1332 only when there is complete diversity, i.e., when no
    
    plaintiff and defendant are citizens of the same state.     A
    
    corporation is deemed a citizen of any state in which it has
    
                                   4
    been incorporated and of the single state in which it has
    
    its principal place of business.    See 28 U.S.C.
    
    § 1332(c)(1).   It is undisputed in the record that Guerrero
    
    is a citizen of Texas.   Therefore, unless State Farm neither
    
    is incorporated nor has its principal place of business in
    
    Texas, the district court could not assert jurisdiction over
    
    this case.
    
         “The burden of pleading diversity of citizenship is
    
    upon the party invoking federal jurisdiction, and if
    jurisdiction is properly challenged, that party also bears
    
    the burden of proof.”    See Ray v. Bird and Son and Asset
    
    Realization Co., 
    519 F.2d 1081
    , 1082 (5th Cir. 1975).      Here,
    
    it was State Farm that invoked the district court’s
    
    jurisdiction by removing the case from state to federal
    
    court.   See Getty Oil Corp. v. Insurance Company of North
    
    America, 
    841 F.2d 1254
    , 1259 (5th Cir. 1988) (finding that
    
    the party removing a case to federal court is invoking the
    
    jurisdiction of the federal courts).   Guerrero properly
    challenged the district court’s jurisdiction by arguing in
    
    her motion to remand that State Farm’s principal place of
    
    business is Texas.   It therefore was State Farm’s burden
    
    both to plead and to prove that State Farm and Guerrero were
    
    completely diverse parties.
    
         Although State Farm alleged in its pleadings that its
    
    principal place of business is Illinois, it did not supply
    
    
    
                                   5
    the court with any evidence in support of that allegation.2
    
    When jurisdiction has been challenged, a mere allegation of
    
    citizenship is insufficient to prove jurisdiction.        See
    
    Welsh v. American Surety Co., 
    186 F.2d 16
    , 17 (5th Cir.
    
    1951).     Moreover, when federal jurisdiction has been
    
    challenged and no evidence in support of jurisdiction is
    
    adduced by the party seeking to invoke it, a federal court
    
    may not assert jurisdiction.     See Roberts v. Lewis, 
    144 U.S. 653
    , 658 (1892) (holding that where diversity of citizenship
    
    was properly alleged by the plaintiff and then challenged by
    
    the defendant, the plaintiff’s failure to present any
    
    evidence of citizenship required reversal for want of
    
    jurisdiction); see also McNutt v. General Motors Acceptance
    
    Corp., 
    298 U.S. 178
    , 189 (1936) (holding that jurisdiction
    
    cannot be maintained by “mere averment” but instead must be
    
    supported by “competent proof”); Tetco Metal Products, Inc.
    
    v. Langham, 
    387 F.2d 721
    , 723 (5th Cir. 1968) (citing
    
    McNutt).    Thus, without State Farm having presented any
    
    evidence regarding its principal place of business, it was
    
    clear error for the district court to have asserted
    
    2
     In the Notice of Removal, State Farm stated: “STATE FARM
    MUTUAL AUTOMOBILE INSURANCE COMPANY, was at that time, and
    is now, a corporation incorporated under the laws of
    Illinois, with its principal place of business in the State
    of Illinois, and was not and is not a citizen of the State
    of Texas wherein this action was brought.”   In the reply to
    Guerrero’s motion to remand, State Farm stated: “State Farm
    was and is incorporated in Illinois and has its principal
    place of business in Illinois.” There is no indication in
    the record that State Farm provided any further discussion
    or any evidence of its principal place of business.
    
                                    6
    jurisdiction in this case.
    
         It is incumbent upon a district court to address any
    
    jurisdictional issues before reaching a decision on the
    
    merits.     See B., Inc. v. Miller Brewing Company, 
    663 F.2d 545
    , 548-49 (5th Cir. 1981) (finding that a “trial court
    
    must be certain of its jurisdiction before embarking upon a
    
    safari in search of a judgment on the merits”).    We
    
    therefore reverse the judgment of the district court
    
    dismissing Guerrero’s claims and remand this case back to
    
    the district court.    Upon remand, the district may in its
    
    discretion either remand the case back to state court for
    
    lack of federal jurisdiction or permit State Farm another
    
    opportunity to provide evidence of its principal place of
    
    business.
    
         REVERSED and REMANDED.
    
    
    
    
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