Opinion
Civil Action No. 3:04-CV-1972-D.
December 22, 2004
MEMORANDUM OPINION AND ORDER
The instant motion to remand presents the questions whether the court has diversity jurisdiction based on the amount in controversy and whether it has federal question jurisdiction. Concluding that it lacks jurisdiction on either basis, the court grants the motion and remands this case to county court.
I
This is a removed putative class action brought by plaintiff Mark Sims ("Sims") against defendant ATT Corp. ("ATT") asserting claims for breach of contract, violation of the Texas Deceptive Trade Practices-Consumer Protection Act ("DTPA"), Tex. Bus. Com. Code Ann. §§ 17.41-17.826 (Vernon 2002 Supp. 2004-05), and negligence. Sims also seeks a declaratory judgment for remedial and injunctive relief related to his substantive claims. He asserts that he and other class members are entitled to this relief because ATT charged them for long distance telephone service that they had previously canceled. ATT provided long distance telephone service to Sims until he switched to another carrier. Sims alleges that ATT billed him for service after he canceled it and charged him late fees when he did not pay. He also asserts that ATT notified him that payment was required to prevent further collection action.
Sims sued ATT in county court, contending that ATT acknowledged that it had mistakenly billed 200,000 to 300,000 customers and as many as 800,000 non-ATT customers since January 1, 2004. The putative class is comprised of persons whose billing addresses are located in Texas and who, during the four years before Sims filed suit, canceled ATT long distance service but were billed for service provided after the date of cancellation. Sims does not pray for a specific amount of damages in his county court petition. A billing statement for service from June 9, 2004 to July 8, 2004 indicates that ATT billed Sims for $39.42. Sims also seeks judgment declaring, inter alia, that ATT must audit all bills sent to class members and make appropriate adjustments. Pet. ¶ 36.
Sims does not allege that he paid the bill or that the delinquent account has actually impacted his credit report.
ATT removed this action based on diversity and federal question jurisdiction. Sims moves to remand.
ATT filed its response to Sims' motion on October 25, 2004. The following day, ATT filed a motion for leave to file a supplemental appendix, which contains a declaration of Craig Farber ("Farber"), Director in ATT's Consumer Product Marketing Management Area. Sims urges the court to deny leave and disregard ATT's supplemental appendix, asserting that the court may not consider post-removal affidavits unless the basis for jurisdiction is ambiguous at the time of removal. The court concludes, however, that it can consider Farber's post-removal declaration because the jurisdictional amount is ambiguous on the face of the county court petition and the declaration helps clarify jurisdictional facts that existed at the time of removal. See St. Paul Reinsurance Co. v. Greenberg, 134 F.3d 1250, 1254 n. 18 (5th Cir. 1998). Accordingly, the court has considered ATT's supplemental appendix in deciding the motion to remand.
II
ATT contends that federal question jurisdiction exists because the breach of contract claims of some potential class members are preempted by the Federal Communications Act of 1934, 47 U.S.C. § 151 et seq. ("FCA").Ordinarily, the term federal preemption refers to ordinary preemption, which is a federal defense to the plaintiff's suit and may arise either by express statutory term or by a direct conflict between the operation of federal and state law. Being a defense, it does not appear on the face of a well-pleaded complaint, and, thus, does not authorize removal to a federal court. By way of contrast, complete preemption is jurisdictional in nature rather than an affirmative defense to a claim under state law. As such, it authorizes removal to federal court even if the complaint is artfully pleaded to include solely state law claims for relief or if the federal issue is initially raised solely as a defense.Johnson v. Baylor Univ., 214 F.3d 630, 632 (5th Cir. 2000) (quoting Heimann v. Nat'l Elevator Indus. Pension Fund, 187 F.3d 493, 500 (5th Cir. 1999)). In cases where complete preemption exists, any complaint that comes within the scope of the federal cause of action created by the federal statute necessarily arises under federal law for purposes of removal based on federal question jurisdiction. Franchise Tax Bd. of State of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 23-24 (1983).
Complete preemption is a narrow exception. . . . To establish complete preemption, [ATT] must show that (1) the statute contains a civil enforcement provision that creates a cause of action that both replaces and protects the analogous area of state law; (2) there is a specific jurisdictional grant to the federal courts for enforcement of the right; and (3) there is a clear Congressional intent that claims brought under the federal law be removable. Few federal statutes can meet such an exacting standard.Johnson, 214 F.3d at 632 (citations, quotation marks, and some brackets omitted).
ATT has not demonstrated that the FCA completely preempts the breach of contract claims of potential class members. Moreover, it cites Bastien v. ATT Wireless Services, Inc., 205 F.3d 983 (7th Cir. 2000), to argue that state-law causes of action related to rates under filed tariffs are preempted by the FCA. Bastien is inapposite because it involved state-law claims that were preempted under 47 U.S.C. § 332(c)(3)(A), which applies only to mobile telephone services. Section 332 is not relevant to Sims' claims or to the possible claims of other potential class members. ATT has not demonstrated that any class member's claim is completely preempted. Accordingly, the court concludes that ATT has failed to establish that removal was proper based on federal question jurisdiction.
III
The court now considers whether ATT has established that the court has diversity jurisdiction.
A
ATT has the burden of demonstrating that this court has jurisdiction and that removal was proper. See Manguno v. Prudential Prop. Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002). The court determines whether jurisdiction exists by examining the claims in the county court petition "as they existed at the time of removal." Id. "Any ambiguities are construed against removal because the removal statute should be strictly construed in favor of remand." Id. (citing Acuna v. Brown Root Inc., 200 F.3d 335, 339 (5th Cir. 2000)). It is undisputed that the parties are diverse citizens. The question is whether the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs. See 28 U.S.C. § 1332(a)(1) ("The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . . citizens of different States[.]").
"[U]nless the law gives a different rule, the sum claimed by the plaintiff controls if the claim is apparently made in good faith." St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938) (footnotes omitted).
[W]here . . . the petition does not include a specific monetary demand, [the defendant] must establish by a preponderance of the evidence that the amount in controversy exceeds $75,000. This requirement is met if (1) it is apparent from the face of the petition that the claims are likely to exceed $75,000, or, alternatively, (2) the defendant sets forth "summary judgment type evidence" of facts in controversy that support a finding of the requisite amount.Wise v. CB Richard Ellis, Inc., No. 3:03-CV-1597-D, slip op. at 2 (N.D. Tex. Dec. 9, 2003) (Fitzwater, J.) (quoting Manguno, 276 F.3d at 723 (citations omitted)). ATT maintains that the threshold is exceeded based on Sims' combined allegations for declaratory and injunctive relief, attorney's fees, punitive damages, and class action expenses.
B
ATT first argues that the minimum jurisdictional amount is met because the pecuniary consequence of the declaratory and injunctive relief that Sims seeks exceeds $75,000. It correctly asserts that "[t]he amount in controversy, in an action for declaratory or injunctive relief, is the value of the right to be protected or the extent of the injury to be prevented." D. Br. at 4 (quoting St. Paul Reinsurance Co. v. Greenberg, 134 F.3d 1250, 1252-53 (5th Cir. 1998)). But it then follows the wrong analytical path by maintaining, based on Duderwicz v. Sweetwater Savings Ass'n, 595 F.2d 1008 (5th Cir. 1979), and other decisions, that this value can be measured by the pecuniary consequence to ATT. ATT urges that if the court determines that it must audit all bills sent to Sims and other class members during the four years that preceded the lawsuit, it would incur costs estimated to exceed $75,000. ATT also posits that the cost of adjusting credit reports would add to the expenses it would incur. And it maintains that, even if a class is not certified and Sims alone prevails, the cost of complying with his claims for declaratory and injunctive relief would not change.
Sims requests the following remedial and injunctive relief based on his declaratory judgment action:
A. An order prohibiting ATT from continuing to bill him and other Class Members or to pursue collection efforts against them;
B. An order requiring ATT to audit all bills sent to Plaintiff and Class Members and to make appropriate adjustments removing the unauthorized charge(s), any penalties, and interest;
C. An order requiring ATT to correct any unfavorable credit reports made in connection with the unauthorized charges to Plaintiff and Class Members; and
D. An order requiring ATT to refund monies to Class Members who paid for unauthorized charges.
Pet. ¶ 36(A)-(D).
ATT maintains that there are more than 1.3 million persons with billing telephone numbers located in Texas who currently subscribe to its service. D. Supp. App. 3. It asserts that it would cost $85.00 per file to perform the audit that Sims requests. Id. at 4.
The correct perspective for measuring the amount in controversy is "[t]he value to the plaintiff of the right to be enforced or protected." Alfonso v. Hillsborough County Aviation Auth., 308 F.2d 724, 727 (5th Cir. 1962) (emphasis added); see also Vraney v. County of Pinellas, 250 F.2d 617, 618 (5th Cir. 1958) (per curiam). ATT's reliance on Duderwicz to argue against a "plaintiffviewpoint" approach — thereby allowing the court to exercise jurisdiction because ATT's cost of compliance with a requested order meets the jurisdictional requirement — is misplaced. See Garcia v. Koch Oil Co. of Tex., 351 F.3d 636, 640 n. 4 (5th Cir. 2003) ("Contrary to the defendants' view, Duderwicz did not signal our acceptance of the `either-party viewpoint'. . . . The Court of Appeals for the Eleventh Circuit, which is also bound by Duderwicz, reads this case as we do and similarly concludes that it does not signal an `abandonment of the plaintiff-viewpoint rule' by the Fifth Circuit." (citation omitted)). Accordingly, ATT cannot establish that the amount in controversy requirement is satisfied based on the pecuniary consequence of its compliance with the requested declaratory and injunctive relief.
C
ATT next maintains that attorney's fees, punitive damages, and class action expenses exceed $75,000. It contends that the minimum jurisdictional requirement is satisfied regardless whether the putative class is ultimately certified. Although no class has been certified, the court will treat the suit as a class action for the purpose of determining whether it has jurisdiction. See Smith v. GTE Corp., 236 F.3d 1292, 1304 n. 12 (11th Cir. 2001); In re Abbott Labs., 51 F.3d 524, 525 n. 1 (5th Cir. 1995); Eagle v. Am. Tel. Tel. Co., 769 F.2d 541, 545 n. 1 (9th Cir. 1985).
1
ATT asserts that the attorney's fees recovered under the DTPA must be aggregated and attributed to Sims, as the representative party, to determine the amount in controversy. Attorney's fees may properly be considered to determine the amount in controversy because the DTPA provides for their recovery. See Tex. Bus. Com. Code Ann. § 17.50(d) (Vernon 2002); Manguno, 276 F.3d at 723. ATT's contention, however, contravenes the standard approach to distribute attorney's fees pro rata to all class members, both named and unnamed, when determining the amount in controversy. See Coghlan v. Wellcraft Marine Corp., 240 F.3d 449, 455 n. 5 (5th Cir. 2001) (holding, inter alia, that, under Texas law, attorney's fees should not be attributed to named class representative for jurisdictional purposes). ATT relies on Martin v. Ford Motor Co., 1995 WL 1554361 (S.D. Tex. Aug. 15, 1995) (Kent, J.), in which the court held that it should aggregate attorney's fees awarded under the DTPA and attribute them to the class representative when calculating the amount in controversy. Id. at *7. This court respectfully disagrees with Martin, which may not even reflect that judge's current thinking on the issue. See Johnson v. DirecTV, Inc., 63 F.Supp.2d 768, 770 (S.D. Tex. 1999) (Kent, J.) (holding that court was "not convinced that the attorneys' fees associated with prosecuting a class action lawsuit under Texas law may properly be attributed to the named class representative for jurisdictional purposes"). Moreover, attributing aggregated attorney's fees to the named representative for jurisdictional purposes is contrary to Texas law generally. See Coghlan, 240 F.3d at 455 n. 5; Gooding v. Allstate Ins. Co., 2000 WL 626856, at *2 (N.D. Tex. May 12, 2000) (Lynn, J.); Quebe v. Ford Motor Co., 908 F. Supp. 446, 452 (W.D. Tex. 1995). ATT has not shown that, once attorney's fees are distributed pro rata to all class members, the minimum jurisdictional amount is satisfied.
2
ATT next relies on the amount of punitive damages. Sims does not dispute that punitive damages are properly considered in determining the amount in controversy. Nevertheless, it is not facially apparent that Sims' claim of mistaken billing for approximately $40 involves punitive damages that, together with an award of reasonable attorney's fees, will exceed the minimum jurisdictional requirement. Nor has ATT demonstrated by a preponderance of the evidence that Sims' claim for punitive damages exceeds the minimum jurisdictional amount. It instead cites several cases in which Texas juries have awarded punitive damages in excess of $75,000 for fraud-based claims. These cases, however, are not comparable because each one — none of which was a class action — involved claims with substantial actual damage awards. Moreover, punitive damages are not aggregated to meet the minimum jurisdictional requirement. See HD Tire Auto.-Hardware Inc. v. Pitney Bowes Inc., 250 F.3d 302, 304 (5th Cir. 2001) (per curiam) (on rehearing) ("Yet damages of individual class members cannot be aggregated across a class. That is the law of the Fifth Circuit, even as regards punitive damages."). ATT has thus failed to show that the punitive damages awarded to any single plaintiff will even approach, much less meet, the minimum jurisdictional amount.
This conclusion is valid even if attorney's fees and punitive damages are considered together.
3
ATT also posits that the cost of providing notice to class members can be aggregated to reach the minimum jurisdictional amount. It contends that the provision of 28 U.S.C. § 1332 that requires satisfaction of the jurisdictional amount "exclusive of . . . costs" refers only to costs taxable under 28 U.S.C. § 1920. ATT thus reasons that, because the cost of class action notice is not among the taxable costs listed in § 1920, it is not excepted from, and is therefore included in, the amount in controversy.The court is not persuaded that the aggregate cost of class notice should be included when determining the amount in controversy. In the context of declaratory and injunctive relief, the Fifth Circuit, when valuing the amount in controversy, has differentiated between the true object of the litigation and litigation tools employed to obtain the ultimate relief. See, e.g., Garcia, 351 F.3d at 640-41. This distinction is also appropriate here. See 14B Charles A. Wright et al., Federal Practice Procedure § 3702, at 77-78 (1998) (noting without restriction to injunctive or declaratory relief that "the amount in controversy for jurisdiction purposes is measured by the direct pecuniary value of the right that the plaintiff seeks to enforce or protect or the value of the object that is the subject matter of the suit," and observing that in most claims for damages, amount plaintiff seeks to recover is equal to amount defendant seeks to preserve). Class notice is not a form of relief that Sims seeks to obtain through this lawsuit. It is merely a litigation tool to obtain the relief actually sought. See S. States Police Benevolent Ass'n v. Second Chance Body Armor, Inc., 336 F.Supp.2d 731, 737 (W.D. Mich. 2004) ("[T]he notice does not constitute the ultimate relief to the class members, but is merely a means by which the actual relief sought . . . can be obtained."). Accordingly, ATT cannot satisfy the minimum jurisdictional amount based on the cost of providing notice to class members.
D
Sims alleges that he was mistakenly billed for less than $40. Although he does not allege that he paid the bill, he now seeks unspecified monetary damages and declaratory and injunctive relief. It is not facially apparent that Sims' claims for economic damages, attorney's fees, and punitive damages — individually or considered together — involve in excess of $75,000. Although satisfaction of the jurisdictional amount is not facially apparent, the court could have exercised diversity jurisdiction had ATT submitted proof that demonstrated by a preponderance of the evidence that Sims' claims exceeded the jurisdictional amount. See De Aguilar v. Boeing Co., 11 F.3d 55, 58 (5th Cir. 1993). The conclusory statements contained in ATT's appendix are inadequate to meet this burden. Accordingly, the court concludes that it does not have subject matter jurisdiction under § 1332.
IV
Sims requests an award of attorney's fees pursuant to 28 U.S.C. § 1447(c) in seeking to procure the remand of this case to county court. "The decision to award fees is a matter of discretion." Fathergill v. Rouleau, 2003 WL 21467570, at *2 (N.D. Tex. June 23, 2003) (Fitzwater, J.) (citations omitted). The court holds that Sims is entitled to recover his attorney's fees and costs incurred in obtaining remand of this case, which was improvidently removed. The award is limited to the "fees and costs incurred in federal court that would not have been incurred had the case remained in state court." Avitts v. Amoco Prod. Co., 111 F.3d 30, 32 (5th Cir. 1997). He may apply for an award no later than 30 days from the date this memorandum opinion and order is filed if the parties cannot agree on the amount.* * *
Sims' October 5, 2004 motion is granted. The court holds that it lacks subject matter jurisdiction and, pursuant to 28 U.S.C. § 1447(c), remands this case to County Court at Law No. 4 of Dallas County, Texas. The clerk shall effect the remand according to the usual procedure.