SHOW CAUSE HEARING ORDERED AFTER INSURED’S COUNSEL ARGUES PROPOSED POST-REMOVAL STIPULATION DEFEATS REMOVAL

Last Thursday, Judge Micaela Alvarez denied an insured’s motion to remand, emphasizing that post-removal stipulations are irrelevant in determining whether removal is proper and ordering insured’s counsel to appear at a show cause hearing.  In Cantu v. Allstate Vehicle & Property Ins. Co., 2016 WL 1695284 (S.D. Tex., McAllen Division, April 28, 2016), the insured brought various insurance-related claims in state court based on alleged wind and hail damage.  Allstate timely removed the action to federal court based on diversity jurisdiction because the amount-in-controversy exceeded $75,000.  The insured then filed a motion to remand to state court based on an alleged stipulation between the parties that the claimed damages were limited to $23,945.43. The court focused its analysis on the insured’s pleadings and well-established Fifth Circuit law on post-removal stipulations in denying insured’s motion. Because the insured’s pleadings sought more than $200,000, the insured bore the burden to show with legal certainty that the claimed damages were actually less than $75,000. In a failed attempt to meet this burden, the insured argued that the parties had agreed to a binding stipulation prior to removal limiting the claim to $23,945.63. In fact, the parties had not actually signed the stipulation. Even if the stipulation had been signed, the court noted it would have been irrelevant to the court’s removal analysis as a post-removal stipulation. Accordingly, the court denied insured’s motion to remand.

The court then admonished insured’s counsel for representing that the insured had filed a stipulation with her original petition prior to removal.  Instead, the insured had merely attached a proposed stipulation with its motion to remand filed after removal. The court reminded the insured’s counsel of his obligations under Rule 11 of the Federal Rules of Civil Procedure that by filing a motion, he certified that his claims regarding the amount-in-controversy had evidentiary support.  Due to the utter lack of support for insured’s claim that a pre-removal agreed stipulation existed, the Court ordered insured’s counsel to appear at a show cause hearing to explain why the court should not issue sanctions against him.

Editor’s Note: The order marks the second time this spring that Judge Alvarez has ordered an insured’s counsel to appear at a show cause hearing after determining that their claims lacked factual support.