Garcia v. Koch Oil Co. of Texas Inc.

The costs of producing the requested accounting are akin to the discovery costs incurred by the parties in every lawsuit. The court holds that these"litigation costsare simply not relevant to whether diversity jurisdiction exists under 28 U.S.C. �1332.

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Click here for the full text of this decision FACTS:At issue in this case is the proper way to measure the amount in controversy, required for federal diversity jurisdiction under 28 U.S.C. �1332, in the context of a suit seeking an equitable accounting. The district court held that the defendants’ costs for performing the accounting may be considered in calculating the amount in controversy HOLDING:Reversed and remanded. Whether the district court’s conclusion that the defendants have met their burden is correct, the plaintiffs argue, depends on the viewpoint by which the amount in controversy is measured. Plaintiffs claim that “the value of the plaintiff’s right sought to be enforced must exceed the jurisdictional amount in order to confer federal jurisdiction.” Vraney v. County of Pinellas, 250 F.2d 617 (5th Cir. 1958); see also Alfonso v. Hillsborough County Aviation Auth., 308 F.2d 724, 727 (5th Cir. 1962). The plaintiffs argue that the instant case should be remanded to state court because the accounting is of no “value” to them; rather it is merely a means to discover the amount of restitution damages they are owed. Therefore, they believe that the monetary damages, not the accounting costs, are the true amount in controversy. The plaintiffs conclude that because the defendants have not alleged that any one plaintiff will recover more than $75,000, the jurisdictional amount is unsatisfied. The defendants urge the court to follow an “either-party viewpoint” for determining the amount-in-controversy requirement. Emphasizing that the accounting relief requested by the plaintiffs is equitable in nature, the defendants argue that the court should consider the costs of providing that relief as the amount in controversy. According to the defendants, because it will cost them more than $75,000 to provide the equitable relief requested by each plaintiff, the court must recognize these costs as a “pecuniary consequence” of the litigation that satisfies the jurisdictional amount. The court concludes that the defendants are correct when they argue that it does not matter from which viewpoint the amount in controversy is viewed. Unlike the defendants, however, the court believes that the costs of an equitable accounting should not be considered in determining the sum or value of the matter in controversy in the instant case. These costs are collateral to the true object of the litigation: reimbursement to the plaintiffs for the oil and gas condensate allegedly converted by the defendants. The defendants urge the court to remember that the first form of relief demanded by the plaintiffs is an “equitable accounting.” If a court eventually determines that the plaintiffs have established a right to receive this relief, then the defendants believe that they will be forced to bear the costs of calculating how much oil and gas condensate was taken from each of the plaintiffs’ wells between 1975 and 1989. Thus, the defendants argue, the litigation will necessarily resolve the controversy over whether the defendants are legally obliged to perform the accounting � essentially providing the plaintiffs the “value” of avoiding these expenses. Because they have proffered affidavit evidence demonstrating that these costs exceed �1332′s jurisdictional amount, the defendants argue that they have met their burden to establish that federal jurisdiction is proper. The court does not agree. In cases seeking equitable relief “it is well established that the amount in controversy is measured by the value of the object of the litigation.” Hunt v. Wash. State Apple Adver. Comm’n, 432 U.S. 333 (1977). Here, the true object of the litigation is the payment of restitution damages to the plaintiffs. The equitable accounting is merely the means by which the value of the these damages may be calculated. Other circuits have explained that an equitable accounting is simply a tool by which a plaintiff may shift the plaintiff’s normal burden of discovery to the defendants. This decision comports with the manner by which the court measures the jurisdictional amount in actions where a trustee is compelled to perform an accounting of the assets in a trust or when an administrator is ordered to account for the value of the property in an estate. In Davidson v. Blaustein, the court reviewed the law in this area and found that “[w]here affirmative relief is sought by an accounting, the amount in controversy is measured by the value of the res, the damage to the res sought to be redressed, or the monetary value of the complainant’s share of the res which is distributable.” 247 F. Supp. 225 (D. Md. 1965). This last metric is analogous to the jurisdictional amount in the case at hand. Without question, the true “amount in controversy” is the restitution award that the defendants may be required to pay to the putative class members as a consequence of removing more oil and gas condensate from the plaintiffs’ various well sites than the defendants previously reported. Therefore, because neither party contends that the defendants owe more than $75,000 to any single plaintiff, the defendants have failed to demonstrate the existence of federal diversity jurisdiction. OPINION:King, C.J.

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