NJ Federal Court Confirms the Importance of Ascertaining the Amount in Controversy Before Removal to Federal Court

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by Arooj Siraj, Esq.

The United States District Court for the District of New Jersey recently ruled that a plaintiff’s refusal to admit or deny the amount of monetary damages was not sufficient to give the federal court subject matter jurisdiction over the case.  See Melvin v. Costco Wholesale Corp., 2:21-cv-13934 (D.N.J. Jan. 3, 2022) (Judge Martinotti). Plaintiff, Renard Melvin, initiated a lawsuit in state court against his former employer, Defendant, Costco Wholesale Corp. for failure to provide reasonable accommodation for his alleged disability. Approximately 173 days after filing the Answer, Costco served Melvin with a request for admission, asking Melvin to admit that the amount in controversy is less than $75,000 (the minimum amount required to confer jurisdiction on the federal court). In response, Melvin conveyed that it was impossible to admit or deny the request. As a result, Costco removed the suit to federal court based on diversity jurisdiction.

Melvin then filed a motion to remand the case back to state court on the ground that removal was not filed within the thirty day period after receiving the Complaint as required under 28 U.S.C. § 1446(b). In its opposition, Costco relied on the exception outlined in 28 U.S.C. § 1446(b)(3) which allows a party to remove a case to federal court after the initial thirty day window, where federal jurisdiction was not apparent and after receiving a copy of “other paper from which it may first be ascertained” that the case is removable. As such, Costco argued that it only became aware of the amount in controversy after Melvin’s request for admission responses.

The court evaluated the motion to remand by going through a two-step analysis: (1) whether the initial pleading on its face was removable and (2) whether Melvin’s request for admission response had sufficient information from which Costco could reasonably conclude that the case was removable. As to the first step, the court agreed with Costco, finding that the case was not initially removable based on the pleading because Melvin did not give notice that the amount in controversy could exceed the minimum amount and Costco’s independent calculation of damages amounted to a mere $3,270.

However, in the second step of the analysis, the court found that Melvin’s refusal to concede that the amount in controversy exceeded $75,000 was insufficient to give notice of damages and trigger the thirty-day removal period to confer federal subject matter jurisdiction over the case. In particular, the court noted that Costco, not Melvin bears the burden of demonstrating that the amount in controversy exceeds the statutory threshold, which Costco did not. Accordingly, the court granted Melvin’s motion to remand the case to state court.

This case illustrates the delicate position defendants are in when approaching amounts in controversy for purposes of removal. Costco’s strategy was to employ the often under-utilized tool of a request for admission to force the plaintiff into admitting that the maximum amount in controversy was below $75,000, thereby either (1) limiting plaintiff’s recoverable damages or (2) meeting the amount in controversy requirement for removal to federal court.  Unfortunately, while this creative strategy was not successful for Costco, it does provide an informative example of the importance of ascertaining the amount in controversy before removal. 

The opinion can be found at https://casetext.com/case/melvin-v-costco-wholesale-corp

Please contact me or another member of NFC’s litigation team if you have any questions.


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