SW Legal studies in Business

Punitive Damage Claims Cannot Be Aggregated to Establish Diversity Jurisdiction
Description Appeals court held that a class action suit filed for relatively small damages, but that requested punitive damages so as to allow the amount in controversy to exceed $75,000 in order to obtain diversity jurisdiction in federal court, was not permissible under Georgia law. The suit would be heard in state court.
Topic Court Procedure
Key Words Jurisdiction; Class Action; Punitive Damages
C A S E   S U M M A R Y
Facts Kirkland had a mortgage on her residence for several years. The mortgage was held by Midland. Kirkland allowed her home owner hazard insurance to lapse for a while, but later obtained a policy. In the meantime, Midland imposed a policy on the property, as the mortgage allowed, and billed Kirkland for it. Kirkland paid double premiums for a while. When the extra premium was not refunded, Kirkland sued Midland for breach of fiduciary duty and fraud. She sued in federal court, requesting class action certification on behalf of all similarly affected mortgage holders, and requested punitive damages, so that the sum in controversy would exceed $75,000. Midland moved for summary judgment, but the trial judge allowed the suit to proceed. Midland appealed.
Decision Reversed. Under Georgia law, multiple plaintiffs cannot aggregate punitive damages for purposes of establishing the amount in controversy required for diversity jurisdiction. The purpose of punitive damages is not compensation of the plaintiff and the amount of such awards is based on the behavior of the defendant in general. The case will be remanded to state court for proceedings due to lack of subject matter jurisdiction in federal court.
Citation Kirkland v. Midland Mortgage Co., - F.3d - (2001 WL 224776, 11th Cir., 2001)

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