A $25,000 Settlement Amount Did Not Count Towards A Monroe City Court’s Subject Matter Jurisdictional Limit of $30,000

cash-money-1520773-1024x768The generally rudimentary question of “what is the ‘amount in dispute’” was anything but simple when Louisiana courts sought to determine whether settlement amounts should be considered “in dispute” in calculating jurisdictional limits. The Monroe Circuit Court sought to determine the “amount in dispute” in relation the subject matter jurisdiction of a City Court with a jurisdictional limit of $30,000. The issue to be determined was whether following the dismissal of the settling defendants, the City Court had jurisdiction over plaintiff’s claim against her uninsured motorist insurer to the full extent of that court’s $30,000 jurisdictional limit. The implications of this case are that it will be easier for injured individuals to remain in City Court if they allege damages less than the jurisdictional limit, despite whether they have previously settled a portion of their claim for an amount exceeding the jurisdictional limit.

Holly D. Swayze (Holly) was involved in an automobile accident Brittany Miles struck her vehicle (Tortfeasor) on her passenger side door. Holly sustained injuries to her back and neck and sought recovery for her injuries in by filing a lawsuit in Monroe City Court, which had a jurisdictional limit of $30,000. She later amended her complaint for uninsured motorist (UM) benefits from her insurer, Shelter Mutual Insurance Company (Shelter Insurance), after it was revealed the tortfeasor carried an insurance policy in the amount of $25,000.

The procedural posture of this case was quite convoluted. Holly sought and was granted transfer to district court, alleging her claims presented an amount in dispute that exceeded the $30,000 jurisdictional limit. Transfer was granted. Soon thereafter, Holly executed a settlement with the tortfeasors insurer for $25,000, filed a motion to dismiss the tortfeasor and her insurer from the underlying lawsuit, and filed a motion to vacate the transfer order. The motion to dismiss and the motion to vacate were both granted.

A dispute arose over whether the City Court’s jurisdictional limits had been exhausted. Shelter Insurance filed summary judgment, arguing that the $25,000 settlement amount from the tortfeasors insurer and $5,000 medical payment it made exhausted the jurisdictional limit. The City Court agreed with Shelter Insurance and held that settlement may be counted in determining jurisdictional limit of the City Court. Nonetheless, Shelter Insurance’s exception was overruled since the city was not presented with information showing the allocation of settlement between Holly and her husband, both of whom could recover $30,000 in the City Court proceeding.

After the trial court concluded that Shelter Insurance’s maximum exposure was $5,000, Holly filed a motion for new trial and argued that the amount received from settlement should not be relevant or considered in determining the available award amount. The trial court changed its position by granting a new trial and vacating its original judgment. Shelter Insurance appealed and argued that the City Court erred in failing to find settlement a portion of the “amount of dispute”, as was required pursuant to La. C.C.P. art 4843 (F).

Up until this point, the City Court had ruled in favor of Shelter Insurance and then changed its position. The trial court had initially ruled in favor of Shelter Insurance but then granted a new trial and vacated its original judgment. On appeal, the appellate court then concluded the city court did not have jurisdiction as the “amount in controversy” exceed the jurisdictional limit. See Swayze v. State Farm Mut. Auto. Ins. Co., 142 So.3d 369, 373 (La. App. 2014). The appellate court concluded “the total amount of damages caused by” the tortfeasors negligence remained a central issue in Holly’s claim even after the tortfeasors dismissal. Id. Thus, because the trial courts total amount of general damage against the tortfeasor was $40,000 ($25,000 settlement amount and $15,000 city court’s general damage award) and exceeded the city court’s jurisdictional limit of $30,000, the city court lacked subject matter jurisdiction. The decision was once again appealed.

Under Louisiana law, “[w]hen the jurisdiction of a court over the subject matter of an action depends on the amount in dispute, or value of the right asserted, it shall be determined by the amount demanded … or value asserted in good faith by the plaintiff …” La. C.C.P. art 4 (emphasis added). Under La. C.C.P. art. 4841(A) and (B), the article addressing subject matter o the City, Court, “the subject matter jurisdiction of a city courts is limited by the nature of the proceedings and by the amount in dispute, which amount is determined by the amount demanded.” Thompson v. State Farm Mut Auto. Ins. Co., 50 So.3d 1271, 1274 (La. 2010).

Shelter insurance remained adamant in its argument that the “amount in dispute” must take into account the settlement amount since UM coverage is not triggered unless there is proof of damages exceeding the amount of the tortfeasors liability coverage. Holly remained adamant in her position and argued that the “amount demanded” by her should only include the “amount demanded” from the defendant before the court at the time the jurisdiction is determined. Thus, according to Holly, the “amount in dispute”, as stipulated by her, was no more than $30,000.

The Louisiana Supreme Court implemented statutory interpretation standards and according to the court, upon settlement in the case, the “amount in dispute” in Holly’s action no longer included the amount originally demanded from the tortfeasors liability as that amount was no longer part of Holly’s demand, it was no longer an amount at risk in the litigation, and it could no longer be awarded by judgment. Thus, after many judicial reversals, it was held that because the $25,000 settlement no longer constituted an “amount in dispute” the City Courts jurisdiction over the underinsured motorist claim was to the full extent of its $30,000 jurisdictional limit.

Settlement amounts will not affect a courts “amount in dispute” for jurisdictional purposes. It appears this decision will permit more cases to remain in City Court, rather than to proceed to district court.

ADDITIONAL SOURCES: HOLLY D. SWAYZE, ET AL. VERSUS STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, ET AL.

Written by Berniard Law Firm Blog Writer: Tyler Olson

Additional Berniard Law Firm Articles on City Courts’ Jurisdictional Limits: Louisiana Supreme Court Clarifies City Courts’ Jurisdictional Limit in Civil Cases