Del Vecchio v. Conseco, Inc.
230 F.3d 974 (2000)
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Rule of Law:
For a federal court to have diversity jurisdiction over a class action, each plaintiff's claim must independently satisfy the amount in controversy requirement; claims cannot be aggregated. A claim for punitive damages only counts toward this amount if it is legally plausible and not so disproportionate to compensatory damages that it is a 'legal certainty' the plaintiff cannot recover the jurisdictional minimum.
Facts:
- In 1947, Elio Del Vecchio purchased a $5,000 whole life insurance policy from Bankers National Life Insurance Company.
- By 1967, the policy was fully paid up, requiring no further premium payments.
- In 1982, a Bankers Life agent, Joseph Gennaco, convinced Del Vecchio to replace his policy with a $10,000 universal life policy.
- Gennaco represented that after an initial premium payment funded by the surrendered policy's value ($3,137.27), no further payments would be necessary.
- Del Vecchio purchased the new policy in 1984 based on these representations.
- Annual statements through 1993 indicated the policy would remain in force with no future premiums based on 'current assumptions.'
- In 1994, Del Vecchio observed that the policy's actual cash value had fallen below the 'guaranteed' cash value listed in the policy table, and this shortfall increased annually.
- Del Vecchio never made any premium payments on the new policy other than the initial surrender value of his old policy.
Procedural Posture:
- Elio Del Vecchio filed a class-action lawsuit against Conseco, Inc., Bankers National Life Insurance Company, and Great American Reserve Insurance Company in federal district court.
- The complaint alleged six state-law counts, including fraudulent misrepresentation and breach of contract, asserting jurisdiction based on diversity of citizenship.
- The defendants filed a motion for summary judgment.
- The district court (trial court) granted the defendants' motion for summary judgment, dismissing the case on the grounds that the claims were barred by the statutes of limitations.
- Del Vecchio (appellant) appealed the district court's grant of summary judgment to the U.S. Court of Appeals for the Seventh Circuit.
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Issue:
Does a class action plaintiff satisfy the amount in controversy requirement for federal diversity jurisdiction by aggregating the claims of the entire class or by asserting a claim for punitive damages that is disproportionately large compared to the actual damages alleged?
Opinions:
Majority - Wood, J.
No, a class action plaintiff cannot aggregate claims to meet the jurisdictional amount, nor can they rely on a speculative and grossly disproportionate claim for punitive damages. To establish diversity jurisdiction, each plaintiff's claim must be held separate. Under the rule from Snyder v. Harris, multiple plaintiffs cannot combine their claims to reach the minimum amount in controversy. Del Vecchio's attempt to frame the amount as the defendants' total unjust enrichment is an improper aggregation. Furthermore, while punitive damages may be considered, a court must dismiss a claim if it appears to a 'legal certainty' that the claim is for less than the jurisdictional amount. Here, Del Vecchio's claim for $75,000 in punitive damages on top of approximately $600 in actual damages—a ratio of 125 to 1—is excessive, not made in good faith, and stretches the normal ratio beyond what is permissible. Such a claim is a legal certainty not to be recoverable, and therefore federal subject matter jurisdiction is lacking.
Analysis:
This case reinforces the strict application of the amount in controversy requirement for federal diversity jurisdiction, particularly in the class action context. It affirms the anti-aggregation principle of Snyder v. Harris, preventing plaintiffs from using class action devices to manufacture federal jurisdiction where individual claims are small. The decision serves as a gatekeeping mechanism, instructing federal courts to critically scrutinize punitive damages claims that appear inflated solely to meet the jurisdictional threshold. This ensures that the statutory limits on federal jurisdiction are not undermined by plaintiffs asserting fanciful or legally unrecoverable damage amounts.
