United States: Voluntary Dismissal Ends Lawsuit – Boomerjack's v. Owners First Property Assoc.

Amount in controversy

Boomerjack's Grill & Bar v. The Members of the Owners First Property Association, docket No.: 3:21-CV-01022-X (U.S. Dist. Ct., N.D. Tex. Feb. 3, 2022)

On February 3, 2022, Judge Brantley Starr of the U.S. District Court for the Northern District of Texas denied a Renewed Motion to Remand filed by the plaintiff Boomerjack's Bar & Grill, ending Plaintiff's lengthy attempt to avoid litigating this COVID insurance coverage case in Texas' federal courts. Shortly after the Court rejected its remand motion, Plaintiff voluntarily dismissed its lawsuit with prejudice.

Boomerjack's operates a chain of 17 sports bars in the Dallas/Fort Worth area. It filed suit against its first-party property insurers in Texas state court on March 23, 2021, to recover for alleged lost revenues during the COVID-19 pandemic. Boomerjack's contended that various COVID-related governmental orders had compelled it to reduce or eliminate its indoor dining, causing lost income that it contended should be covered under the subject policies. The Insurers had denied Boomerjack's claim, including on the basis that neither the governmental orders nor the alleged presence of the Coronavirus at the restaurant locations represented "direct physical loss or damage" to Boomerjack's property, as the Policy required.

The Insurers removed the case to the U.S. District Court, which triggered a nine-month battle over whether the lawsuit would remain in federal court. The importance of the forum became more and more clear as the months went on, during which both the Fifth Circuit Court of Appeals under Texas law and the Northern District of Texas consistently ruled in favor of insurers on these same issues, whereas the decisions of Texas' state courts were mixed.

After its initial Motion to Demand was denied without prejudice, Boomerjack's filed a Renewed Motion to Remand on December 20, 2021. Boomerjack's argued, among other things, that the Insurers had not proved the required Amount in Controversy for federal jurisdiction, and also that Texas' federal courts should abstain from ruling on COVID insurance cases in deference to its state courts.

To decide the Amount in Controversy issue for the various insurers and each Member or "Name" of each Lloyds syndicate, the Court needed to determine the amount of Boomerjack's damage claim. Under Texas federal practice, the Amount in Controversy is generally based on the dollar amount stated in the Petition. However, the amount demanded in the initial pleading does not control if "the State practice does not permit demand for a specific sum." Noyola v. State Farm Lloyds, 7:13-CV-146, 2013 WL 3353963 (S.D. Tex. July 3, 2013). Boomerjack's Petition was filed in Texas state court, where the Rule 47, Civil Procedure, requires a plaintiff to plead only that its demand is within a certain dollar range. So, the Petition did not control.

When the Petition does not control, the Amount in Controversy must be established by the removing party by a preponderance of evidence. Id. In an insurance coverage case, the prime evidence of the Amount in Controversy will be the policy limits. Id. Boomerjack's argued that the policy limit for its claim was $5 million; but, it had represented to the Court in an earlier pleading that it was entitled to a policy limit of $500 million. The Amount in Controversy also is determined based on evidence of the Plaintiff's actual damage claim. Boomerjack's had told the Insurers that it was losing almost $1 million per week, and its Petition asserted that its losses continued for at least a year. The Court calculated the demand, therefore, at more than $50 million. "No matter how you slice it," Judge Starr concluded, the Amount in Controversy was greater than $75,000 per payor.

The Court also refused to abstain from deciding the case. The Insurers had pointed out that more than a dozen Texas federal appellate and trial court decisions had been handed down on these same COVID insurance issues. The Court conclude that none of the factors that would require abstention (a separate pending state-court action; the requirements of judicial economy; and a need to construe a state-court decree in a parallel action, see Tudor Ins. Co. v. Ocotillo Real Estate Investments I, LLC, No. 3:14-CV-2689-N, 2015 WL 11120873, at *2 (N.D. Tex. Jan. 9, 2015)) existed.

The Motion to Remand was denied by Order dated February 3, 2022. On February 9, 2022, Boomerjack's filed a Stipulation of Voluntary Dismissal, ending the lawsuit.

The Order denying remand can be read here.
The Stipulation for Dismissal can be read here.