Mobile Association of Retarded Citizens, Inc. v. Arch Insurance Group Inc. et al

Filing 32

ORDER ADOPTING 21 REPORT AND RECOMMENDATION with additional discussion & finds that Arch's removal of the case is time-barred as set out. MARC's 12 MOTION to Remand is GRANTED. Signed by Judge Callie V. S. Granade on 11/22/2013. (tot)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
MOBILE ASSOCIATION FOR
RETARDED CITIZENS, INC.,
Plaintiff,
vs.
ARCH INSURANCE GROUP,
INC., et al.,
Defendants.

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) Civil Action No. 13-0394-CG
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ORDER

This matter is before the court on the Report and Recommendation of
the Magistrate Judge (Doc. 21). Also before the court is the Defendants Arch
Insurance Group, Inc.’s and Arch Insurance Co.’s (collectively, “Arch”)
objection to the Report and Recommendation (Doc. 22) and the Plaintiff
Mobile Association for Retarded Citizens, Inc.’s (“MARC”) response (Doc. 25).
The Magistrate Judge summarized the factual background of the case
in his Report and Recommendation and the court will not duplicate those
efforts here. See Doc. 21 at 1-5. The Magistrate Judge recommended that
MARC’s motion to remand (Doc. 12) be granted. Specifically, the Magistrate
Judge determined that removal was untimely because Arch failed to file a
notice of removal within thirty days of the date the initial pleading was filed.
See 28 U.S.C. § 1446(b).
After due and proper consideration of all portions of this file deemed

relevant to the issue raised, and a de novo determination of those portions of
the recommendation to which objection is made, the Report and
Recommendation of the Magistrate Judge made under 28 U.S.C. §
636(b)(1)(B) is ADOPTED as the opinion of this Court, with the following
additional discussion.
DISCUSSION
Arch argues that they were unaware that the case was removable until
they received MARC’s motion for entry of default judgment, which revealed
that the amount of damages claimed by MARC exceeded the federal
jurisdictional threshold of $75,000 for diversity cases. Section1446(b)
describes the time limit for removal:
(1) The notice of removal of a civil action or
proceeding shall be filed within 30 days after the
receipt by the defendant, through service or
otherwise, of a copy of the initial pleading setting
forth the claim for relief upon which such action or
proceeding is based, or within 30 days after the
service of summons upon the defendant if such
initial pleading has then been filed in court and is
not required to be served on the defendant,
whichever period is shorter.
….
(3) [I]f the case stated by the initial pleading is not
removable, a notice of removal may be filed within
thirty days after receipt by the defendant, through
service or otherwise, of a copy of an amended
pleading, motion, order or other paper from which
it may first be ascertained that the case is one
which is or has become removable.
See 28 U.S.C. § 1446(b). As reflected in the Report and Recommendation,
authorities are split on the issue of whether a pre-suit document can serve as

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notice of a claim’s value so as to trigger the thirty-day period set forth in 28
U.S.C. § 1446(b), with the Eleventh Circuit having not yet addressed the
issue.
The weight of authority, including all Circuit Courts of Appeal to rule
on the matter, applies the bright line rule set forth in Chapman v.
Powermatic, Inc., 969 F.2d 160 (5th Cir. 1992). See Lovern v. General Motors
Corp., 121 F.3d 160 (4th Cir. 1997); Harris v. Bankers Life and Cas. Co., 425
F.3d 689 (9th Cir. 2005); Foster v. Mutual Fire, Marine & Inland Ins. Co., 986
F.2d 48 (3rd Cir. 1993). In Chapman, the court adopted a rule that pre-suit
documents received by the defendant do not trigger the running of the thirtyday removal period, concluding that this rule “promotes certainty and judicial
efficiency by not requiring courts to inquire into what a particular defendant
may or may not subjectively know.” Chapman, 969 F.2d. at 163. Rather, the
thirty-day removal period “starts to run from the receipt of the initial
pleading only when the initial pleading affirmatively reveals on its face that
the plaintiff is seeking the jurisdictional amount.” Id. at 160. District Courts
have also warned, however, against converting the Chapman rule into a
“head in the sand” rule. Evett v. Consolidated Freightways Corp., 110
F.Supp.2d 510, 513 (E.D. Texas 2000) (finding that the Chapman rule does
not mandate “rigid adherence to some kind of formalistic pleading
requirement,” but “merely requires that a state court complaint be
sufficiently definite on its face to enable defendants to ascertain removability

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without reliance on speculation or conjecture”). See Wise v. Bayer, 281
F.Supp.2d 878, 885 (W.D. La. 2003) (citing Century Assets Corporation v.
Solow, 88 F.Supp.2d 659, 662-663 (E.D. Tex. 2000); Oracle Oil, LLC v.
Liberty Mut. Ins. Co., 2010 WL 5575758, * 4 (M.D. La. Nov. 22, 2010); Schild
v. Tymco, Inc. 842 F.Supp. 225, 226 (M.D. La. 1994).
The Magistrate Judge declined to adopt the majority view instead
relying to a large extent upon the case of Miekle v. Allstate Ins. Co., 472
F.Supp. 851 (D.C. Mich. 1979), which held that the thirty-day removal period
begins to run from the receipt of the complaint when pre-litigation documents
put the defendant on notice that the claim meets the jurisdictional amount.
Id. at 853. Applying this standard, the Magistrate Judge found that the
thirty-day removal period began running from Arch’s receipt of the complaint
because a Proof of Loss statement and correspondence regarding the IRS
claims, which were submitted to Arch approximately one to two years before
the complaint was filed, notified Arch that MARC was seeking damages well
in excess of $75,000. See Doc. 21 at 11.
Arch argues that the Magistrate Judge’s reliance on the holding of
Miekle was misplaced. However, even assuming for the purpose of the
argument that Arch is correct, removal would still be proper under the “head
in the sand” interpretation of the Chapman test. Wise, 281 F.Supp.2d at 885
(refusing to convert the Chapman “bright line rule into a “head in the sand”
rule and holding that removal was untimely when the defendants knew that

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the potential value of the case exceed the jurisdictional minimum at the time
the initial pleading was filed).
Although Arch asserts that the grounds for removal were ambiguous,
the record reflects otherwise. MARC filed the complaint against Arch
asserting claims for breach of contract, negligence, and negligent and/or
wanton hiring, training, supervision and retention. See Doc. 1-1. The
complaint explicitly referenced the two insurance policies as well as the
policy numbers from which MARC sought recovery and the IRS’ suit against
MARC’s director for recovery of unpaid payroll taxes. Id. The complaint also
sought judgment “in such an amount of compensatory damages as a jury
deems reasonable.” Id. These allegations are sufficient to alert Arch that the
amount in controversy is satisfied in this matter. Id.
The “head in the sand” theory is also supported by the fact that unlike
the cases relied upon by Arch, Arch showed no interest in ascertaining the
specific amount of damages sought. See Chapman, 968 F.2d. at 161
(removing the case after the plaintiff responded to interrogatories that he
sought over $800,000 in damages); Lovern, 121 F.3d at 160 (removing the
case after receipt of answers to interrogatories demonstrating diverse
citizenship); Harris, 425 F.3d at 692 (removing the case after inquiring
whether the plaintiff intended to pursue service against a non-diverse
defendant); Village Square Condominium of Orlando, Inc. v. Nationwide Mut.
Fire. Ins. Co., 2009 WL 4855700, * 1 (M.D. Fla. Dec. 10, 2009) (removing the

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case after receiving the plaintiff’s interrogatory answers stating the specific
amount of damages sought). Arch “did nothing for more than two months
until after MARC filed a Motion for Entry of Default at which time they
removed this action.” (Doc. 21 at 11). As explained by the Magistrate Judge,
Arch should not be allowed “to ignore documents within its possession and
claim ignorance in order to avail itself of this Court’s jurisdiction.” (Doc. 21 at
12).
Consequently, the court finds Arch’s removal of the case untimely
when applying the Miekle rule or Chapman rule.
CONCLUSION
For the reasons stated above, the Magistrate Judge’s report and
recommendation (Doc. 21) is ADOPTED with the additional discussion
provided supra, and finds Arch’s removal of the case time-barred. It is
ORDERED that MARC’s motion to remand (Doc. 12) be GRANTED.
DONE and ORDERED this 22nd day of November, 2013 .
/s/ Callie V. S. Granade
UNITED STATES DISTRICT JUDGE

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