Proctor et al v. Homesite Indemnity Company et al

Filing 17

ORDER that the Clerk shall remand this action to state court. Signed by Judge David G Campbell on 12/8/2008. (Attachments: # 1 Remand Letter)(LAD)

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

) ) ) Plaintiffs, ) ) vs. ) Homesite Indemnity Company, a foreign ) ) corporation, ) ) Defendant. ) Gerard Proctor; and Barbara Proctor,

No. CV-08-1910-PHX-DGC ORDER

At the case management conference held on December 4, 2008, the Court raised the issue of whether federal subject matter jurisdiction exists in this case. The Court discussed the issue with the parties and requested additional information concerning the timing of payments in this case. As explained below, the Court concludes that federal subject matter jurisdiction is lacking and that the case must be remanded to state court. Plaintiffs filed a complaint against Defendant in Arizona state court on September 16, 2008. The complaint asserts a breach of contract claim and a bad faith tort claim. Plaintiffs seek compensatory and punitive damages. Dkt. #1-2. Defendant removed the action to this Court on October 17, 2008. Dkt. #1. Defendant asserts in its notice of removal that the Court has subject matter jurisdiction under 28 U.S.C. § 1332 because the parties are diverse and the matter in controversy exceeds the jurisdictional amount of $75,000 given that the breach of contract claim alone included $212,000 in damages. Id. at 2. The parties' joint case management report revealed that Defendant has paid Plaintiffs a portion of their contractual damages. Dkt. #13 at 4-5.

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Because diversity jurisdiction must be analyzed based on the amount in controversy at the time of removal, see Sparta Surgical Corp. v. Nat'l Ass'n of Sec. Dealers, Inc., 159 F.3d 1209, 1212-13 (9th Cir. 1998), the Court inquired at the case management conference as to when the contractual damages were paid. Following the conference, Defendant informed the Court that it had paid $202,000 in contractual damages on October 15, 2008 ­ two days before removal. Defendant further stated that it intends to make a supplemental payment of $16,000. Any civil action brought in state court over which the federal district courts have original jurisdiction may be removed to the federal district court for the district where the action is pending. 28 U.S.C. § 1441(a). Courts strictly construe the statute against removal jurisdiction. See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). Indeed, there is a "strong presumption" against removal and "[f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Id. "The `strong presumption' against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper." Id. "If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c). The complaint in this case does not demand a dollar amount. Dkt. #1-2. Defendant therefore "bears the burden of establishing, by a preponderance of the evidence, that the amount in controversy exceeds [$75,000]." Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996); see Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003). To meet its burden, Defendant "must provide evidence establishing that it is `more likely than not' that the amount in controversy exceeds [$75,000]." Id.; see Gaus, 980 F.2d at 566-67 ("If it is unclear what amount of damages the plaintiff has sought, . . . then the defendant bears the burden of actually proving the facts to support jurisdiction, including the jurisdictional amount.") (emphasis in original); McNutt v. GM Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936) ("[T]he court may demand that the party alleging jurisdiction justify his allegations by a preponderance of evidence."). /// -2-

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When the case was removed to this Court on October 17, 2008, Defendant had paid Plaintiff most of what was owed for contractual damages. At the case management conference, counsel for Defendant stated that removal was proper in light of the bad faith claim and the request for punitive damages. Counsel explained that punitive damages could be several multiples of the contractual damages and emotional distress damages could also be awarded on the bad faith claim. An attorneys' fees recovery is also possible. Such possibilities "neither overcome[] the `strong presumption' against removal jurisdiction, nor satisf[y] [Defendant's] burden of setting forth . . . the underlying facts supporting its assertion that the amount in controversy exceeds [$75,000]." Gaus, 980 F.2d at 567 (emphasis in original); see Matheson, 319 F.3d at 1090-91 ("Conclusory allegations as to the amount in controversy are insufficient."); Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 375 (9th Cir. 1997) (removal "`cannot be based simply upon conclusory allegations' where the [complaint] is silent" as to the amount of damages) (citation omitted); Valdez v. Allstate Ins. Co., 372 F.3d 1115, 1116-17 (9th Cir. 2004) (removal cannot be based upon mere "information and belief" that the amount in controversy exceeds $75,000); see also Haisch v. Allstate Ins. Co., 942 F. Supp. 1245, 1249 (D. Ariz. 1996) ("It would be inherently speculative for this Court to conclude that the amount in controversy requirement can be met by simply asserting that large punitive damages have been awarded in the past against insurance companies . . . . Defendant has failed to articulate why the particular facts that are alleged in the instant action might warrant extraordinary punitive damages."). Because the amount-in-controversy requirement has not been met, federal subject matter jurisdiction is lacking. The Court accordingly will remand this matter to state court. See 28 U.S.C. § 1447(c); Valdez, 372 F.3d at 1118 ("If the district court determines that it is sufficiently doubtful that the amount-in-controversy requirement has been met and thus that federal subject matter jurisdiction is lacking, the district court should . . . remand to state court."); Matheson, 319 F.3d at 1090 ("Where doubt regarding the right to removal exists, a case should be remanded to state court."); Sanchez, 102 F.3d at 406 (directing the district court to remand to state court where the defendant had failed to establish the jurisdictional -3-

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amount by a preponderance of the evidence). IT IS ORDERED that the Clerk shall remand this action to state court. DATED this 8th day of December, 2008.

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