dela Fuente et al v. Humana Insurance Company

Filing 12

ORDER, denying Plaintiffs' 7 Motion to Remand; denying Plaintiffs' Request for Attorneys' Fees. Signed by Judge James A Teilborg on 9/13/11.(REW)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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DELA)
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Plaintiffs,
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vs.
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HUMANA INSURANCE COMPANY, a)
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foreign insurer,
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Defendant.
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DOMINIC and HEATHER
FUENTE, husband and wife,

No. CV-11-0700-PHX-JAT
ORDER

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Currently before the Court is Plaintiffs Dominic and Heather dela Fuente’s Motion
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to Remand. (Doc. 7.1) Defendant Humana Insurance Company filed a Response on May 5,

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2011. (Doc. 9.) Plaintiffs filed a Reply on May 18, 2011. (Doc. 10.) For the reasons that
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follow, the Court denies Plaintiffs’ Motion to Remand.
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I.

Background

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Plaintiffs Dominic and Heather dela Fuente, and their four children who are not
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named as plaintiffs in this matter, received health insurance coverage from Defendant
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beginning on May 2, 2008. Plaintiffs allege that their son, Cody dela Fuente, was injured in
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a serious car accident and had to receive emergency treatment and several surgical
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procedures. Plaintiffs allege that Defendant assured them that the doctors performing the
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surgical procedures were network providers under Defendant’s plan. However, Plaintiffs
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All Documents are in CV 11-0700 unless otherwise indicated.

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subsequently received several notifications from Defendant stating that the doctors who

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performed the procedures were not network providers. As such, Plaintiffs allege that

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Defendant breached their contract by refusing to provide insurance coverage.

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On August 9, 2010, Plaintiffs commenced this action in Maricopa County Superior

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Court. (Doc. 1 in CV 10-2210, Ex. 1, Complaint.) In the Complaint, Plaintiffs allege breach

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of contract and breach of good faith and fair dealing. (Id.) Plaintiffs seek actual, general,

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and consequential damages, as well as punitive damages and reasonable attorneys’ fees and

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costs. (Compl., 9:3–7.)

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On October 15, 2010, Defendant removed the case to this Court based on diversity

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jurisdiction. (Doc. 1 in CV 10-2210.) Plaintiffs filed a timely motion to remand claiming

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this Court lacked subject matter jurisdiction because Defendant had not provided sufficient

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evidence to establish that the amount in controversy exceeded $75,000. (Doc. 8 in CV 10-

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2210.) Defendant argued that the amount in controversy requirement was met by Plaintiffs’

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claim of actual damages, consequential damages, punitive damages, attorneys’ fees, and

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Plaintiffs’ concession that damages exceeded $50,000. (Doc. 10 in CV 10-2210.) On

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February 17, 2011, this Court granted Plaintiffs’ Motion to Remand. (Doc. 12 in CV 10-

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2210.)

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On April 4, 2011, Defendant removed the case to this Court for the second time.

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(Doc. 1.) Plaintiffs filed a timely motion to remand claiming, once again, that this Court

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lacks subject matter jurisdiction because Defendant has failed to prove that the amount in

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controversy exceeds $75,000. (Doc. 7 at 4.) Defendant claims that after this Court remanded

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the case back to Maricopa County Superior Court, the parties initiated settlement discussions.

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(Doc. 1 at 6.) Defendant argues that the amount in controversy requirement has been met by

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the Plaintiffs’ opening settlement offer of $135,000, which Defendant claims Plaintiffs admit

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to making since this Court’s initial remand. (Doc. 9 at 2.)

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II.

Legal Standard

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Pursuant to 28 U.S.C. § 1332, “district courts shall have original jurisdiction of all

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civil actions where the matter in controversy exceeds the sum or value of $75,000,
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exclusive of interests and costs, and is between . . . citizens of different States[.]”

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28 U.S.C. § 1332(a)(1).

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The removal statute, 28 U.S.C. § 1441, provides, in pertinent part: “any civil action

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brought in a State court of which the district courts of the United States have original

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jurisdiction, may be removed by the defendant . . . to the district court of the United States

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for the district and division embracing the place where such action is pending.” 28 U.S.C.

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§ 1441(a); see Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987) (“Only . . . actions that

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originally could have been filed in federal court may be removed to federal court by the

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defendant.”). Courts strictly construe the removal statute against removal jurisdiction. See

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Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108–09 (1941); Gaus v. Miles, Inc., 980

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F.2d 564, 566 (9th Cir. 1992). There is a “strong presumption” against removal, and

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“[f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal in the

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first instance.” Gaus, 980 F.2d at 566 (citing Libhart v. Santa Monica Dairy Co., 592 F.2d

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1062, 1064 (9th Cir. 1979)). “The ‘strong presumption’ against removal jurisdiction means

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that the defendant always has the burden of establishing that removal is proper.” Id. “If at

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any time before final judgment it appears that the district court lacks subject matter

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jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c).

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“In a removed case, . . . the plaintiff chose a state rather than federal forum. Because

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the plaintiff instituted the case in state court, ‘[t]here is a strong presumption that the plaintiff

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has not claimed a large amount in order to confer jurisdiction on a federal court[.]’” Singer v.

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State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 375 (9th Cir. 1997) (quoting St. Paul Mercury

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Indem. Co. v. Red Cab Co., 303 U.S. 283, 290 (1938)). “Where the complaint does not

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demand a dollar amount, the removing defendant bears the burden of proving by a

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preponderance of the evidence that the amount in controversy exceeds [$75,000].” Id. at 376

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(citing Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996)). “Under this

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burden, the defendant must provide evidence establishing that it is ‘more likely than not’ that

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the amount in controversy exceeds [$75,000].” Sanchez, 102 F.3d at 404. “[R]emoval

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‘cannot be based simply upon conclusory allegations’ where the [complaint] is silent” as to
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the dollar amount of damages the plaintiff seeks. Singer, 116 F.3d at 377 (quoting Allen v.

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R&H Oil & Gas Co., 63 F.3d 1326, 1335 (5th Cir. 1995)).

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III. Analysis

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Plaintiffs’ Complaint does not demand a specific dollar amount in damages. Defendant

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therefore bears the burden of proving by a preponderance of the evidence that the amount in

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controversy exceeds $75,000. Id. at 376. Defendant cannot base removal upon conclusory

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allegations, Sanchez, 102 F.3d at 404, but rather must prove the facts to support the

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jurisdictional amount. Gaus, 980 F.2d at 566–67. Defendant claims that Plaintiffs’

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settlement offer of $135,000 represents new and different grounds for removal and is

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sufficient evidence to satisfy Defendant’s burden of establishing that removal is proper.

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(Doc. 1 at 6–7.)

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The Ninth Circuit has held that “[a] settlement letter is relevant evidence of the amount

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in controversy if it appears to reflect a reasonable estimate of the plaintiff’s claim.” Cohn

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v. Petsmart, Inc., 281 F.3d 837, 840 (9th Cir. 2002). Although the parties agree that Cohn

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is the decisive authority, they disagree regarding the requirements that must be satisfied in

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order for a settlement offer to represent relevant evidence of the amount in controversy.

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Plaintiffs incorrectly assert that a proper settlement letter is required for an offer of

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settlement to be used to prove the amount in controversy. (Doc. 7 at 5.) Although Cohn’s

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holding includes the language “settlement letter,” it is unlikely that the court intended to

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make that a requirement. Two cases that the court relied on in its holding support this

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conclusion. See Chase v. Shop ‘N Save Warehouse Foods, Inc., 110 F.3d 424, 428–30 (7th

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Cir. 1997) (holding that a settlement offer is properly consulted in determining “plaintiffs

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assessment of the value of her case”) (emphasis added); Burns v. Windsor Ins. Co., 31 F.3d

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1092, 1097 (11th Cir. 1994) (holding that although not determinative, a settlement offer

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“counts for something”) (emphasis added). Accordingly, a settlement offer can be used as

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evidence of the amount in controversy, even if it is not embodied in a formal settlement

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letter.

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Plaintiffs also incorrectly assert that in order for a settlement letter to be considered
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relevant evidence of the amount in controversy, it must contain more than a mere dollar

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amount. (Doc. 10 at 4.) The only requirement that Cohn specifies is that the settlement offer

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appear “to reflect a reasonable estimate of the plaintiff’s claim.” 281 F.3d at 840. Plaintiffs

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have not demonstrated that there are any additional requirements for a settlement letter to be

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used as evidence of the amount in dispute. In fact, the Ninth Circuit has said that the amount

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in controversy may even be proven by an imprecise settlement letter. Babasa v. Lenscrafters,

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Inc., 498 F.3d 972, 975 (9th Cir. 2007).

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As in Babasa, Plaintiffs’ settlement offer does not stand alone. Id. Here, Defendant’s

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initial Response in Opposition to Plaintiffs’ Motion to Remand presented a five element

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argument that the amount in controversy exceeded $75,000. (Doc. 10 in CV 10-2210 at 4)

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(arguing that the compulsory arbitration certificate, actual damages, punitive damages,

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attorneys’ fees and Plaintiffs’ failure to indicate an amount less than $75,000, lead to the

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conclusion that the amount in controversy has been proven). Although Plaintiff correctly

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asserts that the Court will not reconsider an issue that has already been decided (Doc. 7 at 4),

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nothing bars the Court from considering Defendant’s former arguments in light of its new

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and different grounds for removal. Therefore, taking into account Defendant’s five element

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argument, Plaintiffs’ settlement offer of $135,000 appears to reflect a reasonable estimate of

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Plaintiffs’ claim.

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Defendant correctly asserts that courts have relied heavily on a plaintiff’s failure to

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disavow the offered settlement amount. See Cohn, 281 F.3d at 840 (“[Plaintiff] could have

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argued that the demand was inflated and not an honest assessment of damages, but he made

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no attempt to disavow his letter or offer contrary evidence.”); Krajca v. Southland Corp., 206

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F. Supp. 2d 1079, 1082 (D. Nev. 2002) (“Plaintiffs . . . do not claim that the settlement letter

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inflated damages or is otherwise incorrect.”). Although neither dispositive nor obligatory,

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Plaintiffs’ failure to disavow the offered settlement amount is another reason why their

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settlement offer “appears to reflect a reasonable estimate of the Plaintiff[s’] claim.” Cohn,

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281 F.3d at 840. As a result, Defendant has proven by a preponderance of the evidence that

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the amount in controversy exceeds $75,000.
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IV. Motion for Attorneys’ Fees

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Federal Rule of Civil Procedure 11 justifies sanctions “when a filing is frivolous,

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legally unreasonable, or without factual foundation, or is brought for an improper purpose.”

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Estate of Blue v. County of L.A., 120 F.3d 982, 985 (9th Cir. 1997). A “frivolous” filing is

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one that is “both baseless and made without a reasonable and competent inquiry.” Townsend

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v. Holman Consulting Corp., 929 F.2d 1358, 1362 (9th Cir. 1990). Prior to filing a

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complaint, an attorney has a duty to conduct a reasonable factual investigation and to perform

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adequate legal research that confirms whether the theoretical basis of the complaint is

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“warranted by existing law or a good faith argument for an extension, modification or

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reversal of existing law.” Christian v. Mattel, Inc., 286 F.3d 1118, 1127 (9th Cir. 2002)

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(quoting Golden Eagle Distrib. Corp. v. Burroughs Corp., 801 F.2d 1531, 1537 (9th Cir.

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1986)); Fed. R. Civ. P. 11(b)(2).

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Obviously, given the Court’s ruling on the Motion to Remand, Plaintiffs have failed

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to show that Defendant was legally unreasonable or that it acted for an improper purpose

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when it removed. Accordingly, Plaintiffs are not entitled to attorneys’ fees.

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Based on Cohn’s holding that a settlement letter is relevant evidence of the amount in

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controversy, and considering the evidence presented, the Court concludes that Defendant has

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met its burden to prove by a preponderance of the evidence that the amount in controversy

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exceeds the jurisdictional threshold of $75,000.

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Accordingly,

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IT IS ORDERED that Plaintiffs’ Motion to Remand (Doc. 7) is DENIED.

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IT IS FURTHER ORDERED that Plaintiffs’ request for attorneys’ fees is DENIED.

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DATED this 13th day of September, 2011.

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