Welsh v. New Hampshire Insurance Company et al

Filing 14

ORDER granting 7 Plaintiff's Motion to Remand to State Court. Plaintiff's request for attorneys' fees is denied. The Clerk of the Court shall remand this action to Maricopa County SuperiorCourt. Signed by Judge James A Teilborg on 2/7/12. (Attachments: # 1 Remand Letter)(DMT)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Plaintiff,
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vs.
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New Hampshire Insurance Company,)
Specialty Risk Services, LLC (aka)
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Sedgwick Claims Mngmt Svcs Inc),
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Defendants.
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Jeremiah Welsh,

No. CV 11-2039-PHX-JAT
ORDER

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Pending before the Court is Plaintiff’s Motion to Remand (Doc. 7). The Court now

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rules on the motion.

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I.

BACKGROUND

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Plaintiff was an employee of Lowe’s Home Improvement Warehouse, Inc. (Doc. 1,

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Ex.1 at 2). While fixing a cabinet door at work, Plaintiff stood up and felt a sharp pain in his

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back. (Id. at 3). Defendants denied Plaintiff’s workers’ compensation claim, prompting

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Plaintiff to request a hearing with the Industrial Commission. (Id. at 4). The Industrial

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Commission hearings resulted in an Administrative Law Judge ordering Defendants to

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compensate the claim.

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Plaintiff commenced this action in Maricopa County Superior Court against

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Defendants, alleging two state causes of action for breach of the implied covenant of good

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faith and fair dealing and aiding and abetting. (Id. at 6–7). Plaintiff seeks compensatory

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damages, financial damages, punitive damages and attorneys’ fees, as well as costs. (Id. at

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9). Defendants filed their Notice of Removal of this action pursuant to 28 U.S.C. § 1441(b),

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claiming diversity jurisdiction pursuant to 28 U.S.C. §1332. (Doc. 1 at 2). In their Notice

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of Removal, Defendants allege that “[t]his action . . . is a civil action between citizens of

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different states and the matter in controversy exceeds the sum of $75,000.” (Id.) Both

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parties agree that the action is between citizens of different states.

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Accordingly, the Court must determine whether Defendants have established the requisite

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amount in controversy for this Court to have subject matter jurisdiction.

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II.

(Doc. 8 at 2).

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: “[A]ny 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). 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). “The ‘strong presumption’ against removal jurisdiction means

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that the defendant always has the burden of establishing that removal is proper.” Gaus, 980

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F.2d at 566 (citing Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 1979).)

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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, ‘there 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

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376. “Under this burden, the defendant must provide evidence establishing that it is ‘more

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likely than not’ that the amount in controversy exceeds [$75,000].” Sanchez v. Monumental

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Life Insurance Co., 102 F.3d 398, 404 (9th Cir. 1996). “[R]emoval ‘cannot be based simply

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upon conclusory allegations’ where the [complaint] is silent” as to the dollar amount of

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damages the plaintiff seeks. Singer, 116 F.3d at 377 (citing Allen v. R&H Oil & Gas Co., 63

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F.3d 1326, 1335 (5th Cir. 1995)). However, the inquiry into the amount in controversy is not

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confined to the face of the complaint. Valdez v. Allstate Ins. Co., 372 F.3d 1115, 1117 (9th

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Cir. 2004).

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III.

ANALYSIS

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Plaintiff has not demanded a dollar amount in his complaint. Accordingly, it is

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Defendants’ burden to prove by a preponderance of the evidence that the amount in

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controversy exceeds $75,000. Singer, 116 F.3d at 376. Defendant may not rely upon

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conclusory allegations, but may submit summary-judgment-type evidence. Valdez, 372 F.3d

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at 1117.

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Defendants submitted four pieces of evidence to support their assertion that the

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amount in controversy is greater than $75,000. (Doc. 8 at 3-5). First, Defendants requested

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that the parties agree to limit damages to no more than $75,000 in exchange for Defendants’

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stipulation to remand this case. (Id.) Plaintiff did not agree. (Id.) Second, Plaintiff certified

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that the claim is not subject to compulsory arbitration because the amount in controversy

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exceeded $50,000. (Id. at 3). Third, Defendants claim that punitive damages could be “a

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significant amount easily satisfying the jurisdictional requirements.” (Id. at 4). Finally,

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Plaintiff has requested attorneys’ fees, which Defendants claim will likely exceed $25,000.

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(Id.) In sum, Defendants argue that Plaintiff’s certification that the amount in controversy

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exceeds $50,000, in addition to the potential punitive damages and attorneys’ fees establish

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that the jurisdictional requirement is met. (Id.)

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Defendants have not satisfied their burden in demonstrating that the amount in

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controversy meets the $75,000 requirement. Although Plaintiff’s certificate regarding
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compulsory arbitration is undisputed, it estimates that the amount in controversy is at least

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$50,000. Defendants’ statements that attorneys’ fees and punitive damages make up the

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remaining $25,000 are unsupported by further evidence. Also, a lack of agreement between

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the parties to limit damages to $75,000 is not conclusive.

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A.

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Defendants correctly assert that the certification that the amount in controversy

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exceeds $50,000 can be included in calculating the total amount in controversy. Ansley v.

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Metro. Life Ins. Co., 215 F.R.D. 575, 578 (D. Ariz. 2003); cf. Singer, 116 F.3d at 376 (district

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judge has discretion to accept plaintiff’s admission as to the amount in controversy). Plaintiff

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concedes that the $50,000 certification is an estimate only and does not prove that damages

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will exceed $75,000. The Court agrees. See Ferguson v. First Am. Specialty Ins. Co., No.

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CV 09-01581-PHX-JAT, 2009 WL 4154653, at *3 (D. Ariz. Nov. 23, 2009) (stating “the

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certificate regarding compulsory arbitration does nothing more than establish that the amount

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in controversy is likely more than $50,000”). Thus, the certification only demonstrates that

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the amount in controversy is at least $50,000.

Arbitration Certificate

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B.

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Defendants are also correct that attorneys’ fees may be included in the amount in

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controversy when a statute authorizes those fees. Galt G/S v. JSS Scandinavia, 142 F.3d

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1150, 1156 (9th Cir. 1998). Under Arizona law, attorneys’ fees for actions arising out of

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contract, including those incurred pursuing a bad faith action, may be awarded to a successful

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litigant. Noble v. Nat’l Am. Life Ins. Co., 624 P.2d 866, 868 (D. Ariz. 1981).

Attorneys’ Fees

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Defendants argue that “it is highly likely that Plaintiff will incur well over $25,000.00

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in attorneys’ fees.” (Doc. 8 at 4). Defendants offer no other evidence to substantiate their

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statement and a statement of mere opinion is speculative. See Burk v. Med. Sav. Ins. Co., 348

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F. Supp. 2d 1063, 1068 (D. Ariz. 2004); Ferguson, 2009 WL 4154653, at *3 (stating that an

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affidavit estimating the attorneys fees is too speculative to be used in calculating the amount

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in controversy). As a result, this statement cannot support a finding that the attorneys’ fees

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would sufficiently increase the amount in controversy.
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C.

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Punitive damages, recoverable under law, may be included in computing the amount

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in controversy. Gibson v. Chrysler Corp., 261 F.3d 927, 945 (9th Cir. 2001); Ferguson,

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2009 WL 4154653, at *4. Under Arizona law, punitive damages may be awarded in bad

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faith insurance cases. Filasky v. Preferred Risk Mut. Ins. Co., 734 P.2d 76, 83 (Ariz. 1987).

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“However, the mere possibility of a punitive damages award is insufficient to prove that the

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amount in controversy requirement has been met.” Burk, 348 F. Supp. 2d at 1069 (citing

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Surber v. Reliance Nat’l Indem. Co., 110 F. Supp. 2d 1227, 1232 (N.D. Cal. 2000)). To

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show that the claim for punitive damages establishes that it is more likely than not that the

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amount in controversy exceeds $75,000, Defendants must present appropriate evidence. Id.

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(citing McCaa v. Mass. Mut. Life Ins. Co., 330 F. Supp. 2d 1143, 1149 (D. Nev. 2004)).

Punitive Damages

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Defendants argue punitive damages “could likely be a significant amount easily

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satisfying the jurisdictional requirements.” (Doc. 8 at 4). Defendants cite Sanchez, to state

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that if bad faith is shown, punitive damages will likely be a significantly large amount of

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money. (Id.) However, Sanchez is inapposite because it discusses trebling punitive damages

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per a California statute in regard to “unfair or deceptive practices against senior citizens or

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disabled persons.” 102 F.3d at 405. In addition, in Sanchez, the Ninth Circuit Court of

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Appeals vacated the district court’s judgment and remanded the case with instructions to

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remand to the state court because defendant did not establish that the amount in controversy

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exceeded the requirement. Id. at 406. Defendants offer no other support that possible

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punitive damages in this case would satisfy the jurisdictional requirement for the amount in

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controversy.

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D.

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Defendants’ last argument is that Plaintiff’s refusal to stipulate to limit damages is

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direct evidence that Plaintiff is seeking over $75,000 in damages. Such evidence can be

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considered in determining the amount in controversy. See Ansley, 215 F.R.D. at 578; see

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also, Del Real v. Healthsouth Corp., 171 F. Supp. 2d 1041, 1043 (D. Ariz. 2001). However,

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such evidence is not conclusive in establishing that the amount in controversy is greater than

$75,000 Agreement

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$75,000.

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The Court is not persuaded by Defendants’ argument that Plaintiff tacitly admitted to

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seeking damages in excess of $75,000 by requesting Defendant stipulate that they owe a

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minimum of $75,000.

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IV.

CONCLUSION

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The Defendants have not met their burden to show that the amount in controversy

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exceeds the jurisdictional requirement of $75,000. The arbitration certificate suggests that

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the amount in controversy exceeds $50,000, but the conclusory allegations that punitive

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damages, attorneys’ fees, and failure to jointly agree to limit damages have not persuaded the

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Court that the amount in controversy exceeds $75,000. Therefore, Plaintiff’s Motion to

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Remand is granted.

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V.

ATTORNEYS’ FEES

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Plaintiff requests attorneys’ fees pursuant to 28 U.S.C. § 1447(c) because Plaintiff

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claims Defendants did not have an “objectively reasonable basis” for removal. Although the

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Court is granting the motion to remand, Defendants had an objectively reasonable argument

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for removal. The complaint does not request a specific amount of damages and it is

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objectively reasonable to argue that attorneys’ fees and punitive damages from claims of

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breach of the implied covenant of good faith and fair dealing and aiding and abetting satisfy

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the jurisdictional requirements. Therefore, Plaintiff’s request for attorneys’ fees is denied.

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Accordingly,

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IT IS ORDERED that Plaintiff’s request for attorneys’ fees is DENIED.

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IT IS FURTHER ORDERED that Plaintiff’s Motion to Remand (Doc. 7) is

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GRANTED. The Clerk of the Court shall remand this action to Maricopa County Superior

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Court.

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DATED this 7th day of February, 2012.

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