Grady et al v. USAA Casualty Insurance Company

Filing 22

ORDER: IT IS ORDERED that this action is dismissed for lack of subject matter jurisdiction. Signed by Judge David G Campbell on 9/22/2016. (REK)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Michael P. Grady, et al., Plaintiffs, 10 11 12 13 No. CV16-00785-PHX-DGC ORDER vs. USAA Casualty Insurance Company, Defendant. 14 15 The Court has subject matter jurisdiction over cases in which the parties are 16 diverse and the amount in controversy exceeds $75,000. 28 U.S.C. § 1332. Plaintiffs 17 allege generally that the amount in controversy requirement is satisfied in this case 18 (Doc. 1, ¶ 3), but the Court does not agree. 19 “Federal courts are courts of limited jurisdiction. They possess only that power 20 authorized by Constitution and statute[.]” Kokkonen v. Guardian Life Ins. Co. of Am., 21 511 U.S. 375, 377 (1994). “The party asserting jurisdiction has the burden of proving all 22 jurisdictional facts.” Indus. Tectonics, Inc. v. Aero Alloy, 912 F.2d 1090, 1092 (9th Cir. 23 1990) (citing McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 189 (1936)); see 24 Fenton v. Freedman, 748 F.2d 1358, 1359, n.1 (9th Cir. 1984). Courts must presume a 25 lack of jurisdiction until the plaintiff proves otherwise. Kokkonen, 511 U.S. at 377. 26 Defendant insured Plaintiffs’ home, which suffered water damage in 2011. The 27 loss was calculated at an amount of $44,829.77 – an amount Plaintiffs do not dispute. 28 Because Plaintiffs’ home was subject to a security interest held by a mortgage lender, and 1 the insurance policy provided that payments could be made to such lenders, Defendant 2 issued the water-damage check jointly to Plaintiffs and the lender on several different 3 occasions. Plaintiffs and the lender did not cash the checks. 4 Eventually, Plaintiffs’ home was sold in a trustee’s sale and the lender acquired 5 the home by making a credit bid. In June 2014, Judge Teilborg of this Court ruled that 6 the lender was foreclosed by the credit bid from collecting any additional amount on the 7 debt. Plaintiffs’ counsel conceded during a hearing before this Court on September 21, 8 2016, that the ruling by Judge Teilborg said nothing about the lender’s rights to the 9 insurance proceeds because that issue was not before him. Plaintiffs nonetheless claim 10 that the ruling foreclosed the insurer’s rights under the insurance policy and Defendant 11 therefore should have reissued the water-loss check solely to them. They assert that 12 Defendant engaged in bad faith when it failed to do so. 13 Plaintiffs filed for bankruptcy in July 2015. During that proceeding, the 14 bankruptcy trustee accepted full payment of the $44,829.77 from Defendant, with the 15 knowledge and consent of Plaintiffs, and applied the funds to Plaintiffs’ benefit in the 16 bankruptcy proceeding. Plaintiffs nonetheless have sued Defendant in this case for 17 breach of contract. Plaintiffs’ counsel explained during the hearing that they do not seek 18 to recover the $44,829.77 owed under the policy because that amount has already been 19 paid. Plaintiffs instead seek to recover other damages they suffered by being denied 20 payment of the $44,829.77 after Judge Teilborg’s ruling. 21 The Court noted during the hearing that lost use of the money from June 2014 to 22 the present would likely amount to only a few thousand dollars at today’s investment 23 rates. Plaintiffs’ counsel agreed, but said there may be other lost opportunity costs that 24 he could not identify. He admitted that such costs were “debatable.” 25 Nor have Plaintiffs identified the amount of bad faith damages they allegedly 26 incurred after Defendant failed to read Judge Teilborg’s ruling as foreclosing the 27 insurance company’s claim on the insurance proceeds. Plaintiffs’ complaint includes a 28 claim for punitive damages, but those appear to be as speculative as Plaintiffs’ other -2- 1 categories of damages. Finally, Plaintiffs seek $14,364 in attorneys’ fees. Doc. 1, ¶ 28. 2 Even if one could conclude that Defendant – which has attempted to pay the 3 undisputed amount of the water loss for years – breached its contract or engaged in bad 4 faith by failing to read Judge Teilborg’s order to resolve issues it did not address, the 5 amount of damages to Plaintiffs appears to be minimal, particularly since Defendant paid 6 the full amount of the water-loss damages to Plaintiffs’ bankruptcy trustee. In any event, 7 the damages are speculative. 8 jurisdiction until Plaintiffs prove otherwise, and Plaintiffs have failed to provide any 9 colorable basis for damages exceeding $75,000 in this case. 10 11 12 As noted above, the Court must presume a lack of IT IS ORDERED that this action is dismissed for lack of subject matter jurisdiction. Dated this 22nd day of September, 2016. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -3-

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