Hoarau v. Safeco Insurance Company of America

Filing 20

ORDER: IT IS ORDERED denying 9 Plaintiff's Motion to Remand. (See attached Order for details). Signed by Judge John J Tuchi on 8/4/17.(JAMA)

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NOT FOR PUBLICATION

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Ziva Hoarau,

No. CV-17-01594-PHX-JJT
Plaintiff,

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v.

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Safeco Insurance Company of America,

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ORDER

Defendant.

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At issue is Plaintiff’s Motion to Remand (Doc. 9, MTR), to which Defendant filed

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a Response (Doc. 12, Resp.) and Plaintiff filed a Reply (Doc. 18, Reply). The Court has

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reviewed these documents, the evidence and citations Defendant and Plaintiff have

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provided, Defendant’s Notice of Removal (Doc. 1, Notice of Removal), and Plaintiff’s

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Complaint (Doc. 1, Ex. B., Compl.), and finds that Defendant has shown by a

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preponderance of the evidence that the amount in controversy exceeds $75,000. The

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Court will therefore deny Plaintiff’s Motion to Remand.

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I.

BACKGROUND

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On or about August 8, 2014, a windstorm occurred that caused significant damage

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to the residence and rental property of Plaintiff Ziva Hoarau (“Hoarau”). (Compl. ¶ 10.)

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Hoarau’s residence was insured by Defendant Safeco Insurance Company of America

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(“Safeco”) under a landlord protection policy. (Compl. ¶ 11.) Hoarau submitted a claim

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to Safeco regarding the damage to her house from the windstorm, which resulted in

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Safeco completing an inspection of the house and determining that repair costs totaled

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$6,471.56. (Compl. ¶ 19.) Hoarau did not agree with this repair valuation and hired a

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public adjuster, who determined that the replacement cost value of repairs was

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$62,332.65. (Compl. ¶¶ 22-23.) Hoarau’s tenants moved out of the house due to the

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presence of mold as a result of the water damage. (Compl. ¶ 25.) Safeco then completed

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an amended scope of loss finding that the replacement cost value of the necessary repairs

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was $11,217.96. (Compl. ¶ 26.) On January 31, 2017, Hoarau brought suit against Safeco

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in Arizona state court, alleging three claims: (1) breach of insurance contract; covenant of

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good faith and fair dealing; (2) tortious bad faith claims handling; and (3) declaratory

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judgment. Safeco then removed the action to this Court based on diversity jurisdiction.

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(Notice of Removal.) Hoarau now moves to remand, contending that the amount in

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controversy is below the jurisdictional threshold of $75,000. (MTR.)

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II.

LEGAL STANDARD

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Federal courts may exercise removal jurisdiction over a case only if subject matter

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jurisdiction exists. 28 U.S.C. § 1441(a); Valdez v. Allstate Ins. Co., 372 F.3d 1115, 1116

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(9th Cir. 2004). The removing party bears the burden of providing a signed notice of

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removal that contains a short and plain statement of the grounds for removal. 28 U.S.C.

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§ 1446(a).

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Federal courts have diversity jurisdiction over actions between citizens of different

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states where the amount in controversy exceeds $75,000, exclusive of interest and costs.

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28 U.S.C. § 1332(a). The Supreme Court has concluded that, under § 1446(a), “a

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defendant’s notice of removal need include only a plausible allegation that the amount in

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controversy exceeds the jurisdictional threshold.” Dart Cherokee Basin Operating Co. v.

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Owens, 135 S. Ct. 547, 554 (2014). “Evidence establishing the amount is required by

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§ 1446(c)(2)(B) only when the plaintiff contests, or the court questions, the defendant’s

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allegation.” Id.

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When a defendant’s assertion of the amount in controversy is challenged, then

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“both sides submit proof and the court decides, by a preponderance of the evidence,

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whether the amount-in-controversy requirement has been satisfied.” Dart Cherokee

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Basin, 135 S. Ct. at 554. The Ninth Circuit Court of Appeals has noted that the Supreme

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Court did not decide the procedure for each side to submit proof, leaving district courts to

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set such procedure. See Ibarra v. Manheim Inv., 775 F.3d 1193, 1199-1200 (9th Cir.

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2015) (citing Dart Cherokee Basin, 135 S. Ct. at 554). “[E]vidence may be direct or

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circumstantial,” and “a damages assessment may require a chain of reasoning that

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includes assumptions.” Id. at 1199. “When this is so, those assumptions cannot be pulled

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from thin air but need some reasonable ground underlying them.” Id. Courts may

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consider evidence of jury awards or judgments in similarly situated cases to make an

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amount in controversy determination.1 Ansley v. Metro. Life Ins. Co., 215 F.R.D. 757,

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578 & n.4 (D. Ariz. 2003).

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III.

ANALYSIS

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The Court begins by examining whether Safeco’s Notice of Removal satisfies the

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requirement of alleging diversity jurisdiction as set forth in Dart Cherokee Basin, 135 S.

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Ct. at 554. The Notice of Removal contains a plausible allegation that the amount in

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controversy exceeds the jurisdictional threshold of $75,000. Safeco alleges that the

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amount is met by adding together the compensatory damages demanded by Hoarau

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($62,332.65), the attorney’s fees Hoarau seeks (a minimum of $8,000), and the punitive

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damages that Hoarau seeks in the Complaint. (Notice of Removal ¶¶ 2-3, 11, 13.) Indeed,

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when adding only the compensatory damages and the minimum amount of attorney’s fees

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sought in the Complaint, the total sum exceeds $70,000, without including punitive

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damages or any additional attorney’s fees. Therefore, the Court concludes that Safeco’s

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statement of the jurisdictional threshold amount in the Notice of Removal is plausible.

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The Court next examines evidence of the jurisdictional amount because Hoarau

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contests that the amount exceeds $75,000. In doing so, the Court must examine both

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direct and circumstantial evidence.

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The Court disagrees with Hoarau’s contention in her Reply that, as a result of
Dart Cherokee Basin, district courts may not look at a defendant’s citations to
sufficiently similar cases to make an amount in controversy determination. (See Reply at
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Hoarau concedes that the minimum amount of compensatory damages she seeks is

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$55,861.09 by subtracting the amount Safeco originally calculated as the compensable

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repair costs from the windstorm ($6,471.56) from the total Hoarau sought ($62,332.65).2

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(MTR at 5.) Safeco argues, as it alleges in the Notice of Removal, that all of Hoarau’s

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claims in the Complaint add up to an amount that exceeds the jurisdictional threshold.

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First, Safeco contests Hoarau’s calculation of compensatory damages by adding $1,500

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to the $55,861 figure for a loss of rents. (Resp. at 3; MTR at 2.) The Court will accept

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this addition to the calculation for the amount in controversy because Hoarau seeks this

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amount in her Complaint. (Compl. ¶ 25.)

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Second, Safeco contests Hoarau’s position that attorney’s fees should not be added

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to the calculation of the amount in controversy because the amount is too speculative.

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(MTR at 6.) If she prevails, Hoarau is likely entitled to an award of attorney’s fees under

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A.R.S. § 12-341.01. See Haldiman v. Cont’l. Cas. Co., 666 Fed. App’x 612, 614 (9th Cir.

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2016) (attorney’s fees would have been recoverable if the plaintiff had prevailed); Galt

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G/S v. JSS Scandinavia, 142 F.3d 1150, 1155-56 (9th Cir. 1998) (allowing attorney’s fees

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authorized by statute to be considered in an amount in controversy determination). If the

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Court uses the “conservative estimate” of 12.5% of economic damages for attorney’s

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fees, which Safeco cites as an example from Guglielmino v. McKee Foods Corp., 506

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F.3d 696 (9th Cir. 2007), that figure ($7,170) is very close to the amount Hoarau

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requested in the Complaint ($8,000). (Compl. ¶ 51.) Because Hoarau specifies a plausible

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amount in her Complaint, the Court will use the figure of $8,000 for attorney’s fees in the

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calculation of the amount of controversy. Taking this amount together with the

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conservative estimate of compensatory damages, the amount in controversy is more than

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$65,000, excluding punitive damages.

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The Court will use the figure of $55,861 as the baseline for Hoarau’s
compensatory damages claim, even though the Complaint mentions an amended scope of
loss estimate of $11,217—an amount higher than the original offset of $6,471.56. This
second scope of loss offset would potentially lower the estimate for the amount in
controversy, but Hoarau argues that the minimum amount is $55,861 in her Motion to
Remand.
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Safeco also argues that the Court should account for extra-contractual tort

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damages, including the amount that Hoarau paid the public adjuster. However, Hoarau

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does not specifically seek this amount in the Complaint, and Safeco does not provide any

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case law to support the proposition that the Court should add this type of damages to the

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calculation. In any event, making an estimate for extra-contractual damages is

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unnecessary because punitive damages more likely than not will take the amount in

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controversy over the $75,000 threshold.

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Lastly, Safeco contends that the Court must account for punitive damages in the

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amount in controversy determination. Hoarau argues that the punitive damages she seeks

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in the Complaint are too speculative to be included and that the mere possibility of a

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punitive damages award is insufficient without evidence demonstrating how much these

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damages are likely to be. (MTR at 8.) A court should consider for purposes of the

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jurisdictional amount all claims that a plaintiff asserts in good faith in the complaint,

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regardless of how those claims are ultimately resolved. See Theis Research Inc. v. Brown

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& Bain, 400 F.3d 659, 664 (9th Cir. 2005); Chabner v. United of Omaha Life Ins. Co.,

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225 F.3d 1042, 1046 n.3 (9th Cir. 2000) (considering punitive damages in determination

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of amount in controversy). Here, Hoarau seeks punitive damages against Safeco for her

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claim of tortious bad faith claims handling (Compl. ¶ 62), and the Court will not ignore

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that claim for purposes of Hoarau’s Motion to Remand.

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Safeco cites three Arizona bad faith insurance cases that awarded substantial

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amounts in punitive damages to plaintiffs, and these cases are sufficiently similar to the

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present case for the Court to consider them in the amount in controversy determination.

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See Nardelli v. Metro. Group Prop. & Cas. Ins. Co., 277 P.3d 789 (Ariz. Ct. App. 2012)

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(reducing punitive damages for bad faith stolen car insurance claim to $155,000);

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Melancon v. USAA Cas. Ins. Co., 849 P.2d 1374, 1375 (Ariz. Ct. App. 1992) (jury

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awarded $4,500,000 in punitive damages for mishandling of vehicle collision claim);

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Filasky v. Preferred Risk Mut. Ins. Co., 734 P.2d 76, 78 (jury awarded $1,000,000 in

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punitive damages for bad faith automobile and home insurance claims). In Ansley v.

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Metropolitan Life Insurance Company, the Court concluded that a bad faith insurance

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case satisfied the amount in controversy requirement in part because the plaintiff’s claims

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for attorney’s fees and punitive damages “will more likely than not be a significantly

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large amount of money.” 215 F.R.D. at 577-78. Here, similar to in Ansley, Safeco’s

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citation to several similarly situated cases is sufficient to convince the Court that a

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punitive damages award would more likely than not be well over the $10,000 required to

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push the amount in controversy over the $75,000 threshold. Therefore, upon reviewing

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the evidence and citations, the Court concludes by a preponderance of the evidence that

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the amount in controversy of $75,000 is met in this case and that Safeco’s removal was

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proper.
IT IS THEREFORE ORDERED denying Plaintiff’s Motion to Remand
(Doc. 9).
Dated this 4th day of August, 2017.

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Honorable John J. Tuchi
United States District Judge

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