Travelers Property Casualty Company of America v. Zurich American Insurance Company et al

Filing 28

ORDER denying 10 Defendants' Joint Motion to Dismiss. Signed by Judge James A Teilborg on 7/25/12.(LSP)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Travelers Property Casualty Company of)
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America, a Connecticut corporation,
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Plaintiff,
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vs.
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Zurich American Insurance Company, a)
New York Corporation; National Union)
Fire Insurance Company of Pittsburgh,)
PA, a Pennsylvania corporation; Farm)
Bureau Property & Casualty Insurance)
Company, an Iowa corporation aka Farm)
Bureau Mutual Insurance Company;)
Mortimer Inc. dba Mortimer Nursery &)
Landscaping Center and/or Mortimer’s)
Custom Landscaping, an Arizona)
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corporation,
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Defendants.
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No. CV 11-8151-PHX-JAT
ORDER

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Pending before the Court is the Motion to Dismiss Defendant Farm Bureau Property

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& Casualty Insurance and Defendant Mortimer, Inc. for lack of subject matter jurisdiction

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(Doc. 10). The Court now rules on this Motion.

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I.

Factual Background

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In 2007, Plaintiff Travelers Property Casualty Company of America (“Travelers” or

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“Plaintiff”) issued an insurance policy to Ames Construction, Inc. (“Ames”). In October

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2009, Lowe’s HIC, Inc. (“Lowe’s”) filed a complaint against EMJ Corporation (“EMJ”),

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among others, asserting various claims arising from allegedly negligent construction work

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on the “MSE Wall” at the Lowe’s Prescott store. At some point during that litigation,

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Travelers agreed to defend EMJ against allegations of property damages arising out of the

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work that its insured, Ames, performed for or on behalf of EMJ at the Lowe’s Prescott store.

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Plaintiff alleges that it has no duty to indemnify EMJ for acts of independent negligence.

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In September 2011, Plaintiff instituted the instant action against various other

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insurance companies, who Plaintiff contends have a duty to indemnify or insure EMJ for

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EMJ’s or other entities’ actions (with the exception of Ames) relating to the construction at

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the Lowe’s Prescott store. Plaintiff alleges that it has paid more than its equitable share in

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the defense of EMJ arising from the claims relating to the construction work at the Lowe’s

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Prescott store. In this action, Plaintiff seeks a judicial determination of its rights and duties

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under its policies, and allocation and reimbursement from the Defendant insurance

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companies. Plaintiff alternatively alleges that it has the right to selection of counsel of its

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choice in defending EMJ in the underlying action.

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Defendants Farm Bureau Property and Casualty Insurance Company and Mortimer,

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Inc. now move to dismiss this action. These Defendants argue that this Court’s sole

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jurisdiction arises from the diversity of the parties and Plaintiff has failed to adequately

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allege the $75,000 amount in controversy to confer subject matter jurisdiction upon the

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Court.

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II.

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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). “Where the plaintiff originally files in federal court, ‘the amount in

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controversy is determined from the face of the pleadings.’” Geographic Expeditions, Inc. v.

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Estate of Lhotka, 599 F.3d 1102, 1106 (9th Cir. 2010) (quoting Crum v. Circus Circus

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Enters., 231 F.3d 1129, 1131 (9th Cir. 2000)). “The amount in controversy alleged by the

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proponent of federal jurisdiction—typically the plaintiff in the substantive dispute—controls

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so long as the claim is made in good faith.” Id. (citing Crum, 231 F.3d at 1131).

Legal Standard

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“To justify dismissal, it must appear to a legal certainty that the claim is really for less

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than the jurisdictional amount.” St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S.

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283, 290 (1938) (quoting Crum, 231 F.3d at 1131). Under this “legal certainty” standard, the

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“federal court has subject matter jurisdiction unless ‘upon the face of the complaint, it is

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obvious that the suit cannot involve the necessary amount.’” Id. (quoting St. Paul Mercury

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Indemnity Co., 303 U.S. at 292 (1938)).

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Furthermore, for purposes of determining the amount in controversy in a claim

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exclusively for declaratory judgment, the Court considers the value of the object of the

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litigation. Cohn v. Petsmart, Inc., 281 F.3d 837, 840 (9th Cir. 2002) (internal citation

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omitted). Additionally, courts have recognized that losses that are expected in the future may

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preclude a court from concluding, to a legal certainty, that the amount in controversy will not

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be met. Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333, 348 (1977)

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(superseded on other grounds as recognized by United Food & Commer. Workers Union

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Local 751 v. Brown Group, 517 U.S. 544 (1996)).

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III.

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Defendants argue that the amount in controversy is not at or above the $75,000

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threshold because Plaintiff alleges that the current total bill for EMJ’s defense is just over

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$100,000 and Zurich unilaterally allocated 50% of that amount to Travelers. (Doc. 10 at 3).

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Therefore, Defendants contend, Plaintiff is only currently liable for $50,000, which is clearly

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below the amount in controversy threshold. (Doc. 10 at 3).Defendants further argue that

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because Plaintiff seeks to pay less than half of the current and future legal fees “the amount

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in controversy in this action cannot be EMJ’s total current fees.” (Doc. 20 at 2). Lastly,

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Defendants argue that Plaintiff may re-file its complaint at some point in the future once

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Plaintiff has already paid at least $75,000 in fees. Id. at 3.

Analysis

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Defendants’ arguments are without merit. Although Plaintiff argues that it should not

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be required to pay more than the excess of $50,000 that it claims it has already paid for

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EMJ’s defense, it is possible, if Plaintiff is unsuccessful in this action, that it could be

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required to pay far more for the defense of EMJ. Because Plaintiff may be held liable for
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more than $75,000 should it lose its suit, the object of the case (Plaintiff’s portion of the cost

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of EMJ’s defense in the underlying suit) satisfies the amount in controversy. Cohn, 281 F.3d

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at 840. Furthermore, as mentioned above, expected future losses can satisfy the amount in

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controversy requirement. Hunt, 432 U.S. at 348. In the current case, there is no showing of

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bad faith, Plaintiff directly filed this complaint in federal court, and Plaintiff expressly alleges

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that the amount in controversy “exceeds $100,000.” (Doc. 1 at 3; Doc. 22 at 3). Thus,

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Plaintiff’s complaint suffices to establish jurisdiction because, on its face, it alleges, in good

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faith, an amount in controversy over $75,000 and Defendants do not argue that this is legally

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certain to be false. See Geographic Expeditions, Inc., 599 F.3d at 1107 (finding that “good

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faith allegations in [Appellant’s] petition as to the amount in controversy suffice to establish

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the jurisdictional amount unless it appears legally certain that the amount in dispute is

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$75,000 or less”).

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IV.

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Because Plaintiff alleges that the amount in controversy will exceed $100,000 and,

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because it is not legally certain that Plaintiff’s recovery will be below that amount, Plaintiff

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has sufficiently alleged the amount in controversy to establish subject matter jurisdiction

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pursuant to 28 U.S.C. § 1332.

Conclusion

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Based on the foregoing,

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IT IS ORDERED that Defendants’ Joint Motion to Dismiss (Doc. 10) is denied.

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DATED this 25th day of July, 2012.

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