Bradshaw Home Medical Equipment LLC v. Hospice Family Care Incorporated et al

Filing 18

ORDER denying #12 Plaintiff's Motion to Remand. Signed by Senior Judge Paul G Rosenblatt on 12/2/13.(LSP)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Bradshaw Home Medical Equipment,
L.L.C.,

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Plaintiffs,
vs.
Hospice Family Care, et al.,
Defendants.

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No. 13-CV-8218-PCT-PGR

ORDER

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Before the Court is Plaintiff’s motion to remand. (Doc. 12.) Defendant opposes the
motion. (Doc. 14.) For the reasons set forth herein, the motion is denied.
BACKGROUND

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Plaintiff Bradshaw Home Medical Equipment filed a complaint in Yavapai County

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Superior Court on August 14, 2013, alleging breach of contract and breach of the implied

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covenant of good faith and fair dealing. (Doc. 1, Ex. A.) Defendant removed the case on

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September 4, 2013, and filed an answer on September 11, 2013. (Doc. 1, 6.) The case was

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assigned to this court on September 19, 2013.

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Plaintiff’s claims arise out of a Health Care Services Agreement, effective February

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1, 2013, between Plaintiff and National HME.1 Defendant informed Plaintiff in May 2013

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that it was terminating the Agreement.

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Plaintiff alleges that Defendant breached the contract by failing to make timely

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payments, failing to honor the exclusivity provision of the Agreement, and by wrongfully

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terminating the Agreement. The complaint seeks judgment for the balance due on past

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invoices, amounts accruing in lost revenue, and interest, late fees, and attorneys fees.

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Defendant removed the action based on diversity jurisdiction pursuant to 28 U.S.C.

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§§ 1332, 1441, and 1446. (Doc. 1.) Defendant alleges that this is an action involving a

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controversy between citizens of different states and that the amount in controversy exceeds

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$75,000. (Id.)
DISCUSSION

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A defendant may remove a case from state court to federal court if the case could have

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originally been filed in federal court. 28 U .S.C. § 1441(a). “The district courts shall have

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original jurisdiction of all civil actions where the matter in controversy exceeds the sum or

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value of $75,000 . . . and is between . . . citizens of different States.” 28 U.S.C. § 1332(a)(1).

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The removing party bears the burden of establishing diversity and the amount in controversy

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by a preponderance of the evidence. Hertz Corp. v. Friend, 559 U.S. 77, 96 (2010). The party

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must support its jurisdictional allegations by “competent proof.” Id. at 96–97. Courts “strictly

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construe the removal statute against removal jurisdiction” and must reject removal “if there

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is any doubt as to the right of removal in the first instance.” Gaus v. Miles, Inc., 980 F.2d

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564, 566 (9th Cir. 1992).

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The complaint alleges that National HME “was the authorized agent and manager
authorized to enter into binding agreements for Defendant Curo Hospice.” (Doc. 1, Ex. A,
¶ 8.)
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In opposing removal and seeking remand to state court, Plaintiff contends that

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Defendant fails to meet its burden of proof on both the amount in controversy and the

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diversity of the parties. The Court disagrees.

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Amount in controversy

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Courts decide whether the amount in controversy requirement has been met by first

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considering whether the amount is “facially apparent” from the complaint. Abrego Abrego

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v. The Dow Chemical Co., 443 F.3d 676, 690 (9th Cir. 2006) (quoting Singer v. State Farm

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Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th Cir. 1997)). “Where it is not facially evident from

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the complaint that more than $75,000 is in controversy, the removing party must prove, by

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a preponderance of the evidence, that the amount in controversy meets the jurisdictional

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threshold.”Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003);

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see Guglielmino v. McKee Foods Corp., 506 F.3d 696, 699 (9th Cir. 2007) (explaining that

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when the complaint does not allege a specific amount of damages, the party seeking removal

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bears the burden of persuasion that it is “more likely than not” that the amount in controversy

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exceeds the jurisdictional amount). If the removing party’s “allegations of jurisdictional facts

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are challenged . . . , he must support them by competent proof.” Gaus, 980 F.2d at 567.

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For purposes of calculating the amount in controversy, a court may consider, in

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addition to potential compensatory damages, a plaintiff’s potential punitive damages and

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attorneys’ fees. See Ansley v. Metropolitan Life Ins. Co., 215 F.R.D. 575, 577 (D.Ariz. 2003)

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(citing Chabner v. United of Omaha Life Ins. Co., 225 F.3d 1042, 1046 n.3 (9th Cir. 2000),

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and Galt G/S v. JSS Scandinavia, 142 F.3d 1150, 1155–56 (9th Cir. 1998)).

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Plaintiff seeks compensatory damages, punitive damages, and attorneys’ fees. Because

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the jurisdictional amount is not facially evident from the complaint, Defendant must prove

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the amount by a preponderance of the evidence.

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The complaint alleges that Plaintiff is entitled to compensatory damages consisting

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of “actual damages in a specific amount to be proved at trial, plus interest, expenses and

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attorneys’ fees”; “the balance due on past invoices, amounts accruing in lost revenue, plus

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interest, late fees, and attorneys’ fees”; “damages in the sum certain of the ‘set ups’ Plaintiff

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has been deprived of”; “pre-judgment interest at the maximum allowable rate on this sum

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certain accruing from May 20, 2013 until the date of the Judgment”; and post-judgment

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interest. (Doc. 1, Ex. A, ¶¶ 35, 40, A–C.) The complaint further alleges that Plaintiff is

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entitled to “tort damages on Defendant for attempting to deprive the Plaintiff of the benefits

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of such agreements, to deprive the Defendant of the benefits taken without compensation,

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and to deter the Defendant from acting in bad faith and otherwise seeking to take advantage

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of similar relationships in the future.” (Id., ¶ 33.)

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Defendant asserts that “a careful reading of the ambiguous Complaint makes clear that

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Plaintiff seeks to recover at least $91,730.50.” (Doc. 14 at 7.) This assertion is based in part

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on figures alleged by Plaintiff. The complaint specifically refers to $18,730.50 for amounts

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due and owing on invoices and $3,000 in attorneys’ fees (Doc. 1, Ex. A, ¶¶ 21, C).2 The

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Court agrees that these figures, totaling $21,730.50, are properly included in calculating the

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jurisdictional amount.

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In addition to these amounts, Defendant interprets the complaint as seeking “a

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minimum of $70,000 in either reliance damages for expenses incurred in reliance on the

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Agreement or in expectation damages for lost profits.” (Id. at 7–8.) The complaint states that

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as a result of the Agreement “Plaintiff invested nearly $80,000 in equipment upgrades.”3 (Id.,

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¶ 18.) The complaint alleges that the Defendant has refused to allow it to perform new “set

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ups” since May 2013. (Id., ¶ 22.) Therefore, Plaintiff was allowed to perform exclusively as

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it expected to for only about one-eighth of the two-year term of the Agreement. (Id., ¶¶ 12,

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17.) Therefore Defendant, in arriving at the $70,000 figure, interprets the complaint as

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While the parties disagree as to whether attorneys’ fees incurred after removal may
be included in the amount in controversy, the Court agrees with Defendant the $3,000 figure
represents the minimum amount of fees sought in the complaint.
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As stated in the complaint, Plaintiffs sent a demand letter to Defendant prior to
filing this suit. The letter referred to Plaintiff’s $80,000 investment in new equipment. (Doc.
1, Ex. A, ¶ 26.)
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alleging that Plaintiff has suffered damages of at least seven-eighths of the amount it invested

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in reliance on the Agreement. (Doc. 14 at 5.) Defendant asserts that this figure is properly

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included in the amount in controversy as “consequential damages or under a reliance theory,

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and [] because that amount is indicative of the amount of lost profits Plaintiff will seek to

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recover.” (Doc. 14 at 4.)

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In addition, as Defendant notes, the complaint seeks expectation damages in the form

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of lost profits. The complaint requests damages equal to “the ‘set ups’ Plaintiff has been

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deprived of due of Defendant’s breach.” (Doc. 1, Ex. A, ¶ A.) The complaint does not specify

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an amount for these lost set ups. However, according to Defendant, based on monthly

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invoices billed by Plaintiff to National HME, “the minimum amount that Plaintiff could have

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reasonably expected to receive under the two-year Agreement . . . is $297,499.00.”4 (Id. at

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5.) Defendant contends that these “lost profits” can be taken into account in calculating the

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amount in controversy.

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Next, Defendant notes that the complaint requests punitive damages in an unspecified

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amount. Defendant argues that Arizona courts have awarded punitive damages in cases

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involving breaches of good faith and fair dealing. (Id. at 6–7.) Defendant cites cases where

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punitive damages in amounts greater the jurisdictional limit were awarded for breaches in the

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context of insurance contracts. For example, in Hawkins v. Allstate Ins. Co., 733 P.2d 1073,

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1077 (1987), the court upheld a $3.5 million award of punitive damages for a breach of the

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duty of good faith. In Nardelli v. Metro. Group Prop. & Cas. Ins. Co., 277 P.3d 789, 806

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Plaintiff’s invoices from February 2013 through April 2013 show that Plaintiff
billed National HME on average nearly $16,000 per month for services rendered under the
Agreement: $15,685.50 in February, $16,844 in March, and $15,428 in April. (See Doc. 14,
Ex. A.) Based on these figures, according to Defendant, Plaintiff’s lost profits can be
calculated as follows. For May 2013 through August 2013: $25,499 ($16,000 per month less
the amount invoiced during that time for continuing patients). For September 2013 to January
2015: $272,000 ($16,000 per month for the remaining 17-month term of the Agreement).
(Doc. 14 at 6.)
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(App. 2012), the court upheld a 1:1 ratio of punitive damages to compensatory damages for

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an insurer’s bad faith.

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Plaintiff counters that the complaint includes neither a theory under which it would

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recover for sums spent on the new equipment nor a figure for the amount of such a recovery.

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(Doc. 17 at 2–3.) Plaintiff also contends that Defendant has not presented adequate proof

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with respect to the amount of punitive damages. (Id. at 3–5.)

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The Court agrees that Defendant has not provided competent proof concerning

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punitive damages. While the complaint clearly requests an award of punitive damages, the

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cases cited by Defendant are not sufficiently analogous to guide the Court in assigning a

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figure to such damages.

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However, the Court concludes that even without including an amount for punitive

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damages, the damages sought in the complaint, taken cumulatively, likely would exceed

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$75,000. Along with unspecified punitive damages, the complaint seeks pecuniary damages,

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which include the balance due on Plaintiff’s invoices, $18,730.50; damages related to the

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$80,000 equipment upgrade; lost revenue from the set ups Plaintiff was deprived of as a

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result of the alleged breach; and attorneys’ fees of at least $3,000. While the complaint is

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vague as to the amount of lost profits, Defendant has properly relied on Plaintiff’s allegations

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to arrive at an estimate of potential damages in excess of the jurisdictional amount. See, e.g.,

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McPhail v. Deere & Co., 529 F.3d 947, 955–56 (10th Cir. 2008) (citing Meridian Sec. Ins.

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Co. v. Sadowski, 441 F.3d 536, 541 (7th Cir. 2006)). It is more likely than not that damages

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related to the equipment upgrade and lost set ups exceeds the amount necessary, when added

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to the balance due on the invoices and a minimum of $3000 in attorneys’ fees, to satisfy the

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jurisdictional amount of $75,000.

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In sum, based on the facts and theories set forth in the complaint, the Court finds, by

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a preponderance of the evidence, that any calculation of potential damages exceeds $75,000.

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2.

Diversity

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For the Court to have diversity jurisdiction, each plaintiff must be a citizen of a

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different state than each of the defendants. Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996).

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For diversity jurisdiction purposes, a corporation is a citizen of the state of its incorporation

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and the state of its principal place of business. Davis v. HSBC Bank Nevada, N.A., 557 F.3d

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1026, 1028 (9th Cir. 2009). The Supreme Court has interpreted the phrase “principal place

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of business” to mean the place where a corporation’s high level officers direct, control, and

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coordinate the corporation’s activities. Hertz Corp. v. Friend, 559 U.S. at 82. A corporation’s

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principal place of business typically will be the place where the corporation maintains its

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headquarters, “provided the headquarters is the actual center of direction, control, and

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coordination, i.e., the ‘nerve center,’ and not simply an office where the corporation holds

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its board meetings (for example, attended by directors and officers who have traveled there

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for the occasion).” Id. at 1192.

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As alleged in the complaint, Plaintiff Bradshaw Home Medical Equipment, LLC, is

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an Arizona limited liability company. (Doc. 1, Ex. A, ¶¶ 1, 6.) Defendant contends that

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diversity exists because it is a Delaware corporation with its principal place of business in

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North Carolina. Defendant’s Notice of Removal is accompanied by the declaration of Cindy

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Phillips, Senior Vice President of Human Resources of Curo Health Services. (Id., Exhibit

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C.) Ms. Phillips attests that Hospice Family Care, Inc., is a Delaware corporation that

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maintains its principal place of business in North Carolina; that the sole stockholder of

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Hospice Family Care is Curo Arizona Hospice, LLC, a Delaware limited liability company,

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with Curo Health Services, LLC, as its sole member; that Curo Health Services is organized

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as a Delaware limited liability company, with Curo Health Services Holdings, Inc., as its sole

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member; and that Curo Health Services Holdings is a Delaware corporation with its principal

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place of business in North Carolina. (Id.)

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In responding to Plaintiff’s motion to remand, Defendant submitted a second affidavit

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from Ms. Phillips. (Doc. 14, Ex. B.) Here she attests that Defendant’s officer and directors

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“are all residents of North Carolina and perform their regular duties as officers at the

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Headquarters of Hospice Family Care, Inc., located at 491 Williamson Road, Suite 204, in

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Mooresville, North Carolina.” (Id. at 1–2.) Phillips also states that “[t]hough Hospice Family

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Care, Inc. conducts a significant amount of business activity in Arizona, that activity is

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directed, controlled, and coordinated by its officers in Mooresville, North Carolina.” (Id. at

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2.)

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Plaintiff contends that Ms. Phillips’ declarations are not competent proof that

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Defendant’s corporate headquarters in North Carolina are the true center of control and

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coordination rather than merely an office used for board meetings. (Doc. 12 at 9; Doc. 17 at

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5.) Plaintiff argues that Defendant’s principal place of business is in Arizona, where it has

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offices in Prescott and Mesa and where the parties’ business dealings have occurred. (Doc.

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12 at 9.) Plaintiff also asserts that Defendant’s website does not indicate that any of its

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operations are directed or controlled from North Carolina. (Id.)

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The Court disagrees with Plaintiff and finds that the Phillips declarations are sufficient

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to establish that Defendant’s principal place of business, or nerve center, is in North

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Carolina. Court have consistently found such sworn statements by corporate officers to be

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competent proof of a corporation’s principal place of business. See, e.g., McCollum v. State

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Farm Ins. Co., 376 Fed.Appx. 217, 219–20 (3d Cir. 2010); Simonson v. Allstate Ins. Co., No.

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CV 12–4918 CAS (MANx), 2012 WL 3073918, at *2 (C.D.Cal. July 27, 2012); Thompson

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v. Intel Corp., No. CIV 12-0620 JB/LFG, 2012 WL 3860748, at *17 (D.NM. Aug. 27, 2012);

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37 Water, LLC v. DHI Water & Environment, Inc., No. 1:10-cv-347-CWD, 2010 WL

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4853304, at *4 (D.Idaho Nov. 22, 2010); Greystone Bank v. Tavarez, No. 09-CV-5192

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(SLT), 2010 WL 3311835, at *1–2 (E.D.N.Y. June 10, 2010).

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Because Plaintiff is an Arizona resident while Defendant is incorporated in Delaware

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and has its principal place of business in North Carolina, diversity of citizenship is present

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under 28 U.S.C. § 1332(a).

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CONCLUSION
Based on the forgoing, Defendant has met its burden with respect to the jurisdictional
amount and diversity.

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Accordingly,

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IT IS HEREBY ORDERED denying Plaintiff’s motion to remand (Doc. 12).

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DATED this 2nd day of December, 2013.

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