Jones v. American Bankers Insurance Company of Florida et al

Filing 68

ORDER REMANDING CASE to the El Paso County District Court for further proceedings, by Judge Christine M. Arguello on 6/23/2011. (erv, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Christine M. Arguello
Civil Action No. 11-cv-00140-CMA-KMT
CAROLYN E. JONES,
and ROBERTSON COHEN,
Bankruptcy Trustee in Bankruptcy Case No. 05-41229 ABC,
Plaintiffs,
v.
AMERICAN BANKERS INSURANCE CO. OF FLORIDA and
HSBC FINANCE CORPORATION,
formerly known as HOUSEHOLD FINANCE HFC
f/k/a BENEFICIAL FINANCE CORP.
Defendants.

ORDER REMANDING CASE

Plaintiffs Carolyn E. Jones and Robertson Cohen allege that (1) Defendant
HSBC Financial Corporation (“HSBC”)1 violated section 10-3-1105 of the Colorado
Revised Statutes through advertising and requiring the purchase of an insurance policy
as a prerequisite to obtaining a loan; (2) Defendants violated section 10-3-1104 of the
Colorado Revised Statutes by engaging in purportedly unfair claims settlement
practices and by failing to investigate the payment of her claim in a timely manner; and
(3) Defendants violated section 10-3-1115 of the Colorado Revised Statutes by failing
“to pay a claim for over six years [which] constitutes wrongful withholding of benefits,
outrageous conduct and insurance bad faith.” (Doc. # 65 at 4.) This matter comes

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HSBC at the time was known as Household Finance Corporation (HFC) and was formerly known
as Beneficial Finance Corporation.

before the Court on Defendants’ Motions to Dismiss the Amended Complaint filed on
June 13, 2011. (Docs. ## 66 and 67.) Defendants assert that jurisdiction over Plaintiffs’
claims is proper pursuant to 28 U.S.C. § 1332(a), however, Plaintiffs do not concede
that the amount in controversy exceeds $75,000. (Doc. # 27 at 5.) The Court finds that
jurisdiction is not proper because the amount in controversy does not exceed $75,000.
Therefore, this case must be remanded to state court.
I. BACKGROUND
A.

FACTS
In 1990, Plaintiff Jones took out a loan of approximately $15,000 from HSBC. At

the time that Plaintiff Jones secured the loan, HSBC, acting as an agent on behalf of
ABI, sold Plaintiff Jones an insurance policy. The insurance policy provided that ABI
would make loan payments on Plaintiff Jones’s behalf if Plaintiff Jones involuntarily
became unemployed. Plaintiff Jones was charged a premium of $0.13 per $100 of the
loan per month or 1.56% of the annual payment.
Plaintiff Jones was employed by Glenbyl Beauty Salon at the Broadmoor Hotel
until she involuntarily lost her job when the beauty salon was sold in the fall of 2005.
Plaintiff Jones was unemployed for approximately six months, during which time she
was unable to make loan payments to HSBC. At the time that Plaintiff Jones lost her
job, she filed an insurance claim with ABI, but never received a response. On October
9, 2005, Plaintiff Jones filed for bankruptcy and Plaintiff Cohen was assigned to be the
Bankruptcy Trustee. On June 23, 2010, Plaintiff Jones received a letter from ABI
acknowledging her 2005 unemployment insurance claim. ABI began making payments

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directly to HSBC even though HSBC had been discharged in bankruptcy. In total, ABI
paid HSBC $15,925.26.
B.

PROCEDURAL HISTORY
Plaintiff Jones filed her original Complaint in state court on December 21, 2010.

(Doc. # 2.) On January 20, 2011, ABI removed this action to federal court with the
consent of HSBC pursuant to 28 U.S.C. §§ 1441 and 1446. (Doc. # 1.) Defendants
filed Motions to Dismiss (Docs. ## 11 and 13) for failure to state a claim pursuant to
Fed. R. Civ. P. 12(b)(6) on January 27, 2011. Plaintiff Jones filed a combined
Response on March 25, 2011. (Doc. # 27.) ABI filed a Reply on April 11, 2011. (Doc.
# 33.) HSBC filed a Reply on April 12, 2011. (Doc. # 34.) On May 25, 2011, Plaintiff
Jones amended the Complaint to include the Bankruptcy Trustee, Robertson Cohen, as
a Plaintiff. (Doc. # 65.) Defendants filed the instant Motions to Dismiss the Amended
Complaint on June 13, 2011, arguing that (1) Plaintiff Jones lacks standing; (2) judicial
estoppel bars Plaintiffs’ claims; (3) Plaintiffs’ claims are time barred; (4) sections 10-31115 and 10-3-1116 of the Colorado Revised Statutes do not apply because
Defendants’ conduct occurred before those statutes became effective; (5) Plaintiffs
failed to state a claim for outrageous conduct; (6) there is no private right of action
under section 10-3-1104 of the Colorado Revised Statutes; and (7) there is no private
right of action under section 10-3-1105 of the Colorado Revised Statutes. (Docs. ## 66
and 67.)

II. DISCUSSION
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A.

SUBJECT MATTER JURISDICTION
Subject matter jurisdiction is a threshold matter that may be addressed by the

Court sua sponte. See, e.g., Cook v. Rockwell Int’l Corp., 618 F.3d 1127, 1135 (10th
Cir. 2010). Pursuant to 28 U.S.C. § 1332(a), subject matter jurisdiction requires (1) an
“amount in controversy [that] exceeds the sum or value of $75,000, exclusive of interest
and costs” and (2) diversity of citizenship between the parties for diversity jurisdiction.
The party invoking federal jurisdiction bears the burden of proving that such
jurisdiction exists. Montoya v. Chao, 296 F.3d 952, 955 (10th Cir. 2002). "Where a
plaintiff has not instituted suit in federal court, '[t]here is a strong presumption that the
plaintiff has not claimed a large amount in order to confer jurisdiction on a federal court
. . . .’” Huffman v. Saul Holdings Ltd. P'ship, 194 F.3d 1072, 1079 (10th Cir. 1999)
(quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 290 (1938)). A
defendant seeking removal must “prove jurisdictional facts by a preponderance of
evidence.” McPhail v. Deere & Co., 529 F.3d 947, 952-53 (10th Cir. 2008). "A
complaint that presents a combination of facts and theories of recovery that may
support a claim in excess of $ 75,000 can support removal." Id. at 955.
“[A] plaintiff cannot avoid removal merely by declining to allege the jurisdictional
amount.” When a plaintiff fails to allege the jurisdictional amount, McPhail suggests

that a defendant may use interrogatories obtained in state court before removal was
filed, proposed settlement offers, or affidavits as evidence of the amount in controversy.
529 F.3d at 954. However, conclusory assertions and outright speculation do not
suffice. Tafoya v. Am. Family Mut. Ins. Co., No. 08-cv-01656, 2009 WL 211661, at *2

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(D. Colo. Jan. 28, 2009) (unpublished). “Where uncertainties exist regarding the Court's
jurisdiction, those uncertainties are resolved in favor of remand.” Martin v. Franklin
Capital Corp., 251 F.3d 1284, 1290 (10th Cir. 2001).
B.

ANALYSIS
In the Notice of Removal, Defendant ABI asserts that the amount in controversy

exceeds $75,000. Plaintiffs do not specify an amount in controversy in the Amended
Complaint. Although Plaintiffs have not filed a Motion for Remand to state court,
Plaintiff Jones’s combined Response indicates that she disagrees with Defendant ABI
that the amount in controversy exceeds $75,000. (Doc. # 27 at 5.) Defendant ABI
relies on six theories of damages to support its assertion that the amount in controversy
has been met. However, the Court finds that only two of these theories are valid.
Therefore, the Court finds that Defendant ABI has failed to demonstrate by a
preponderance of the evidence that the amount in controversy exceeds the $75,000
threshold for the following reasons.
Defendant ABI puts forth two valid theories of damages on which Defendant ABI
may rely to demonstrate that the $75,000 threshold has been met. First, Defendant ABI
asserts that “Plaintiff seeks to recover as damages the ‘insurance benefits that were
paid under the policy’ to HSBC.” (Doc. # 1 at 4.) Defendant ABI has provided an
affidavit as evidence that the insurance benefits that were paid to HSBC totaled
$15,926.76. (Doc. # 1-3 at 2.) Therefore, Defendant ABI may rely on this figure to
establish the amount in controversy.
Second, Defendant ABI asserts that “Plaintiff seeks to recover double [her
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insurance benefits] under Colorado Revised Statutes section 10-3-1116.” (Doc. # 1 at
4.) Pursuant to section 10-3-1116, a claimant “whose claim for payment of benefits

has been unreasonably delayed or denied may bring an action in a district court to
recover reasonable attorney fees and court costs and two times the covered
benefit.” Plaintiffs have requested two times Plaintiff Jones’s covered benefit as
damages and have alleged facts in the Amended Complaint sufficient to state a
plausible claim that Defendant ABI unreasonably delayed payment of benefits.
(Doc. # 65 at 7.) Therefore, Plaintiff Jones could plausibly recover two times the
covered benefit, $31,851.52, in damages under section 10-3-1116 of the Colorado
Revised Statutes. Thus, Defendant ABI may rely on this figure to reach the amount in
controversy requirement. See Miera v. Dairyland Ins. Co., 143 F.3d 1337, 1340 (10th
Cir. 1998) (holding that a district court may consider potential punitive damages in
determining whether the jurisdictional amount has been met). However, this still does
not take the amount in controversy beyond the $75,000 threshold.
Defendant ABI relies on four theories of damages which are invalid and may not
serve as basis for reaching the amount in controversy requirement. First, Defendant
ABI asserts that “Plaintiff seeks still further ‘treble damages for unjustifiable delay in
paying first party benefits under Colo. Rev. Stat. § 10-3-1116.’” (Doc. # 1 at 5.)
Defendant ABI calculates that the treble damages Plaintiffs seek under section 10-31116 of the Colorado Revised Statutes will total $47,777.28, three times the amount of
the insurance benefits that Plaintiffs are seeking to recover. Although the Court agrees
that Plaintiffs can recover two times Plaintiff Jones’s covered benefit under section 10-3-

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1116, the Court finds nothing in that section that would allow Plaintiffs to recover further
treble damages. It is Defendant ABI’s burden to show by a preponderance of the
evidence that the amount in controversy exceeds $75,000. It is not the role of the Court
to search for case law that would indicate that section 10-3-1116 allows for the recovery
of treble damages. Nothing in the text states that treble damages are available and
Defendant ABI has not provided any case law to inform the Court otherwise. Therefore,
Defendant ABI may not rely on treble damages under section 10-3-1116 to reach the
amount in controversy requirement.
Second, Defendant ABI asserts that the amount in controversy is increased by
an additional $47,777.28 because Plaintiffs seek treble damages under the Colorado

Consumer Protection Act (“CCPA”). (Doc. # 1 at 4-5.) Defendant ABI contends that
Plaintiffs may be able to recover triple the amount of Plaintiff Jones’s insurance
benefits under the CCPA, because the CCPA provides that a person who:
is found to have engaged in or caused another to engage in any deceptive
trade practice listed in this article shall be liable in an amount equal to the
sum of: (a) The greater of: (I) The amount of actual damages sustained; or (II)
Five hundred dollars; or (III) Three times the amount of actual damages
sustained, if it is established by clear and convincing evidence that such
person engaged in bad faith conduct; plus (b) In the case of any successful
action to enforce said liability, the costs of the action together with reasonable
attorney fees as determined by the court.
Colo. Rev. Stat. § 6-1-113(2). Defendant ABI assumes that Plaintiff Jones’s actual
damages under the CCPA are the insurance benefits, $15,926.76, to which Plaintiff
Jones claims she is entitled. However, Defendant ABI misunderstands the damages
available to Plaintiff Jones under the CCPA. Plaintiffs assert that Defendant HSBC’s
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practice of advertising and requiring purchase of an insurance policy is a statewide
deceptive trade practice in violation of the CCPA. (Doc. # 65 at 6.) Therefore,
Plaintiff Jones’s actual damages resulting from Defendant HSBC’s deceptive trade
practices would be insurance premiums that Plaintiff Jones paid to Defendant ABI as
a precondition to receiving the loan, not the insurance benefits. Therefore, the
Court must disregard Defendant ABI’s contention that Plaintiffs’ CCPA claim raises
the amount in controversy by an additional $47,777.28. Furthermore, beyond
speculation, the Court does not have the information necessary to make a
calculation of Plaintiff Jones’s damages under the CCPA, nor is it the role of the
Court to do so.
Third, Defendant ABI contends that “[t]he Complaint’s request for an award of
attorneys’ fees itself, in a case of this nature, places the amount in controversy over the
$75,000 threshold.” (Doc. # 1 at 5.) It is well settled that “when a statute permits
recovery of attorney’s fees a reasonable estimate may be used in calculating the
necessary jurisdictional amount in a removal proceeding based upon diversity of
citizenship.” Miera v. Dairyland Ins. Co., 143 F.3d 1337, 1340 (10th Cir. 1998).
Although Colorado law provides for the recovery of attorney’s fees under section 10-31116 of the Colorado Revised Statutes, Defendant ABI must prove by a preponderance
of the evidence that the attorney’s fees will increase the amount in controversy over
$75,000. A defendant may use “an affidavit from its own experts as to the probable
costs of litigation and amount of attorney's fees” to help meet this burden. Tafoya v.
Am. Family Mut. Ins. Co., No. 09-cv-01656, 2009 WL 211661, at *2 (D. Colo. Jan. 28,
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2009) (unpublished).
Although Defendant ABI has provided a declaration (Doc. # 1-5) from an expert,
Defendant ABI has failed to show that the asserted attorney’s fees are not merely
speculative. The Court does not find this decision to be contrary to prior holdings of the
Tenth Circuit in which the court determined that the asserted attorney’s fees were not
speculative. For example, in Miera, the plaintiff had alleged the actual attorney’s fees to
date in the complaint. Miera, 143 F.3d at 1340. The attorney’s fees already expended
and alleged by the plaintiff brought the amount in controversy within approximately
$2,000 of the $75,000 threshold. The Miera court found that “[c]onsidering the realities
of modern law practice and the complexities of this case, we cannot say that, viewed as
of the date of removal, it would be unreasonable to expect plaintiff to incur an additional
$2,117.50 in attorney's fees.” Id.; see also Salazar v. Geico Ins. Co., No. CIV 10-0118,
2010 WL 2292930, at *6 (D.N.M. Apr. 27, 2010) (unpublished) (holding that the
plaintiff’s “potential entitlement to attorney’s fees on top of the $75,000.00 in benefits
under the insurance policy” established that the court had jurisdiction.)
In the instant case, unlike in Miera, Plaintiffs have not alleged their attorney’s
fees to date. Additionally, for the reasons previously discussed, Defendant ABI has only
provided enough evidence to show that the amount in controversy is $31,851.52, not
including attorney’s fees. It is far too speculative, even with a declaration, for the Court
to infer that the attorney’s fees will raise the current amount in controversy by over
$40,000 to exceed the $75,000 threshold. Per Tafoya, “given that the case is in its
infancy, one would have to engage in sheer speculation to determine the amount of

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fees that might ultimately be awarded on the present record.” 2009 WL 211661, at *2.
Fourth, Defendant ABI incorrectly asserts that the amount in controversy
represented by Plaintiff Jones’s counsel on the state court cover sheet should be given
weight when determining the amount in controversy. Defendant ABI concedes that
state court cover sheets, by themselves, cannot be used to establish the amount in
controversy. See Baker v. Sears Holdings Corp., 557 F. Supp. 2d 1208, 1214 (D. Colo.
2007). However, Defendant ABI argues Plaintiff Jones’s Civil Cover Sheet may be
sufficient to establish the amount in controversy if accompanied by additional evidence.
(Doc. # 1 at 6.) In the instant case, as discussed above, Defendant ABI has not
provided additional evidence sufficient to support the assertion that the amount in
controversy exceeds the $75,000 threshold. Therefore, Defendant ABI cannot rely on
Plaintiff Jones’s Civil Cover Sheet to establish the amount in controversy. See Tafoya,
2009 WL 211661, at *2 (holding that “allegations in a plaintiff’s Civil Cover Sheet are
insufficient, in the absence of otherwise sufficient factual showings to satisfy the amount
in controversy requirement.”); Valdez v. Byers, No. 09-cv-00764, 2009 WL 1440090, at
*2 (D. Colo. May 20, 2009) (unpublished) (holding that the defendants could rely on the
civil cover sheet because the defendants also provided probative evidence regarding
the amount in controversy, the settlement demand letter).
Therefore, the Court finds that Defendant ABI has not proven by a
preponderance of the evidence that the amount in controversy exceeds $75,000
because four of the damages theories that Defendant ABI relies on are invalid.
III. CONCLUSION

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Accordingly, it is ORDERED that this action is REMANDED to the El Paso
County District Court for further proceedings.
DATED: June

23 , 2011
BY THE COURT:

_______________________________
CHRISTINE M. ARGUELLO
United States District Judge

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