Continental Casualty Company v. Kidney Real Estate Associates of Arvada, LLC

Filing 28

RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE by Magistrate Judge Kristen L. Mix on 11/30/2018. IT IS HEREBY RECOMMENDED that Respondents Motion to Dismiss 11 be DENIED. (jgonz, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 18-cv-00551-CMA-KLM
CONTINENTAL CASUALTY COMPANY, an Illinois corporation,
Petitioner,
v.
KIDNEY REAL ESTATE ASSOCIATES OF ARVADA, LLC, a Colorado limited liability
company,
Respondent.
_____________________________________________________________________
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
_____________________________________________________________________
ENTERED BY MAGISTRATE JUDGE KRISTEN L. MIX
This matter is before the Court on Respondent’s Motion to Dismiss [#11]1 (the
“Motion”). Petitioner filed a Response [#13] in opposition to the Motion and Respondent
filed a Reply [#14]. Pursuant to 28 U.S.C. § 636(b)(1) and D.C.COLO.LCivR 72.1(c), the
Motion [#11] has been referred to the undersigned for a recommendation regarding
disposition. See [#12]. The Court has reviewed the Motion, the Response, the Reply, the
entire case file, and the applicable law, and is sufficiently advised in the premises. For the
reasons set forth below, the Court respectfully RECOMMENDS that the Motion [#11] be
DENIED.
I. Background
Petitioner, an insurance company, issued Property Insurance Policy No. B
1

“[#11]” is an example of the convention the Court uses to identify the docket number
assigned to a specific paper by the Court's case management and electronic case filing system
(CM/ECF). This convention is used throughout this Recommendation.

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5094150675 (the “Policy”) to Respondent, the owner of property in Arvada, Colorado (the
“Property”). Petition [#1] ¶ 4. The Policy covered “direct physical loss of or damage to
covered property caused by or resulting from a covered cause of loss, including damage
caused by wind or hail during the policy period.” Id. On May 8, 2017, the Property
sustained damage caused by a hailstorm and Respondent subsequently submitted an
insurance claim to Petitioner in the amount of $162,489.57. Id. ¶¶ 3, 5. Petitioner
conducted its own investigation of the Property damage and issued payment for the
assessed damages in the amount of $19,002.21. Id. ¶¶ 6, 7. This amount was the net
payment after applying $1,000 for the Policy’s windstorm/hail deductible and $9,599.81 in
depreciation. Id. ¶ 7. Respondent disagreed with the coverage determination and invoked
the appraisal provision of the Policy, which states:
If we and you disagree on the amount of loss, either may make written
demand for an appraisal of the loss. In this event, each party will select a
competent and impartial appraiser. The two appraisers will select an umpire.
If they cannot agree, either may request that selection be made by a judge
of a court having jurisdiction. The appraisers will state separately the amount
of loss. If they fail to agree, they will submit their differences to the umpire.
A decision agreed to by any two will be binding. Each party will:
a. Pay its chosen appraiser; and
b. Bear the other expenses of the appraisal and umpire equally. If there is
an appraisal, we will still retain our right to deny the claim.
Id. ¶¶ 8, 10. Pursuant to this provision, Respondent and Petitioner retained their respective
appraisers. Id. ¶ 8. The appraisers could not agree on selecting an umpire. Id. For that
reason, Petitioner filed the Petition to Appoint Umpire [#1] (the “Petition”) in this Court on
March 8, 2018. In the Petition, Petitioner only seeks declaratory relief in the form of the
appointment of an appraisal umpire and states that jurisdiction in this Court is proper
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pursuant to 28 U.S.C. § 1332, Fed. R. Civ. P. 57, and 28 U.S.C. § 2201. Id. ¶¶ 1-3. On
April 6, 2018, Respondent filed the present Motion [#11] pursuant to Fed. R. Civ. P.
12(b)(1), arguing that the Court does not have subject matter jurisdiction to appoint an
appraisal umpire and that, because of this, the “action should have been filed in state
court.” [#11] at 1.
II. Standard of Review
The purpose of a motion to dismiss pursuant to Rule 12(b)(1) is to test whether the
Court has jurisdiction to properly hear the case before it. Because “federal courts are
courts of limited jurisdiction,” the Court must have a statutory basis to exercise its
jurisdiction. Montoya v. Chao, 296 F.3d 952, 955 (10th Cir. 2002); Fed. R. Civ. P. 12(b)(1).
Statutes conferring subject matter jurisdiction on federal courts are to be strictly construed.
F & S Const. Co. v. Jensen, 337 F.2d 160, 161 (10th Cir. 1964). It is well established that
“[t]he party invoking federal jurisdiction bears the burden of establishing such jurisdiction
as a threshold matter.” Radil v. Sanborn W. Camps, Inc., 384 F.3d 1220, 1224 (10th Cir.
2004). “The lack of federal jurisdiction cannot be overcome by mere agreement of the
parties.” Mitchell v. Maurer, 293 U.S. 237, 244 (1934).
A motion to dismiss pursuant to Rule 12(b)(1) may take two forms: facial attack or
factual attack. Holt v. United States, 46 F.3d 1000, 1002 (10th Cir. 1995). When reviewing
a facial attack, the Court accepts the allegations of the complaint as true. Id. By contrast,
when reviewing a factual attack, the Court “may not presume the truthfulness of the
complaint's factual allegations.” Id. at 1003. With a factual attack, the moving party
challenges the facts upon which subject matter jurisdiction depends. Id. The Court
therefore must make its own findings of fact. Id. In order to make its findings regarding
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disputed jurisdictional facts, the Court “has wide discretion to allow affidavits, other
documents, and a limited evidentiary hearing.” Id. (citing Ohio Nat’l Life Ins. Co. v. United
States, 922 F.2d 320, 325 (6th Cir. 1990); Wheeler v. Hurdman, 825 F.2d 257, 259 n.5
(10th Cir.), cert. denied, 484 U.S. 986 (1987)). The Court’s reliance on “evidence outside
the pleadings” to make findings concerning purely jurisdictional facts does not convert a
motion to dismiss pursuant to Rule12(b)(1) into a motion for summary judgment pursuant
to Rule 56. Id.
III. Analysis
Although the Motion [#11] is not a model of clarity, Respondent appears to argue
that this Court lacks subject matter jurisdiction to adjudicate the Petition for three reasons.
First, that there is no case or controversy between Petitioner and Respondent (collectively,
the “Parties”) to raise a justiciable issue. See Motion [#11] at 2-3; Reply [#14] at 5-6.
Second, that the amount in controversy requirement is not satisfied to grant the Court
diversity jurisdiction pursuant to 28 U.S.C. § 1332(a). See Motion [#11] at 2; Reply [#14]
at 3-5. Third, that these two deficiencies cannot be cured by Petitioner filing its Petition
under the Declaratory Judgment Act. See Motion [#11] at 3-4; Reply [#14] at 6-8. The
Court will address each argument in turn.
A.

Case or Controversy
As stated above, Respondent first argues that the Court lacks subject matter

jurisdiction because the Petition fails to demonstrate a case or controversy between the
Parties which raises a justiciable issue. See Motion [#11] at 2-3; Reply [#14] at 5-6.
Article III of the United States Constitution limits the jurisdiction of the federal courts
to actual cases or controversies. U.S. Const. art. III, § 2, cl. 1. To meet this jurisdictional
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requirement, an actual case or controversy must be present at all stages of the litigation.
See Copar Pumice Co. v. Tidwell, 603 F.3d 780, 792 (10th Cir. 2010). To establish that
a case or controversy exists, Petitioner must demonstrate that the controversy is: (1)
definite, concrete, and touches on the legal relations of the Parties, and (2) sufficiently
immediate and real. Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-41 (1937);
Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941). Another “element of
the case-or-controversy requirement is that [Petitioner] must establish that [it] [has]
standing to sue.” Clapper v. Amnesty Int’l USA, 568 U.S. 398, 408 (2013) (internal
quotation marks and citations omitted). The elements of standing are the existence of a
particularized injury that is fairly traceable to Respondent and capable of being redressed
by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). In
other words, Petitioner must allege an injury in fact, assert a causal connection between
the injury in fact and the challenged action, and demonstrate that there is a likelihood that
the injury can be redressed by a favorable decision. See Jordan v. Sosa, 654 F.3d 1012,
1019 (10th Cir. 2011). As with all requisites to conferring subject matter jurisdiction, parties
cannot create standing by agreement. Wilson v. Glenwood Intermountain Properties, Inc.,
98 F.3d 590, 593 (10th Cir. 1996).
Respondent first argues that “[t]he appointment of an umpire does not directly
translate into a justiciable issue because of the possibility that [ ] the two appraisers will
disagree as to the amount of loss and thereafter submit their differences to the
Court-appointed umpire -- i.e., the umpire may not even be utilized to resolve the
underlying amount of loss dispute.” Motion [#11] at 2-3. Respondent cites no authority to
support this argument.
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The Court agrees with Petitioner that, whether or not the appraisers disagree at a
future date, Respondent’s argument ignores the adversarial dispute, or “disagreement,”
that presently exists between the Parties. The Petition clearly demonstrates at least two
on-going controversies that include disputes over the value of loss to the Property and the
appointment of a neutral umpire. See Petition [#1] ¶¶ 8, 9. “Indeed, [Respondent’s]
invocation of appraisal is premised on the existence of a contractual dispute between the
[Parties].” Response [#13] at 7; see Cypress Chase Condo. Ass’n A v. QBE Ins. Corp., No.
10-61987-CIV, 2011 WL 1544860, at *5 (S.D. Fla. Apr. 15, 2011) (construing a similar
appraisal provision as making “disagreement a prerequisite to appraisal”). Moreover,
according to the Policy’s appraisal provision, the appointment of an umpire is a condition
precedent to an appraisal occurring. See Petition [#1] ¶ 10.2

Therefore, the Parties’

disagreement over selecting an umpire precludes Petitioner (or Respondent) from obtaining
the appraisal that Respondent invoked, and further delays resolution of the claim under the
Policy. Response [#13] at 7; see Maryland Casualty Co., 312 U.S. at 273 (An actual
controversy exists for purposes of the Declaratory Judgment Act where “there is a
substantial controversy, between parties having adverse legal interests, of sufficient
immediacy and reality to warrant the issuance of a declaratory judgment.”). Accordingly,

2

The Policy’s appraisal provision provides that when one party invokes appraisal after a
disagreement on the amount of loss, “each party will select a competent and impartial appraiser
[and] [t]he two appraisers will select an umpire.” Petition [#1] ¶ 10. In the event the two appraisers
cannot agree to an umpire selection, “either may request that selection be made by a judge of a
court having jurisdiction.” Id. Although the provision reads that the Parties “may” seek appointment
by a judge, the provision as a whole implies that an umpire must be selected prior to an appraisal
occurring. Otherwise, there would be no neutral third party to whom the appraisers could submit
their differences if they fail to agree on the amount of loss. Therefore, if the appraisers cannot
agree to an umpire and an umpire must be appointed prior to an appraisal, the Parties must seek
appointment of an umpire by a court with jurisdiction before the claim can be resolved.

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the Court finds that the Petition does present an actual controversy between Petitioner and
Respondent that is both definite and sufficiently real to confer federal court jurisdiction.
See Aetna Life Ins. Co., 300 U.S. at 240-41; Maryland Cas. Co., 312 U.S. at 273 (1941).
Respondent next argues that no actual controversy exists because the Parties are
complying with the terms of the Policy and thus, “there is no allegation that either party
breached the insurance contract.” Motion [#11] at 2-3. While Respondent does not identify
which justiciability doctrine this argument is directed to, the Court construes this argument
as challenging Petitioner’s ability to demonstrate an injury in fact for purposes of standing.
Petitioner asserts in its Response [#13] that Petitioner’s “inability to proceed with the
appraisal guaranteed by the contract is an injury in fact, which affords [Petitioner] the
requisite standing.” [#13] at 7. In support, Petitioner cites Matter of Appraisal of Church
Mut. Claim No. 1171752 v. Paul Quinn AME Church, No. A-13-CA-079-SS, 2013 WL
12093756 (W.D. Tex. Aug. 30, 2013), which the Court finds persuasive.
Like the present case, Church involved a disputed claim of loss under an insurance
policy that contained an appraisal provision nearly identical to the provision found in the
Policy here. Church, 2013 WL 12093756, at *1.3 After the appraisal provision was invoked
and the parties’ appraisers could not agree to an umpire, the plaintiff insurance company
filed a federal suit under diversity jurisdiction, requesting that the district court appoint an

3

The appraisal provision at issue in Church stated: “If we and you disagree on the value
of the property or the amount of the loss, either may make written demand for an appraisal of the
loss. In this event, each party will select a competent and impartial appraiser. The two appraisers
will select an umpire. If they cannot agree, either may request that selection be made by a judge
of a court having jurisdiction. The appraisers will state separately the value of the property and the
amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision
agreed to by any two will be binding.” Church, 2013 WL 12093756, at *1.

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umpire. Id. The defendant insured then moved for summary judgment, in part, on the
ground that the insurance company lacked standing. Id.
The district court rejected this argument in holding that the insurance company had
demonstrated an injury in fact to establish standing. Id. at *2. Specifically, the district court
found that the insurance company’s right to an appraisal under the insurance policy, and
the insured’s failure to comply with the provision by selecting an umpire, evidenced “a
concrete, particular injury” that was not “[conjectural] or hypothetical.” Id. As the district
court explained:
There is no doubt there is a causal connection between [the insured’s], and
[insured’s] appraiser’s refusal to agree to an umpire, and [the insurance
company’s] inability to obtain an appraisal as guaranteed under the [parties’
insurance policy]. Finally, it is quite certain this injury can and will be
addressed by a decision in [the insurance company’s] favor.
Id.4
Although Respondent argues Church is “inapposite” to the present case, this
contention appears directed only to the amount in controversy analysis found in Church
which this Court addresses below in Section B. Reply [#14] at 5. In fact, with respect to
the issue of standing, Respondent appears to concede that Church supports the conclusion
that Petitioner is the appropriate party with standing to seek appointment of an umpire in
federal court. Id. Therefore, the Court finds no reason to disagree with the holding in
Church as a persuasive rebuttal to Respondent’s standing argument. See also Lochwood
Chateau Master Home Owners Ass’n, Inc. v. Am. Family Mut. Ins. Co., No.

4

The court in Church also rejected the argument that only the insurance company’s
appraiser, rather than the insurance company itself, had standing to seek appointment of an umpire
in federal court. Church, 2013 WL 12093756, at *2.

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15-CV-02246-MSK-KMT, 2017 WL 4837835, at *3 (D. Colo. Oct. 26, 2017) (stating that the
“the inability to determine loss [is an injury] sufficient to establish standing for the
declaratory judgment claim and for the claim for specific performance as to the appraisal
process, but not as to the claims pertaining to non-payment.”).
Moreover, Petitioner identifies another concrete injury attendant to this delay in
appraising the loss and resolving the disputed claim. Under Colorado law, Petitioner is
required to maintain a reserve of funds while Respondent’s claim remains pending.
Response [#13] at 5-6 (citing Colo. Rev. Stat. § 10-3-201(1)(a)(V)); see Silva v. Basin W.,
Inc., 47 P.3d 1184, 1189 (Colo. 2002) (“Colorado statutes[ ] require insurers to maintain
reserves to assure the insurer’s ability to satisfy its potential obligations under its policies.”).
The Court does not agree with Respondent that maintaining this reserve does not
constitute an injury because Petitioner is “keeping money in its coffers and accruing
interest.” Reply [#14] at 5. Aside from the fact that Respondent cites no authority for this
argument, it is unquestionable that Petitioner has a legally protected interest in its funds
and how they are allocated. See Lujan, 504 U.S. at 560. Thus, the fact that Petitioner
must set aside a portion of those funds in reserve until Respondent’s claim is resolved
creates an “injury [that] is financial, definite, and concrete.” Philadelphia Indem. Ins. Co.
v. Lexington Ins. Co., 845 F.3d 1330, 1335 (10th Cir. 2017).
The Court further rejects Respondent’s alternative argument that, even if Petitioner’s
maintenance of a reserve amounts to an injury in fact, this injury is self-inflicted because
Petitioner chose to bring this action in federal court and agreed to include “this [appraisal]
mechanism in their contract for resolving disagreement[s] about an umpire.” Response
[#14] at 6. Respondent again cites no authority for this assertion and the Court finds this
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argument to obfuscate the fact that Respondent, not Petitioner, invoked the appraisal
provision. See Petition [#1] ¶ 8; Motion [#11] at 1-2.
Finally, Respondent quotes an Order to Show Cause issued in this district
apparently in support of its argument that Petitioner cannot identify an injury in fact to
establish standing. Motion [#11] at 4 (quoting Vista Pointe Townhome Association, Inc. v.
Auto-Owners Ins. Co., No. 16-cv-0973-MSK-NYW, 2017 WL 4772859, at *3 (D. Colo. Oct.
23, 2017) [hereinafter Vista Pointe Order to Show Cause]). Respondent does not explain
why the Vista Pointe Order to Show Cause is dispositive of the standing issue but merely
quotes the Order by stating that “the request for appointment of an umpire is not a request
that the Court compel a party to perform obligations under the contract. Rather, it is a
request that the Court discharge a duty (resolving the parties’ [appraisers’] impasse) that
the parties created for it in their contract.” Id. (quoting Vista Pointe Order to Show Cause,
2017 WL 4772859, at *3) (modifications in the original).
Vista Pointe is similar to this action in that it was a hail-damage case where the
value of an insurance claim was at dispute and a nearly identical appraisal provision was
invoked under the parties’ insurance policy. See Vista Pointe Order to Show Cause, 2017
WL 4772859, at *1.

However, as Petitioner thoroughly notes, Vista Pointe is

distinguishable from the present case in several respects. See Response [#13] at 7-9.
When the plaintiff insured in Vista Pointe filed suit, it was neither seeking a declaration of
rights under the insurance policy, nor asking the Court to appoint an umpire. Vista Pointe
Order to Show Cause, 2017 WL 4772859, at *1. Rather, the insured asserted three causes
of action for breach of contract, bad faith breach of an insurance contract, and
unreasonable delay and denial of payment of covered benefits, and requested that the
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court compel the defendant-insurer to complete the appraisal process with the insured’s
designated appraiser. Id. Underlying these claims was not a disagreement over the
selection of an umpire but was instead a dispute over the impartiality of the appraiser
appointed by the insured. Id.
Shortly after the suit was filed, the parties consented to administratively close the
case pending completion of the appraisal process. Id. Thereafter, the insured filed a
motion to reopen the case and to appoint an umpire. Id. It was at this stage in the
proceedings when the court issued the Order to Show Cause questioning whether the
insured had standing to pursue any of its claims and seek appointment of an umpire, given
that “no breach of contract existed [at] the time [the action was filed], and the parties [were]
currently performing their obligations under the [insurance policy].” Id. at *2.
After the parties responded to the Order to Show Cause, the court ultimately found
that the insured only lacked standing to pursue its breach of contract claim. See Vista
Pointe Townhome Association Inc. v. Auto-Owners Ins. Co., No. 16-CV-0973-MSK-NYW,
2018 WL 1773407 (D. Colo. Apr. 13, 2018) [hereinafter Vista Pointe Opinion]. As to the
insured’s request that the court compel the insurer to complete the appraisal process with
the insured’s designated appraiser, the court construed this request as a claim for specific
performance of the appraisal provision to remedy the insurer’s contractual breach. Id. at
*6-7. Accordingly, because the court had found that the insured lacked standing to bring
a claim for breach of contract, it further held that, “without a mature claim for breach of
contract, [the insured] cannot request the remedy of specific performance of the contract.”
Id. at *6.
Within this analysis, the court dedicated one footnote to the jurisdictional issue
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presented by the request to appoint an umpire. See id. at *6 n.5. In that footnote, the court
suggested that the appraisers, rather than the insured or insurer, would be the appropriate
parties with standing to seek a court-appointed umpire which, this Court notes, Respondent
has not argued and is contrary to the decision in Church where the issue was directly
presented. Id.; see Motion [#11]; Church 2013 WL 12093756, at *2. While the court in
Vista Pointe also expressed “profound doubts that it would possess jurisdiction to select
an umpire simply because the parties disagree,” the court did not analyze the issue and
was not faced with a declaratory judgment claim. Vista Pointe Opinion, 2018 WL 1773407,
at *6 n.5; see Larson v. One Beacon Ins. Co., No. 12-cv-03150-MSK-KLM, 2013 WL
5366401, at *12 (D. Colo. Sept. 25, 2013) (noting that a statement from a prior case was
not persuasive, in part, because it appeared “to be dicta, with no accompanying analysis
or citation to case law”); Ctr. For Native Ecosystems v. Salazar, 795 F. Supp. 2d 1236,
1239 n. 3 (D. Colo. 2011) (stating that reliance “upon dicta [is] a dubious provenance for
any legal proposition”).
Furthermore, as Petitioner correctly observes, Respondent’s reliance on Vista Pointe
is misplaced to the extent that either the Order to Show Cause or Opinion are “read to
suggest that state courts are courts of general jurisdiction for non-justiciable matters.”
Response [#13] at 9; see Vista Pointe Opinion, 2018 WL 1773407, at *6 n.5 (“At best, it
would seem that a request for appointment of an umpire would have to be made to a court
of general jurisdiction -- e.g. a state court.”). Colorado state courts are themselves limited
by the Colorado Constitution to resolve “actual controversies based on real facts” and not
“[t]he mere possibility of a future claim.” Bd. of Directors, Metro Wastewater Reclamation
Dist. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 105 P.3d 653, 656 (Colo. 2005). Indeed,
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Colorado courts must “limit their exercise of judicial power through jurisprudential doctrines
that include standing, mootness, and ripeness, to establish parameters for the principled
exercise of judicial authority.” Id. (citation omitted).
In this case, Respondent freely agreed to and invoked the Policy’s appraisal
provision. Petitioner and Respondent are presently at an impasse over selecting an umpire
which the appraisal provision clearly contemplates by providing either party the option to
request that selection be made by a court having jurisdiction. If this matter is “not
justiciable,” as Respondent contends, then no court would have jurisdiction to appoint an
umpire and the Policy’s appraisal provision would be incapable of being performed. This
cannot be the result as “words of promise which by their terms make performance entirely
optional . . . cannot serve as consideration for an enforceable agreement, and any
purported ‘agreement’ would be illusory.” Vernon v. Qwest Commc’ns Int’l, Inc., 857 F.
Supp. 2d 1135, 1153–54 (D. Colo. 2012), aff'd, 925 F. Supp. 2d 1185 (D. Colo. 2013)
(applying Colorado law).
Accordingly, the Court finds that Petitioner has established the existence of a case
or controversy that is both definite and sufficiently real. The Court further finds that, for
purposes of standing, Petitioner has demonstrated a financial, concrete injury that is fairly
traceable to Respondent’s failure to agree to an umpire and will be redressed if the Court
appoints an umpire pursuant to the Policy. The Court therefore concludes that it has
subject matter jurisdiction to adjudicate the Petition under Article III of the United States
Constitution.
B.

Amount in Controversy
Respondent next argues that the Court lacks diversity subject matter jurisdiction
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because the Petition fails to satisfy the amount in controversy requirement of 28 U.S.C. §
1332(a). See Motion [#11] at 2; Reply [#14] at 3-5. Petitioner asserts that the amount in
controversy is satisfied by Respondent’s demand for payment in the amount of
$162,489.57. Petition [#1] ¶ 3; see also Response [#13] at 6.
Pursuant to 28 U.S.C. § 1332(a), diversity jurisdiction is conferred on district courts
in all civil actions between citizens of different states “where the matter in controversy
exceeds the sum or value of $75,000, exclusive of interest and costs.”5 “When federal
subject matter jurisdiction is challenged based on the amount in controversy requirement,
the [Petitioner] must show that it does not appear to a legal certainty that [it] cannot recover
the jurisdiction[al] amount." Woodmen of the World Life Ins. Soc’y v. Manganaro, 342 F.3d
1213, 1216 (10th Cir. 2003) (internal quotation marks omitted). This requires Petitioner to
demonstrate “that it is not legally certain that the claim is less than the jurisdictional
amount.” Id. “The legal certainty standard is very strict. As a result, it is difficult for a
dismissal to be premised on the basis that the requisite jurisdictional amount is not
satisfied.” Accordingly, “[t]here is a strong presumption favoring the amount alleged by the
[Petitioner].” Id.
In the Motion [#11], Respondent makes only one argument as to why the amount
in controversy does not exceed $75,000. According to Respondent, the amount in
controversy requirement cannot be met in this case based on “the possibility that . . . the
umpire selected by this Court might find the amount of loss to exceed the $75,000

5

Petitioner has demonstrated, and Respondent does not contest, that diversity of
citizenship exists. See generally Motion [#11]. The Petition [#1] states that Petitioner is a
corporation with its principal place of business in Illinois and Respondent is a Colorado limited
liability company. [#1] ¶ 2.

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jurisdictional requirement.” Motion [#11] at 3.
The Court quickly dispenses with this argument given that, as Petitioner notes, “the
likely result” of this litigation is irrelevant in determining whether the amount in controversy
meets the jurisdictional threshold. Response [#13] at 6. It is well settled that “[t]he amount
in controversy . . . is not ‘the amount the [Petitioner] will recover,’ but rather ‘an estimate
of the amount that will be put at issue in the course of the litigation.’” Frederick v. Hartford
Underwriters Ins. Co., 683 F.3d 1242, 1245 (10th Cir. 2012) (quoting McPhail v. Deere &
Co., 529 F.3d 947, 956 (10th Cir. 2008)); see also Gibson v. Jeffers, 478 F.2d 216, 220
(10th Cir. 1973) (“The test to determine amount in controversy is not the sum ultimately
found to be due, but the sum demanded in good faith.”). Therefore, whether or not the
appraisal process ultimately results in an amount of loss greater than $75,000, the Court
initially finds that Petitioner has satisfied the amount in controversy requirement by
asserting $162,489.57 as the amount at issue in this litigation.
In its Reply [#14], Respondent raises new arguments for why the amount in
controversy requirement is not met which the Court finds similarly unavailing. Respondent
first argues that there is simply “no amount in controversy before this Court” because “[i]f
the Court were to fully resolve the issue presented by . . . appoint[ing] an appraisal
umpire[,] no money will have exchanged hands and no money will have been spared from
such an exchange.” Reply [#14] at 3. In support of this argument, Respondent cites one
unreported case from the Northern District of Texas, Treasure Star Properties Fund, Inc.
v. Admiral Ins. Co., No. 4:12-CV-462-Y, 2013 WL 12114861 (N.D. Tex. Apr. 1, 2013).
Reply [#14] at 3, 8.
There, the district court remanded a case similar to the one here in which the plaintiff
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filed a petition to appoint an umpire after the parties’ appraisers failed to agree on a neutral
umpire. Treasure Star, 2013 WL 12114861, at *1. In remanding the case, the court found
that the petition did “not involve a sufficient amount in controversy to invoke the [c]ourt’s
diversity jurisdiction.” Id. The court reached this conclusion based on the view that “the
only relief that [the plaintiff] seeks is the appointment of a neutral umpire for appraisal [and
the defendant] seeks no damages.” Id. Therefore, according to the court, “[a]lthough . .
. there may be a broader dispute between the parties that involves more than $75,000, the
[c]ourt is not persuaded that this is germane to the question of whether the amount in
controversy in this case exceeds the jurisdictional minimum.” Id. (emphasis omitted).
Putting aside the fact that Treasure Star is not binding precedent in the Tenth
Circuit, the Court finds it unpersuasive for three reasons. First, the rationale provided
above is the extent of the district court’s analysis, with no authority cited to support its
conclusion. See Larson, 2013 WL 5366401, at *12.
Second, although the facts underlying Treasure Star are similar to those presently
before the Court, that case was procedurally different. Treasure Star was removed to
federal court from state court, hence a different presumption regarding the amount in
controversy applies. In cases removed to federal court, “there is a strong presumption that
the plaintiff has not claimed a large enough amount to confer jurisdiction. Concomitantly,
there is a strong presumption against removal.” Baker v. Sears Holdings Corp., 557 F.
Supp. 2d 1208, 1212 (D. Colo. 2007) (citing St. Paul Mercury Indem. Co. v. Red Cab Co.,
303 U.S. 283, 290-92 (1938); Martin v. Franklin Capital Corp., 251 F.3d 1284, 1289 (10th
Cir. 2001)); see also 28 U.S.C. § 1447(c) (“If at any time before final judgment it appears
that the district court lacks subject matter jurisdiction, the case shall be remanded.”)
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(emphasis added). In contrast, and as stated above, where a case is initiated in federal
court, “[t]here is a strong presumption favoring the amount alleged by the [petitioner].”
Woodmen, 342 F.3d at 1216 (10th Cir. 2003); see also Martin, 251 F.3d 1284 at 1289;
Baker, 557 F. Supp. 2d at 1212 (“In such a case, the amount claimed by the plaintiff is
presumed to be sufficient to support diversity jurisdiction.”). Therefore, because Treasure
Star was a removal case in which a different presumption applied to the amount in
controversy issue, the Court finds that holding even less persuasive.
Third, while Respondent cites Treasure Star for the proposition that no amount in
controversy exists where a party seeks only the appointment of an appraisal umpire, that
view does not comport with other decisions in the Fifth Circuit or elsewhere. Church, for
instance, is a decision of a district court in the Fifth Circuit which held the amount in
controversy requirement was satisfied based on the insured’s disputed claim of
$464,553.26. Church, 2013 WL 12093756, at *1. Respondent argues that Church is
inapposite because “[t]here . . . the parties agreed that the amount in controversy
requirement was satisfied.” Reply [#14] at 4-5; see Church, 2013 WL 12093756, at *1
(stating that “there is no dispute the amount-in-controversy requirement is satisfied.”).
Respondent also recognizes, however, that “parties cannot concede jurisdiction by
agreeing that the jurisdictional amount requirement has been satisfied.” Reply [#14] at 5
(quoting Huffman v. Saul Holdings Ltd. P’ship, 194 F.3d 1072, 1079 n.4 (10th Cir. 1999)).
Although Respondent asserts that this “is exactly what happened in” Church, the Court
declines to adopt this reading of the case considering all federal “courts . . . have an
independent obligation to determine whether subject-matter jurisdiction exists, even in the
absence of a challenge from any party.” Arbaugh v. Y&H Corporation, 546 U.S. 500, 514
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(2006).
Moreover, in contrast to Treasure Star, it appears that Church more closely aligns
with the established caselaw on this issue. Several decisions “have looked beyond the cost
of the umpire to the value of the parties’ underlying dispute in determining whether the
amount in controversy is sufficient.” Liberty Mut. Grp., Inc. v. Wright, No. CIV.A. DKC
12-0282, 2012 WL 718857, at *3 (D. Md. Mar. 5, 2012); see e.g., Garvin v. Acuity, No.
11-5105-CV-SW-RED, 2012 WL 12903747, at *1 (W.D. Mo. Jan. 18, 2012) (“[T]he amount
in controversy is determined by the policy limits of the insurance policy, i.e. [the insured’s]
potential recovery, and is not merely the specific relief requested by [insured] in his [petition
to appoint an umpire].”); R.C. Spenceley, Inc. v. Topa Ins. Co., No. CIV. 2010-115, 2011
WL 3742181, at *4 (D.V.I. Aug. 24, 2011) (“Here, in assessing the amount-in-controversy,
the Court . . . looks beyond the ‘initial step’ of the issue of the selection of an umpire.”);
Church Mut. Ins. Co. v. Household of Faith Church, No. CIV.A.06-3839, 2007 WL 1537629,
at *2 (E.D. La. May 23, 2007) (looking to the value of the underlying dispute in measuring
the amount in controversy in a case seeking the appointment of an umpire); Ear, Nose &
Throat Consultants of N. Mississippi, PLLC v. State Auto Ins., No. CIV.A. 3:05CV18-B-B,
2006 WL 1071834, at *1-2 (N.D. Miss. Apr. 21, 2006) (same).
While the Parties do not cite, and the Court did not locate, a Tenth Circuit decision
specifically addressing this question, the cases cited above align with how the Tenth Circuit
measures the amount in controversy in actions seeking either declaratory relief or to
compel arbitration. “In cases seeking declaratory . . . relief, ‘the amount in controversy is
measured by the value of the object of the litigation’ . . . which considers either the value
to [the party seeking relief] or the cost to [the party against whom relief is sought].” Lovell
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v. State Farm Mut. Auto. Ins. Co., 466 F.3d 893, 897 (10th Cir. 2006) (quoting Hunt v.
Washington State Apple Adver. Comm’n, 432 U.S. 333, 347 (1977); citing Justice v.
Atchison, Topeka and Santa Fe Ry. Co., 927 F.2d 503, 505 (10th Cir. 1991)). Relatedly,
when “determining the amount in controversy in cases seeking to compel arbitration . . .
[the Tenth Circuit] look[s] through to the possible award resulting from the desired
arbitration.” Woodmen, 342 F.3d at 1217 (internal quotation marks and citations omitted).6
Therefore, based on the above, the Court finds that the value of the object of this
litigation is, at the very least, the difference between Respondent’s initial claim of
$162,489.57 and Petitioner’s subsequent payment of $19,002.21. This underlying disputed
amount is $132,887.55, which obviously satisfies the jurisdictional threshold. Accordingly,
because the Petition asserts an amount in controversy greater than $75,000 and
Respondent’s arguments do not overcome the presumption favoring the amount alleged
by Petitioner, the Court cannot say to a legal certainty that Petitioner cannot meet the
amount in controversy. The Court therefore concludes that Petitioner has sufficiently
alleged an amount in controversy in excess of $75,000, conferring jurisdiction under 28
U.S.C. § 1332(a).
C.

Declaratory Judgment Act
Respondent’s final argument is that the Court’s lack of subject matter jurisdiction

cannot be saved by Petitioner filing the Petition under the Declaratory Judgment Act, 28

6

The Court acknowledges that appraisals and arbitrations are different in several respects
but finds the rationale in Woodmen instructive. The Court also rejects, for reasons already
explained, Respondent’s argument that the object of this litigation is without any monetary value
because “[u]nlike arbitration, an appraisal only binds the parties to the amount of loss, not the
amount of payment.” Reply [#14] at 8.

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U.S.C. § 2201. Motion [#11] at 3-4. Although it is true that any action premised on the
Declaratory Judgment Act must still meet the minimum jurisdictional requirements, Prier
v. Steed, 456 F.3d 1209, 1212 (10th Cir. 2006), the Court need not address Respondent’s
argument given the Court’s conclusion above that those jurisdictional requirements have
been satisfied.
IV. Conclusion
Based on the foregoing, the Court concludes that Petitioner has sufficiently
demonstrated that the Court has subject matter jurisdiction to adjudicate the Petition [#1]
by appointing an umpire pursuant to the Policy’s appraisal provision. Accordingly,
IT IS HEREBY RECOMMENDED that Respondent’s Motion to Dismiss [#11] be
DENIED.
IT IS FURTHER ORDERED that pursuant to Fed. R. Civ. P. 72, the Parties shall
have fourteen (14) days after service of this Recommendation to serve and file any written
objections in order to obtain reconsideration by the District Judge to whom this case is
assigned. A party’s failure to serve and file specific, written objections waives de novo
review of the Recommendation by the District Judge, Fed. R. Civ. P. 72(b); Thomas v. Arn,
474 U.S. 140, 147-148 (1985), and also waives appellate review of both factual and legal
questions. Makin v. Colo. Dep’t of Corr., 183 F.3d 1205, 1210 (10th Cir. 1999); Talley v.
Hesse, 91 F.3d 1411, 1412-1413 (10th Cir. 1996).

A party’s objections to this

Recommendation must be both timely and specific to preserve an issue for de novo review
by the District Court or for appellate review. United States v. One Parcel of Real Prop., 73
F.3d 1057, 1060 (10th Cir. 1996).

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Dated: November 30, 2018

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