Graves v. Standard Insurance Company

Filing 18

MEMORANDUM OPINION AND ORDER denying 13 Motion to Remand. Signed by Senior Judge John G. Heyburn, II on 11/7/2014. cc: Counsel(JBM)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
CIVIL ACTION NO. 3:14-CV-558-H

LINDA GRAVES

PLAINTIFF

V.
STANDARD INSURANCE CO.

DEFENDANT

MEMORANDUM OPINION AND ORDER
Linda Graves and Standard Insurance Company disagree over whether this case should
be in federal court, mostly because they disagree over when Standard had sufficient information
to require removal under 28 U.S.C. § 1446. Graves, a Kentuckian, filed Kentucky state law
claims against Standard—a corporation incorporated in Oregon with its principal place of
business in Portland, Oregon—in Jefferson Circuit Court. The case proceeded for several
months before Standard removed to this Court on diversity jurisdiction. Standard argues that
earlier removal was not required because it was not yet clear that the necessary jurisdictional
amount was met. Graves argues that Standard waited too long to remove and therefore seeks
remand to state court.
For the reasons that follow, the Court concludes that Standard did not have sufficient
information that would require removal within thirty (30) days of the initial complaint.
I.
The facts are straightforward. Linda Graves had a long term disability insurance policy
with Standard. While covered under the policy, she became disabled and entitled to monthly
benefits. A former school bus driver, the 51 year-old Graves’ disability was due to neck pain,
back pain, and cervical fusion surgery. At first, Standard approved her claim and paid her

disability insurance benefits for the next twenty-four months. After this twenty-four month
period, the definition of “disability” in her policy became more stringent, and Standard refused to
continue paying her monthly disability income, believing she did not qualify as “disabled” under
the more rigid standard.
Four months later, Graves sued for her missing disability benefits, which at that point
were worth less than $6,800. She sought damages for (1) breach of contract; (2) breach of the
duty of good faith and fair dealing; (3) statutory bad faith; (4) violation of Kentucky’s consumer
protection act; and (5) unjust enrichment. She also sought punitive damages. Initially, Standard
did not remove her complaint to federal court. Thinking that her case was worth less than
$6,800—the amount of benefits payments she alleged Standard owed her—Standard believed the
case was not removable because it fell short of the federal jurisdictional minimum.
Instead, the two parties litigated at length in state court. Motions were filed and briefed;
discovery proceeded. After over five months of litigation—and after Graves responded to an
interrogatory saying she valued her claim at $883,000 or more—Standard removed to federal
court. Graves opposes removal and desires remand to state court. Not only does she assert that
Standard’s removal was untimely, she also argues that Standard has forfeited its right to remove
and has failed to show by a preponderance of the evidence that the required jurisdictional
minimum is met in this case.
II.
“When considering a motion to remand, the Court must examine whether the case was
properly removed to federal court.” Shawver v. Bradford Square Nursing, LLC, No. 3:09-02DCR, 2009 WL 971463, at *1 (W.D. Ky. Apr. 9, 2009) (citing Coyne ex rel. Ohio v. Am.
Tobacco Co., 183 F.3d 488, 492 (6th Cir. 1999)). Where removal is based on diversity

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jurisdiction—as here—the amount in controversy must exceed $75,000. 28 U.S.C. § 1332
(2012). The removing party must file within thirty days of receiving the initial complaint, unless
it is unclear that the claims are worth $75,000. Then, defendants may remove within thirty days
of receiving “an amended pleading, motion, order or other paper from which it may first be
ascertained that the case is one which is or has become removable.” 28 U.S.C. § 1446(b)(3)
(2012). Discovery responses are considered “other paper” under the relevant statute. 28 U.S.C.
§ 1446(c)(3)(A). The party seeking removal carries the burden of establishing diversity
jurisdiction by a preponderance of the evidence. See Broaddus v. Walmart Stores East, LP, No.
3:13-CV-00932-H, 2013 WL 6511922, at *2 (W.D. Ky. Dec. 12, 2013); Dunn v. Gordon Food
Servs., Inc., No. 3:10-CV-00335-R, 2010 WL 4180503, at *2 (W.D. Ky. Oct. 20, 2010).
A.
This Court has often recognized the difficult position defendants sometimes face when
deciding whether and when they may remove to federal court. See, e.g., Egan v. Premier Scales
& Sys., 237 F. Supp.2d 774 (W.D. Ky. 2002). Standard claims that it put off removal because it
knew that the benefits Graves claimed were valued at less than $6,800, equal to the amount of
monthly payments it had not made. Even contemplating punitive damages,1 Standard argues
that, from what it knew, it was reasonable to assume that Graves’ suit fell far short of the
$75,000 threshold. Standard defended itself in state court for over five months before it removed
based on Graves’ response to an interrogatory asserting her claims as $883,000 or more.
Standard argues that her response was the first “solid and unambiguous information” that the
case met the $75,000 threshold.

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The parties have mentioned, based on United States Supreme Court and Sixth Circuit precedent, punitive
damages calculations of both 2:1 and 4:1. Either way, tacking punitive damages onto Graves’ $6,800 lost benefits
falls well short of $75,000—$13,000 at the low end and $27,200 the high.

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This is a case which should suggest some appropriate flexibility for a removing party.
Graves reminds the Court of advice it gave to defendants some five years ago: “when in doubt,
remove.” Mozee v. Dugger, 616 F.Supp.2d 672, 674 (W.D. Ky. 2009). That directive is sage
advice. Although “when in doubt, remove” is indeed good advice that should appear in the
heading of a defendants’ best practices guide, it is not a rule of law. As this Court also said in
Mozee, “the Court does not sanction any effort to determine whether a defendant should have or
could have inquired more diligently into unknown facts. That is not required.” Id. And as the
Court noted last year, “the inquiry here is based on the actual writings provided to Defendant,
not what extra research or investigation it might have done . . . . Otherwise, courts would be
constantly required to assess the diligence of a defendant’s discovery with[in] the first thirty days
after a complaint. Clearly, that is not the standard. ” Broaddus, 2013 WL 6511922, at *3
(citation omitted) (emphasis added).
The Court has sustained motions to remand, but this case is dissimilar. In Mozee, “the
plaintiff had demanded a $200,000 settlement prior to filing suit and submitted a request for
admission with his complaint asking the defendants to admit that he was entitled to $100,000 in
pain and suffering.” Id. at *2 (citing Mozee, F. Supp.2d at 674). In another case where the Court
granted remand, “the plaintiff had notified the defendant pre-suit that he had unsuccessfully
undergone back surgery, that his injury would probably impact his ability to work in the future,
that a $45,000 expense for a port was anticipated, and that other expenses had been incurred and
were expected.” Id. (citing Johnson v. Hartford Fire Ins. Co., No. 4:08-CV-74, 2008 WL
3850482 at *1 (W.D. Ky. Aug. 15, 2008)). In the cases where the Court sustained motions for
remand, it did so because defendants had clear and adequate notice that the claims against them
would eclipse the minimum jurisdictional requirement.

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What Standard knew from actual writings Graves provided was that she had lost benefits
payments totaling less than $6,800. She did request punitive damages, but even assuming a ratio
of 4:1, her benefits claims fell short of the $75,000 threshold. Graves made other claims, but as
usual under Kentucky pleading rules, her complaint did not quantify the damages sought. And
simply asserting claims for breaching the duty of good faith, violating the Kentucky Consumer
Protection Act, and seeking punitive damages for insurance claims worth $8,000—and asking for
attorneys’ fees as well—did not make it “more likely than not that the amount in controversy
exceed[ed] $75,000.” See Sargent v. Monumental Life Ins. Co., No. 3:12-CV-000725-H, 2013
WL 321660 at *1 (Jan. 28, 2013).
In sum, Standard “could have made a case for removal at an earlier time, but it was not
required to do so.” Id. All the law requires is that Standard remove within thirty days of
receiving information “from which it may first be ascertained that the case is one which is or has
become removable.” 28 U.S.C. §1446(b)(3) (2012). After careful consideration, the Court
concludes that Standard did not have solid and unambiguous information permitting removal
until it received Graves’ $883,000 response in discovery.
B.
Paradoxically, Graves also thinks Standard has not competently demonstrated the amount
in controversy. She cites case law from the Eastern District of Kentucky for the proposition that
an initial “high-ball” number is insufficient to establish the jurisdictional amount where it did not
previously exist. See May v. Wal-Mart Stores, Inc., 751 F. Supp.2d 946, 949 (E.D. Ky. 2010).
Therefore, she argues, her interrogatory response that she valued her claim at about $883,000
was insufficient to prove that it was more likely than not that this case was worth at least
$75,000.

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This is not a logically persuasive argument and is distinguishable from May for several
reasons. Most obviously, in May the defendant “almost reflexively” removed the case to federal
court—at a time when the “dearth of evidence” made it almost “impossible for the defendant to
establish jurisdictional facts”—and then asked to conduct “jurisdictional discovery” to unearth
facts needed to keep the case in federal court. See id. at 947. The Eastern District noted that
defendants must be prepared “at the moment of removal to demonstrate by a preponderance of
the evidence that federal jurisdiction exists,” but that the defendant in that case was not so
prepared. Id. (emphasis in original). In this case, however, Standard’s removal was not
reflexive. Indeed, it proceeded with discovery in state court. When it asked Graves to identify
all damages she claimed in the lawsuit, she responded:
My long term disability benefits. I believe this to be at least $71,925. The value
of my car I had to sell. I’m uncertain right now as to its value. The value of my
mortgage payments. The money lent to me by friends. The value of my claims in
this lawsuit. I am working on obtaining a value on all of my claims, but I
estimate the value to be at least $883,000.
DN 1, Page ID # 429. Graves wants to have it both ways: she wants the Court to conclude that
Standard should have guessed from the very beginning—when she had not indicated how much
her claims were worth—that the case was worth $75,000, yet wants the Court to also conclude
that her saying the case was worth eleven times that much was not competent proof that the case
was worth at least $75,000. If the Court adopted Graves’ conceptions, the Court would force
Standard into an unfair Catch-22. There is no doubt: after Graves’ interrogatory response,
Standard had plenty of information to support removal.
C.
Graves also seeks remand on the idea that Standard’s state court litigation forfeited its
right to remove. Graves’ argument is part and parcel with her argument that Standard should

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have removed earlier in the litigation. As she styles it, Standard gambled by litigating in state
court and only sought removal when it became clear that Standard was, as gamblers say,
“drawing dead” in state court. But because the Court disagrees that Standard had to remove at an
earlier time, it also disagrees that Standard forfeited its right to remove just because it defended
itself in state court until it became clear by a preponderance of the evidence that the case met the
minimum jurisdictional threshold.
Being otherwise sufficiently advised,
IT IS HEREBY ORDERED that Linda Graves’ motion to remand is DENIED.

November 7, 2014

cc:

Counsel of Record

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