O'Brien v. Hartford Accident and Indemnity Company et al
Filing
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ORDER denying 7 Motion to Remand. Signed by Judge Charles C. Lovell on 3/22/2016. (MKB)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
HELENA DIVISION
DIANE O’BRIEN, individually and on
behalf of herself and all others similarly
situated,
Plaintiff,
vs.
HARTFORD ACCIDENT &
INDEMNITY COMPANY, HARTFORD
CASUALTY INSURANCE COMPANY,
HARTFORD FIRE INSURANCE
COMPANY, HARTFORD INSURANCE
COMPANY OF THE MIDWEST,
HARTFORD UNDERWRITERS
INSURANCE COMPANY, PROPERTY
& CASUALTY INSURANCE
COMPANY OF HARTFORD,
SENTINEL INSURANCE COMPANY,
LTD., TRUMBULL INSURANCE
COMPANY, TWIN CITY FIRE
INSURANCE COMPANY, and KNAPP
INSURANCE AGENCY, INC., a
Montana Corporation,
Defendants.
CV 15–14–H–CCL
ORDER
Before the Court is Plaintiff’s Motion for Remand (Doc. 7). The motion is
opposed.
This putative class action is brought by Plaintiff Diane O’Brien (“Plaintiff”)
against both the Defendant Insurance Companies (the “Hartford Companies”),
which have a principal place of business and a state of incorporation outside of
Montana, and also against the Knapp Insurance Agency, Inc. (“Knapp”), which is
a Montana corporation. (Doc. 5, Amended Compl., ¶¶ 1-2.) Plaintiff alleges that
in 2011 she purchased a homeowner’s insurance policy from the Hartford
Companies through Knapp, an independent insurance agency, and the policy
provided personal property coverage of $143,250, that amount being 75% of the
value of her dwelling. In her Amended Complaint, Plaintiff asserts that her
personal property is not worth $143,250. Plaintiff further alleges that the Hartford
Companies always require homeowners to purchase personal property coverage at
a value of 75% of their dwellings, whether or not their personal property actually
justifies that valuation. Plaintiff therefore concludes that to the extent that she is
paying a premium for personal property coverage in excess of her needs, the
insurance policy is illusory and violates Montana insurance laws and public
policy. Plaintiff claims that Knapp concealed from her the illusory nature of the
personal property coverage, and she did not discover this until after July 7, 2014.
In Count 1 of the Amended Complaint, Plaintiff seeks declaratory judgment
that the Hartford Companies’ collection of excess personal property premiums
violates Montana law and public policy and is illegal. Plaintiff seeks return of all
excessive premiums from the Hartford Companies, 10% interest on the refunded
premium payments, attorney fees. In Count 2, Plaintiff alleges constructive fraud
against Knapp and the Hartford Companies in their alleged concealment and
failure to disclose the illusory nature of Plaintiff’s personal property premiums.
The Hartford Companies are also alleged to be liable for Knapp’s conduct under
principles of agency. In Count 3, Plaintiff alleges that Knapp and the Hartford
Companies were negligent in obtaining this illusory coverage for her, and, again,
the Hartford Companies are liable for Knapp’s conduct under principles of agency.
In Count 4, Plaintiff alleges that she is bringing all of her claims on behalf
of the following class of individuals:
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“a. Who purchased homeowners insurance policies issued by any of the
Hartford Companies in Montana;
b. Who had personal property worth less than 75% of the stated value of the
dwelling insured under such insurance policy;
c. Who paid premiums for personal property coverage; and,
d. Whose claim arose not more than eight (8) years preceding the filing of
the Complaint in this action.”
(Doc. 5, Amended Compl., ¶ 20.) Plaintiff states that “[t]he individuals in the
class above defined number in the hundreds and are so numerous that individual
joinder of class members as plaintiffs is impracticable.” (Doc. 5, ¶ 28.)
The first class claim is for declaratory relief and refund of excess premiums
with interest, and the second class claim is for attorney fees for all class members.
Motion for Remand
Federal statutes govern whether a defendant may remove a case from state
court to federal district court. Libhart v. Santa Monica Dairy Co., 592 F.2d 1062,
1064 (9th Cir. 1979). Pursuant to 28 U.S.C. § 1441, a civil case may be removed to
a federal district court if the court has original jurisdiction over the issues. In this
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case, Defendants’ Notice of Removal states that the removal is based on the
court’s original jurisdiction under the Class Action Fairness Act of 2005
(“CAFA”), 28 U.S.C. § 1332(d), § 1453. Defendants assert (and Plaintiff agrees)
that this is a class action with more than 100 putative class members, but Plaintiff
contends that minimal diversity is lacking and less than $5,000,000 is in
controversy. Plaintiff therefore denies that removal is proper under CAFA.
Normally, a presumption against removal attaches to state court cases
removed pursuant to federal statute. See Abrego Abrego v. Dow Chem. Co., 443
F.3d 676, 684 (9th Cir. 2006); Gaus v. Miles, Inc., 980 F.2d 564, 566-67 (9th Cir.
1992). In a CAFA case, however, there is no anti-removal presumption because
“Congress enacted [CAFA] to facilitate adjudication of certain class actions in
federal court.” Dart Cherokee Basin Operating Co., LLC v. Owens, 135 S.Ct. 547,
554, 190 L.Ed.2d 495 (2014).
CAFA enlarges the federal district court jurisdiction over certain class
actions (i.e., those having at least 100 plaintiffs and putting into controversy at
least $5 million) by relaxing the diversity of citizenship rules. Normally, of
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course, all defendants must be diverse to the plaintiffs. Under CAFA, however,
only minimal diversity is required, so that only the “primary defendants” need be
diverse to the proposed plaintiff classes. Serrano v. 180 Connect, Inc., 478 F.3d
1018, 1021 (9th Cir. 2007). In this case, the parties are in agreement that the
putative class would number in the hundreds of policy holders.
The two issues raised by Plaintiff’s motion for remand are whether the
matter in controversy exceeds the sum of $5 million and whether minimal
diversity exists in light of the presence of Knapp, the Montana insurance agency
that procured Plaintiff’s homeowner policy for her.
CAFA’s Value of Matter in Controversy
When a complaint does not state the value of the matter in controversy, as is
the case here, a defendant may state the value of the matter in controversy in its
notice of removal. 28 U.S.C. § 1446(c)(2)(A). The amount so stated need only be
plausible, should be short and plain (as is required by 28 U.S.C. § 1446(a)), and
need not be supported by evidentiary documentation. Dart Cherokee Basin
Operating Co., LLC v. Owens, 135 S.Ct. 547 (2014). However, the removing
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defendant bears the burden of meeting a preponderance of the evidence standard.
See Ibarra v. Manheim Invs., Inc., 775 F.3d 1193, 1199 (9th Cir. 2015).
The notice of removal need only contain a “plausible allegation” as to the
amount in controversy, Dart, 135 S.Ct. at 554, but when a plaintiff challenges this
allegation, as in a motion for remand, “the defendant must provide evidence
establishing that it is ‘more likely than not’ that the amount in controversy exceeds
[$5 million].” Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir.
1996); Gugliemino v. McKee Foods Corp., 506 F.3d 696, 699 (9th Cir. 2007)
(applying Sanchez preponderance rule to CAFA cases). However, Defendants’
“burden is not daunting, as courts recognize that under this [“more likely than
not”] standard, a removing defendant is not obligated to research, state, and prove
the plaintiffs’ claims for damages.” Korn v. Polo Ralph Lauren Corp., 536
F.Supp.2d 1199, 1204-05 (E.D. Cal. 2008) (emphasis in original). Instead,
defendants must demonstrate their consideration of “real evidence and the reality
of what is at stake in the litigation, using reasonable assumptions underlying the
defendant’s theory of damages exposure.” Ibarra, 775 F.3d at 1198. The
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defendant may submit affidavits, declarations, or other ‘summary-judgment-type
evidence relevant to the amount in controversy at the time of removal.’” Id. at
1197 (quoting Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th Cir.
1997). The claims of all class members (including those unnamed) must be
aggregated to determine whether the matter in controversy exceeds the $5 million
threshold. 28 U.S.C. § 1332(d)(6).
Defendants have submitted a Declaration of Fernando Guimaraes as an
exhibit to the Notice of Removal. (Doc. 1-1.) In his Declaration, Guimaraes
states that he is an employee of Hartford Fire Insurance Company, and he oversees
a Product Management team that sets homeowners insurance rates in a five-state
region, including Montana. He states that, in 2015, there were 13,269
homeowners insurance policies with personal property coverage in Montana
issued by the Hartford Companies. (Doc. 1-1, ¶ 9.) The total number of the
putative class would be significantly higher than 13,269, however, taking into
account an 8-year class period. Guimaraes further states that Hartford does not
calculate separate premiums for different coverages of its homeowners policies.
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Instead, a “total policy premium covers “Coverage A - Dwelling, Coverage B Other Structures, Coverage C - Personal Property, and Coverage D - Loss of Use.”
(Doc. 1-1, ¶ 3.) Guimaraes estimates that “the portion of total policy premium
attributable to Coverage C for homeowners insurance policies in Montana during
the eight-year period 2007-2014 [the putative class period] as between
$15,905,141 and $29,159,425. (Doc. 1-1, ¶ 4.) This estimate is based upon
$82,839,275 in total premiums received by the Hartford Companies between 2007
and 2014.
Guimaraes estimates that total personal property premiums to be as low as
19% or as high as 35% of the entire homeowner’s policy premium. This means
that either little as $15,904,141 or much as $29,159,425 is the putative class’s total
personal property premium at stake in this case. In his second declaration
submitted with Defendants’ response brief, Guimaraes also provides a percent of
Montana-only personal property claims compared to all Montana claims (13%),
resulting in a third estimation of $11,183,302. Any one of these estimates more
than meet CAFA’s matter in controversy requirement.
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Defendants defends their estimates and the extrapolations therefrom as
being reasonable under all the circumstances presented by the Amended
Complaint. Plaintiff submits no evidence in response to Defendant’s evidence, not
even the extent to which Plaintiff’s own personal property is overvalued by her
personal property coverage, which would be a value that Plaintiff could have
herself ascertained.
Plaintiff objects to Defendants’ attempts to estimate what the personal
property premium overcharge might be and how that might affect the Court’s
evaluation of the matter in controversy. This speculation, according to Plaintiff,
cannot be the premise for Defendants to meet their preponderance burden of proof
that the matter in controversy exceeds $5 million. Perhaps so, although the
Plaintiff has not attempted to be at all specific regarding the alleged overcharging
of premiums in her Amended Complaint, and in fact alleges that all the personal
property premiums were “programmatically designed and implemented to sell
illusory coverage for personal property” (Amended Compl., at ¶ 21), leading the
Court to value what is at stake in this case to be the entire personal property
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premium, not just the alleged overcharge.
The total amount of personal property premium is in issue because, at this
point, virtually any percentage of that amount could ultimately be found to be the
overcharge percentage. See Lewis v. Verizon Commun., Inc.,627 F.3d 395, 400
(9th Cir. 2010); Raskas v. Johnson & Johnson, 719 FG.3d 884, 887-88 (8th Cir.
20134) (citing Lewis and finding total medication sales proper value instead of
wrongful medication sales). The Defendants’ most conservative estimate of
$11,183,302 at stake well surpasses the $5 million requirement and plausibly
demonstrates that the CAFA matter in controversy requirement is met.
Defendants’ assumptions underlying its calculations of the matter in controversy
are reasonable and conservative, and supported appropriately by evidence.
In addition, the $5 million benchmark is again easily met by combining the
value of the personal property premiums in issue with attorney fees and punitive
damages. Potential attorneys’ fee awards may be included in the amount in
controversy when the “underlying statute authorizes an award of attorneys’ fees,
either with mandatory or discretionary language....” Galt v. Scandinavia, 142 F.3d
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1150, 1156 (9th Cir. 1998); Gibson v. Chrysler Corp., 261 F.3d 927, 945-46. In
the Ninth Circuit, “25% of the common fund” is a “benchmark award for attorney
fees.” Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998). In addition,
punitive damages may also be counted toward the CAFA matter-in-controversy
requirement. The Court finds that Defendants have demonstrated by a
preponderance that the value of the matter in controversy exceeds $5 million.
Home-State Exception and Minimal Diversity
Under section 1332(d)(4), Title 28, which is the “home-state” exception to
CAFA removal, “a district court shall decline to exercise jurisdiction under
paragraph (2)-(A)(i) over a class action in which–
(I) greater than two-thirds of the members of all proposed
plaintiff classes in the aggregate are citizens of the state in
which the action was originally filed;
(II) at least 1 defendant is a defendant–
(aa) from whom significant relief is sought by members
of the plaintiff class;
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(bb) whose alleged conduct forms a significant basis for
the claims asserted by the proposed plaintiff class; and
(cc) who is a citizen of the State in which the action was
originally filed; and
(III) principal injuries resulting from the alleged conduct or any
related conduct of each defendant were incurred in the state in
which the action was originally filed; and
(ii) during the 3-year period preceding the filing of that class action,
no other class action has been filed asserting the same or similar
factual allegations against any of the defendants on behalf of the same
or other persons; or
(B) two-thirds or more the members of all proposed plaintiff classes
in the aggregate, and the primary defendants, are citizens of the State
in which the action was originally filed.
28 U.S.C. § 1332(d)(4). Plaintiff seeking remand under the “home-state
exception” to removal jurisdiction bears the burden of proving that an express
exception to removal applies. See Luther v. Countrywide Home Loans Servicing
LP, 533 F.3d 1031, 1034 (9th Cir. 2008).
Defendants argue that the “primary defendants (i.e., the defendants from
whom “significant relief” is being sought by Plaintiff) are the Hartford
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Companies. The Hartford Companies packaged the homeowners policies and
charged premiums therefor, and, significantly, they are the entities from which the
Plaintiff seeks a premium refund. It is telling that Plaintiff seeks no damages
directly from the Knapp Agency, and repeatedly asserts that the Hartford
Companies are responsible for acts of the Knapp Agency under a theory of
respondeat superior. This Court agrees that the Hartford Companies are clearly
the primary defendants in this case.
Accordingly,
IT IS HEREBY ORDERED that Plaintiff’s Motion for Remand (Doc. 7) is
DENIED.
DATED this 22nd day of March, 2016.
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