Burton v. Trinity Universal Insurance Company et al

Filing 18

ORDER LIFTING STAY. Set Deadlines/Hearing as to 7 MOTION to Compel Appraisal and MOTION to Dismiss or MOTION to Stay or Alternatively, to Dismiss Counts Three Through Eight and to Dismiss the Action as to Kemper Corporation: Responses due by 3/17/2015. Replies due by 3/31/2015. Motions ripe 3/17/2015. Motions terminated: 9 MOTION to Remand filed by Dennis E. Burton is DENIED. Signed by Judge Donald W. Molloy on 2/24/2015. (dle)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
MISSOULA DIVISION

DENNIS E. BURTON,

CV 14–242–M–DWM

Plaintiff,
vs.

ORDER

TRINITY UNIVERSAL INSURANCE
COMPANY, ALPHA PROPERTY &
CASUALTY INSURANCE COMPANY,
FINANCIAL INDEMNITY COMPANY,
MERASTAR INSURANCE COMPANY,
KEMPER CORPORATION, and
SYDNEY MARIE GARBEDIAN,
Defendants.

INTRODUCTION
Plaintiff Dennis E. Burton filed this lawsuit in the Montana Eleventh
Judicial District Court, Flathead County, alleging that he suffered bodily and
property damage as a result of an automobile accident and that his insurer, Trinity
Universal Insurance Company, aided and abetted by the other defendant insurance
companies, Alpha Property & Casualty Insurance Company, Financial Indemnity
Company, Merastar Insurance Company, and Kemper Corporation (collectively
“Defendants”), illegally sought subrogation from the at-fault driver before he was
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made whole. Plaintiff claims Defendants are part of a common scheme to deny
insured Montanans appropriate benefits through wrongful collection of
subrogation funds and seeks to represent a class of individuals who have suffered
similar injuries. Defendants removed the case on the theory that it is a class action
with diversity of citizenship and an amount in controversy of more than $5
million. Plaintiff is unhappy with Defendants impeding his choice of forum and
has filed a motion to remand. Plaintiff insists removal was improper because
Defendants have failed in their burden to demonstrate that the amount in
controversy meets the necessary $5 million threshold for class action diversity
jurisdiction. For the reasons set forth below, the motion is denied.
DISCUSSION
“[A] removing party must initially file a notice of removal that includes ‘a
plausible allegation that the amount in controversy exceeds the jurisdictional
threshold.’” Ibarra v. Manheim Inv., Inc., 775 F.3d 1193, 1195 (9th Cir. 2015)
(quoting Dart Basin Operating Co. v. Owens, ___ U.S. ___, 135 S. Ct. 547, 554
(2014)). When a plaintiff challenges removal, “[a] defendant seeking removal . . .
must demonstrate, by a preponderance of evidence, that the aggregate amount in
controversy exceeds the jurisdictional minimum.” Rodriguez v. AT & T Mobility
Servs. LLC, 728 F.3d 975, 978, 981 (9th Cir. 2013). “[N]o antiremoval
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presumption attends cases invoking [the Class Action Fairness Act], which
Congress enacted to facilitate adjudication of certain class actions in federal
court.” Dart, 135 S. Ct. at 554.
Plaintiff argues that Defendants have failed to meet their burden because
Defendants’ amount in controversy calculation is excessive as to the compensatory
damages, punitive damages, attorneys’ fees, and injunctive relief sought in the
Complaint. However, Defendants have shown, by a preponderance of the
evidence, that the compensatory damages, punitive damages, and attorneys’ fees at
issue exceed $5,000,000.00.
To justify removal, Defendants produced evidence of $1,208,727 in total
subrogation funds collected over the eight-year class period. (Doc. 1-1 at 4.)
Contrary to Plaintiff’s argument that only the wrongful subrogation funds should
be considered for the purposes of determining the amount in controversy, “[t]he
amount in controversy is simply an estimate of the total amount in dispute, not a
prospective assessment of defendant’s liability.” Lewis v. Verizon Commun., Inc.,
627 F.3d 395, 400 (9th Cir. 2010). Here, the total amount of subrogation funds
collected is at issue because the Complaint does not distinguish between proper
and wrongful subrogation funds or allege that only a percentage of subrogation
funds collected were wrongful. (See Doc. 6 at 8, 28.) The compensatory damages
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at issue are $1,208,727.
Plaintiff seeks punitive damages, and the total—not wrongful—subrogation
funds serve as the basis for the punitive damages at issue. See Raskas v. Johnson
& Johnson, 719 F.3d 884, 887–88 (8th Cir. 2013) (relying on Lewis and using
total medication sales rather than wrongful medication sales as basis for punitive
damages at issue). The parties agree that a reasonable ratio for determining
punitive damages is 4 to 1. (Docs. 1 at 17; 10 at 8.) Four times $1,208,727 is
$4,834,908 in punitive damages at issue, which raises the amount in controversy
to $6,043,635.
Plaintiff also seeks attorneys’ fees, which further increase the amount in
controversy above the statutory threshold. In support of removal, Defendants used
the Ninth Circuit’s “benchmark” for attorneys’ fees in class action cases: 25% of
recovery. (Doc. 1 at 19–20 (citing Steckmest v. Farmers Ins. Exchange, 2013 WL
5234305, at *6 (D. Mont. Sept. 17, 2013).) Plaintiff does not dispute this
percentage. (Doc. 10 at 11.) For purposes of determining the amount in
controversy, attorneys’ fees are based on both compensatory and punitive damages
at issue. See Steckmest, 2013 WL 5234305, at *6 (basing attorneys’ fees on
compensatory and punitive damages); Altamirano v. Shaw Indus., Inc., 2013 WL
2950600, at *13 (N.D. Cal. June 14, 2013) (same). This results in $1,510,908 in
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attorneys’ fees should Plaintiff prevail.
Plaintiff wants a declaration of rights and legal duties, “return of all
subrogration gained by [Defendants] before a valid and appropriate made whole
determination had been made,” and an order requiring Defendants “to re-adjust
each class member’s made whole claims.” (Doc. 6 at 28.) Although “[t]he cost of
prospective relief cannot be ignored in the calculation of the amount in
controversy,” Keeling v. Esurance Ins. Co., 660 F.3d 273, 274 (7th Cir. 2011), the
injunctive relief Plaintiff seeks on behalf of the putative class does not implicate
future recovery because the Complaint seeks a declaration as to past subrogation
practices and recovery of past subrogation funds collected by Defendants in
relation to the putative class members during the eight-year class period. (See
Doc. 6 at 28–29.) The injunctive relief Plaintiff seeks does not factor into the
amount in controversy. Regardless, Defendants have met their burden of showing,
by a preponderance of the evidence, that the amount in controversy exceeds $5
million.
Accordingly, IT IS ORDERED that Plaintiff’s Motion to Remand (Doc. 9)
is DENIED.
IT IS FURTHER ORDERED that Defendants’ Motion to Compel Appraisal
and Dismiss or Stay or, Alternatively, Dismiss Counts Three Through Eight and
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Dismiss the Action as to Kemper Corporation, (Doc. 7), is no longer stayed.
Plaintiff’s Response must be filed no later than March 17, 2015. Defendants’
optional Reply must be filed in accordance with Local Rule 7.1(d)(1)(C).
DATED this 24th day of February, 2015.

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