Hockenbury et al v. Hanover Insurance Company

Filing 26

ORDER denying 14 Motion to Remand. Signed by Honorable Timothy D. DeGiusti on 1/5/2016. (mb)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
MICHAEL HOCKENBURY,
an individual, on behalf of himself
and others similarly situated,

)
)
)
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Plaintiff,
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)
vs.
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THE HANOVER INSURANCE
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COMPANY,
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)
Defendant. )

Case No. CIV-15-1003-D

ORDER
After his property was damaged by water, Plaintiff Michael Hockenbury
(“Hockenbury”) submitted a claim to his insurer, Defendant The Hanover Insurance
Company (“Hanover”). Hockenbury contends Hanover, in bad faith and in violation
of the insurance policy, failed to conduct a fair and reasonable investigation and
intentionally underpaid him for the loss. Hockenbury brings this action on behalf of
himself and a putative class of all persons who submitted claims to Hanover for
property damage under homeowners or commercial policies issued in or covering
property in the State of Oklahoma any time after February 1, 2009.
Hanover timely removed the action to this Court on two grounds: (1) diversity
jurisdiction over Hockenbury’s individual claim and (2) jurisdiction under the Class
Action Fairness Act of 2005 (“CAFA”). Hockenbury moves to remand his suit to state

court on the basis that neither claim of jurisdiction meets the requisite amount in
controversy under either jurisdictional theory [Doc. No. 14]. Hanover has filed its
Response in Opposition [Doc. No. 21]. The matter is fully briefed and at issue.
STANDARD OF DECISION
The present action is removable only if Hockenbury could have originally
brought it in federal court. 28 U.S.C. § 1441(a). Removal statutes are narrowly
construed and Hanover, as the proponent of removal,“bears the burden to establish
that its removal of plaintiff’s case to federal court was proper.” Hernandez v. Liberty
Ins. Corp., 73 F.Supp.3d 1332, 1336 (W.D. Okla. 2014) (citing Huffman v. Saul
Holdings Ltd. P’ship, 194 F.3d 1072, 1079 (10th Cir. 1999)). This burden applies to
actions brought under CAFA as well. See Frederick v. Hartford Underwriters Ins.
Co., 683 F.3d 1242, 1246 (10th Cir. 2012) (“a defendant seeking to remove under
CAFA must show that the amount in controversy exceeds $5,000,000 by a
preponderance of the evidence.”).
The Supreme Court recently held the general “notice pleading” standard under
Rule 8(a) of the Federal Rules of Civil Procedure governs a defendant’s notice of
removal. Dart Cherokee Basin Operating Co., LLC v. Owens, ___ U.S. ___, 135 S.Ct.
547, 553, 190 L.Ed.2d 495 (2014). Under Dart, “a defendant’s notice of removal need
include only a plausible allegation that the amount in controversy exceeds the
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jurisdictional threshold. Evidence establishing the amount is required by
§1446(c)(2)(B) only when the plaintiff contests, or the court questions, the
defendant’s allegations.” Dart, 135 S.Ct. 547 at 554. In considering the amount in
controversy, courts may use their “judicial experience and common sense” to
determine whether the amount in controversy is satisfied. Roe v. Michelin North
America, Inc., 613 F.3d 1058, 1062 (11th Cir. 2010). The amount in controversy is
normally decided at the time of removal, by either the good faith allegations of the
petition, or, where they are not determinative, by the allegations in the notice of
removal. Lonnquist v. J.C. Penney Co., 421 F.2d 597, 599 (10th Cir. 1970).
In proving the amount in controversy, “the defendant must affirmatively
establish jurisdiction by proving jurisdictional facts that made it possible that $75,000
was in play.” McPhail v. Deere & Co., 529 F.3d 947, 955 (10th Cir. 2008) (emphasis
in original). Conclusory allegations and statements will not suffice. Coco–Cola
Bottling of Emporia, Inc. v. South Beach Beverage Co., Inc., 198 F. Supp. 2d 1280,
1283 (D. Kan. 2002) (proponent “must do more than make conclusory allegations and
assertions; it must set forth the underlying facts supporting its assertions concerning
the amount in controversy.”).
A defendant’s proof may be presented by estimating potential damages from
the allegations of the plaintiff’s pleading. McPhail, 529 F.3d at 955–56. Other
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documentation may also provide the basis for determining the amount in controversy,
such as affidavits or other evidence submitted in the federal action afterward. Id. at
956. “But once those underlying facts are proven, a defendant (like a plaintiff) is
entitled to stay in federal court unless it is ‘legally certain’ that less than $75,000 is
at stake. If the amount is uncertain then there is potential controversy, which is to say
that at least $75,000 is in controversy in the case.” McPhail, 529 F.3d at 954. “Given
the limited scope of federal jurisdiction, there is a presumption against removal, and
courts must deny such jurisdiction if not affirmatively apparent on the record.” Okla.
Farm Bureau Mut. Ins. Co. v. JSSJ Corp., 149 F. App’x 775, 778 (10th Cir. 2005)
(unpublished).
DISCUSSION
Hockenbury brings this action, in part, under the Oklahoma Unfair Settlement
Practices Act and the Oklahoma Insurance Code, codified at 36 OKLA. STAT. § 1250.1
et seq. and 36 OKLA. STAT. § 101 et seq., respectively. As noted above, in presenting
his claims for relief, he alleges that, after he timely and properly submitted his claim
for water damage, Hanover breached the policy by failing to pay all benefits owed.
Petition, ¶ 15 [Doc. No. 1-2]. Hockenbury also alleges Hanover breached the duty of
good faith and fair dealing by, inter alia, failing to conduct a fair and objective
investigation and intentionally engaging in “secretive programs, practices, initiatives,
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and goals to improperly reduce payment of indemnity dollars on claims[.]” Id. ¶ 20.
Hockenbury contends this matter should proceed as a class action on behalf of “[a]ll
persons who submitted claims to [Hanover] for property damage under homeowners
or commercial policies issued in or covering property in the state of Oklahoma at any
time after February 1, 2009[.]” Petition, ¶ 31.
Hockenbury alleges Hanover’s breach of the policy caused him to sustain
financial losses in excess of $10,000 and Hanover’s alleged intentional, willful and
malicious conduct entitles him to an award of punitive damages. Id. ¶¶ 16-17.
Likewise, Hockenbury states Hanover’s breach of its duty to deal fairly and in good
faith caused financial damages in excess of $10,000, and Hanover’s alleged
intentional, willful and malicious conduct entitles him to punitive damages. Id. ¶¶ 2627. Hockenbury’s prayer for relief states:
Plaintiff prays for certification of the Class as defined above and
judgment against Defendant ... for:
a.

Payment of all contractual benefits for all coverages
afforded to Plaintiff under the subject policy of insurance
for damage to his dwelling and personal property ...
together with interest on all amounts due;

b.

Payment of all contractual benefits due and owing to
members of the class;

c.

Disgorgement of the increased financial benefits derived by
Defendant as a direct result of Defendant’s wrongful or
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intentional, willful, malicious and/or reckless conduct;
d.

Actual and punitive damages each in an amount in excess
of Ten Thousand ($10,000) but less than Seventy Five
Thousand Dollars ($75,000) on Plaintiff’s individual claim;

e.

Total damages on the Class Claims less than Five Million
Dollars ($5,000,000.00); and

f.

Attorneys’ fees, costs and interest, including pre-judgment
and post-judgment interest.

Petition at 10 (emphasis added).
Based on the foregoing, Hanover alleges a plain reading of the Petition shows
Hockenbury seeks compensatory damages up to $74,999. Hanover argues this fact,
coupled with the availability of punitive damages and attorney’s fees, establishes
Hockenbury’s requested damages exceed the amount in controversy. Def. Resp. to
Motion to Remand at 3-7 [Doc. No. 21]. Hanover also contends jurisdiction under
CAFA is met by virtue of (1) extrapolating the amount sought on Hockenbury’s claim
to the putative class, (2) the large size of claim payments at issue, and/or (3)
estimating the amount sought by the Petition with respect to Hanover’s “reinspection”
program on property claims. Id. at 8. Hockenbury contends his stipulation that he does
not seek damages excess of $75,000 for himself or $5,000,000 on behalf of the class
(Petition at 10) should end the Court’s inquiry and result in remand. He further states
Hanover has failed to show his damages meet the statutory minimum, either under 28
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U.S.C. § 1332 or CAFA, even assuming punitive damages are recovered.
As to Hockenbury’s individual claim, the Court finds Hanover has
demonstrated by a preponderance of the evidence (namely, by citing relevant portions
from the Petition) that the amount in controversy, as alleged, more likely than not
exceeds $75,000, or at least such amount is in play. McPhail, 529 F.3d at 954-55. In
determining the amount in controversy, the Court must consider not only the
Petition’s allegations, but also Hockenbury’s request for, and the availability of,
punitive damages and attorney’s fees. See Frederick, 683 F.3d at 1247 (“The
preponderance of the evidence standard must be applied to all damages counted
toward the total amount in controversy, including punitive damages.”) (emphasis
added); Woodmen of World Life Ins. Soc’y v. Manganaro, 342 F.3d 1213, 1218 (10th
Cir. 2003) (a court should consider an award of attorneys’ fees in determining amount
in controversy).1
The Petition alleges Hanover, among other things, failed to conduct a
reasonable investigation, intentionally conducted an outcome-oriented investigation,
engaged in a scheme designed to save money otherwise due and owing to
Hockenbury, implemented hidden and secretive programs, practices and initiatives to

1

Hockenbury does not dispute attorney’s fees are available under § 3629(B) of
the Oklahoma Insurance Code. See 36 OKLA. STAT. § 3629(B).
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reduce payments, and evaluated employees on the basis of whether they met or
exceeded payout reduction goals. Petition at 4-5. Hockenbury seeks an award of actual
and punitive damages over $10,000 but less than $75,000, or, in essence, damages up
to $74,999. Id. at 10. In addition, Hockenbury seeks payment of all contractual
benefits for all coverages afforded to him under the policy, plus interest; disgorgement
of the increased financial benefits derived by Hanover; and attorneys’ fees, costs and
interest, including pre-judgment and post-judgment interest. Id. If Hockenbury is
successful on his claims, considering the categories of damages and relief sought, the
Court cannot say to a legal certainty that less than $75,000 is at stake. It is clear from
these allegations that the amount in controversy is not limited to damages sustained
by Hockenbury prior to filing suit, but rather includes damages that seek to remedy
Hanover’s alleged unjust enrichment and malicious/reckless conduct. Accordingly,
Hanover has carried its burden to establish sufficient facts to warrant the district
court’s exercise of diversity jurisdiction over Hockenbury’s individual claims.
Because the Court has decided subject matter jurisdiction exists under 28
U.S.C. § 1332(a), it need not decide whether jurisdiction exists under CAFA. See, e.g.,
In re FEMA Trailer Formaldehyde Products Liab. Litig., No. 07-1873, 2012 WL
1204734, at *1 (E.D. La. Apr. 11, 2012) (“Because the Court finds that diversity
jurisdiction exists under 28 U.S.C. § 1332(a), the Court need not address whether
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removal was also proper under CAFA”). As Hanover correctly notes, and Hockenbury
implicitly stipulates, the Court may exercise supplemental jurisdiction over the class
claims. See Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 549 (2005)
(a court may exercise supplemental jurisdiction over class action claims that are less
than the required jurisdictional amount, as long as at least one named plaintiff asserts
a claim in excess of the $75,000 jurisdictional amount in the same case or
controversy).
For the reasons stated, Hockenbury’s Motion to Remand [Doc. No. 14] is
DENIED.
IT IS SO ORDERED this 5th day of January, 2016.

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