State Farm Fire and Casualty Company v. Sparkleberry Hill Apartments et al
Filing
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ORDER granting 9 Motion to Dismiss, dismissing the action without prejudice. Signed by Honorable Joseph F Anderson, Jr on 01/11/2012.(bshr, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION
State Farm Fire and Casualty Co.,
Plaintiff,
vs.
Sparkleberry Hill Apartments, a
Limited Partnership;
Boyd Management, Inc.;
Leanna Taylor Cruz, individually and
as parent and guardian of her daughter
A.C.C.,
Defendants.
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C/A No.: 3:11-cv-02844-JFA
ORDER
This matter comes before the court on a motion to dismiss filed by Defendants
Sparkleberry Hill Apartments, L.P. (“Sparkleberry”) and Boyd Management, Inc.
(“BMI”). Defendants Sparkleberry and BMI (collectively “defendants”) contend that this
court does not have subject matter jurisdiction over this case because the amount in
controversy requirement has not been met.
I.
Factual and Procedural History
Sparkleberry owns and BMI manages an apartment complex known as
Sparkleberry Hill Apartments (“Apartments”) located in Columbia, SC. In March 2011,
Sparkleberry and BMI were served with a complaint in which Leanna Cruz and her
daughter (“Cruz”) sought damages for alleged injuries caused by alleged mold in their
apartment. Upon receipt, Sparkleberry and BMI forwarded the complaint to State Farm
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Fire and Casualty Company (“State Farm”) and requested that State Farm provide both
coverage and a defense under an Apartment Policy naming the defendants as insureds.
State Farm denied coverage for mold-related claims but agreed to provide a
defense through trial under a reservation of rights to the extent the policy can be read as
asserting non-mold negligence claims. State Farm then filed this declaratory judgment
action seeking a declaration that State Farm “is under no duty to indemnify the Cruz
claim for any damage allegedly caused by exposure to mold.” (ECF No. 1, p. 5).
Specifically, State Farm contends that Endorsement No. 6566 is a part of the insurance
policy and that it excludes certain losses related to mold.
Defendants Sparkleberry and BMI have filed this Motion to Dismiss alleging that
Endorsement No. 6646 (“FE 6646”) is applicable and that it provides for $50,000 of
limited coverage for mold-related claims. Sparkleberry and BMI submit that the only
issue for this case is whether State Farm can be held liable under FE 6646. Because the
defendants’ maximum recovery would be $50,000 even if FE 6646 is applicable, they
contend that it is impossible for this case to meet the $75,000 jurisdictional amount
requirement under 28 U.S.C. § 1332(a)(1). As such, Defendants Sparkleberry and BMI
ask that this case be dismissed.
Defendant Leanna Taylor Cruise, the plaintiff in the underlying state action
against Defendants Sparkleberry and BMI, has not responded to the Complaint in the
instant action, nor has she filed a response to the pending Motion to Dismiss. On January
9, 2012, this court held a hearing in which State Farm, Sparkleberry, and BMI were able
to present their arguments on the Motion to Dismiss.
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II.
Legal Standard
Federal courts are courts of limited jurisdiction and, as such, may only hear and
decide cases when they have been given the authority to do so by the Constitution and by
federal statute. In re Bulldog Trucking, Inc., 147 F.3d 347, 352 (4th Cir. 1998). “If the
court determines at any time that it lacks subject-matter jurisdiction, the court must
dismiss the action.” Fed. R. Civ. P. 12(h)(3). According to 28 U.S.C. § 1332(a)(1),
federal courts have diversity jurisdiction of civil actions where the matter in controversy
exceeds the sum or value of $75,000. (2006). In the Fourth Circuit, “it is settled that the
test for determining the amount in controversy in a diversity proceeding is ‘the pecuniary
result to either party which [a] judgment would produce.’” Dixon v. Edwards, 290 F.3d
699, 710 (4th Cir. 2001) (quoting Gov’t Emps. Ins. Co. v. Lally, 327 F.2d 568, 569 (4th
Cir. 1964)). As to the burden of showing jurisdictional amount, “the federal courts have
developed a principle that if the defendant (or the district judge) challenges the
satisfaction of the jurisdictional amount requirement it will succeed only if it is shown
that there is a legal certainty that the amount in controversy cannot be recovered.” 14AA
Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and
Procedure § 3702 (4th ed. 2011).
III.
Analysis
In their Motion to Dismiss, Defendants assert that “the only real issue presented by
the Complaint is whether State Farm may be held liable under the endorsement.” (ECF
No. 9-1, p. 2). According to Defendants, whether they prevail or not on the Motion to
Dismiss, the maximum amount in controversy for purposes of this declaratory judgment
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action is $50,000, and, thus, it is impossible for this case to meet the jurisdictional
amount. In fact, the defendants stipulated in the hearing before this court that the most
that they could recover from the insurance policy, by way of indemnity coverage, on the
mold-related claims would be $50,000. Defendants further stipulated that if FE 6646
does not apply, then they would be personally liable for any judgment and could not
receive any indemnification from State Farm on the mold-related claims.
Plaintiff raises a number of issues in response to the Motion to Dismiss. For
example, Plaintiff points out that in the underlying tort case, Cruz is seeking more than
$75,000—the medical bills total $35,329.79, and Cruz is requesting treble damages.
According to State Farm, the policy issued by State Farm to Sparkleberry and BMI
provides three million dollars in liability coverage subject to the terms, definitions,
conditions, endorsements, and exclusions of the policy. Both sides seem to agree that
certain acts of negligence alleged in the Cruz claim could survive the application of the
mold exclusion. State Farm asserts that the non-mold negligence claims allow them to
file for a declaration as to the applicability of the entire three million dollar policy to the
Cruz claim. However, State Farm has not done so in this case. State Farm’s complaint
“requests a declaration of rights . . . that the Plaintiff State Farm Fire and Casualty is
under no duty to indemnify the Cruz claim for any damage allegedly caused by exposure
to mold.” (ECF No. 1, p. 5). Because in its declaratory judgment action State Farm has
only asked for a declaration as to its duties with respect to the mold-related claims, this
court cannot consider the pecuniary amount that would be at stake had State Farm asked
for a declaration as to its duties with respect to all of the Cruz claims.
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State Farm’s remaining arguments that this case meets the jurisdictional amount
are unpersuasive. State Farm points out that Cruz has not conceded that there is only
$50,000 in coverage, but such a concession is not necessary for this court to decide the
jurisdictional amount in this case. Plaintiff further asserts that it considers defense costs
part of the value of this case since State Farm is providing a defense to the Cruz claim
under a reservation of rights; however, the defense that State Farm has conditionally
agreed to provide is based on the non-mold negligence claims. Because mold-related
claims are a part of the same suit, State Farm is also providing a defense for those claims
even though they have expressly denied a duty to provide a defense for those claims.
Thus, whether State Farm prevails in this action or not, it is already assuming the defense
costs for the mold-related claims.
As an additional argument against the dismissal of this case, State Farm contends
that the defendants’ concession that the amount in controversy is limited to $50,000
would not divest this court of jurisdiction because the concession developed after the
filing of the complaint. State Farm also takes issue with the fact that Sparkleberry and
BMI have yet to answer or counterclaim in this declaratory action, asserting that “the
possibility of that counterclaim should be considered as part of the ‘pecuniary result.’”
(ECF No. 10, p. 4). Neither of these arguments is persuasive.
In order to show that this court lacks subject matter jurisdiction, the defendants
must show to a legal certainty that jurisdictional amount cannot be met. Here, the
plaintiff has asked for a declaration of its duties with respect to certain mold-related
claims in an underlying lawsuit. The defendants (who would be indemnified by the
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plaintiff if found liable in the underlying lawsuit) have stipulated that the most that they
can recover under the insurance contract for the mold-related claims is $50,000. The
plaintiff contends that the defendants have no coverage with respect to the mold-related
claims. No other monetary amounts proposed by State Farm can be considered part of
the pecuniary amount at issue in this case. As such, Defendants Sparkleberry and BMI
have shown to a legal certainty that the jurisdictional amount in this case is less than that
required by 28 U.S.C. § 1332(a)(1). Therefore, this court lacks subject matter jurisdiction
over this case.
IV.
Conclusion
Based on the foregoing, this court hereby dismisses this case without prejudice.
IT IS SO ORDERED.
January 11, 2012
Columbia, South Carolina
Joseph F. Anderson, Jr.
United States District Judge
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