Kleinsasser v. Progressive Direct Insurance Company et al

Filing 34

ORDER by Judge Benjamin H. Settle requiring evidentiary hearing and requesting additional responses re 14 MOTION to Remand filed by Mark D Kleinsasser. Parties to file proposed schedule by 10/20/2017. (TG)

1
2
3
4
5
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT TACOMA

6
7
8

MARK D. KLEINSASSER,

CASE NO. C17-5499 BHS

Plaintiff,
9
10

v.
PROGRESSIVE DIRECT INSURANCE
COMPANY, et al.,

ORDER REQUIRING AN
EVIDENTIARY HEARING
AND REQUESTING ADDITIONAL
RESPONSES

11
Defendants.
12
13
14
15

This matter comes before the Court on Plaintiff Mark Kleinsasser’s (“Plaintiff”)
motion to remand (Dkt. 14). The Court has considered the pleadings filed in support of
and in opposition to the motion and the remainder of the file and hereby rules as follows:

16
17

I.

PROCEDURAL HISTORY

On April 1, 2016, Plaintiff filed a class action complaint against Defendants

18

Progressive Direct Insurance Company and Progressive Max Insurance Company

19

(collectively, “Progressive”) in Pierce County Superior Court for the State of

20

Washington. Dkt. 1-2 (“Comp.”). Plaintiff seeks to recover diminished value on a class-

21

wide basis and individual loss of use damages under the Underinsured Motorists Property

22

ORDER - 1

1

Damage (“UIM”) provision of his insurance contract with Progressive. Id. Plaintiff

2

alleged that the total amount of compensatory damages would be “approximately

3

$3,010,903.” Id.

4

On June 28, 2017, Progressive removed the matter to this Court. Dkt. 1.

5

On July 28, 2017, Plaintiff filed a motion to remand challenging both the timing of

6

the removal and Progressive’s calculation of damages. Dkt. 14. On August 28, 2017,

7

Progressive responded. Dkt. 24. On September 1, 2017, Plaintiff replied. Dkt. 29.

8

II.

FACTUAL BACKGROUND

9

On September 18, 2015, an uninsured driver hit Plaintiff’s vehicle causing

10

significant damage. Comp., ¶ 1.8. The vehicle was towed to a repair shop, and Plaintiff

11

submitted a claim to Progressive. Id. ¶ 6.7. Plaintiff was without the use of his vehicle

12

until November 24, 2015, and, on two separate occasions, he returned the vehicle to the

13

repair shop for additional repairs. Id. ¶ 1.9. Plaintiff alleges that Progressive failed to

14

provide him with a rental car or otherwise reimburse him for the loss of use of his

15

vehicle. Id. ¶¶ 6.7, 6.11. Plaintiff also alleges that Progressive failed to compensate him

16

for the diminished value of his vehicle. Id. ¶¶ 6.2–6.5.

17

Plaintiff claims that Progressive’s failure to compensate its insured for diminished

18

value has been “systematic and continuous” and has affected a large number of insureds

19

over time. Id. ¶ 5.1. As such, Plaintiff seeks certification of a class as follows:

20
21
22

All PROGRESSIVE insureds with Washington policies issued in
Washington State, where the insured’s vehicle damages were covered under
Underinsured Motorist coverage, and
1. the repair estimates on the vehicle (including any supplements)
totaled at least $1,000; and

ORDER - 2

1
2
3

2. the vehicle was no more than six years old (model year plus five
years) and had less than 90,000 miles on it at the time of the accident; and
3. the vehicle suffered structural (frame) damage and/or deformed
sheet metal and/or required body or paint work.
Excluded from the Class are (a) claims involving leased vehicles or
total losses, and (b) the assigned Judge, the Judge’s staff and family.

4
Id., ¶ 5.3. Plaintiff alleged that “the total amount sought in compensatory damages in this
5
action will be approximately $3,010,903,” based on “approximately 2107 claims” and
6
“$1429 per claim on average as the average damages recoverable.” Id. ¶ 2.5.
7
On June 28, 2017, Progressive removed the matter to federal court asserting that
8
the Court has jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”), 28
9
U.S.C. § 1332(d). Dkt. 1. Progressive conducted an independent search of its database
10
and concluded that the total amount of damages exceeds $5,000,000, which is the
11
jurisdictional minimum for CAFA jurisdiction. Id. ¶¶ 19–31. Progressive submitted two
12
declarations in support of this calculation. Frist, Michael Silver, a master data analyst for
13
Progressive, conducted a review of Progressive’s records. Dkt. 2, Declaration of Michael
14
Silver (“Silver Decl.”), ¶¶ 1, 3. Mr. Silver constructed search criteria that matched his
15
understanding of Plaintiff’s class definition and “identified 3,814 claims that fit the
16
search criteria.” Id. ¶ 8. Mr. Silver, however, “was unable to eliminate claims involving
17
leased vehicles from the proposed class through electronic searches because Progressive
18
does not regularly record this information as part of its claims data.” Id. ¶ 9.
19
Second, Kevin Rehkme, a claims supervisor for Progressive, conducted a manual
20
inspection of Progressive’s claim files in order to determine the proportion of leased
21
vehicles within the claims identified by Mr. Silver. Dkt. 3, Declaration of Kevin
22

ORDER - 3

1

Rehkme, ¶¶ 1, 4. Mr. Rehhkme declares that he did not review a sample of claims

2

within the proposed class because “insureds do not always inform Progressive when they

3

purchase a vehicle they had previously been leasing.” Id. ¶ 4. Instead, Mr. Rehkme

4

reviewed a sample of claims wherein the vehicle was a total loss. Id. ¶ 5. In total-loss

5

claims, he “could identify whether the vehicle was leased or owned by identifying total

6

loss payments to lienholders and then reviewing the claims notes.” Id. ¶ 7. Upon review

7

of 172 total-loss claims, he found that ten claims involved leased vehicles or 5.8%. Id. ¶

8

10. Mr. Rehkme concluded that it is reasonable to assume that 5.8% of the claims

9

identified by Mr. Silver should be excluded from the class list. Id. ¶ 11.

10

On July 28, 2017, Plaintiff moved to remand challenging Progressive’s assertion

11

that CAFA jurisdiction existed and submitted evidence in support of its position. 1

12

Plaintiff’s expert, Dr. Bernard Siskin, reviewed Mr. Silver and Mr. Rehkme’s

13

declarations and claims that they made two specific errors as follows:

14
15
16

a. Remove all vehicles that have only non-Class related damage
(such as to lights, chrome bumpers, etc., i.e., damage that is not to
frame/structure and/or body/paint);
b. Accurately determine the percentage of leased vehicles because
they have used as a starting point a biased and improper sample which
dramatically understates the percentage of leased vehicles.

17
Dkt. 14-1 at 7–14, Declaration of Bernard Siskin (“Siskin Decl.”), ¶¶ 4–5. After
18
explaining why Mr. Rehkme’s assumptions and analysis were flawed, Dr. Siskin
19
concludes as follows:
20
21
22

1

Although Plaintiff attempted to submit three exhibits under seal, the Court is unable to locate
these documents in the record. Plaintiff filed placeholders for the exhibits, see Dkts. 14-1, 14-2, 14-3, but
failed to actually file the documents on the record under seal.

ORDER - 4

1
2
3
4
5
6
7

If I apply the expected percentage (9.5%) based upon lease rates in
Washington, the Class Size would be 3,452 claims [3,814 claims x 90.5%]
which would be $4,932,908 in damages at $1,429/claim.
If I apply the percentage I have derived from Mr. Rehmke’s flawed
sample (by adjusting the population to account for his under sampling of
leased vehicles) of 10.3%, the Class size would be 3,421 claims [3,814
claims x 89.7%] which would be $4,888,609.
If I apply the percentage inflation in the lease rate in the class
compared to that among non class damaged cars (3.36*5.8% or 19.5%), the
Class size would be 3,070 claims [3,814 claims x .80.5%] which would be
$4,387,030.
Id. ¶¶ 13–15.

8

Dr. Siskin then discusses flaws in Mr. Silver’s analysis. Mr. Silver assumed that

9

“vehicles with repair estimates of at least $ 1,000 would have sustained either structural

10

damage, deformed sheet metal, and/or required body or paint work.” Silver Decl., ¶ 6.

11

Dr. Siskin contends that this assumption is flawed because, based on data from a previous

12

diminished value case, “accidents with over $1,000 in damages can result from damages

13

to only replaceable parts that do not require painting (such as lights, grills, chrome

14

bumpers, etc.), and these type of accidents are not uncommon.” Siskin Decl., ¶ 16. For

15

example, a headlight assembly for a 2016 Honda Accord has a list price of $1,140.87. Id.

16

n.5. Accounting for these claims, Dr. Siskin further reduced Progressive proposed class

17

size by concluding as follows:

18
19
20
21
22

[T]he actual class size would be 3,372 (using the 9.5% figure for leased vehicles)
or 3,372 (using the 10.3% figure I have derived from Mr. Rehmke’s undersampled sample) or 2,999 (using the 19.5% figure based on Allstate data on the
relationship between the lease rate of class vehicles and non-class damaged
vehicles). This would be respectively $4,818,588 (using 9.5% leased vehicles) or
$4,77,718 [sic] (using 10.3% leased vehicles) in damages or $4,285,571 (using the
19.5% leased rate).
Id. ¶ 18.

ORDER - 5

1

In response, Progressive employed an expert, Dr. Michael Salve, who pointed out

2

flaws in Dr. Siskin’s work and provided other conclusions. Dkt. 27, Declaration of Dr.

3

Michael Salve. First, Dr. Salve declares that

4

6

[a]side from the obvious fact that [Dr. Siskin’s] estimates vary by a factor
of more than 100% and that Dr. Siskin has not stated which estimate he
thinks is correct, I find that the calculation methodologies that underlie all
three of these estimates are deficient and misleading and that the estimates
themselves are unreliable.

7

Id. ¶ 8. The errors are based on a misinterpretation of a leading car publication, a

8

deficient and misleading attempt to correct for bias in Mr. Rehmke’s work, and an

9

unsupported comparison of vehicle lease rates from Dr. Siskin’s work in an earlier

5

10
11

Allstate case. Id. ¶ 9–15.
Second, Dr. Salve concluded that the average claim would be $1,854.08. Id. ¶ 20.

12

Dr. Salve based this number on Dr. Siskin’s average claim amount in the older Allstate

13

matter, which was $1,386.87, and increased it proportional to the average increase in

14

retail selling prices for cars during the time period between the older case and this case.

15

Id. ¶¶ 16–19.

16

In reply, Plaintiff submits additional evidence from Dr. Siskin and Darrell Harber,

17

a professional in the auto and auto repair industry. Dr. Siskin declares that Dr. Salve

18

made numerous errors in his critique and in his conclusions. Dkt. 30 at ¶¶ 5–13. Dr.

19

Siskin also declares that, in a similar diminished value case, he applied his statistical

20

model for damages to an actual sample and determined that damages were “$590.96 per

21

claim.” Id. ¶ 16.

22

ORDER - 6

1

Mr. Harber declares that he provides actual diminished value estimates for

2

customers. Dkt. 31, Declaration of Darrell Harber, ¶¶ 4–5. Mr. Harber claims that most

3

insurers reject smaller diminished value claims outright, but will pay claims for higher

4

amounts. Id. ¶ 7. Thus, Mr. Rehmke’s sample based on diminished value claims that

5

were paid is “highly misleading” because the proposed class consists of insureds with

6

smaller, rejected claims. Id. ¶ 8.

7

III.

In this case, Plaintiff moves to remand based on the amount in controversy and the

8
9
10
11

DISCUSSION

timing of the removal. The Court will address both issues.
A.

Amount in Controversy
“A defendant generally may remove a civil action if a federal district court would

12

have original jurisdiction over the action.” Allen v. Boeing Co.,784 F.3d 625, 628 (9th

13

Cir. 2015). CAFA vests federal district courts with original jurisdiction over class

14

actions involving more than 100 class members, minimal diversity, and at least

15

$5,000,000 in controversy, exclusive of interests and costs. Dart Cherokee Basin

16

Operating Co. v. Owens, 135 S. Ct. 547, 552 (2014) (citing 28 U.S.C. § 1332(d)). A

17

defendant seeking removal under CAFA must file a notice of removal “containing a short

18

and plain statement of the grounds for removal.” 28 U.S.C. § 1446(a); see also Dart

19

Cherokee, 135 S. Ct. at 551.

20

The burden of establishing removal jurisdiction remains on the party seeking

21

removal. Abrego Abrego v. The Dow Chem. Co., 443 F.3d 676, 685 (9th Cir. 2006).

22

“When, as here, ‘a defendant’s assertion of the amount in controversy is challenged . . .

ORDER - 7

1

both sides submit proof and the court decides, by a preponderance of the evidence,

2

whether the amount-in-controversy requirement has been satisfied.’” LaCross v. Knight

3

Transp. Inc., 775 F.3d 1200, 1202 (9th Cir. 2015) (quoting Dart Cherokee, 135 S.Ct. at

4

554)). “The parties may submit evidence outside the complaint, including affidavits or

5

declarations, or other ‘summary-judgment-type evidence relevant to the amount in

6

controversy at the time of removal.’” Ibarra v. Manheim Investments, Inc., 775 F.3d

7

1193, 1197 (9th Cir. 2015) (quoting Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d

8

373, 377 (9th Cir. 1997)). Then “the district court must make findings of jurisdictional

9

fact to which the preponderance standard applies.” Dart Cherokee, 135 S. Ct. at 554

10

(citing H.R.Rep. No. 112–10, p. 16 (2011)). “[W]hen the defendant relies on a chain of

11

reasoning that includes assumptions to satisfy its burden of proof, the chain of reasoning

12

and its underlying assumptions must be reasonable ones.” LaCross, 775 F.3d at 1202

13

(9th Cir. 2015) (citing Ibarra, 775 F.3d. at 1199). “Under the preponderance of the

14

evidence standard, if the evidence submitted by both sides is balanced, in equipoise, the

15

scales tip against federal-court jurisdiction.” Id. at 1199.

16

In this case, the parties contest the potential size of the class, the average amount

17

of each potential claim, and the amount of awardable attorney’s fees. Regarding the

18

potential class size, the parties have created a battle of experts and lay witnesses requiring

19

findings of fact. Both parties start with a proposed class size of 3,567 based on a list

20

produced by Progressive. Dkt. 24 at 4 n.2; Dkt. 32-1 at 1. Then the parties extrapolate to

21

exclude the potential number of leased vehicles within that group. The extrapolations are

22

based on underlying facts and assumptions. When the facts are established, Progressive

ORDER - 8

1

bears the burden to show that the “chain of reasoning and its underlying assumptions” are

2

reasonable. LaCross, 775 F.3d at 1202. Therefore, the Court will schedule an

3

evidentiary hearing on the matter to resolve the conflicting facts.

4

Regarding the amount of each claim, the parties have also created a battle of

5

witnesses requiring findings of fact. This battle, however, seems more relevant to the

6

amount in controversy than class size due to the wide variance in the estimated amounts.

7

Based on the current record, the spectrum of average potential individual damages ranges

8

from $590.96 to $1,854.08. If the Court adopts either one of these extremes, then the

9

potential number of claims appears to be immaterial. 2 As such, it is curious that both

10

parties rely on assumptions and speculation when actual numbers seem attainable. For

11

example, each party could pick ten potential class members, submit the claims to an

12

independent assessor, like Mr. Harber, and have the assessor return twenty estimates to

13

produce an actual number representing an average claim amount. Of course an

14

extrapolation would still be necessary to reach an amount representing the amount in

15

controversy, but the chain of reasoning and underlying assumptions would be based on

16

this class instead of other data. The parties have invested so much time, effort, and

17

expense into disputing hypothetical class sizes and amounts that actual underlying

18

evidence may be warranted. Regardless, the Court will also set this matter for hearing to

19

resolve the factual disputes.

20
21
22

2

Back-of-the-envelope calculation.

ORDER - 9

1

Finally, with regard to attorney’s fees, the parties dispute an unresolved question

2

of law. In the complaint, Plaintiff alleges that he “and the members of the proposed Class

3

are entitled to . . . statutory attorney’s fee allowed by RCW 4.84.015 ($200.00).” Comp.

4

¶ 7.1(c). Progressive contends that if Plaintiff “seeks to recover $200 for each class

5

member, that would result in an additional $718,557.60 of damages.” Dkt. 1, ¶ 31. In

6

the motion to remand, Plaintiff argues that this is a meritless throw-away argument. Dkt.

7

14 at 12. Progressive responds with a paragraph of its own. Dkt. 24 at 11–12. Because

8

resolution of the facts regarding potential class size and potential claim amount could

9

result in a conclusion that the amount in controversy is between approximately

10

$4,300,000 and $5,000,000, resolution of this $700,000 potential award could be relevant

11

to the ultimate conclusion. As such, the parties have inadequately briefed the issue.

12

Therefore, the Court requests additional briefing on this issue.

13

B.

Timing

14

Plaintiff argues that Progressive’s removal was untimely. Dkt. 14 at 13. The

15

Court will not engage in a lengthy analysis of this issue because this is a preliminary

16

order and because Plaintiff’s counsel has repeatedly made the same argument to this

17

Court in numerous cases. It is black letter Ninth Circuit law that a defendant’s subjective

18

knowledge regarding the potential amount in controversy does not trigger the second

19

thirty-day removal period. Roth v. CHA Hollywood Med. Ctr., L.P., 720 F.3d 1121, 1126

20

(9th Cir. 2013) (“we are inclined to think that the sentence should be understood in

21

context to mean only that a ‘defendant’s subjective knowledge cannot convert a non-

22

removable action into a removable one’”). Giving defendant step-by-step instructions on

ORDER - 10

1

how to search its database to determine the potential amount in controversy seems

2

irrelevant whether a defendant acts or fails to act because, at most, acting will result in

3

defendant’s subjective knowledge of the potential class size. Applied to this case,

4

Plaintiff’s argument that Progressive’s “counsel had plenty of occasion to inquire

5

reasonably of Progressive how its claims data reflects on the accuracy of class size

6

estimate alleged by Plaintiff in his Complaint without the benefit of discovery” is

7

irrelevant. Absent any evidence of objective knowledge, the Court may be easily dispose

8

of this argument.

9
IV.

ORDER

10
Therefore, it is hereby ORDERED that the parties shall meet and confer and then
11
submit a briefing schedule, including a deadline for proposed findings of fact, and a
12
proposed hearing date. The parties shall file the proposed schedule no later than October
13
20, 2017.
14
Dated this 10th day of October, 2017.
15

A

16

BENJAMIN H. SETTLE
United States District Judge

17
18
19
20
21
22

ORDER - 11