Panhandle Farmers Mutual Insurance Company, Inc. v. Ridge Crest Properties, LLC
Filing
20
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS MOTION TO DISMISS FORLACK OF SUBJECT MATTER JURISDICTION 5 , DENYING PLAINTIFFS MOTION TO AMEND COMPLAINT re: 7 , DENYING DEFENDANT'S MOTION FOR LEAVE TO FILE AND ASSERT A COUNTERCLAIM 16 AND DENYING DEFENDANT'S MOTION TO FILE SUPPLEMENTAL MEMORANDUMIN SUPPORT OF PREVIOUSLY FILED MOTION TO DISMISS AS MOOT 18 . Signed by Senior Judge Frederick P. Stamp, Jr. on 8/7/2013. The case is to be DISMISSED WITHOUT PREJUDICE and STRICKEN from the docket. (copy to all counsel of record via CM/ECF). (nmm) Modified docket text on 8/7/2013. NEF Regenerated. (nmm).
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
PANHANDLE FARMERS MUTUAL
INSURANCE COMPANY, INC.,
Plaintiff,
v.
Civil Action No. 5:13CV6
(STAMP)
RIDGE CREST PROPERTIES, LLC.
Defendant.
MEMORANDUM OPINION AND ORDER
GRANTING DEFENDANT’S MOTION TO DISMISS FOR
LACK OF SUBJECT MATTER JURISDICTION,
DENYING PLAINTIFF’S MOTION TO AMEND COMPLAINT,
DENYING DEFENDANT’S MOTION FOR LEAVE TO FILE
AND ASSERT A COUNTERCLAIM AND
DENYING DEFENDANT’S MOTION TO FILE SUPPLEMENTAL MEMORANDUM
IN SUPPORT OF PREVIOUSLY FILED MOTION TO DISMISS AS MOOT
I.
Background
Panhandle Farmers Mutual Insurance Company filed the above
styled civil action in this Court on January 16, 2013.
In its
complaint, the plaintiff seeks declaratory judgment from this Court
that the policy held by the defendant, Ridge Crest Properties, LLC,
does not cover the loss that the defendant suffered in June 2012.
At that time, one of the defendant’s rental buildings was damaged
by an act of vandalism.
The defendant claims that under the
insurance policy, the plaintiff should compensate the defendant for
this loss. The plaintiff denied this claim, arguing that vandalism
was not covered by the defendant’s policy.
Since this denial, the
parties have been negotiating a settlement of this issue.
The
defendant
also
asserted
additional
allegations
against
the
plaintiff, which include allegations of bad faith and breach of
contract due to the denial of coverage.
Apparently, an offer of
$150,000.00 to settle all of the claims was made by the defendant
to the plaintiff, but this offer was rejected soon thereafter.1
After the plaintiff filed its complaint, the defendant filed
a
motion
Procedure
to
dismiss
the
12(b)(1).
action
The
under
defendant
Federal
claims
Rule
that
of
Civil
diversity
jurisdiction for the action does not exist because the amount in
controversy does not exceed $75,000.00, exclusive of interest and
costs.
The defendant argues that the policy limits and actual
damages suffered limit the possible recovery to significantly less
than
$75,000.00.
The
plaintiff
argues
in
response
that
a
negotiation offer by the defendant demonstrates that the amount in
controversy is sufficient.
In this response, the plaintiff asks
for leave to amend its complaint.
The defendant later filed a
motion seeking leave to assert a counterclaim, in which it seeks to
assert wrongful prosecution, breach of contract, bad faith, and
West Virginia Unfair Trade Practices Act claims.
For the reasons
stated below, this Court will grant the motion to dismiss, deny the
motion
to
amend
the
complaint,
1
deny
the
motion
to
assert
a
Although a letter is in the record evidencing rejection of
this offer, there is no letter documenting the offer itself. See
ECF No. 5 Ex. D.
2
counterclaim,
and
deny
the
motion
to
file
a
supplemental
memorandum.2
II.
Legal Standard
A lack of subject matter jurisdiction may be asserted at any
time by any interested party either in the form of the answer or in
the form of a suggestion to the court prior to final judgment.
5A
Charles Alan Wright & Arthur R. Miller, Federal Practice and
Procedure § 1350, at 201-02 (2d ed. 1990).
The burden of proving
subject matter jurisdiction on a motion to dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(1) is on the plaintiff, the
party asserting jurisdiction.
If the plaintiff alleges, in good
faith, an amount in controversy exceeding $75,000.00, the burden
shifts
to
the
defendant
to
prove,
to
the
level
of
a
certainty, that the amount in controversy is not sufficient.
legal
St.
Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-90
(1938).
A
trial
court
may
consider
evidence
by
affidavit,
deposition, or live testimony without converting the proceeding to
one for summary judgment.
Adams v. Bain, 697 F.2d 1213, 1219 (4th
Cir. 1982); Mims v. Kemp, 516 F.2d 21 (4th Cir. 1975).
Because the
court’s very power to hear the case is at issue in a Rule 12(b)(1)
2
This Court recognizes that on August 6, 2013, the defendant
also filed a motion for leave to supplement its motion to dismiss.
This Court has reviewed the supplemental memorandum and nothing
contained in this supplement alters this Court’s opinion expressed
herein. Therefore, this motion will be denied as moot.
3
motion, the trial court is free to weigh the evidence to determine
the existence of its jurisdiction.
III.
A.
Discussion
Motion to dismiss
In its motion to dismiss, the defendant argues that this case
should be dismissed under Federal Rule of Civil Procedure 12(b)(1)
because this Court lacks diversity jurisdiction.
The defendant
does not dispute that the parties are diverse, but argues that the
complaint fails to allege facts supporting an amount in controversy
greater than $75,000.00.
The defendant argues that the amount in
controversy cannot exceed $75,000.00 for two reasons: (1) the
relevant policy limit is $25,000.00 and (2) the actual value of the
damages is less than $7,000.00. Because the policy only covers the
defendant’s property up to $25,000.00, the defendant argues that
this Court can be legally certain that $75,000.00 will not be
exceeded.
Further, the defendant argues that declaratory judgment
in cases where coverage — rather than the validity of the policy
itself — is at issue, the amount in controversy equals the amount
of damages claimed under the disputed coverage.
Therefore, the
value of the litigation is the value of the vandalism damages,
approximately $7,000.00, and in no case could the value exceed
$25,000.00, the policy limit for the property.
The plaintiff, on the other hand, argues in its response that
the amount in controversy should include the damages under the
4
policy and, in addition, the damages for the breach of contract and
bad faith claims as mentioned by the defendant during negotiation.
Because the defendant could win a separate suit for breach and bad
faith after this suit, the plaintiff argues that these subsequent
damages should be included in the amount in controversy.3
The
plaintiff argues that the amount in controversy under all these
claims
is
evidenced
$175,000.00.
by
the
defendant’s
settlement
offer
of
In reply, the defendant argues that because only the
policy claim is at issue in this case, any broader settlement
offers are not relevant to the amount in controversy.
In this complaint, only the issue of coverage was plead and
there was no request to resolve the separate but related issue of
bad faith. To determine the amount in controversy, it is necessary
to determine whether the damages for subsequent claims that would
be affected by the present declaratory judgment should be included
in the amount in controversy.
The amount in controversy in
declaratory judgment cases only includes the object actually at
issue, not the future goal or impact of the litigation.
Lanham
Ford, Inc. v. Ford Motor Co., 101 F. App’x 381, 382 (4th Cir.
2004).
In Lanham Ford, Inc., the plaintiff was a Ford dealership
owner seeking declaratory judgment from the court which would grant
it a new hearing before the Ford Policy Board.
3
Id. at 381.
The
The plaintiff also seems to ask for leave to amend its
complaint in its response to the motion to dismiss. This request
will be addressed below.
5
plaintiff sought this hearing because it believed that the previous
hearing, which resulted in the loss of its dealership, had not been
“full, fair and objective.”
Id.
The court found that, although
the plaintiff clearly sought to retain its dealership through the
new hearing, the amount in controversy was the value of the hearing
and not the dealership.
Id. at 382.
In a case from the Northern District of Florida that is
similar to this civil action, an insurer claimed that an unfiled
bad faith claim should be considered in determining the amount in
controversy of a suit where the insurer sought declaratory judgment
stating that coverage did not exist.
New Hampshire Indemnity
Company v. Scott, No. 8:11-cv-943-T-23MAP, 2012 WL 6537098 at *1
(M.D. Fla. Dec. 12, 2012).
judgment’s
attenuated,
The court found that “a declaratory
collateral
consequence
perforce
res
judicata, collateral estoppel, or stare decisis contributes nothing
to the amount in controversy.”
analogously
declined
to
Id. at *3.
consider
Other courts have
possible,
but
counterclaims when calculating the amount in controversy.
unfiled
Unitrin
Auto and Home Ins. Co. v. Bastida, No.3:09-cr-00217-W, 2009 WL
3591190 at *2-3 (W.D.N.C. Oct. 26, 2009) (finding that potential
counterclaims do not contribute to the amount in controversy
because they are only speculative and otherwise plaintiffs could
circumvent the requirement until the counterclaims were filed).
Because these bad faith and breach of contract claims were not
6
included in the complaint,4 they are not the “object of the
litigation” and, thus, they are not relevant to determination of
the amount in controversy.
Lanham, 101 F. App’x at 382.
Accordingly, the only item to be valued is the coverage that
the defendant is claiming.
When the issue in declaratory judgment
is whether a claim of coverage is valid, the amount in controversy
is the amount of the underlying claim.
Darbet, Inc. v. Bituminous
Cas. Co., 792 F. Supp. 487, 488 (S.D. W. Va. 1992) (citing Mut.
Life Ins. Co. v. Moyle, 116 F.2d 434, 436 (4th Cir. 1940).
The
defendant
and
claims
approximately
$6,500.00
in
negotiations for the damage to its property.
its
fillings
Further, the policy
limits all claims due to damage to the residence to $25,000.00.
This Court finds that the defendant has proven to a legal certainty
that
the
amount
in
controversy
currently
does
$75,000.00, exclusive of interest and costs.
not
exceed
Thus, diversity
jurisdiction does not exist under this complaint.
B.
Plaintiff’s motion to amend
The plaintiff contends that the bad faith and breach of
contract claims should be included in the amount in controversy
under the complaint as it stands.
Nonetheless, in its response to
the motion to dismiss, the plaintiff asks for leave to amend its
4
It is worth noting that because this case will be dismissed
without prejudice, the plaintiff will be free to file this case
again in a court having jurisdiction and explicitly state all
appropriate claims for declaratory judgment.
7
complaint and directly state these claims for declaratory judgment
from the court. Normally, the existence of jurisdiction depends on
the facts at the time the complaint is filled.
Newman-Green, Inc.
v. Alfonzo-Lorrin, 490 U.S. 826, 831 (1989) (citing Smith v.
Sperling, 354 U.S. 91, 93 n.1 (1957)).
In certain situations,
however, “[d]efective allegations of jurisdiction may be amended”
under 28 U.S.C. § 1653.
These situations are narrowly defined and typically involve
minor mistakes regarding the more technical pleading requirements.
One example of such an amendable defect is mistakenly stating the
amount in controversy for all plaintiffs, rather than calculating
each plaintiff’s amount in controversy separately.
Texaco,
Inc.,
16
F.3d
1408,
1412
(4th
Cir.
1994)
Feikema v.
(allowing
amendment to separate amount in controversy because defect was in
form only).
On the other hand, even the minor error of including
a non-diverse party in the complaint is considered “basic and
actual, not formal” and, thus, not eligible for amendment under 28
U.S.C. § 1653.
Russel v. Basila Mfg. Co., 246 F.2d 432, 433 (5th
Cir. 1957) (disallowing amendment at appeal even though by that
time the claims against the non-diverse parties had been dismissed
on the merits in the lower court); accord Newman-Green, Inc., 490
U.S. at 831 (disapproving of amendment during appeal to drop a
party that destroyed diversity under 28 U.S.C. § 1653 because it
would “produce jurisdiction where none actually existed before”).
8
Several circuit courts have explicitly stated that amendment
may not introduce new claims in order to gain jurisdiction, as this
would not be a technical defect.
Pressroom Unions-Printers League
Income Sec. Fund v. Continental Assur. Co., 700 F.2d 889, 893 (2d
Cir. 1983); Boelens v. Redman Homes, Inc., 759 F.2d 504, 512 (5th
Cir. 1985); Monrongo Band of Mission Indians v. California State
Bd. of Equalization, 858 F.2d 1376, 1380 n.3 (9th Cir. 1988).
To
summarize, it appears that amendment is only allowed under 28
U.S.C. § 1653 when jurisdiction appears to exist, given the parties
and claims set forth in the complaint, but the existence of
jurisdiction is not correctly documented.
Since this amendment
would seek to add entirely new claims, it is far from the kind of
technical mistake that can be amended.
Accordingly, amendment
cannot be justified under 28 U.S.C. § 1653 and leave to amend the
complaint will be denied by this Court.
C.
Defendant’s motion for leave to file and assert a counterclaim
The defendant has asked for leave to file a counterclaim which
would assert a variety of additional claims against the plaintiff.
However,
as
discussed
above,
there
does
not
appear
to
be
jurisdiction under the original complaint. First, although the law
is not settled on this point, the weight of the case law seems to
favor not considering counterclaims when determining the amount in
controversy.
See 14AA Federal Practice and Procedure Jurisdiction
§ 3706 n.20-21 (4th ed.); West Virginia State Bar v. Bostic, 351 F.
9
Supp. 1118, 1121 (S.D. W. Va. 1972) (stating, in removal action,
that counterclaims should not add to the amount in controversy,
even where counterclaiming is required by state law); R.L. Jordan
Oil Co. of N.C., Inc. v. Boardman Petroleum, Inc., 23 F. App’x 141,
144-45 (4th Cir. 2001) (stating, in a removal action, that it
appears that counterclaims should not be considered for determining
the amount in controversy). Second, the value of this counterclaim
is expressly limited to $49,000.00. Even if this counterclaim were
to be combined with the value of the original complaint, which is
at most $25,000.00, the amount in controversy would not exceed
$75,000.00. Therefore, even if this Court allowed the counterclaim
to be filed, diversity jurisdiction would not exist and this Court
would still be required to dismiss the case.
IV.
Conclusion
For the above stated reasons, the defendant’s motion to
dismiss for lack of subject matter jurisdiction is GRANTED.
The
plaintiff’s
The
motion
to
amend
its
complaint
is
DENIED.
defendant’s motion for leave to file and assert a counterclaim is
DENIED
AS
MOOT.
The
defendant’s
motion
supplemental memorandum is DENIED AS MOOT.
for
leave
to
file
a
Therefore, the instant
case is to be DISMISSED WITHOUT PREJUDICE and STRICKEN from the
active docket of this Court.
IT IS SO ORDERED.
10
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein. Pursuant to Federal
Rule of Civil Procedure 58, the Clerk is DIRECTED to enter judgment
on this matter.
DATED:
August 7, 2013
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
11
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