-GSA Scalzo v. Allied Property and Casualty Insurance Company, Inc. et al, No. 1:2011cv00612 - Document 18 (E.D. Cal. 2011)
Court Description: FINDINGS and RECOMMENDATIONS Regarding 10 MOTION to REMAND signed by Magistrate Judge Gary S. Austin on 7/11/2011. Objections to F&R due within fifteen (15) days of service of this recommendation.(Bradley, A)
Download PDF
<![CDATA[
-GSA Scalzo v. Allied Property and Casualty Insurance Company, Inc. et al Doc. 18 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 MARTHA SCALZO, 11 12 13 14 15 16 ) ) Plaintiff, ) ) v. ) ) ALLIED PROPERTY AND CASUALTY ) INSURANCE COMPANY, a corporation and ) DOES 1 through 10, ) ) Defendants. ) _____________________________________ ) 1:11-cv-00612 LJO GSA FINDINGS AND RECOMMENDATIONS REGARDING MOTION TO REMAND (Document 10) 17 18 RELEVANT FACTUAL AND PROCEDURAL BACKGROUND 19 On March 8, 2011, Plaintiff Martha Scalzo filed a complaint in the Madera County 20 Superior Court, asserting the following causes of action: breach of contract, breach of implied 21 covenant of good faith and fair dealing, and intentional misrepresentation. In addition to general 22 damages and the recovery of attorneys fees and costs, Plaintiff sought an award of punitive 23 damages. Generally speaking, Plaintiff alleges that Defendant Allied Property and Casualty 24 Insurance Company, Inc. breached a policy of insurance between the parties following damages 25 sustained at Plaintiff’s home in Madera, California, caused by a rain storm that occurred on May 26 23, 2010. (See Doc. 1, Ex. A.) 27 28 1 Dockets.Justia.com 1 On April 15, 2011, Defendant filed a Notice of Removal with this Court. More 2 specifically, Defendant removed the action from state court on the basis of diversity. (Doc. 1.) 3 On April 22, 2011, Defendant filed an answer to the complaint. (Doc. 8.) 4 On June 9, 2011, Plaintiff filed a Motion to Remand for Lack of Subject Matter 5 Jurisdiction. (Docs. 10-12.) Thereafter, on June 24, 2011, Defendant opposed the motion to 6 remand. (Doc. 15.) On July 1, 2011, Plaintiff filed a reply. (Doc. 16.) 7 On July 5, 2011, this Court determined the matter was suitable for decision without oral 8 argument pursuant to Local Rule 230(g).1 The hearing scheduled for July 8, 2011, was vacated 9 and the matter was deemed submitted for written findings. (Doc. 17.) 10 11 LEGAL STANDARD Title 28 of the United States Code section 1441(a) provides that a defendant may remove 12 “any civil action brought in a State court of which the district courts . . . have original jurisdiction 13 . . ..” Removal is proper when a case originally filed in state court presents a federal question or 14 where there is diversity of citizenship among the parties and the amount in controversy exceeds 15 $75,000. See 28 U.S.C. §§ 1331, 1332(a). 16 Section 1447(c) provides that “[i]f at any time before final judgment it appears that the 17 district court lacks subject matter jurisdiction, the case shall be remanded.” “The removal statute 18 is strictly construed against removal jurisdiction [and] [t]he defendant bears the burden of 19 establishing that removal is proper.” Provincial Gov’t of Marinduque v. Placer Dome, Inc., 582 20 F.3d 1083 (9th Cir. 2009). The Ninth Circuit has held that “[w]here doubt regarding the right to 21 removal exists, a case should be remanded to state court.” Matheson v. Progressive Specialty 22 Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003). 23 A motion to remand is the proper procedure for challenging removal. Babasa v. 24 LensCrafters, Inc., 498 F.3d 972, 974 (9th Cir. 2007). When reviewing a motion to remand, a 25 26 1 27 The Court carefully reviewed and considered all of the pleadings, including arguments, points and authorities, declarations, and exhibits. Any omission of a reference to an argument or pleading is not to be construed that this Court did not consider the argument or pleading. 28 2 1 district court must analyze jurisdiction “on the basis of the pleadings filed at the time of removal 2 without reference to subsequent amendments.” Sparta Surgical Corp. v. Nat'l Ass'n of Sec. 3 Dealers, Inc., 159 F.3d 1209, 1213 (9th Cir. 1998) (citation omitted). If a defendant has 4 improperly removed a case over which the district court lacks subject matter jurisdiction, the 5 district court shall remand the case to the state court. 28 U.S.C. § 1447(c); see also Durham v. 6 Lockheed Martin Corp., 445 F.3d 1247, 1252 (9th Cir. 2006) (noting that a district court resolves 7 all ambiguity in favor of remand). However, a district court lacks discretion to remand a case to 8 the state court if the case was properly removed. Carpenters S. Cal. Admin. Corp. v. Majestic 9 Hous., 743 F.2d 1341, 1343 (9th Cir. 1984); see also Carnegie-Mellon Univ. v. Cohill, 484 U.S. 10 343, 356, 108 S.Ct. 614, 98 L.Ed.2d 720 (1988). 11 Where the parties in an action are citizens of different states, a district court “shall have 12 original jurisdiction . . . where the matter in controversy exceeds the sum or value of $75,000, 13 exclusive of interest and costs.” 28 U.S.C. § 1332(a). This amount includes claims for general 14 and special damages (excluding costs and interests), attorneys fees if recoverable by statute or 15 contract, and punitive damages, if recoverable as a matter of law. Conrad Assocs. v. Hartford 16 Accident & Indem. Co., 994 F.Supp. 1196, 1198 (N.D. Cal. 1998). The amount in controversy is 17 “determined at the time the action commences, and a federal court is not divested of jurisdiction 18 . . . if the amount in controversy subsequently drops below the minimum jurisdictional level.” 19 Hill v. Blind Industries and Services of Maryland, 179 F.3d 754, 757 (9th Cir. 1999). 20 Where the complaint does not specify the amount sought as damages, the removing party 21 must prove by a preponderance of the evidence that the amount in controversy meets the 22 jurisdictional threshold. Guglielmino v. McKee Foods Corp., 506 F.3d 696, 699 (9th Cir. 2007); 23 Abrego v. The Dow Chemical Co., 443 F.3d 676, 683 (9th Cir. 2006); Sanchez v. Monumental 24 Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996). 25 // 26 // 27 28 3 1 DISCUSSION 2 Plaintiff seeks remand to state court, asserting that Defendant has not met its burden of 3 establishing that removal was proper. More particularly, Plaintiff argues that Defendant has 4 failed to establish that the amount in controversy exceeds $75,000. (Doc. 10 at 2-5.) 5 Additionally, Plaintiff argues that Defendant has failed to prove diversity of citizenship. (Doc. 6 10 at 5-7.) Defendant opposes the motion, contending the amount of controversy has in fact been 7 met, and that diversity of citizenship exists between the parties. (Doc. 15 at 2-8.) 8 9 For the foregoing reasons, this Court will recommend the matter be remanded to the Madera County Superior Court. 10 A. 11 Where a complaint does not specify a particular amount of damages, the Ninth Circuit has Amount in Controversy 12 held the removing party bears the burden of establishing, by a preponderance of the evidence, 13 that the recovery sought meets the amount in controversy requirement. Abrego v. The Dow 14 Chemical Co., 443 F.3d at 683. Therefore, the removing party must provide evidence that it is 15 more likely than not that the amount in controversy exceeds $75,000. Id., citing Sanchez v. 16 Monumental Life Ins. Co., 102 F.3d at 404. Where this burden is not met, the case must be 17 remanded to the state court where it was originally filed. Fed. R. Civ. P. 1447(c). As previously 18 noted, the removal statute is strictly construed against removal. Provincial Gov’t of Marinduque 19 v. Placer Dome, Inc., 582 F.3d 1083; Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 (9th 20 Cir. 1988). 21 Plaintiff’s complaint does not specify a particular amount of damages sought. Rather, 22 Plaintiff seeks general, special, economic and consequential damages, attorney fees, prejudgment 23 interest, costs of suit, and punitive damages. (Doc. 1, Ex. A at 12.) Thus, Defendant must show 24 by a preponderance of the evidence that the amount in controversy exceeds $75,000. 25 // 26 // 27 28 4 1 2 1. Punitive Damages Defendant asserts that Plaintiff’s bad faith and punitive damages claims establish that the 3 amount in controversy is met. Specifically, Defendant cites to a number of cases wherein 4 “[j]uries in California render verdicts in the millions of dollars based on the alleged bad faith 5 denial of insurance benefits and punitive damages claims.” (Doc. 15 at 3.) Counsel for 6 Defendant also appended copies of jury verdicts in three matters to her supporting declaration. 7 (Doc. 15-1, Exs. A-C.) 8 9 However, “[i]t would be inherently speculative for this Court to conclude that the amount in controversy requirement can be met by simply asserting that large punitive damage awards 10 have been awarded in the past against insurance companies” for bad faith failure to pay claims. 11 Conrad Assocs. v. Hartford Accident & Indem. Co., 994 F.Supp. at 1201 (internal citation 12 omitted). Here, Defendant has not provided any factual data on the cases cited and “has made no 13 effort to compare the facts of [those cases] with the alleged facts of this case.” Id., at 1201. The 14 cases cited by Defendant involve a different kind of insurance - workers’ compensation, 15 disability and automobile - and do not provide information regarding value of the underlying 16 claim or damages sought. Defendant “has failed to articulate why the particular facts that are 17 alleged in the instant case might warrant extraordinary damages.” Id., at 1201. 18 Further, while Plaintiff’s complaint seeks damages for emotional distress related to a 19 breach of the implied covenant of good faith and fair dealing, Defendant also has not provided a 20 sound basis for this Court to estimate a potential award of said damages, and the Court will not 21 speculate. The evidence offered by Defendant is too vague to establish subject matter 22 jurisdiction. 23 24 25 2. Attorney’s Fees Defendant further contends that whether Plaintiff can recover only “40% of the contract damages, or an hourly calculation based on the amount of fees incurred in pursuit of contract 26 27 28 5 1 damages . . . [e]ither method results in significant potential attorney’s fees that can be awarded in 2 this case and contribute to the amount in controversy.” (Doc. 15 at 4-5.) 3 Plaintiff’s complaint does include a prayer for attorney’s fees. In her moving papers, 4 Plaintiff indicates that “the only legal work performed . . . has been the preparation of the 5 complaint.” (Doc. 10 at 4.) In her reply to Defendant’s opposition, Plaintiff asserts that 6 Defendant has failed “to present credible evidence as to the fees attributable to recovering 7 benefits . . . at the time of removal.” (Doc. 16 at 2.) 8 California law permits recovery of attorneys fees incurred by the insured in obtaining benefits due under the policy when the insurer’s conduct in withholding benefits was tortious. The theory permitting this recovery is that when an insurer’s tortious conduct reasonably compels the insured to retain an attorney to obtain the benefits due under a policy, it follows that the insurer should be liable in a tort action for that expense. However, only attorney fees attributed to an attorney’s efforts in obtaining benefits due under the insurance contract are recoverable, and fees attributable to obtaining any portion of the plaintiff’s award which exceeds the amount due under the policy are not recoverable. Since the amount in controversy may include attorneys fees if recoverable by statute or contract, attorney fees recoverable . . . may be considered in determining whether the amount in controversy exceeds the jurisdictional floor. 9 10 11 12 13 14 15 Conrad Assocs. v. Hartford Accident & Indem. Co., 994 F.Supp. at 1199 (internal citations & 16 quotation marks omitted). As noted by Plaintiff in her moving papers, attorney fees are minimal 17 “because at the time of removal the only legal work performed . . . [was] the preparation of the 18 complaint.” (Doc. 10 at 4.) 19 Defendant’s prediction that an award of attorney fees could be significant is too vague to 20 establish subject matter jurisdiction. See Galt G/S v. JSS Scandinavia, 142 F.3d 1150, 1156 (9th 21 Cir. 1998); Conrad Assocs. v. Hartford Accident & Indem. Co., 994 F.Supp. at 1200. The 22 amount in controversy must be determined as of the date of removal. Conrad Assocs. v. 23 Hartford Accident & Indem. Co., 994 F.Supp. at 1200. This Court is not persuaded that the 24 attorney fee exposure here works to establish that the amount in controversy exceeds $75,000. 25 // 26 // 27 28 6 1 2 3. Plaintiff’s Refusal to Stipulate In his declaration in support of the remand motion, counsel for Plaintiff declares that 3 Defendant offered to stipulate to remand in exchange for Plaintiff’s stipulation to a limit of her 4 claims, including costs, to $75,000. (Doc. 12, ¶ 2.) 5 To the degree Defendant can be said to assert that Plaintiff’s failure to stipulate that her 6 case is worth less than $75,000 can be interpreted as evidence that potential damages meet the 7 jurisdictional requirement (see Doc. 15-1, Ex. E), any such assertion is incorrect. In Conrad 8 Assocs. v. Hartford Accident & Indem. Co., the court held that plaintiff’s refusal to stipulate that 9 the case was worth less than $75,000 was not enough to establish diversity jurisdiction. Conrad 10 Assocs., 994 F.Supp. at 1199 (finding a defect in the subject matter jurisdiction cannot be 11 stipulated to or waived). 12 4. The Settlement Offer 13 Defendant asserts that because Plaintiff “has offered nearly the jurisdictional minimum as 14 a settlement offer,” or $68,500, her “claim of $20,000 in disputed damages . . . is disingenuous.” 15 (Doc. 15 at 6; Doc. 15-1, Ex. D.) 16 “A settlement letter is relevant evidence of the amount in controversy if it appears to 17 reflect a reasonable estimate of the plaintiff’s claim.” Cohn v. Petsmart, Inc., 281 F.3d 837, 840 18 (9th Cir. 2002). In Cohn, the Court determined that a settlement letter demanding $100,000 19 dollars for alleged violations of a trademark was sufficient evidence that the amount in 20 controversy exceeded $75,000. Id. The Court noted that “Cohn could have argued that the 21 demand was inflated and not an honest assessment of damages, but he made no attempt to 22 disavow his letter or offer contrary evidence. Rather, he consistently maintained that his mark is 23 worth more than $100,000.” Id. 24 Here, Plaintiff’s counsel sent a letter to defense counsel following receipt of Defendant’s 25 notice of removal. Counsel for Plaintiff asserted that removal was improper because the amount 26 in controversy did not establish this Court’s jurisdiction. In conclusion, the letter states as 27 28 7 1 follows: “We are authorized by our client to settle this case for $68,500. This offer will remain 2 in effect until 5pm on May 20, 2011, at which time it will automatically be revoked and our 3 office will proceed to vigorously litigate this matter.” (Doc. 15-1, Ex. D.) 4 The settlement offer here appears to be a reasonable estimate of Plaintiff’s claim. Cohn v. 5 Petsmart, Inc., 281 F.3d at 840. A claim that is less than this Court’s required jurisdictional 6 minimum. Additionally, in insurance claims matters, “the jurisdictional amount in controversy is 7 measured by the value of the underlying claim - not the face amount of the policy.” Hartford Ins. 8 Group v. Lou-Con Inc., 293 F.3d 908, 911 (5th Cir. 2002); see also Budget Rent-A-Car, Inc. v. 9 Higashiguchi, 109 F.3d 1471, 1473 (9th Cir. 1997); Infinity Ins. Co. v. Guerrero, 2007 WL 10 2288324 (E.D. Cal. 2007). Plaintiff asserts in her motion that this matter “arises out of a $20,000 11 dispute over insurance policy benefits.” (Doc. 10 at 2; see also Doc. 10 at 3.) A. Michael De 12 Cesare, a licensed public adjuster retained by Plaintiff, provided a declaration in support of the 13 motion. In relevant part, the declaration provides: 14 15 16 Attached as Exhibit A to my declaration is a true and correct copy of my letter to Roger Cummings, Property Claims Representative, dated October 21, 2010. Attached to the letter was a notarized proof of loss in the amount of $41,523.40. The proof of loss is sworn to by Ms. Scalzo. Allied paid $14,451.94 towards the claim. As schedule A to the Proof of loss states there is a net amount payable of $20,288.75 [less depreciation and deductible], in policy benefits. 17 18 (Doc. 11, ¶ 3.) Plaintiff has consistently maintained the value of her claim does not exceed the 19 jurisdictional minimum. Also, as Plaintiff noted in her reply to Defendant’s opposition, 20 “[s]ettlement offers embody numerous considerations other than just the amount in controversy 21 at the time of removal.” (Doc. 16 at 3.) 22 23 24 25 26 Finally, like the Northern District court in J. Marymount, Inc. v. Bayer Healthcare, LLC, 2009 WL 4510126 *3 (Nov. 30, 2009), this Court is persuaded by the following reasoning: In Faulkner [v. Astro-Med, Inc., 1999 U.S. Dist. LEXIS 15801 (N.D. Cal. Oct. 1, 1999)], the plaintiff made an initial offer to settle his claims including “all compensatory damages, attorney’s fees and punitive damages” for “$72,000, with each side to bear their own fees and costs.” Id. at *8. Subsequently, the Plaintiff made a second settlement offer of $50,000 that “also included compensatory damages, attorney’s fees and punitive damages.” Id. The Court found that the 27 28 8 1 2 3 4 5 6 7 two settlement offers supported “plaintiff’s claim that he [was] seeking a total of less than $75,000,” and ultimately found that the defendant had not shown that the amount in controversy exceeded $75,000. Id. *8, 12. Other districts have come to similar conclusions. In Vasquez v. CSX Transportation, Inc., the plaintiff made a settlement offer of $70,000. See id., 2009 U.S. Dist. LEXIS 57825, *1 (N.D. Ill. July 1, 2009). There, the court acknowledged that “when litigants settle lawsuits, they usually take the risk of going to trial into account. Thus, plaintiffs usually settle for less than what they believe they could get if they prevailed at trial. Id. at *7. However, the court noted that the $70,000 settlement offer was an initial offer, and typically initial offers are used to anchor the negotiations in [a party’s] favor by starting the process with a high number.” Id. Accordingly, the court refused “to jump to the conclusion that because [the plaintiff’s] initial settlement offer was $70,000, the amount in controversy” exceeded $75,000. Id. at *7-8. 8 9 10 11 This Court will not simply conclude that Plaintiff’s settlement offer of $68,500 is evidence that Plaintiff’s claim exceeds the required jurisdictional minimum. For all of the foregoing reasons, this Court finds that Defendant has failed to meet its 12 burden of establishing the amount in controversy in this matter exceeds $75,000. Lastly, because 13 this Court so finds, it need not reach the issue of whether or not diversity of citizenship exists 14 between the parties. Accordingly, this Court will recommend Plaintiff’s motion to remand this 15 matter to state court be granted. 16 B. 17 Plaintiff seeks an award of $2,100 in attorney’s fees related to the preparation and filing 18 19 Attorney’s Fees Related to the Instant Motion of the motion for remand. (Doc. 10 at 7; Doc. 12, ¶ 3.) An award of costs and fees is authorized only where remand occurs for “a defect in 20 removal procedure” or for a lack of subject matter jurisdiction. 28 U.S.C. § 1447(c). A federal 21 court may order the defendant to pay plaintiff its “just costs and any actual expenses, including 22 attorney fees, incurred as a result of the removal.” Martin v. Franklin Capital Corp., 546 U.S. 23 132, 136, 126 S.Ct. 704, 708-09 (2005). The award of attorney fees is not automatic where 24 plaintiff has prevailed; it is discretionary. Id., at 136. The key factor regarding such an award is 25 the propriety of the removal, “absent unusual circumstances, attorney’s fees should not be 26 27 28 9 1 awarded when the removing party has an objectively reasonable basis for removal.” Id., at 136; 2 see also Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062, 1065 (9th Cir. 2008). 3 Here, an award of fees and costs is not warranted. While the Court has in fact decided 4 against Defendant on the issue of removal, it cannot be said its basis for seeking to remove this 5 action from the state court is objectively unreasonable. Martin v. Franklin Capital Corp., 546 6 U.S. at 136. 7 8 In sum, this Court will recommend that Plaintiff’s request for an award of attorney fees related to the instant motion be denied. 9 RECOMMENDATIONS 10 For the reasons stated above, this Court RECOMMENDS that Plaintiff’s Motion for 11 Remand for Lack of Subject Matter Jurisdiction be granted in part. More specifically, the Court 12 recommends this matter be remanded to the Madera County Superior Court in its entirety. 13 However, as to Plaintiff’s request for an award of attorney’s fees related to preparation of the 14 instant motion, this Court RECOMMENDS the request be denied. 15 These findings and recommendations are submitted to the district judge assigned to this 16 action, pursuant to Title 28 of the United States Code section 636(b)(1)(B) and this Court’s Local 17 Rule 304. Within fifteen (15) days of service of this recommendation, any party may file written 18 objections to these findings and recommendations with the Court and serve a copy on all parties. 19 Such a document should be captioned “Objections to Magistrate Judge’s Findings and 20 Recommendations.” The district judge will review the magistrate judge’s findings and 21 recommendations pursuant to Title 28 of the United States Code section 636(b)(1)(C). The 22 parties are advised that failure to file objections within the specified time may waive the right to 23 appeal the district judge’s order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991). 24 25 IT IS SO ORDERED. 26 Dated: 6i0kij July 11, 2011 /s/ Gary S. Austin UNITED STATES MAGISTRATE JUDGE 27 28 10
]]>
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You
should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
