Gallardo v. Stillwater Insurance Company

1 WO [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] 9 Joseph Gallardo, et al., No. CV-19-05235-PHX-SMB 10 Plaintiffs, ORDER 11 v. 12 Stillwater Insurance Company, et al., 13 Defendants. [15] 16 At issue is Defendants’ Notice of Removal (Doc. 1) filed on September 20, 2019. The 17 Court has reviewed the Notice of Removal and finds that Defendants have not sufficiently 18 established that the case exceeds the amount in controversy required to grant the Court 19 subject matter jurisdiction over this matter. Accordingly, the Court issues the following 20 Order: 21 I. BACKGROUND 22 Plaintiffs Joseph and Angel Gallardo, both citizens of Arizona, suffered water 23 damage at their home on or about August 27, 2018. Plaintiffs hold a homeowner’s 24 insurance policy (“the Policy”) with Stillwater Insurance Group (“Defendants”)1, a 25 California corporation with its principle place of business in Florida. Plaintiffs claim the 26 alleged damage is covered under the Policy. Plaintiffs contend the Policy covered 27 “structure damage, damages to flooring, walls, cabinetry, contents damages, loss of use, [28] 1 Plaintiffs include numerous parties to be identified in their complaint. 1 additional living expenses, ‘pack out’ and ‘pack back’” expenses. After the damage 2 rendered daily use of their home impossible, a Stillwater claims estimator inspected 3 Plaintiffs’ residence. Stillwater estimated the damage at $1,877.26. Plaintiff contested 4 this amount as insufficient and hired a licensed public adjuster to obtain an independent 5 damage assessment. Retaining the public adjuster obligated Plaintiffs to pay 30% of all 6 funds recovered from Defendants to the public adjuster’s office. The adjuster estimated 7 damages to Plaintiffs dwelling at approximately $48,845.95 and assessed damages to 8 contents (including “pack out,” cleaning, and “pack back expenses) of $25,822.36. On 9 Plaintiffs behalf, the adjuster demanded appraisal with Stillwater, as provided for under the 10 Policy, to resolve the dispute. Defendants demurred, offering instead to reinspect and 11 reassess the property damage. They did so and made several additional payments under 12 the Policy. To date, Defendants have paid out under the Policy in the following amounts: 13 $28,564.74 (after subtracting a $2,000 deductible) for personal property damage; 14 $21,663.39 to supplement repairs on covered dwelling damages; $5,40.60 for dwelling 15 damage; $10,447,89 for additional living expenses. Plaintiffs were required to pay 16 $12,432.26 to the public adjuster. 17 Plaintiffs now bring a bad faith state law claim, seeking general and special 18 damages, punitive damages and reasonable attorney’s fees. Plaintiffs do not specify an 19 amount in controversy. However, Plaintiffs did certify damages sought in excess of the 20 $50,000 limit for mandatory arbitration in Maricopa County. 21 II. LEGAL STANDARD 22 Federal courts may exercise jurisdiction over a case only if jurisdiction existed over 23 the suit as originally brought by the plaintiff. 28 U.S.C. § 1441 (a). The removing party 24 bears the burden of establishing federal subject matter jurisdiction. Emrich v. Touche Ross 25 & Co., 846 F.2d 1190 , 1195 (9th Cir. 1998). However, because the plaintiff chose a state 26 rather than federal forum, “the removal statute is strictly construed against removal 27 jurisdiction.” Id. “The strong presumption against removal jurisdiction means that the 28 defendant always has the burden of establishing that removal is proper.” Gaus v. Miles, 1 Inc., 980 F.2d 564, 566 (9th Cir. 1992) (quotation omitted). If at any time before final 2 judgment it appears the district court lacks subject matter jurisdiction over a case removed 3 from state court, the case must be remanded. 28 U.S.C. § 1447 (c). 4 Jurisdiction based on 28 U.S.C. § 1332 require complete diversity and an amount in 5 controversy that exceeds $75,000. Id. In the context of removal, the inquiry into the 6 amount in controversy “is not confined to the face of the complaint.” Burk v. Medical 7 Savings Ins. Co., 248 F.Supp.2d 1063, 1067 (D. Ariz. 2004) (citing Valdez v. Allstate Ins. 8 Co., 372 F.3d 1115, 1117 (9th Cir. 2004)). “The court may consider whether it is ‘facially 9 apparent’ from the complaint that the amount in controversy has been met,” and “[i]f it is 10 not facially apparent, the court may consider facts in the removal petition or ‘summary11 judgment-type evidence relevant to the amount in controversy at the time of removal.’” 12 Plexus Worldwide LLC v. TruVision Health LLC, No. CV-14-02093-PHX-ROS, 2014 WL 13 12650627, at *2 (D. Ariz. Dec. 22, 2014) (quoting Singer v. State Farm Mutual Automobile 14 Ins. Co., 116 F.3d 373, 377 (9th Cir. 1997)). Where a plaintiff’s state court complaint does 15 not allege a specific amount of damages, the removing defendant bears the burden of 16 proving by a preponderance of the evidence that the amount in controversy exceeds the 17 jurisdictional amount. See Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th 18 Cir. 1996). “[T]he defendant must set forth facts supporting the assertion that the amount 19 in controversy exceeds the statutory minimum.” Int’l Tech. Coatings, Inc. v. Trover, No. 20 2:12-CV-01007-JAT, 2012 WL 2301382 , at *3 (D. Ariz. June 18, 2012). But, 21 “[c]onclusory allegations as to the amount in controversy are insufficient.” Matheson v. 22 Progressive Specialty Ins. Co., 319 F.3d 1089, 1090-91 (9th Cir. 2003). 23 For purposes of calculating the amount in controversy, in addition to considering a 24 plaintiff’s potential compensatory damages, a court may consider a plaintiff’s potential 25 punitive damages and the potential award of attorneys’ fees. See Chabner v. United of 26 Omaha Life Ins. Co., 225 F.3d 1042 , 1046 n. 3 (9th Cir. 2000) (punitive damages); Galt 27 G/S v. JSS Scandinavia, 142 F.3d 1150, 1155-56 (9th Cir. 1998) (attorneys’ fees). 28 III. DISCUSSION 1 Plaintiffs complaint specifies no amount in controversy. Thus, it is not facially 2 apparent that, here, the amount in controversy exceeds $75,000. Accordingly, Defendants 3 carry the burden to prove by preponderance of the evidence that the amount in controversy 4 requirement is met. Defendants argue that the amount in controversy requirement is more 5 likely than not satisfied because (1) Plaintiffs filed a certified of compulsory arbitration in 6 state court indicating the value of the claim exceeds $50,000; (2) Plaintiffs have allegedly 7 advised Defendants that they are “strongly opposed” to resolve the case for anything less 8 than $75,000; and (3) the damages resultant of a successful bad faith claim entitles 9 Plaintiffs to “substantial amounts for special and general damages, punitive damages, 10 attorney’s fees and costs, and fees associated with their retention of a public adjuster.” 11 (Doc. 1). However, Defendants argument is not support by citation to specific facts, case 12 law, or summary judgment type evidence. 13 Defendants first argument has some merit. Defendants correctly identify that a 14 certification that the amount in controversy exceeds $50,000 may be included in calculating 15 the total amount in controversy. See Welsh v. New Hampshire Ins. Co., 843 F.Supp.2d 16 1006, 1010-11 (D. Ariz. 2012). However, a district court has discretion to accept the 17 Plaintiffs formal judicial admission. Singer, 116 F.3d at 376-77 (supporting a district 18 judge’s discretion where “[i]n the absence of any conflicting evidence, the plaintiff’s 19 admission established by preponderance” that the amount in controversy was exceeded). 20 The arbitration certificate demonstrates the amount in controversy is at least $50,000. 21 Standing alone, it does no more. See Welsch v. New Hampshire Ins. Co., 843 F.Supp.2d 22 1006, 1009-10 (D. Ariz. 2012) (finding the arbitration certificate “does not prove that 23 damages will exceed $75,000). 24 Defendants second argument falls far short of meeting the required burden on proof. 25 While some courts have considered a plaintiff’s refusal to stipulate that damages sought 26 are less than the amount in controversy as persuasive evidence in finding that jurisdiction 27 was proper, no such situation is present here.2 Here, Plaintiffs have not refused a specific 28 2 The law in the Ninth Circuit is far from settled. Compare Ansley v. Metropolitan Life Ins. Co., 215 F.R.D. 575, 578 (D. Ariz. 2003) (refusing to strike a refusal to stipulate) with 1 offer to stipulate that they seek no more than $75,000. Plaintiffs also have not refused to 2 state the amount in controversy sought. See Gordon v. Allstate Ins. Co., 2010 WL 1949164 , 3 at *2 (D. Ariz. May 13, 2010) (“Plaintiffs . . . are under no such obligation to announce, on 4 their own accord, the amount in controversy.”). Defendants presentation of undocumented, 5 self-serving communications indicating that Plaintiffs are “strongly opposed” to settling 6 for less than the amount in controversy does not convince this Court. 7 Defendants conclusory position that the “substantial amounts” of damages sought 8 by Plaintiffs exceeds the amount in controversy is similarly unpersuasive. Defendants fail 9 to cite to any evidence regarding the amount of likely compensatory damages, punitive 10 damages, and award of attorneys’ fees. Without such evidence, the Court cannot assume 11 that the total amount in controversy far exceeds the $50,000 admitted by Plaintiffs. 12 Regarding possible compensatory damages, the highest damage estimate to in Plaintiffs 13 complaint was approximately $48,845.95 of damage to the contents of the home and an 14 additional $25,822.36 in “pack back” expenses. (Doc. 1, Exh. 3 at 24). Tentatively,3 this 15 would place the payment sought by Plaintiffs under the Policy at $74,668.31.4 However, 16 as Plaintiffs themselves point out, Defendants have already paid out $65,058.61 under the 17 Policy. Thus, it is possible Plaintiffs only seek approximately $9,609.70 in compensatory 18 damages but seek in excess $50,000 if punitive damages and attorneys’ fees are awarded. 19 Defendants treatment of possible punitive damages is similarly cursory. As 20 discussed earlier, punitive damages may also be included in the amount in controversy if 21 recoverable under the applicable law. See e.g., Gibson v. Chrysler Corp., 261 F.3d 927 , 22 945 (9th Cir. 2001); Chabner, 225 F.3d at 1046 n. 3. In Arizona, punitive damages are 23 recoverable in successful bad faith insurance claims. Filasky v. Preferred Risk Mut. Ins. [24] Conrad Assocs. v. Hartford Acc. & Indem. Co., 994 F.Supp. 1196, 1199 (N.D. Cal. 1998) 25 (finding a plaintiff’s refusal to stipulate their case was not worth $75,000 unconvincing). 3 It is unclear from Plaintiffs complaint if these estimates are fully inclusive. 26 4 In their complaint, Plaintiffs appear to use this number illustratively, not as an estimate of damages sought or an amount in controversy. Seemingly, Plaintiffs highlight the 27 discrepancy between their retained adjuster’s estimate ($74,668.31) with Defendants initial estimate ($1,877.26) to infer bad faith. That Defendants only paid out $65,058.61 after 28 Plaintiffs hired an adjuster at significant cost to themselves is used to bolster their bad faith case. 1 Co., 152 Ariz. 591, 734 (1987). “However, the mere possibility of a punitive damages 2 award is insufficient to prove the amount in controversy has been met.” Burk, 248 3 F.Supp.2d at 1069. Defendants must present evidence that a punitive damages award more 4 likely than not will satisfy the amount in controversy when all appropriate damages are 5 calculated. Here, Defendants do not attempt to satisfy this burden. Defendants presents 6 no evidence justifying why this case might warrant extraordinary punitive damages. 7 Rather, they merely assert that the sum of the damages sought by the Plaintiffs—to include 8 general damages, special damages, compensatory damages, punitive damages, and 9 attorneys’ fees—is “substantial.” 10 Similarly, attorneys’ fees may be included in the amount in controversy “where the 11 underlying statute authorizes an award of attorneys’ fees, either with mandatory or 12 discretionary language.” Lowdermilk v. United States Bank Nat’l Ass’n, 479 F.3d 994 , 1000 13 (9th Cir. 2007).5 Because bad faith insurance claims arise out of a breach of contract action, 14 attorneys’ fees may be awarded pursuant to A.R.S. § 12-341.01(A). Sparks v. Republic 15 Nat’l Life Ins. Co., 132 Ariz. 529, 544 (1982). However, as with the arguments regarding 16 punitive damages, Defendants present no evidence of Plaintiffs current or future attorneys’ 17 fees. 18 This Court cannot calculate the sum of Defendants unsupported speculation, much 19 less affirm by preponderance of the evidence that it exceeds $75,000. Defendants have not 20 met their burden. See Gaus, 980 F.2d at 567 (holding that a conclusory allegation “neither 21 overcomes the strong presumption against removal jurisdiction, nor satisfies [the 22 defendant]’s burden of setting forth, in the removal petition itself, the underlying facts 23 supporting its assertion that the amount in controversy exceeds” $75,000). 24 IV. CONCLUSION 25 IT IS THEREFORE ORDERED that Defendants show cause in writing within 26 seven days of the date of this Order why this case should not be remanded. 27 5 It is an open question in the Ninth Circuit as to whether attorneys’ fees incurred after the date of removal are properly included in the amount in controversy. Gonzales v. CarMax 28 Auto Superstores, LLC, 840 F.3d 644 , 649 n. 2 (9th Cir. 2016). Here, Defendants provide insufficient information to calculate the effect of either approach. 1 IT IS FURTHER ORDERED that if Defendants fail to show cause in writing within || seven days of the date of this Order, this case will be remanded without further notice. 3 Dated this 8th day of October, 2019. [4] 5 — ose 7 onorable Susan M, Brnovich 3 United States District Judge [28] -7-