Dobos v. American Strategic Insurance Corporation

1 WO [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] 9 Samuel Dobos, et al., No. CV-20-02094-PHX-JJT 10 Plaintiffs, ORDER 11 v. 12 American Strategic Insurance Corporation, et al., [13] Defendants. [14] 15 At issue is Plaintiffs Samuel and Georgiana Dobos’s Motion to Remand (Doc. 9, 16 Mot.), to which Defendant American Strategic Casualty Company filed a Response 17 (Doc. 12, Resp.) and Plaintiffs filed a Reply (Doc. 13, Reply). For the reasons that follow, 18 the Court grants Plaintiffs’ Motion and remands the case to state court. 19 I. BACKGROUND 20 Plaintiffs entered into an insurance agreement with Defendant in which Defendant 21 agreed to cover damage to Plaintiffs’ dwelling and personal property under the terms of 22 the agreement. After Plaintiffs sustained damage to their home in a storm, Plaintiffs filed 23 a claim with Defendant. Plaintiffs allege that Defendant failed to adequately investigate the 24 claim and fully indemnify Plaintiffs for their loss, and Plaintiffs now raise claims of breach 25 of contract and the covenant of good faith and fair dealing against Defendant, seeking 26 compensatory and punitive damages as well as attorneys’ fees. (Doc. 1-1 at 6-12, Compl.) 27 Plaintiffs originally filed this case in Maricopa County Superior Court, and 28 Defendant timely removed the action under 28 U.S.C. § 1441 , asserting diversity of 1 citizenship as the basis for federal subject matter jurisdiction. (Doc. 1, Notice of Removal 2 ¶ 9.) Plaintiffs now request that the Court remand this case to state court, arguing that 3 Defendant cannot demonstrate the requisite amount in controversy to support this Court’s 4 subject matter jurisdiction. 5 II. LEGAL STANDARD 6 Federal courts may exercise removal jurisdiction over a case only if subject matter 7 jurisdiction exists. 28 U.S.C. § 1441 (a); Valdez v. Allstate Ins. Co., 372 F.3d 1115 , 1116 8 (9th Cir. 2004). Federal courts have diversity jurisdiction over actions between citizens of 9 different states where the amount in controversy exceeds $75,000, exclusive of interest and 10 costs. 28 U.S.C. § 1332 (a). The Supreme Court has concluded that, under § 1446(a), a 11 “notice of removal need include only a plausible allegation that the amount in controversy 12 exceeds the jurisdictional threshold.” Dart Cherokee Basin Operating Co. v. Owens, 135 13 S. Ct. 547 , 554 (2014). “Evidence establishing the amount is required by § 1446(c)(2)(B) 14 only when the plaintiff contests, or the court questions, the defendant’s allegation.” Id. 15 “[D]iversity jurisdiction is determined at the time the action commences, and a federal 16 court is not divested of jurisdiction . . . if the amount in controversy subsequently drops 17 below the minimum jurisdictional level.” Hill v. Blind Indus. & Servs of Md., 179 F.3d 18 754, 757 (9th Cir. 1999). 19 When a defendant’s assertion of the amount in controversy is challenged, then “both 20 sides submit proof and the court decides, by a preponderance of the evidence, whether the 21 amount-in-controversy requirement has been satisfied.” Dart Cherokee Basin, 135 S. Ct. 22 at 554; Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir.1996) (“[T]he 23 defendant must provide evidence establishing that it is ‘more likely than not’ that the 24 amount in controversy exceeds that amount.”). 25 The Ninth Circuit has noted that the Supreme Court did not decide the procedure 26 for each side to submit proof, leaving district courts to set such procedure. See Ibarra v. 27 Manheim Inv., 775 F.3d 1193 , 1199–1200 (9th Cir. 2015) (citing Dart Cherokee Basin, 28 135 S. Ct. at 554). “[E]vidence may be direct or circumstantial,” and “a damages 1 assessment may require a chain of reasoning that includes assumptions.” Id. at 1199. 2 “When this is so, those assumptions cannot be pulled from thin air but need some 3 reasonable ground underlying them.” Id. In making an amount-in-controversy 4 determination, courts may consider, inter alia, evidence of jury awards or judgments in 5 similarly situated cases, settlement letters, affidavits, and declarations. See, e.g., Cohn v. 6 Petsmart, Inc., 281 F.3d 837, 840 (9th Cir. 2002); Ansley v. Metro. Life Ins. Co., 215 F.R.D. 7 575 , 578 & n.4 (D. Ariz. 2003). 8 III. ANALYSIS 9 The Court notes at the outset that Defendant’s Notice of Removal conclusorily 10 alleges that Defendant “has a good faith basis to believe that the damages sought by 11 Plaintiffs exceed $75,000, exclusive of interest and costs.” (Notice of Removal ¶ 8.) In 12 their Motion, Plaintiffs contend that their compensatory damages in this case amount to 13 only $31,735.47, well below the jurisdictional threshold of $75,000. (Mot. at 2.) In 14 response, Defendant argues that the jurisdictional threshold is met by considering the 15 punitive damages Plaintiffs seek, which can be as high as four times the compensatory 16 damages award under Arizona case law. (Resp. at 4.) Defendant also argues that Plaintiffs 17 further seek attorneys’ fees, and that Plaintiffs acknowledged in state court that their 18 damages are at least $50,000 by averring that the case was not subject to compulsory 19 arbitration in state court. (Resp. at 4.) 20 A. Punitive Damages 21 Although punitive damages may be included in determining the amount in 22 controversy, “the mere possibility of a punitive damages award is insufficient to prove that 23 the amount in controversy is met.” Burk v. Med. Savs. Ins. Co., 348 F. Supp. 2d 1063 , 1069 24 (D. Ariz. 2004). Defendant must present evidence that a punitive damages award will more 25 likely than not thrust the total amount in controversy over the jurisdictional threshold of 26 $75,000. This is often done by comparisons to analogous cases that have returned verdicts 27 of over $75,000 with punitive damages. Id. [28] 1 Defendant has failed to point to any fact or analogous case suggesting the amount 2 of a punitive damages award in this case. The only argument Defendant makes pertaining 3 to punitive damages is that a punitive damages award may be as large as four times the 4 compensatory damages award in an insurance bad faith case. (Resp. at 2-3 (citing Nardelli 5 v. Metro. Grp. Prop. & Cas. Ins. Co., 277 P.3d 789 (Ariz. Ct. App. 2012).) “Defendant’s 6 burden cannot be met simply by pointing out that the complaint seeks punitive damages 7 and that any damages awarded under such a claim could total a large sum of money, 8 particularly in light of the high burden that must be met in order for a plaintiff even to be 9 eligible for receipt of discretionary punitive damages.” Burk, 348 F. Supp. 2d at 1069 10 (quoting Conrad Assocs. v. Hartford Accident & Indem. Co., 994 F. Supp. 1196 , 1201 11 (N.D. Cal. 1998)); see also Dukes v. Twin City Fire Ins. Co., No. CV-09-2197-PHX-NVW, [12] 2010 WL 94109 , at *3 (D. Ariz. Jan. 6, 2010) (“Defendant has entirely failed to cite to and 13 compare the facts of Plaintiff’s case to other cases where bad faith or punitive damages 14 have been awarded. Defendant therefore has not produced sufficient evidence, or any 15 evidence, that punitive damages take the amount in controversy beyond $75,000.”). 16 Defendant has thus failed to adequately demonstrate a punitive damages award amount that 17 would push the total damages to a sum greater than $75,000. 18 B. Attorneys’ Fees 19 Attorneys’ fees may be included in computing the amount in controversy where an 20 underlying statute authorizes an award. Galt G/S v. JSS Scandinavia, 142 F.3d 1150 , 1156 21 (9th Cir. 1998). Arizona law authorizes a discretionary award of attorneys’ fees in contract 22 actions and for related bad faith claims. A.R.S. § 12-341.01; Sparks v. Republic Nat’l Life 23 Ins. Co., 647 P.2d 1127, 1142 (Ariz. 1982). 24 Like its approach to punitive damages, Defendant has produced nothing to support 25 its contention that attorneys’ fees will push the amount in controversy over $75,000, 26 including no estimate of the number of hours that may be spent on the case or a typical 27 hourly rate. As with punitive damages, the Court is unacceptably left guessing 28 uncertainties. See Dukes, 2010 WL 94109 , at *3. (“Defendant has presented no evidence 1] of Plaintiff's current or future amount of attorneys’ fees. The extent of Defendant’s || argument is that ‘[a]ttorneys’ fees may well exceed the $75,000 jurisdictional limit.’ Such || aspeculative and unsupported statement does not sufficiently demonstrate a past or future amount of attorneys’ fees in controversy.”). 5 C. State Court Filings 6 Finally, Defendant summarily argues that Plaintiffs’ state court filing is evidence || that Plaintiffs seek more than $75,000. Cases filed in Arizona state court are automatically 8 || submitted to compulsory arbitration if the monetary damages sought are below a particular 9|| jurisdictional threshold set by each county. Ariz. R. Civ. P. 72(b). In Maricopa County, || that threshold is $50,000. Plaintiffs filed a Certificate on Compulsory Arbitration in which 11 || they certified that the case was not subject to compulsory arbitration. Defendant also 12 || mentions Plaintiffs’ certification that the case be placed in Tier 2 of the state court’s tiered 13} system for discovery. Tier 2 certification “is applicable where a plaintiff is claiming more than $50,000 and less than $300,000 in damages.” 15 These two filings do nothing more than show Plaintiffs’ claims are likely worth more than $50,000, which is still short of the jurisdictional threshold. See Welsh v. New 17 || Hampshire Ins. Co., 843 F. Supp. 2d 1006, 1010 (D. Ariz. 2012). The Court acknowledges 18 |) that the $50,000 compulsory arbitration threshold excludes attorneys’ fees. Ariz. R. Civ. P. 72(b)(2). However, as the Court explained above, Defendant presented no facts going to 20 || a determination of an attorneys’ fees award in this case. The Court cannot speculate to fill this gap. 22 IT IS THEREFORE ORDERED granting Plaintiffs’ Motion to Remand (Doc. 9). 23 || The Clerk of Court is directed to remand this matter to Maricopa County Superior Court 24 || without delay. 25 Dated this Ist day of July, 2021. CN 26 “wok: 97 wefehlee— Unifga State#District Judge [28] _5-