Pratt v. Safeco Insurance Company of America

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF OKLAHOMA

R ANDY PRATT and DEBRA PRATT, )

)

Plaintiffs, )

)

v. ) Case No. CIV-20-93-D

)

SAFECO INSURANCE COMPANY OF )

AMERICA, )

Defendant. )

O R D E R

Before the Court is Defendant’s Notice of Removal [Doc. No. 1] and Plaintiffs’

Motion to Remand [Doc. No. 7]. Defendant, Safeco Insurance Company of America

(“Safeco”), has filed a Response [Doc. No. 10] in opposition, to which Plaintiffs Randy

and Debra Pratt have replied [Doc. No. 11]. The matter is at issue.

BACKGROUND

Plaintiffs owned a car which was insured by Defendant. Alleging that the car was

rear-ended through no fault of their own, Plaintiffs made a claim with Defendant for

coverage under the insurance policy. Complaint [Doc. No. 1-2] at 1.1 Following the

accident, Plaintiffs assert that Defendant improperly raised Plaintiffs’ automobile

insurance premium in violation of OKLA. STAT. tit. 36 § 941(A). Id. at 2.

Dissatisfied with the premium increases, Plaintiffs filed an action in Oklahoma

County District Court alleging breach of contract, constructive fraud/negligent

1 The parties refer to Plaintiffs’ original pleading as a “Petition”; in keeping with federal

nomenclature, the Court will hereinafter use “Complaint.”

misrepresentation, and unjust enrichment. Id. at 2–5. Defendant timely removed the action

to federal court pursuant to 28 U.S.C. § 1441, arguing that the Court has diversity

jurisdiction over this case under 28 U.S.C. § 1332. Response at 1.

Plaintiffs argue removal was improper and that remand is required due to this

Court’s lack of subject matter jurisdiction. Motion at 1. Specifically, the parties disagree

whether the requisite amount-in-controversy requirement of more than $75,000 is met

under 28 U.S.C. § 1332.

STANDARD OF DECISION

Federal courts are courts of “limited jurisdiction and, as such, must have a statutory

basis to exercise jurisdiction.” Montoya v. Chao, 296 F.2d 952, 955 (10th Cir. 2002). One

such statutory basis is found in 28 U.S.C § 1332. Subject matter jurisdiction under

§ 1332(a) requires completely diverse parties and an amount in controversy that “exceeds

the sum or value of $75,000, exclusive of interest and costs.” 28 U.S.C. § 1332(a).

The party seeking to remove the case “bears the burden to establish that its removal

of [the] case to federal court was proper.” Hernandez v. Liberty Ins. Corp., 73 F. Supp. 3d

1332, 1336 (W.D. Okla. 2014) (citing Huffman v. Saul Holdings Ltd. P’ship, 194 F.3d

1072, 1079 (10th Cir. 1999)). When original jurisdiction is based on § 1332, “[b]oth the

requisite amount in controversy and the existence of diversity must be affirmatively

established on the face of either the petition or the removal notice.” Singleton v.

Progressive Direct Ins. Co., 49 F. Supp. 3d 988, 991 (N.D. Okla. 2014) (quoting Laughlin

v. Kmart Corp., 50 F.3d 871, 873 (10th Cir. 1995)) (emphasis added).

Typically, in order for a defendant to properly establish the amount in controversy,

the “notice of removal need include only a plausible allegation that the amount in

controversy exceeds the jurisdictional threshold.” Dart Cherokee Basin Operating Co. v.

Owens, 574 U.S. 81, 89 (2014). In the event the Court questions the defendant’s proffered

amount in controversy, however, “[e]vidence establishing the amount is required by

§ 1446(c)(2)(B).” Id.

When determining the amount in controversy in a diversity action, 28 U.S.C.

§ 1446(c)(2) lays out the general rule that “the sum demanded in good faith in the initial

pleading” shall suffice. If, however, the “allegations of the complaint . . . are not

dispositive, the allegations in the petition for removal” may be considered. Lonnquist v.

J.C. Penney Co., 421 F.2d 597, 599 (10th Cir. 1970); see 28 U.S.C. § 1446(c)(2)(a). In the

latter case, the removing party “must affirmatively establish jurisdiction by proving

jurisdictional facts that ma[ke] it possible that $75,000 [is] in play . . . .” McPhail v. Deere

& Co., 529 F.3d 947, 955 (10th Cir. 2008) (emphasis in original).

One avenue for a removing party to affirmatively establish the amount in

controversy is “rel[iance] on an estimate of the potential damages from the allegations in

the complaint.” Id. (citing Meridian Security Ins. Co. v. Sadowski, 441 F.3d 536, 541 (7th

Cir. 2006)); see also Marchese v. Mt. San Rafael Hosp., 24 Fed. App’x. 963, 964 (10th

Cir. 2001). “A complaint that presents a combination of facts and theories of recovery that

may support a claim in excess of $75,000 can support removal.” McPhail, 529 F.3d at 955.

This leads the removing party to perform an “economic analysis” of the alleged damages

supported by underlying facts. Archer v. Kelly, 271 F. Supp. 2d 1320, 1322 (N.D. Okla.

2003).

After proving the underlying jurisdictional facts, the defendant “is entitled to stay

in federal court unless it is ‘legally certain’ that less than $75,000 is at stake. If the amount

is uncertain then there is potential controversy, which is to say that at least $75,000 is in

controversy in the case.” McPhail, 529 F.3d at 954. In a peculiar sense, “the burden shifts

to the party seeking remand,”—here Plaintiffs—“who must then prove to a legal certainty

that the amount in controversy is less than $75,000.” Smith v. Brown, No. CIV-17-631-R,

2017 WL 2964824, at *2 (W.D. Okla. July 12, 2017) (unpublished). “Punitive damages

may be considered in determining the requisite jurisdictional amount.” Woodmen of the

World Life Ins. Soc’y v. Manganaro, 342 F.3d 1213, 1218 (10th Cir. 2003).

DISCUSSION

Plaintiffs seek the remand of this case to the Oklahoma County District Court

because, they argue, the requirements for diversity jurisdiction under 28 U.S.C. § 1332 are

not met due to an insufficient amount in controversy. Motion at 1. Plaintiffs also contend

that because removal was improper, they are entitled to an award of attorney fees under

§ 1447(c) if the case is remanded. Id. Defendant contends that removal was proper in this

case because the requirements of the diversity statute are satisfied—including that the

amount in controversy exceeds $75,000. Response at 1.

On various grounds mentioned in the Complaint, Plaintiffs seek damages “in excess

of $10,000.” Complaint at 3–5. In their reply, however, Plaintiffs assert that the “true

amount in controversy” in this case is the alleged improper increase in insurance premiums

of $120.60, and any assertion by Defendant that the $75,000 threshold is met is based on

“guesswork about what Plaintiffs may receive . . . .” Reply at 2.

Plaintiffs contend that the actual amount in controversy is as little as $120.60. It

appears undisputed, however, that Plaintiffs seek: (1) compensatory and special damages

arising out of a breach of contract in excess of $10,000; (2) financial losses and mental and

emotional distress arising out of Defendant’s alleged fraudulent conduct in excess of

$10,000; (3) disgorgement of the increased premiums; and (4) punitive damages for

Defendant’s alleged intentional conduct. Plaintiffs seek, at least, “in excess of $10,000”

for actual and consequential damages, and a similar amount for punitive damages. See

Complaint at 5. These amounts, however, do not reach the requisite minimum of $75,000

to remain in federal court; the Court must look elsewhere.

In its Response, Defendant relies heavily on Plaintiffs’ request for punitive

damages. Response at 5–7. Because Plaintiffs’ Complaint states only that they seek

“punitive damages in an amount to be determined by the jury in excess of $10,000,”

Complaint at 5, the Court must determine by a preponderance of the evidence whether the

value of punitive damages raises the amount in controversy in this case above the requisite

$75,000. 28 U.S.C. § 1446(c)(2)(B).

In its analysis regarding punitive damages, Defendant focuses on Plaintiffs’

allegations of “intentional” conduct. Response at 6. More specifically, Defendant asserts

that, under Oklahoma law, “[a] claim for punitive damages based on intentional conduct

carries a possible punitive damages award of either $500,000.00 or twice the amount of

actual damages—whichever number is higher.” Id. (citing OKLA. STAT. tit. 23, § 9.1(C))

(emphasis in original). As Plaintiffs correctly point out, however, asserting that the

maximum amount of any punitive damage award may exceed $75,000, without supporting

facts, will not establish jurisdiction. See Herndon v. Am.Comm. Ins. Co., 651 F. Supp. 2d

1266, 1273 (N.D. Okla. 2009); see also Singleton, 49 F. Supp. 3d at 993 (“A [d]efendant

must nevertheless offer more than a ‘conclusory statement’ that punitive damages are

sought under Oklahoma law and that such law authorizes recovery in excess of that

jurisdictional amount.”).

Singleton v. Progressive Direct Insurance, 49 F. Supp. 3d 988, 991 (N.D. Okla.

2014), is instructive, here. Singleton also involved a dispute between an insurance

company and its insured over whether the amount-in-controversy requirement under

§ 1332 was met. Id. at 990–91. The court stated that a conclusory statement that a punitive

damages award could be as high as $100,000 under Oklahoma law was insufficient to

establish the amount in controversy. Id. at 993. Nevertheless, the court held that, because

a punitive damages award of $65,000 or more would “reach the jurisdictional threshold,”

the defendant had “affirmatively established” that the jurisdictional requirement was met.

Id. at 994 (citing State Farm Mut. Auto Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003)).

As noted above, the potential actual and consequential damages—based on the face

of the complaint—mean that “even a limited punitive damages award would push

Plaintiffs’ recovery over the jurisdictional threshold.” Daniels v. Safeco Ins. Co. of Am.,

No. CIV-16-360-C, at *2 (W.D. Okla. June 29, 2016) (Cauthron, J.). Based on the alleged

facts before the Court, it is plausible that the amount recoverable in this case exceeds the

amount-in-controversy requirement. Defendant has met its burden of proving jurisdictional

facts that make it possible that more than $75,000 is at stake, and Plaintiffs have failed to

prove to a legal certainty that such recovery is not possible. See McPhail, 529 F.3d at 954.

Therefore, federal subject matter jurisdiction is proper.

Because Plaintiffs’ Motion to Remand is DENIED, Plaintiffs’ request for attorney

fees under § 1447(c) is also DENIED.

CONCLUSION

As set forth herein, Defendant has met its burden of proving this Court has subject

matter jurisdiction over this case and removal was proper.

IT IS THEREFORE ORDERED that Plaintiffs’ Motion to Remand [Doc. No. 7]

is DENIED.

IT IS SO ORDERED this 15" day of April, 2020.

Wy QO,

TIMOTHY D. DeGIUSTI

Chief United States District Judge