ROBERT W. PRATT, District Judge.
On October 12, 2012, Michael Adams and Colleen Adams (the "Adamses") commenced an action against American Family Mutual Insurance Company ("American Family" or "Defendant") in the Iowa District Court for Polk County. Clerk's No. 1-1 at 5-11.
On May 15, 2013, Defendant removed the action to this Court, contending that jurisdiction is proper under the Class Action Fairness Act of 2005 ("CAFA"). Clerk's No. 1 at 1-3. The Adamses, on behalf of themselves and the now-certified class, filed a Motion to Remand the Action to state court on June 7, 2013. Clerk's No. 17. Defendant filed a resistance to the Motion to Remand on June 24, 2013. Clerk's No. 21. Plaintiff filed a Reply on July 12, 2013. Clerk's No. 26. The Court held a hearing on the Motion on August 26, 2013. Clerk's No. 35. The matter is fully submitted.
Plaintiffs claim in their Amended Petition that they had a homeowners' insurance policy on their West Des Moines property with Defendant. Am. Pet. (Clerk's No. 1-3 at 54-83) ¶¶ 16-17. On October 17, 2011, a pipe burst in the Adamses' home, causing significant structural damage. Id. ¶ 18. Defendant made payment for the damages pursuant to the Adamses' insurance policy. Id, ¶ 21. After receiving payment, the Adamses discovered additional damage to their home, but Defendant refused to consider the additional losses. Id ¶¶ 22-23. The Adamses thereafter invoked their right to an appraisal under Iowa law on October 10, 2012, but were informed by Defendant that their policy had only an arbitration clause — not an appraisal clause. Id. ¶¶ 26-27.
The Adamses, on behalf of themselves
Plaintiffs attached several exhibits to the Amended Petition: 1) the affidavit of Paul Norcia (id. Ex. 1), discussing insurance practices regarding appraisals and arbitration; 2) the affidavit of John Trave (id. Ex. 2), an American Family policyholder who received an additional $157,742.91 for losses from American Family after engaging in the appraisal process; 3) the affidavit of Nicole Young (id. Ex. 3), an American Family policyholder who received an additional $29,551.35 for losses from American Family after engaging in the appraisal process; 4) a "Sworn and Binding Stipulation" (id. Ex. 4) wherein Plaintiffs "stipulate that they will not be seeking in this action damages greater than the jurisdictional minimum set forth in [CAFA]"; and 5) the July 10, 2012 letter to American Family from Thomas O'Meara of the Iowa Insurance Division (id Ex. 5). Pursuant to the Federal Rules of Civil Procedure, these exhibits are incorporated into and comprise a part of Plaintiffs' Amended Petition.
Under 28 U.S.C. § 1441(a), a civil action brought in state court may be removed by a defendant to federal court if it could have been brought there originally. 28 U.S.C. § 1441(a); Mot. Control Corp. v. SICK, Inc., 354 F.3d 702, 705 (8th Cir.2003). A case that is not removable when it is initially filed may be removed to federal court at a later date if the case becomes removable. See 28 U.S.C. § 1446(b). Here, Defendant argues that Plaintiffs' Amended Petition is removable because Plaintiffs' addition of class claims subjects the case to CAFA, which permits removal of a class action
"[A] party seeking to remove under CAFA must establish the amount in controversy by a preponderance of the evidence regardless of whether the complaint alleges an amount below the jurisdictional minimum." Bell v. Hershey Co., 557 F.3d 953, 958 (8th Cir.2009). "Under the preponderance standard, `[t]he jurisdictional fact ... is not whether the damages are greater than the requisite amount, but whether a fact finder might legally conclude that they are....'" Id. at 959 (quoting Kopp v. Kopp, 280 F.3d 883, 885 (8th Cir.2002)) (alteration in original). "The inquiry described is fact intensive." Id. Importantly, the removing party's "`burden of describing how the controversy exceeds $5 million' constitutes `a pleading requirement, not a demand for proof. Discovery and trial come later.'" Hartis v. Chi Title Ins. Co., 694 F.3d 935, 944-5 (8th Cir.2012) (quoting Spivey v. Vertrue, Inc., 528 F.3d 982, 986 (7th Cir.2008)). "Once the removing party has established by a preponderance of the evidence that the jurisdictional minimum is satisfied, remand is only appropriate if the plaintiff can establish to a legal certainty that the claim is for less than the requisite amount." Bell, 557 F.3d at 956 (citing
Notably, CAFA was "intended to expand substantially federal court jurisdiction over class actions." See S. Comm. on the Judiciary, Class Action Fairness Act of 2005, S.Rep. No. 109-14, at 41 (Feb. 28, 2005), reprinted in 2005 U.S.C.C.A.N. 3, 41, 2005 WL 627977 (hereinafter "Senate Report"). Accordingly, "[i]ts provisions should be read broadly, with a strong preference that interstate class actions should be heard in a federal court if properly removed by any defendant." Id. Moreover, "if a federal court is uncertain about whether `all matters in controversy' in a purported class action `do not in the aggregate exceed the sum or value of $5,000,000,' the court should err in favor of exercising jurisdiction over the case."
A. Has Defendant Proven by a Preponderance of the Evidence that the Amount in Controversy Exceeds $5 Million?
Defendant recounts in its Notice of Removal four separate ways in which the $5,000,000 jurisdictional requisite is satisfied. See Notice of Removal (Clerk's No. 1) at 4-9. Plaintiffs counter in their Motion to Remand that the jurisdictional minimum cannot be satisfied in this action because Plaintiffs seek only declarative and injunctive relief, and because they filed a Post-Class Certification Sworn and Binding Stipulation that "damages will not be sought in this action greater than the jurisdictional minimum set forth in [CAFA]." See Clerk's No. 1-3 at 34. Thus, the sole matters for resolution at this time are whether the action was properly removed to this Court pursuant to CAFA, and if so, whether Plaintiffs have proven to a legal certainty that the value of their claims falls below the jurisdictional threshold.
It has been long settled that "[i]n actions seeking declaratory or injunctive relief ... the amount in controversy is measured by the value of the object of the litigation." Hunt v. Wash. State Apple Adver. Comm'n, 432 U.S. 333, 347, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977); James Neff Kramper Family Farm P'ship v. IBP, Inc., 393 F.3d 828, 833 (2005). Based on the Amended Petition, Plaintiffs' stated objective is that the Court enter a "declaratory judgment to the effect that Defendant has acted wrongfully and in violation of Iowa law by inserting the illegal binding arbitration clause into its [policies], thus depriving Iowa Policyholders of their right to appraisal" and enter a "mandatory injunction requiring that Defendant advise all Class members that they had a right to appraisal of their losses, under Iowa law, when they submitted claims under their homeowners or farm/ranch insurance policies." Am. Pet. ¶¶ 45, 56. In the Sworn and Binding Stipulation appended to the Amended Petition, Plaintiffs further articulate that they are requesting that the Court issue an "Order directing that the Defendant participate in the appraisal process to resolve the dispute between the Plaintiff class and the Defendant relating to the Plaintiff Class' claims under their homeowners insurance policies or farm and ranch insurance policies issued by Defendant." Id. Ex. 4 ¶ 2(b). The Court accordingly turns to an analysis of what value is appropriately assigned to these
Defendant first argues that the amount in controversy requirement is satisfied because "Plaintiffs have explicitly requested an Order requiring American Family to 'participate in the statutory appraisal process' for each Class Member, and for each claim made during the class period, for the purpose of `resolv[ing] the dispute(s) with all of them.'"
Id. at 5-6. Defendant next contends that if each claim falling within the class period were submitted to appraisal and yielded a 38.99% increase in payments, this would result in well over $90 million in additional payments. Id. at 6. Even more conservatively, if each claim yielded a 2.2% increase in payments after appraisal, this would result in well over $5 million in additional payments. Id. Defendant claims that the amount in controversy would, therefore, be satisfied "if each Class Member received just under an additional $120.00 related to each claim through the appraisal process. Thus, the primary object of the litigation — the additional benefits Plaintiffs and the Class Members seek through the requested injunctive relief — easily and far exceeds $5,000,000." Id.
Defendant next argues that the jurisdictional threshold can be satisfied even without reference to any benefits class members might receive through the appraisal process. Notice of Removal at 6. "It can be and is met simply by taking into account
Defendant's third argument is that Plaintiffs' bad faith tort claim requires proof of damages as an essential element. Notice of Removal at 8. "As Plaintiffs' stipulation eschewing any damages cannot operate to bind absent Class Members, Plaintiffs theoretically may be entitled to damages in the amount [of any increased award determined to be payable through the appraisal process]." Id. (internal citations omitted). Although Defendant does not further expound on this allegation in its Resistance Brief, Plaintiffs' counsel stated at hearing that, should the Court make a finding that Defendant acted in bad faith by improperly removing the appraisal provision from the relevant insurance policies, "the bad faith — extra contractual damages would also be determined in the appraisal process if they're in the case." Hr'g Tr. (Clerk's No. 36) at 23.
Defendant's final argument that the amount in controversy is satisfied rests on the assertion that "it can easily be foreseen that Plaintiffs will seek attorneys' fees in excess of the $5,000,000 jurisdictional threshold under CAFA." Notice of Removal at 8. According to Defendant, if Plaintiffs are successful in this action, "their attorneys' fees request will likely exceed $5,000,000 quite apart from any other relief awarded by this Court." Id. Defendant further claims that, even assuming that Plaintiffs' counsel are bound by their Stipulation that "the [attorney fee and litigation cost] award that is sought will not exceed $4.5 million under any circumstances" (Am. Pet. Ex. 4), "Plaintiffs effectively acknowledge that the amount of attorneys' fees sought will likely be as high as $4,500,000, which would therefore easily satisfy the amount in controversy when combined with the value of the injunctive relief Plaintiffs seek on behalf of the Class Members or other amounts described herein."
Plaintiffs counter that, because they only seek declaratory and injunctive relief, and because they have expressly disclaimed traditional monetary damages as part of the present lawsuit, Defendant's asserted amount in controversy calculation
Plaintiffs further emphasize that their view on calculating the amount in controversy is "far more sensible as it requires no speculation." Pl.'s Br. at 15. Indeed, at hearing, Plaintiffs' counsel summarized their argument as follows:
Hr'g Tr. at 24-25.
Plaintiffs' attempt to limit the value of their requested injunctive and declaratory relief to results directly produced by a judgment in this case conflicts with the intent of CAFA, as articulated in the Report of the Senate Committee on the Judiciary on CAFA, which provides:
Senate Report at 41. In this case, the Court must agree with Defendant that Plaintiffs are attempting to "create an artificial distinction between the relief they seek ... and the value of that relief." Def.'s Br. at 3.
Plaintiffs emphasize that the "object of this litigation is nothing more or less than an opportunity for class members to participate in the appraisal process if they individually elect to do so." Pl.'s Br. at 13; see also id. at 10 ("Thus, if the Plaintiffs are 100% successful in obtaining relief for the class, the class will receive not one penny, but will gain an opportunity to use the appraisal remedy to have American Family's assessment of their loss reevaluated."). This attempt to circumscribe the "object" of the litigation to exclude the practical and monetary effects of the relief sought, however, strains credulity. Indeed, substantial pecuniary costs to Defendant are virtually certain to "logically flow" from requiring it to provide the opportunity to participate in the appraisal process to 34,415 class members with 42,355 separate claims.
The Court can find no case law directly on point, but several cases are at least somewhat instructive and support the Court's conclusion that costs incurred by a defendant in complying with an injunction or declaratory judgment, including the "gap" between the parties' calculations of benefits owed, constitute appropriate considerations in determining the amount in controversy. For instance, in Bemert v. State Farm Fire and Casualty Co., an insured filed suit against her insurer "seeking to invoke an appraisal provision in a homeowner's insurance policy..... Through this appraisal procedure, Plaintiff sought to resolve a dispute with Defendant concerning the appropriate amount of insurance benefits owed to her as a result of water damage sustained to her home." No. 10-12359, 2012 WL 1060089, at *1 (E.D.Mich. Mar. 29, 2012). The insurer removed the action to federal court claiming that the jurisdictional amount in controversy was satisfied by using the first methodology proposed by Defendant — the gap in the benefits claimed to be owed by the parties. Id. (noting that the amount in controversy was satisfied "by virtue of a difference of over $90,000 in the parties' estimates of the cost to repair the damage to Plaintiffs residence"). Id. Although the propriety of the removal was never directly addressed in the case, the court appears to have accepted, without comment, the insurer's method for determining the amount in controversy.
Likewise, in Rasberry v. Capitol County Mutual Fire Insurance Co., a class of Texas Homeowners sued their insurer claiming that it had systematically and pervasively mishandled their Hurricane Rita damage claims. 609 F.Supp.2d 594, 598 (E.D.Tex.2009). As in the present case, the class sought only injunctive and declaratory relief suspending the statute of limitations and preventing the insurer from asserting the statute of limitations as a defense until each claim was evaluated by a licensed adjuster. Id. at 598-99. The class challenged the insurer's removal of the action to federal court under CAFA, claiming that since their class action petition made no claim for monetary recovery, the insurer could not satisfy the amount in controversy requirement. Id. at 600. Noting that CAFA was intended to be "interpreted expansively, and its provisions read broadly, with a strong preference for federal jurisdiction," the Rasberry court found that removal was proper. Id. at 601 (citing Senate Rep. at 42-43). In particular, the court found that "one realistic measure of the value of all relief and benefits that could logically flow from the granting of the declaratory relief sought by claimants is the remaining limits" on the insurance policies, i.e., since the plaintiff class claimed that the defendant mishandled all claims generated by the hurricane, the proper amount in controversy was the "value of the underlying claim," measured by the difference between the amount actually paid and the maximum policy limit. Id. at 601-02.
In Toller v. Sagamore Insurance Co., an insured brought a class action suit against an insurer claiming that the insurer failed to inform purchasers of the availability of uninsured motorist coverage, underinsured motorist coverage, medical benefits, and income disability benefits or accidental death benefits, and also failed to provide them the opportunity to reject such coverage, both as required by Arkansas law.
After consideration of all case law cited by the parties, the hearing transcript, and the entire record before it, the Court must conclude that Defendant has demonstrated by a preponderance of the evidence that the amount in controversy in this action exceeds $5 million, exclusive of interest and costs. Specifically, the Court finds that if Plaintiffs are awarded the declaratory and injunctive relief they seek, Defendant is likely to face pecuniary costs that logically flow from such relief in amounts exceeding $5 million. Such amounts include, at a minimum,
Since Defendant has adequately demonstrated that the jurisdictional minimum is satisfied in this case, the burden now shifts to Plaintiffs to "establish to a legal certainty that th[eir claims are] for less than the requisite amount." Bell, 557 F.3d at 956. To this end, Plaintiffs contend that the Post-Class Certification Sworn and Binding Stipulation is dispositive of the amount in controversy. Pl.'s Br. at 7 (citing Rolwing v. Nestle Holdings, Inc., 666 F.3d 1069, 1072 (8th Cir. 2012)); see also Pl.'s Reply Br. at 6.
In Rolwing, the plaintiff attempted to avoid removal under CAFA by including in his complaint a statement that "Plaintiff and the class do not seek — and will not accept — any recovery of damages ... and any other relief, in total, in excess of $4,999,999." 666 F.3d at 1071. The Eighth Circuit found the plaintiffs disclaimer effective, concluding that "a binding stipulation limiting damages ... can be used to defeat CAFA jurisdiction.... Stipulations of this sort, when filed contemporaneously with a plaintiff's complaint and not after removal, have long been recognized as a method of defeating federal jurisdiction in the non-CAFA context." Id. at 1072.
Rolwing was abrogated by Standard Fire Ins. Co. v. Knowles, ___ U.S. ___, 133 S.Ct. 1345, 185 L.Ed.2d 439 (2013). In Standard, as in Rolwing, the plaintiff included with his complaint a stipulation that he would "not at any time during this case... seek damages for the class ... in excess of $5,000,000 in the aggregate." Id. at 1347. The Supreme Court rejected the plaintiffs attempt to avoid CAFA jurisdiction, finding that a pre-class certification stipulation only tied the hands of the named plaintiff and does not speak for those the named plaintiff purports to represent "because a plaintiff who files a proposed class action cannot legally bind
Plaintiff urges that the present case is distinguishable from Knowles because here, Plaintiffs filed a binding stipulation disclaiming damages in excess of $5 million after the class had already been certified. See Pl.'s Br. at 7 (noting that because the stipulation was filed after certification, "the plaintiffs were the representatives of the declaratory and injunctive relief class and had authority to bind the class"). Although the Court acknowledges that this case differs from Knowles, it nonetheless must conclude that Plaintiffs' Post-Class Certification Sworn and Binding Stipulation does not demonstrate to a legal certainty that the amount in controversy is below CAFA's jurisdictional minimum. First, for reasons explained supra, the Court has already rejected Plaintiffs' assertion that costs of appraisal and benefits awarded in the appraisal process are not properly considerable in the Court's amount in controversy analysis. Since Plaintiffs' Post-Class Certification Sworn and Binding Stipulation neither contradicts the likely expenses Defendant will incur by virtue of the appraisal process nor disclaims an entitlement to benefits during the appraisal process, it is ineffective to limit the overall amount in controversy in this case.
For the reasons stated herein, the Court finds that this action was properly removed to federal court pursuant to CAFA. Accordingly, Plaintiffs' Motion to Remand (Clerk's No. 17) is DENIED.
IT IS SO ORDERED.
On May 1, 2013, after Judge Wilson granted Plaintiffs' request to amend the petition, see Clerk's No. 1-3 at 23, Plaintiff filed a "Post-Class Certification Sworn and Binding Stipulation." Id. at 34-35. This document is similar to the "Sworn and Binding Stipulation" in that it "stipulate[s] that damages will not be sought in this action greater than the jurisdictional minimum set forth in [CAFA]." Id. at 34. It contains two other significant changes, however: 1) Plaintiffs state that they are requesting a court order directing Defendant to "offer to each member of the Class an opportunity to participate in an appraisal process" to either "have an unsettled claim resolved" or "[f]or the purpose of reevaluating a settled claim in the event any Class member is dissatisfied with the payment made by American Family after the Class member's claim was presented"; and 2) Plaintiffs state that they "stipulate that the total amount of damages that will be sought individually by the Plaintiffs in this case, including attorney's fees and litigation costs, will not exceed $4.9 million under any circumstances." Id. at 34-35.
The Court sees no indication in the state court record that Plaintiffs requested leave to substitute the "Sworn and Binding Stipulation" exhibit to the Amended Petition with the "Post-Class Certification Sworn and Binding Stipulation." Thus, it would appear that pursuant to Federal Rule of Civil Procedure 10(c), the operative document to be considered as part of the Amended Petition is the first-filed "Sworn and Binding Stipulation." Where necessary throughout this Order, however, the Court will address any significant distinctions between the two documents in footnotes.
The Court finds Ramirez unconvincing. First, as articulated infra, Ramirez is wholly inconsistent with CAFA's intent that an amount in controversy calculation include the value of all benefits that "logically flow" from a grant of declaratory or injunctive relief. See Senate Rep. at 41. Second, Ramirez's conclusion that the costs of complying with an injunction are "incidental" and, therefore, not to be considered in an amount in controversy analysis conflicts with compelling case law from other courts that have considered the issue. See, e.g., Republic Bank & Trust Co. v. Kucan, 245 Fed.Appx. 308, 314 (4th Cir. 2007) ("[T]he cost ... of complying with the injunction would be an appropriate consideration when determining whether the amount-in-controversy requirement has been met."); Rubel v. Pfizer Inc., 361 F.3d 1016, 1017 (7th Cir.2004) ("[T]he cost to the defendant of complying with an injunction counts toward the jurisdictional minimum."); Lovell v. State Farm Mut. Auto. Ins. Co., 466 F.3d 893, 898 (10th Cir.2006) ("[A] court may look to the compliance costs of a defendant in multiple plaintiff cases to determine the amount in controversy."); In re Corestates Trust Fee Litig., 39 F.3d 61, 65 (3d Cir.1994) (finding that courts should determine the amount in controversy in claims for injunctive relief by calculating "the value of the right sought to be protected by the equitable relief"). Third, Ramirez, along with the other CAFA cases cited by Plaintiff on this issue, was premised on a legal standard that has been expressly rejected by the Eighth Circuit, that is, the Ninth Circuit's requirement in Lowdermilk v. U.S. Bank National Association, 479 F.3d 994, 1000 (9th Cir.2007), that when a plaintiff disavows damages above the jurisdictional threshold, the burden is on the removing party to prove to a legal certainty that the amount in controversy is satisfied. See Bell, 557 F.3d at 957 (rejecting Lowdermilk as a "departure] from our non CAFA precedent where we have only required a removing party to establish jurisdictional facts by a preponderance of the evidence").
Although the Eighth Circuit has not addressed the continuing viability of the "plaintiff's viewpoint" principle under CAFA, at least one district court in this circuit has determined that the rule is no longer tenable under CAFA. See Toller v. Sagamore Ins. Co., 558 F.Supp.2d 924, 930-31 (E.D.Ark.2008) ("Traditionally, the Eighth Circuit has held that a district court must rely solely on the plaintiff's viewpoint in determining the amount in controversy. Courts refused to consider the cost of injunctive relief to the defendant because that would effectively aggregate the plaintiffs' claims to satisfy the amount in controversy, which plaintiffs were not allowed to do. However, after those cases were decided, Congress adopted [CAFA], which requires that the claims of Class action plaintiffs be aggregated in determining whether jurisdictional minimum of $5,000,000 is met. The adoption of this provision requiring aggregation of the plaintiffs' claims is inconsistent with the old rule that required that the amount in controversy be viewed solely from the plaintiffs viewpoint. In determining the amount in controversy under [CAFA], the value of injunctive relief should probably be considered from either the plaintiffs' or the defendant's point of view." (quotations and citations omitted)).
