DEFENDANT, SOCIETY INSURANCE'S, BRIEF IN OPPOSITION TO PLAINTIFFS' MOTION TO REMAND

TANYA WALTON PRATT, District Judge.

Defendant, Society Insurance, more properly designated as Society Insurance, a Mutual Company ("Society"), by and through its attorneys, hereby submits this brief in opposition to Plaintiffs, Martinsville Corral, Inc. d/b/a Martinsville Texas Corral, Victor A. Spina, and William Spina's (hereinafter collectively referred to as "MCI"), Motion to Remand.

INTRODUCTION

This case arises out of the exact same underlying facts, claims, and parties as an earlier case filed by MCI, which is pending before this court. MCI pled that the amount in controversy in this case is less than the jurisdictional requirement of $75,000 solely to avoid federal jurisdiction. MCI did so because the claims alleged in this action had already been settled, released and dismissed with prejudice. MCI even sought leave to resurrect the claims alleged in this action, which Judge Larry J. McKinney swiftly denied.

Society properly removed this case to federal court pursuant to 28 U.S.C. § 1332 because there is diversity of citizenship and the amount in controversy exceeds $75,000. As discussed below, if this case is not dismissed (see Dkt. No. 10, Def.'s Mot. to Dismiss, Oct. 12, 2017), it should remain in federal court and be consolidated with the first action.

BACKGROUND

This case ("MCI II"), along with the related prior pending case — Martinsville Corral, Inc. d/b/a Martinsville Texas Corral, et al. v. Society Insurance Case No. 1:16-cv-02487-TWP-MPB ("MCI I") — both arise from a dispute between DirecTV, LLC ("DirecTV") and MCI in which DirecTV claimed that MCI misappropriated satellite television programming. (MCI I Dkt. No. 10, DirecTV First Am. Compl. 138-39.)1 DirecTV filed two separate lawsuits against MCI which were eventually consolidated into one suit ("DirecTV Action"). (MCI I Dkt. No. 10, MCI I Compl 8-9.) MCI tendered the defense of the DirecTV Action to several of its insurers and ultimately initiated separate litigation against several of those insurers, including Society. (Id. at 9.) Society had issued a Businessowners insurance policy to Martinsville Corral, Inc. d/b/a Martinsville Texas Corral for the policy period December 6, 2013 to December 6, 2014 (the "Policy"). (MCI I Dkt. No. 12, Answer ¶ 5.) Society advised MCI that the claims alleged in the DirecTV Action were not covered under the Policy and the parties exchanged correspondence addressing the coverage issues. (See MCI I Dkt. No. 67-1 through 67-7.)

Procedural Posture

On August 11, 2016, MCI filed the MCI I action in Superior Court of Marion County, Indiana alleging six counts against Society: (1) breach of contract; (2) tortious breach of duty to defend; (3) tortious breach of duty to indemnify; (4) breach of fiduciary duty; (5) breach of duty of good faith and fair dealing; and (6) injunctive relief. (MCI I Dkt. No. 10, Compl. 10-13.) MCI generally alleged that Society breached various duties under the Policy by failing to investigate the DirecTV Action claims and not defending MCI in said action. (Id. at 10-11.) MCI further alleged that the breaches were intentional and in bad faith. (Id. at 10-12.)

The MCI I action was removed to federal court pursuant to 28 U.S.C. § 1332 and Society filed an Answer on October 12, 2016. (MCI I Dkt. No. 12, Answer.) The MCI I action was assigned to Judge Larry J. McKinney. (MCI II Dkt. No. 1, Notice of Removal, Sept. 7, 2017.) In its Answer, Society denied that a complete copy of the Policy was attached to the MCI I Complaint and affirmatively alleged that a true and correct copy of the Policy was instead attached to the Answer as Exhibit A. (MCI I Dkt. No. 12, Answer ¶ 5.) The copy of the Policy that Society attached to its Answer included the Employment-Related Practices Endorsement (the "Endorsement"). (MCI I Dkt. No. 12-1, Society Policy.)

On April 11, 2017, Society and MCI entered into a Confidential Settlement Agreement ("Settlement Agreement") in which the parties agreed that Counts II through V of the MCI I Complaint against Society and any claim for bad faith alleged in Count I would be dismissed with prejudice. (MCI I Dkt. No. 30, Order Granting Partial Dismissal.) The only claim that MCI is permitted to pursue against Society is the duty to defend claim in Count I (excluding the bad faith component of that claim). (Id.; see also MCI I Dkt. No. 10, Compl. 10.) The MCI I Court entered an Order to that effect on May 15, 2017. (MCI I Dkt. No. 30, Order Granting Partial Dismissal.) Meanwhile, the DirecTV Action was dismissed on May 9, 2017. (MCI I Dkt. No. 34-1, Proposed First Am. Compl. ¶ 18.)

On May 19, 2017 (four days after the MCI I Court dismissed the above-referenced claims with prejudice), counsel for MCI sent a letter to Society's counsel re-tendering the defense of the DirecTV Action, but this time doing so specifically under the Endorsement. (MCI I Dkt. No. 67-8, Fathallah Ex. H, Overhauser Letter, May 19, 2017.) Counsel claimed he only recently noticed the Endorsement despite having it since at least October 2016 when Society filed its Answer. (Id. at 1-2.) MCI demanded an updated coverage determination from Society. (Id. at 7.) Per MCI's demand, Society provided a response on May 31, 2017. (MCI I Dkt. No. 67-9, Fathallah Aff. Ex. I, Vogt Letter, May 31, 2017.) Society notified MCI that the Endorsement does not provide coverage because, inter alia, the DirecTV Action does not allege employment-related wrongful acts. (Id. at 1.)

On June 6, 2017, MCI filed its Motion for Leave to File First Amended Complaint in the MCI I action. (MCI I Dkt. No. 34, Pls.' Mot. for Leave to File First Am. Compl.) The Proposed First Amended Complaint alleged that Society breached its duty to defend MCI when Society was entrapped into denying coverage under the Endorsement on May 31, 2017. (MCI I Dkt. No. 34-1, Proposed First Am. Compl. ¶¶ 19-24, June 6, 2017.) MCI contended that Society's denial of coverage under the Endorsement gave rise to a new basis to resurrect the claims that had been dismissed days earlier by the Settlement Agreement: (1) Count I — Breach of Contract (the allegations of bad faith); (2) Count II — Tortious Breach of Duties to Investigate and Defend; (3) Count III — Tortious Breach of Duty to Provide a Defense and Pay Defense Costs; (4) Count IV — Breach of Fiduciary Duty; and (5) Count V — Breach of Duty of Good Faith and Fair Dealing. (Id. ¶¶ 30-49.) On July 13, 2017, the MCI I Court denied MCI's Motion for Leave to File First Amended Complaint because it was apparent that MCI had the Endorsement since at least October 2016, but did not pursue a claim under it in a timely manner. (MCI I Dkt. No. 53, Order 2-3, July 13, 2017.)

On July 28, 2017, MCI filed its Motion for Summary Judgment in MCI I arguing that the DirecTV Action triggered coverage under the Policy and specifically asserted coverage arose under the Endorsement. (MCI I Dkt. No. 55, Mot. for Summ. J. and Br. of Pls. 17-31.) On August 31, 2017, Society filed its Cross Motion for Summary Judgment in the MCI I action. (MCI I Dkt. No. 65, Cross Mot. for Summ. J., Aug. 31, 2017.)

Notwithstanding this Court's July 13, 2017 Order denying MCI's Motion for Leave to File First Amended Complaint, on August 11, 2017, MCI commenced the MCI II action against Society in Marion County Superior Court. (MCI II Dkt. No. 1-7, MCI II Compl.) The causes of action set forth in the MCI II lawsuit are substantively identical to the claims MCI sought to allege with their Proposed First Amended Complaint which was disallowed by the MCI I Court. (MCI I Dkt. No. 34-1, Proposed First Am. Compl. ¶¶ 19-24, June 6, 2017; see also MCI II Dkt. No. 1-7, MCI II Compl. ¶¶ 15-37.) The only difference is that MCI now alleges that they "seek to recover less than $75,000 in damages," presumably in order to avoid removal and, consequently, the ramifications of the MCI I Court's previous Order.2 (MCI II Dkt. No. 1-7, MCI II Compl. ¶ 6.) On September 7, 2017, Society filed its Notice of Removal in the MCI II action pursuant to 28 U.S.C. §§ 1332 and 1441. (MCI II Dkt. No. 1, Notice of Removal ¶¶ 10, 11.)

Subsequently, on Sept. 27, 2017, Society filed its Motion to Consolidate the MCI I and MCI II litigation. (See MCI I Dkt. No. 69, Mot. to Consolidate, Sept. 27, 2017; see also MCI II Dkt. No. 8, Notice of Mot. to Consolidate, Sept. 27, 2017.) MCI I was reassigned to this Court's calendar on September 28, 2017. (MCI I Dkt. No. 71, Order Reassigning Case, Sept. 28, 2017.)

Plaintiffs filed their Motion to Remand on October 3, 2017. (MCI II Dkt. No. 9, Oct. 3, 2017.) In lieu of an Answer to the MCI II Complaint, on October 12, 2017, Society filed a Motion to Dismiss this action pursuant to Fed. R. Civ. P. 12(b)(6) because MCI has violated the terms of the Settlement Agreement and because they have engaged in impermissible claim-splitting by filing this duplicative action. (See MCI II Dkt. No. 11-1, Def.'s Mem. of Law in Supp. of Mot. to Dismiss, Oct. 12, 2017) (filed under seal).

STANDARD OF REVIEW

Under 28 U.S.C. § 1332, federal courts have jurisdiction over civil suits between citizens of different states "where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs." LM Ins. Corp. v. Spaulding Enterprises Inc., 533 F.3d 542, 547 (7th Cir. 2008). "The burden of establishing federal jurisdiction falls on the Defendant as the party typically seeking removal." Crabtree ex rel. Crabtree v. Life Care Centers of Am., Inc., No. 1:08-CV-444-SEB-TAB, 2009 WL 734726, at *2 (S.D. Ind. Mar. 18, 2009). "Jurisdictional allegations must be supported by `competent proof,' which means there must be a showing by `a preponderance of the evidence or proof to a reasonable probability that jurisdiction exists.'" Id. "If removal of a civil action is sought on the basis of jurisdiction conferred by section 1332(a), the sum demanded in good faith in the initial pleading shall be deemed to be the amount in controversy," so long as certain exceptions—a demand for nonmonetary relief; a demand for a money judgment that is not a specific sum; or where the Court finds that the amount in controversy exceeds the requirement by a preponderance of the evidence—do not apply. CCT Enterprises, LLC v. DMG Mori USA, Inc., No. 1:15-CV-00394-SLC, 2016 WL 1388074, at *1 (N.D. Ind. Apr. 8, 2016) (quoting 28 U.S.C. § 1446(c)(2)) (emphasis added).

ARGUMENT

This Court has subject-matter jurisdiction because the amount in controversy exceeds $75,000, as evidenced by facts and claims alleged in MCI I and MCI II.

I. This Court Has Subject-Matter Jurisdiction.

This Court has jurisdiction over the MCI II action pursuant to 28 U.S.C. § 1332. And while the amount in controversy is deliberately alleged in the MCI II Complaint as less than $75,000 solely as to avoid federal jurisdiction, MCI's jurisdictional challenges fall under their own weight.

This case arises from the exact same underlying factual circumstances as MCI I. (See MCI I Dkt. No. 10, MCI I Compl. 8-14; MCI II Dkt. No. 1-7, MCI II Compl.) Plaintiffs have asserted the same breach of contract damages in both cases, i.e. attorney's fees arising from the alleged duty to defend MCI in the DirecTV Action and other extra-contractual relief. (Id.) Plaintiffs have indicated that their attorney's fees and costs are currently $349,545.73.3, 4 (Declaration of Nelson A. Nettles Ex. A, Martinsville Corral, Inc. Invoice Spreadsheet, Aug. 24, 2017) (filed under seal). (Id.) Plaintiffs have represented to the MCI I court that their damages are in excess of $75,000. (MCI I Dkt. No. 34-1, Proposed First Am. Compl. ¶ 5, June 6, 2017.) This representation was based on the claims asserted in Plaintiffs' Proposed First Amended Complaint in the MCI I action, which are substantively similar to the claims now asserted in MCI II. In short, Plaintiffs' damages exceed the jurisdictional requirements and no amount procedural gamesmanship changes that fact.

Plaintiffs' ad damnum clause, or more accurately, its lack of an ad damnum clause, is not controlling for the purposes of determining the amount in controversy in this case. First, Plaintiffs' representation that the MCI II Complaint contains an ad damnum clause is not accurate. The MCI II Complaint alleges that "Plaintiffs seek to recover less than $75,000 in damages." (MCI II Dkt. No. 1-7, MCI II Compl. ¶ 6.) This is not an ad damnum clause since it does not state the amount of damages claimed. See Black's Law Dictionary 45 (10th ed. 2014) (defining ad damnum clause as "[a] clause in a prayer for relief stating the amount of damages claimed"); see also Grauvogl v. Roby, No. 2:11-CV-333, 2012 WL 243573, at *3 (N.D. Ind. Jan. 25, 2012) (citing to Tooley v. Washington Grp. Int'l, No. 08-1084, 2009 WL 102926, at *1 (C.D. Ill. Jan. 13, 2009) (discussing that pleading amount in controversy exceeds a jurisdictional threshold is not a specific ad damnum clause). Second, Plaintiffs' claim that the amount in controversy is less than $75,000 is neither accurate nor reliable because Plaintiffs have already alleged that those same damages exceed $75,000.

II. The Amount in Controversy in MCI I is Relevant.

The amount in controversy in MCI I is relevant here because both cases, at some point, alleged the exact same contractual damages, i.e. attorney's fees incurred in defending the DirecTV Action, and extra-contractual damages. Also, both actions involve identical operative facts, the same insurance policy, and identical parties. In MCI I, MCI claims that their damages exceed $75,000; but in MCI II, they claim that their damages are less than $75,000 even though they have pled additional extra-contractual damages above and beyond the contractual damages they plead here and in MCI I. MCI cannot have it both ways. Either their damages arising from the DirecTV Action are more than $75,000 or less than $75,000. If the damages are less than $75,000, then both cases should be remanded to state court and their damages capped at $75,000. If the damages are more than $75,000, then removal is proper. Ultimately, the only reason MCI filed this action was because it was unhappy with an adverse ruling disallowing the extra-contractual claims it reasserts here. Plaintiffs' attempts to avoid federal jurisdiction by engaging in impermissible claim-splitting requires the Court to consider the amount in controversy in MCI I because MCI I and MCI II are in essence one case that MCI has impermissibly split.5

MCI's contention that this action seeks damages less than $75,000 because it represents a more narrow legal theory is incongruous. First, the legal theory MCI advances is irrelevant if they are seeking the exact same damages. Second, MCI is not asserting a narrower legal theory—they are simply alleging that a different provision of the Policy provided coverage. The legal theory is the same—breach of contract. Besides, MCI's assertion that it does not claim coverage under the Endorsement in MCI I is patently false. On July 28, 2017, MCI filed its Motion for Summary Judgment in MCI I arguing that the DirecTV Action triggered coverage under three different sections of the Policy including the Endorsement. (MCI I Dkt. No. 55, Mot. for Summ. J. and Br. of Pls. 17-31.)

Further, MCI's reliance on Glob. Archery Prod., Inc. v. Firgaira is misplaced. In Firgaira, the defendants filed a Rule 12(b)(1) motion asserting that the court lacked subject-matter jurisdiction because the amount in controversy was less than $75,000. Glob. Archery Prod., Inc. v. Firgaira, No. 1:16-CV-19-TLS, 2017 WL 3118758, at *1 (N.D. Ind. July 21, 2017). The issue there was whether the plaintiff could aggregate the amount it sought to recover from two or more potentially liable parties to satisfy the amount in controversy requirement. Id. at *3. The Firgaira court said that the plaintiff could. Id. Firgaira relied on LM Ins. Corp. v. Spaulding Enterprises Inc., which held that in determining whether the amount-in-controversy requirement has been satisfied, a single plaintiff may aggregate the amount sought in two or more claims, within the case, against a single defendant, even if the claims are unrelated. 533 F.3d 542, 548 (7th Cir. 2008). So in Firgaira and LM Ins. Corp., when the courts stated that it is the case, rather than the claim, that matters in determining the amount in controversy, they were referring to the fact that a plaintiff can aggregate amounts specific to each separate claim or defendant, within that particular case, to meet the jurisdictional threshold. MCI has gone too far when they claim that those cases preclude a defendant from relying on identical damages from a prior pending action. The rule at issue in Firgaira and LM Ins. Corp. is not applicable here because Society does not attempt to aggregate; instead, Society argues that since MCI has pled, in part, the same damages in both cases, and alleged in one that the amount is in excess of $75,000 the same must be true for the second case that asserts the same damages plus additionally damages.

Finally, "when attorney fees are sought as part of the underlying claim, they are properly considered part of the amount in controversy." Peczkowski v. Westfield Ins. Co., No. 2:13-CV-16, 2013 WL 1664381, at *3 (N.D. Ind. Apr. 16, 2013). Here, as discussed above, attorney's fees are sought as part of the underlying claim in both MCI I and MCI II under the breach of contract claims. To the extent those fees when added to the other claims exceed $75,000, MCI's arguments fail. Moreover, for the reasons discussed above, Society's removal was neither "objectionably unreasonable" or in bad faith. To the contrary, removal and eventual consolidation with MCI I (or outright dismissal) was necessary to put a stop to MCI's procedural malfeasance.

CONCLUSION

For the foregoing reasons, Society respectfully requests that the Court deny Plaintiffs' Motion to Remand.