Opinion
Civil Action No. 3:02-CV-1607-L
March 31, 2003
MEMORANDUM OPINION AND ORDER
Before the court is Plaintiff's Motion to Remand, filed August 28, 2002. After careful consideration of the motion, response, reply and applicable authority, the court, for the reasons stated herein, grants Plaintiff's Motion to Remand.
I. Procedural and Factual Background
Plaintiff Mark Adams ("Plaintiff" or "Adams") originally filed this action on September 5, 2001, against Nationwide Mutual Insurance Company ("Defendant" or "Nationwide") in the 14th Judicial District Court of Dallas County, Texas. Nationwide removed this action to federal court on July 29, 2002.
Nationwide is an insurance company authorized to do business in the state of Texas, and routinely underwrites automobile insurance policies in the state of Texas. These automobile insurance policies state that, in the event of an accident, Nationwide must return the policyholder's automobile to its pre-accident condition through repairs in those cases where the automobile is not deemed a total loss by Nationwide.
Plaintiff Adams is a Nationwide automobile policyholder. After an accident, in which his vehicle sustained frame damage, Adams presented his vehicle to Nationwide's adjuster for inspection in accordance with the terms of his insurance policy contract with Nationwide (the "Policy"). Adams alleges that, upon presentment, Nationwide had the contractual duty under the Policy to write an estimate prescribing all repairs and procedures necessary to restore the vehicle to its pre-loss condition with regard to safety, function, and appearance.
At the inspection, Nationwide's adjuster identified the vehicle's frame damage and prescribed a certain amount of time to repair the frame. According to Adams, the estimate failed, however, to provide any time to "measure and identify" any remaining structural damage to the frame after the prescribed repairs were complete. Adams contends that this "measure and identify" procedure, which costs about $75 to perform, is necessary to ensure that a damaged frame has been returned to its pre-loss condition with regard to safety, function, and appearance. Adams further contends that Nationwide's failure to prescribe — and, thus, agree to pay for — this procedure was a breach of its obligations and duties under the Policy.
Nationwide sold automobile insurance policies to other Texas consumers ("Class Members") containing identical contractual obligations as those contained in the Policy. Adams contends that Nationwide, as it did in Adams's case, has systematically failed to to prescribe the "identify and measure" procedure for the vehicles of the Class Members when they have sustained frame damage and have required frame repair.
Adams contends that Nationwide's conduct regarding him was fraudulent and deceitful; constituted unfair settlement practices under the Tex. Ins. Code Ann. art. 21.22, §§ 4, 16; violated the Deceptive Trade Practices Act ("DTPA"), Tex. Bus. Com. Code Ann. § 17.46(b)(12), (13); breached its duty of good faith and fair dealing; and constituted a failure to promptly pay a claim in violation of Tex. Ins. Code Ann. art. 21.55. He also seeks attorney's fees and a declaration regarding Nationwide's practices. On his behalf and that of the Class Members, Adams contends that Nationwide breached its contract with them and failed to make prompt payment of claims filed, which violated the previously stated provision of the Texas Insurance Code. He seeks damages on his behalf and that of the Class Members, a declaration regarding Nationwide's practices, and attorney's fees.
Nationwide states in its defense to these claims that the phrase "measure and identify procedure" does not have to appear on an invoice or estimate in order for Nationwide to have paid for appropriate diagnostic procedures when repairing Plaintiff's and the putative Class Members' automobiles. The absence of this phrase, according to Nationwide, does not mean that the Plaintiff's and the putative Class Members' automobiles were not returned to their pre-accident condition in accordance with the requirements of the automobile insurance policies at issue. For this reason, Nationwide contends that Plaintiff's and the putative Class Members' automobiles were properly repaired and returned to their pre-accident condition. Nationwide further contends that it has at all times been in full compliance with its contractual and statutory obligations to Plaintiff and the putative class.
II. Plaintiff's Motion to Remand
A. The Applicable Standard
The burden of establishing federal subject matter jurisdiction rests with the party seeking to invoke it. St. Paul Reinsurance Co. v. Greenberg, 134 F.3d 1250, 1253 (5th Cir. 1998); De Aguilar v. Boeing Co., 47 F.3d 1404, 1408 (5th Cir.), cert. denied, 516 U.S. 865 (1995). For diversity purposes, the amount in controversy is determined by the amount sought on the face of the plaintiffs pleadings, so long as the plaintiffs claim is made in good faith. Id. at 1253; De Aguilar, 47 F.3d at 1408. In a removal case, when the complaint does not state a specific amount of damages, the defendant must establish by a preponderance of the evidence that "the amount in controversy exceeds the [$75,000] jurisdictional amount." St. Paul, 134 F.3d at 1253. "The preponderance burden forces the defendant to do more than point to a state law that might allow the plaintiff to recover more than what is pled. The defendant must produce evidence that establishes that the actual amount in controversy exceeds [$75,000]." De Aguilar, 47 F.3d at 1412 (emphasis in original). The test to be used by the district court is "whether it is more likely than not that the amount of the claim will exceed [the jurisdictional amount]." Allen v. RH Oil Gas Co., 63 F.3d 1326, 1336 (5th Cir. 1995). As the Fifth Circuit has stated, "[t]he district court must first examine the complaint to determine whether it is "facially apparent' that the claims exceed the jurisdictional amount. If it is not thus apparent, the court may rely on "summary judgment-type' evidence to ascertain the amount in controversy." St. Paul, 134 F.3d at 1253 (footnotes omitted). If a defendant fails to establish the requisite jurisdictional amount, the court must remand the case to state court.
Plaintiff Adams contends that this court does not have subject matter jurisdiction over this action because the amount in controversy does not exceed $75,000, and moves the court to remand it to the 14th Judicial District Court of Dallas County. Defendant Nationwide contends removal is proper under 28 U.S.C. § 1441(a) because there is complete diversity of citizenship between the parties and the amount in controversy exceeds $75,000.
B. Analysis
1. Value of the Object of Litigation
Nationwide contends that Plaintiff's Motion to Remand should be denied because the value of the object of litigation exceeds $75,000. In actions for declaratory or injunctive relief, "the amount in controversy is measured by the object of litigation." Hunt v. Washington State Apple Advertising Comm'n, 432 U.S. 333, 347 (1977); see also St. Paul Reinsurance, 134 F.3d at 1252-53 (quoting Leininger v. Leininger, 705 F.2d 727, 729 (5th Cir. 1983)) ("The amount in controversy, in an action for declaratory injunctive relief, is the value of the right to be protected or the extent of the injury to be prevented.").
The Fifth Circuit for the most part adheres to a plaintiff-perspective or viewpoint rule. Id. at 1253; Alfonso v. Hillsborough County Aviation Auth., 308 F.2d 724, 727 (5th Cir. 1962) ("[t]he value to the plaintiff of the right to be enforced or protected determines the amount in controversy."). When applying the plaintiff-perspective rule, the court, in determining whether the jurisdictional amount has been satisfied, does not consider the costs a defendant incurs in complying with declaratory or injunctive relief granted.
In this particular instance, Nationwide produced affidavit testimony from Robert J. Derrick that its cost of complying with the declaratory relief sought by Adams would be $425,000 for the claims brought in 2001 alone, and urges the court to consider this cost in determining whether the amount in controversy meets the jurisdictional requirement.
Nationwide cites Leininger and Webb v. Investacorp, Inc., 89 F.3d 252 (5th Cir. 1996) for the proposition that the Fifth Circuit has relaxed the plaintiff-perspective rule and considered the costs to a defendant in complying with declaratory or injunctive relief to determine whether the jurisdictional threshold has been met. Nationwide's reliance on these two cases is misplaced, and the court disagrees that the Fifth Circuit has relaxed or abandoned the plaintiff-viewpoint rule. In Leininger, a man filed a lawsuit in state court to enjoin his ex-wife from enforcing an alimony judgment against him from another forum. The defendant ex-wife removed to federal court, and the Fifth Circuit looked to the amount of the underlying judgment to determine the amount in controversy. Leininger, 705 F.2d at 728-29. Likewise, in Webb, the Fifth Circuit looked to the amount claimed in the underlying arbitration matter to determine the amount in controversy. Webb, 89 F.3d at 257 n. 1. In essence, the court concluded that since the value to plaintiff and defendant was identical, determination of the amount in controversy did not contravene the plaintiff-perspective rule. Id.
The court does not view the decisions in Leininger and Webb as a relaxation of the plaintiff-viewpoint rule. At most, these cases represent exceptions applied to the specific facts of the case. The court is aware of no Supreme Court authority or en banc decision of this circuit which has abrogated or overruled the plaintiff-perspective rule, and no such authority has been provided by the parties to the court. The court therefore declines to accept the cost-of-compliance approach that Nationwide urges it to use, and follows the plaintiff-viewpoint rule in deciding the amount in controversy.
2. Amount in Controversy
The amount in controversy in this case cannot be determined by looking solely at the complaint. As the amount of damages sought by Adams cannot be thus determined, the court examines the pleading and the evidence submitted by Nationwide regarding the amount in controversy. The court determines, from Plaintiff's perspective, that Nationwide fails to establish that the amount in controversy meets the jurisdictional threshold.
The court uses the word complaint for consistency and ease of reference. The actual document to which it refers is Plaintiff's First Amended Petition.
Adams states in his state court petition that his individual claims are approximately $11,465.45, plus $75 for his "identify and measure" claim. He contends that even if this amount is trebled because of his claim under the DTPA (rounded to slightly over $36,000), and a pro rata share of attorney's fees is awarded to him, his damages do not exceed $75,000.
In the breakdown of his damages, Plaintiff lists a total of $11,465.45. Although he includes loss of use as a part of his damages, he does not provide a dollar amount for this entry. In doing the math, the court determines the sum to be $9,904.97, rather than $11,465.45 as stated in Plaintiff's First Amended Petition, leaving a discrepancy of $1,560.48. The court assumes that this was an oversight by Plaintiff and that he intended this amount to be included for loss of use of his vehicle.
Nationwide, of course, takes a different approach to attempt to show that the jurisdictional amount is satisfied. First, Nationwide trebles the actual damages because of Plaintiff's claim under the DTPA and avers that his damages, at a minimum, are $34,393. Second, Nationwide states that the attorney's fees Plaintiff seeks on his own behalf could exceed $75,000. Nationwide bases this on an hourly rate of $250 and states that "[i]t would take only approximately 165 hours of attorney's time for the jurisdictional amount to be exceeded." This is based on the $34,393 figure and $41,250 in attorney's fees (165 hours x $250 per hour), which comes to a total of $75,643. Third, Nationwide asserts that the jurisdictional amount is likely to be exceeded because Plaintiff also seeks common law punitive damages, and such damages usually exceed an award of punitive damages permitted by statute. According to Nationwide, the rule of thumb in this circuit is a ratio of 3 to 1 between punitive and actual damages. Under this approach, Nationwide contends that Adams's specified damages are $45,857, rather than $34,393. Finally, Nationwide contends that the damages Plaintiff seeks for the alleged violation of Tex. Ins. Code Ann. art 21.55 must be factored into the equation to determine whether the jurisdictional amount has been met. This provision of the Code allows damages in the amount of the claim, plus 18 percent interest per annum. Nationwide conservatively estimates this amount to be $3,687.66 (rounded to $3,700).
The court is not persuaded by Nationwide's arguments. The pleadings and the evidence establish that Plaintiff's individual claims total slightly less than $40,000. This is based on trebling Plaintiff's damages under the DTPA statute ($36,000) and adding $3,700. The court declines to accept Nationwide's suggestion that a 3 to 1 ratio for punitive damages should be used, because it is simply too speculative and not supported by any competent summary-judgment type evidence. Likewise, Nationwide's "evidence" regarding Plaintiff's attorney's fees is speculative and conjectural. No competent evidence has been provided to establish what the amount of fees will be. Nationwide only provides arguments and speculation about what the amount of attorney's fees will be, and does not provide by affidavit or declaration the basis for the hourly rate for Plaintiff's attorneys or the basis for the number of hours that his attorneys will reasonably expend.
In this kind of case, Nationwide as the removing party seeking to invoke federal jurisdiction must show by a preponderance of the evidence that more likely than not the amount of Plaintiff's claim will exceed $75,000. This it has not done. Accordingly, the court does not have subject matter jurisdiction.
3. Aggregation of Punitive Damages Awards
Nationwide contends that the claims of the Class Members regarding punitive damages may be aggregated for purposes of meeting the jurisdictional amount. In support of its position, Nationwide cites Allen v. RH Oil Gas Co., 63 F.3d 1326 (5th Cir. 1995). Nationwide's argument has several fatal flaws. First, Allen is not precedent for this theory. See HD Tire Automotive-Hardware Inc. v. Pitney Bowes Inc., 227 F.3d 326, 329-30 (5th Cir. 2000), reh'g denied, 250 F.3d 302 (5th Cir.), cert. denied, 534 U.S. 894 (2001) (Fifth Circuit refused to follow Allen because it conflicted with an earlier circuit decision regarding aggregation.). Second, "[d]amages of individual class members cannot be aggregated across a class. That is the law of the Fifth Circuit even as regards punitive damages." HD Tire, 250 F.3d at 305. Third, aggregation of punitive damages is irrelevant and quite beside the point because the Class Members assert no claim for punitive damages. For all of these reasons, Nationwide's theory of aggregation fails.
Although Nationwide appears to makes its aggregation argument only with respect to punitive damages, it is unequivocally clear that actual damages cannot be aggregated with respect to the separate and distinct claims, as here, of the Class Members.
III. Attorney's Fees and Costs
Adams has made a request for attorney's fees and costs. Section 1447(c) provides that "[a]n order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." 28 U.S.C. § 1447(c). The Fifth Circuit has held that there is no "automatic entitlement to an award of attorney's fees." Valdes v. Wal-Mart Stores, Inc., 199 F.3d 290, 292 (5th Cir. 2000). In applying § 1447(c), the court must consider "whether the defendant had objectively reasonable grounds to believe the removal was legally proper." Id. at 293.
One could certainly argue that the action should have never been removed, and that this should have been readily ascertainable to Nationwide. On the other hand, as set forth herein, there is some authority which is either at odds with or an exception to the standard for determining whether the jurisdictional amount has been satisfied with respect to action seeking declaratory or injunctive relief. This authority could have served as a basis for Nationwide believing that this action was removable. Under the circumstances, the court cannot say that Nationwide did not have objectively reasonable grounds to believe that removal of this action was legally proper. Plaintiffs request for attorney's fees therefore is denied. The court, however, grants Herndon's request for reasonable costs. Accordingly, Nationwide shall pay to Plaintiff Herndon all reasonable costs incurred by him as a result of this action being removed to federal court.
IV. Conclusion
For the reasons stated herein, Nationwide has failed to establish that more likely than not the amount in controversy exceeds $75,000. The court therefore lacks subject matter jurisdiction over this action, and grants Plaintiff's Motion to Remand. Plaintiffs request for attorney's fees is denied; however, he shall recover from Nationwide all reasonable costs incurred by him as a result of the removal to federal court. This action is hereby remanded to the 14th Judicial District Court of Dallas County, Texas pursuant to 28 U.S.C. § 1447(c), because the court lacks subject matter jurisdiction. The clerk of the court shall effect this remand in accordance with the usual procedure.