Opinion
1:02-CV-1861-LJM
March 11, 2003
ORDER ON PLAINTIFF'S MOTION TO REMAND
This cause is now before the Court on a motion to remand filed by the plaintiff, Michael Flannery ("Flannery"). Flannery filed this action in Marion County Court on October 29, 2002. In his complaint Flannery alleged that the defendant, Continental Casualty Company ("Continental Casualty"), wrongfully terminated his disability benefits on August 13, 2002, and thereby breached their contract. In addition, Flannery alleged that Continental Casualty violated its covenant of good faith and fair dealing and that Flannery suffered financial and other losses as a result. Flannery's complaint prayed for compensatory damages and punitive damages. On December 2, 2002, Continental Casualty filed its Notice of Removal to this Court based on diversity jurisdiction. Flannery filed the instant motion to remand this cause back to state court arguing that Continental Casualty's Notice of Removal is defective because it failed to specify facts that support a finding that the amount in controversy meets or exceeds the $75,000.00 statutory threshold.
For the foregoing reasons, Flannery's motion to remand should be GRANTED.
I. FACTUAL BACKGROUND
According to the complaint, Flannery was insured under a long term disability policy issued by Continental Casualty. Compl. ¶ 3. He subsequently applied for and received disability benefits from Continental Casualty in the amount of $2,275.02 per month. Id. ¶ 6. Flannery alleges that on August 13, 2002, Continental Casualty "abruptly terminated his long term disability benefits." Id. ¶ 7. Flannery asserts that this abrupt termination breached the insurance contract. Id. ¶ 9.
In addition to breach of contract, Flannery's complaint alleges that Continental Casualty violated its covenant of good faith and fair dealing by: 1) terminating Flannery's benefits when Continental Casualty's liability is clear; 2) conducting an investigation in a manner designed only to terminate Flannery's benefits; 3) compelling Flannery to initiate litigation to recover the amount due him; and 4) ignoring statements from Flannery's physicians who adamantly report that Flannery is unable to work at any occupation. Id. ¶ 11. Flannery also asserts that Continental Casualty acted with malice, fraud, gross negligence and oppressiveness that would entitle Flannery to punitive damages. Id. ¶ 12.
Flannery's prayer for relief states: "an amount that will compensate the Plaintiff for the unpaid disability benefits, interest, damages for the insurance company's bad faith refusal to pay this legitimate claim, and punitive damages." Id. at 3. Moreover, within his complaint, Flannery states that he "has suffered financial and other losses due to Contiental's refusal to pay his disability benefits." Id. ¶ 10.
II. STANDARD
A federal court may remove to its jurisdiction a civil suit filed in state court so long as the district court has original jurisdiction. See Doe v. Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993) (citing 28 U.S.C. § 1441). Courts should interpret the removal statute narrowly and presume that the plaintiff may choose his or her forum. Id. (citing Illinois v. Kerr-McGee Chem. Corp., 677 F.2d 571, 576 (7th Cir.), cert. denied, 459 U.S. 1049 (1982)). Any doubt regarding jurisdiction should be resolved in favor of the states. Id. (citing Jones v. Gen. Tire Rubber Co., 541 F.2d 660, 664 (7th Cir. 1976). The party seeking removal bears the burden of establishing federal jurisdiction. Id. (citing Wilson v. Republic Iron Steel Co., 257 U.S. 92 (1921)).
III. DISCUSSION
Flannery disputes removal of this action to this Court because Continental Casualty neither showed nor can show that the amount in controversy exceeds the $75,000.00 statutory threshold for diversity jurisdiction. Specifically, Flannery argues that Continental Casualty does not have competent proof that his damages will exceed his contract damages, which he asserts amount to approximately $5,687.55. Pl.'s Reply to Def.'s Obj. to Remand, at 2-3 (citing Wethington v. State Farm Mut. Auto. Ins. Co., IP00-1262-C-T/G (S.D.Ind. Jan. 8, 2001)) ("Pl.'s Reply").
Continental Casualty cannot point to a specific amount alleged by Flannery in his complaint because Indiana Trial Rule 8(1)(2) bars plaintiffs from designating the amount in controversy. Therefore, Continental Casualty must rely upon estimates of the value for each of Flannery's alleged claims. Continental Casualty calculates Flannery's potential breach of contract damages at $9,100.00. Moreover, because Flannery also alleges that Continental Casualty breached its covenant of good faith and fair dealing, to this damage amount the Court must add and amount of damages that proximately flow from Continental Casualty's alleged breach. Def.'s Obj. to Pl.'s Mot. to Remand, at 5 (citing Erie Ins. Co. v. Hickman by Smith, 622 N.E.2d 515, 519 (Ind. 1993)) ("Def.'s Obj."). Continental Casualty asserts that this amount at a minimum is equal to the amount Flannery will lose per month under the contract until a trial on the merits. Id. at 6. Using twelve months as an estimate of time before trial, Continental Casualty argues that Flannery's compensatory damages for his claim for breach of the covenant of good faith and fair dealing would be approximately $27,300.00. Id.
Continental Casualty asserts that the Court then must consider punitive damages, which are available to Flannery under his tort claim. Continental Casualty estimates that "it would not be surprising that punitive damages would be at least 3 times the bad faith compensatory damages or $81,900.00." Id. at 7. Therefore, Continental Casualty concludes that there is a reasonable probability that the amount in controversy exceeds the $75,00.00 jurisdictional amount.
The Court finds that under the circumstances of this case, removal was not proper. Flannery asserts that he may create an issue about the amount in controversy by arguing that Continental Casualty has provided no facts to support its assertions that the amount in controversy met or exceeded $75,000.00. In effect, Flannery is using Indiana Trial Rule 8(1)(2) to block Continental from removing this case, without stipulating that his damages are less than the $75,000.00 threshold. Cf. King v. Wal-Mart Stores, Inc., 940 F. Supp. 213, 215-16 (S.D.Ind. 1996). There is nothing in Flannery's motion that makes it clear to this Court that Flannery is actually offering alternative facts from which this Court could draw an inference in his favor; Flannery merely asserts that Continental Casualty's evidence is lacking or speculative. However, there is no case law that prohibits a plaintiff from challenging removal in this manner.
Assuming Flannery can create a dispute about the amount in controversy without stipulating to facts that show the amount to be less than the jurisdictional amount, the Court will address whether Continental Casualty has proffered competent proof that there is a reasonable probability that the amount in controversy meets or exceeds the $75,000.00 jurisdictional amount. See King, 940 F. Supp. at 216 (citing Reason v. Gen. Motors Co., 896 F. Supp. 829 (S.D.Ind. 1995)). First, there is a dispute over the amount of contract damages Flannery may recover. Flannery asserts that the amount is capped at $5,687.55 (two-and-a-half months times $2,275.02), which corresponds to the total amount of unpaid benefits from the date of termination to the date the suit was filed. Pl.'s Reply, at 2 (citing Keck v. Fidelity Casualty Co. of N.Y., 359 F.2d 840 (7th Cir. 1966)). However, Continental Casualty puts the amount at $9,100.00 (approximately four months times $2,275.02), which corresponds to the amount of unpaid benefits from the date of termination to the date of removal. Def.'s Obj. at 5 (previously citing Keck, 359 F.2d at 841).
The law in the Seventh Circuit with respect to allegations like Flannery's that an insurance company breached a contract by terminating benefits is clearly set forth in Keck v. Fidelity Casualty Co. of New York, 359 F.2d 840 (7th Cir. 1966). The court in Keck affirmed a district court's decision that
the sum in controversy, as alleged in the complaint, was limited to the difference between the amount of the partial disability payments which the plaintiff had received and the amount which the plaintiff would have received under the total disability provisions of the insurance policy to the date of suit. . . .
Keck, 359 F.2d at 841. Here, the amount Flannery would have received, had Continental Casualty not terminated his benefits, was $2,275.02 per month from August 13, 2002, to October 29, 2002 (the date Flannery filed suit), or approximately 2.5 months. Continental Casualty provides no citation for the proposition that the Court should consider Flannery's contract damages up to the time of removal. Therefore, Flannery's breach of contract claim is worth approximately $5,687.55.
The Court must now consider the probable amount in controversy for Flannery's tort claim of breach of the covenant of good faith and fair dealing. Continental Casualty argues that the probable amount in controversy for this claim is based on "`any damages directly traceable to the wrong, and arising without an intervening agency.'" Def.'s Obj. at 5 (quoting Erie Ins. Co. v. Hickman, 622 N.E.2d 515, 519 (Ind. 1993)). Continental Casualty acknowledges that Flannery does not specify the "financial and other losses" attributable to Continental Casualty's refusal to pay additional benefits; but, it estimates that Flannery's loss would at least total $2,275.02 per month for each month Flannery was denied benefits starting in August 2002, and ending with the date of trial. Id. at 6. Continental Casualty reasons that while Keck limits a plaintiff's recovery for future payments of disability income under a breach of contract claim, there is no such prohibition under Flannery's tort claim. Id. at 6. Therefore, within a reasonable certainty, Continental Casualty asserts that on his tort claim Flannery could recover compensatory damages in the amount of $2,275.02 per month from the date he filed suit until the date of trial, which is likely to be at least a period of twelve months. Id. Continental Casualty estimates this amount to be approximately $27,300.00. Id.
Flannery argues that Continental Casualty's offer of proof is insufficient because there is no supporting affidavit or citation to similar case law upon Continental Casualty could base its estimate. Pl.'s Reply, at 2 (citing Wethington, No. IP00-1262-C-T/G). Therefore, Flannery asserts that Continental Casualty has failed to provide competent proof of the amount in controversy on this claim.
The Court finds that Continental Casualty's argument that a reasonable estimate of Flannery's compensatory damages on his tort claim is approximately $27,300.00, is "minimally reasonable" under the circumstances of this case. Flannery's complaint states that he "suffered financial and other losses due to Contiental's refusal to pay his disability benefits. . . ." Compl. ¶ 10. Flannery does not dispute that if he is successful on his tort claim he may recover "all damages directly traceable to the wrong, and arising without intervening agency." Erie Ins., 622 N.E.2d at 519. Flannery argues that the Indiana Supreme Court in Erie Insurance Co. v. Hickman, found that bad faith damages are generally coterminous with breach of contract damages. 622 N.E.2d at 519. However, the Erie Insurance court did not limit a plaintiff to contract damages in a bad faith case. The Erie Insurance court merely suggested that in most cases the plaintiff's contract damages would be coterminous with his tort damages. Id. In full, the Erie Insurance court stated:
In tort, all damages directly traceable to the wrong and arising without an intervening agency are recoverable. By contrast, the measure of damages in a contract action is limited to those actually suffered as a result of the breach which are reasonably assumed to have been within the contemplation of the parties at the time the contract was formed. Nonetheless, in most instances, tort damages for the breach of the duty to exercise good faith will likely be coterminous with those recoverable in a breach of contract action.
Id. (citations omitted).
This Court has no reason not to believe Continental Casualty's estimate that the damages arising from its alleged breach of its covenant of good faith and fair dealing will exceed the damages arising from its alleged breach of contract. Flannery's complaint is specifically open ended about the "financial and other losses" he sustained as a result of Continental Casualty's breach of its covenant of good faith and fair dealing. Moreover, Flannery points to no case law that limits his recovery under the tort in the same way that Keck limits his recovery for breach of contract. Therefore, it is reasonable for Continental Casualty, and this Court, to conclude that Flannery will argue for tort damages in an amount that would compensate him for losses he incurred after he filed the instant suit that were proximately caused by Continental Casuaty's breach of good faith and fair dealing. His financial losses alone are at least $2,275.02 per month until the end of trial. Further, twelve months is a reasonable estimate of the time it would take to prepare this cause for trial.
The Court notes that Flannery has not argued that he will not seek damages for tort other than those that are "coterminous" with his contract damages.
The Court must also consider the potential for punitive damages in this case. See Anthony v. Sec. Pac. Fin. Servs., Inc., 75 F.3d 311, 315 (7th Cir. 1996). Continental Casualty estimates that a jury could value Flannery's punitive damages at as much as three times his compensatory damages, or a total of $81,900.00. Def.'s Obj. at 7. Flannery objects to this calculation stating that Continental Casualty's bald assertion without evidence is not competent evidence. Pl.'s Reply, at 3 (citing Wethington, IP00-1262-C-T/G). In other words, Flannery asserts that Continental Casualty's estimate is no more than surmise and guesswork.
Although the Court agrees with Continental Casualty that if the facts Flannery plead in support of his claim for punitive damages are proved true, the company would be liable for punitive damages, the Court must agree with Flannery that Continental Casualty's estimate of punitive damages is unsupported by competent evidence. The case law is clear that "`[s]peculation' or mere `possibility' that a claim exceeds the jurisdictional amount in controversy is not enough." King, 940 F. Supp. at 217 (citing Reason, 896 F. Supp. at 835). Continental Casualty provides no citation for its proposition that the punitive damages in this case is likely to be three times the compensatory tort damages. Without more some evidence of a basis for this assertion, the Court cannot evaluate the reasonableness of Continental Casualty's estimate.
In summary, although Continental Casualty has shown minimally reasonable estimates that the amount in controversy in this case is at least $32,987.55, it has not shown competent evidence in support of its estimate of punitive damages. Therefore, Continental Casualty has not met its burden to show that the amount of controversy in this case at the time of removal met the $75,000.00 jurisdictional requirement.
Flannery has requested that the Court award him attorney's fees for filing the instant motion should he prevail. Under 28 U.S.C. § 1447(c), "[a]n order remanding a case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." A district court is not required to find either good or bad faith for its denial or awarding of costs. Instead, the decision is left to the sole discretion of the district court. See Tenner v. Zurek, 168 F.3d 328, 330 (7th Cir. 1999). Within its discretion, the Court denies Flannery's request for costs and attorney's fees incurred as a result of Continental Casualty's removal of this action to this Court. The Seventh Circuit and this Court have cautioned plaintiffs about the difficulty presented when they fail to stipulate in their complaint that the amount of damages will not exceed the federal jurisdictional amount. See In re Shell Oil Co., 970 F.2d 355, 356 (7th Cir. 1992); King v. Wal-Mart Stores, Inc., 940 F. Supp. 213, 216 (S.D.Ind. 1996). Moreover, in this case Flannery does little more than challenge jurisdiction without making any assertion that he will seek less than $75,000.00. In addition, although not required, the Court has concluded that there is no evidence of Continental Casualty's bad faith or intentional delay in filing its notice of removal. As a result, the Court will deny Flannery's request for fees under 28 U.S.C. § 1447(c).
IV. CONCLUSION
For the foregoing reasons, the Court finds that the defendant has failed to provide competent evidence that the amount in controversy in this cause at the time of removal exceeded $75,000.00. Therefore, this Court lacks subject matter jurisdiction over this cause. The Court GRANTS the plaintiff's motion to remand and REMANDS this matter to Marion County Court. Finally, the Court DENIES the plaintiff's request for attorney's fees and costs.