228 F.3d 1255 (11th Cir. 2000), 98-00377-IV-J-20C, Morrison v Allstate Indemnity Co.

Docket Nº:98-00377-IV-J-20C
Citation:228 F.3d 1255
Party Name:Morrison v Allstate Indemnity Co.
Case Date:September 26, 2000
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit

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228 F.3d 1255 (11th Cir. 2000)

REX T. MORRISON, HAROLD HIGHLEY, et al., Plaintiffs-Appellants,



No. 99-14141

D.C. Docket No. 98-00377-CIV-J-20C

United States Court of Appeals, Eleventh Circuit

September 26, 2000

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Appeal from the United States District Court for the Middle District of Florida

Before CARNES, HILL, and KRAVITCH, Circuit Judges.

CARNES, Circuit Judge:

This putative diversity class action suit arises out of a dispute over insurance coverage for the diminished value of a vehicle after it sustains physical damage and is repaired. The district court dismissed the suit, concluding that the plaintiffs failed to state a claim upon which relief can be granted, and the plaintiffs appealed. However, we do not reach the merits of the plaintiffs' arguments on appeal because it appears that the district court lacked subject matter jurisdiction over this lawsuit. For the following reasons, we remand the case to the district court to allow the plaintiffs an opportunity to prove that jurisdiction is present.


The named plaintiffs in this case brought this suit against nine insurance companies in the United States District Court for the Middle District of Florida.1.

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In their Second amended complaint, the plaintiffs sought to invoke the district court's diversity jurisdiction pursuant to U.S.C. § 1332(a), alleging that the matter in controversy exceeded $75,000 and that diversity of citizenship existed between the plaintiffs, who are all citizens of Florida, and the nine non-Florida insurers. The plaintiffs brought suit on behalf of themselves and all other persons or entities similarly situated.

Each plaintiff owned a vehicle insured by one of the defendants. The insurance policies provide coverage for physical damage to the vehicle, subject to specified limitations of liability. For example, the policy for Allstate Indemnity Company involved in this case provides that "Allstate will pay for direct and accidental loss to your insured auto or a non-owned auto . . . from a collision with another object or by upset of that auto . . . ." This coverage for loss is limited by the following policy language: "Allstate's limit of liability is the actual cash value of the property or damaged part of the property at the time of loss . . . . However, our liability will not exceed what it would cost to repair or replace the property or part with other of like kind and quality." In other words, the policies limit the defendants' liability to the lesser of (1) the cash value of the vehicle, or (2) the cost to repair the vehicle.2

The dispute in this case centers on whether, under Florida law, this policy language requires the defendants to compensate the plaintiffs for the diminished value of their vehicle after its has been repaired - the difference between the pre-accident market value of the vehicle and its market value after it has been repaired. The plaintiffs say it does, the defendants say it does not. The dispute matters because there is a difference in value between pre-wrecked value and fully repaired post-wreck value. For whatever reason (probably skepticism about the efficacy of automobile repairs) people generally will pay more for a used vehicle that has never been wrecked than they will for what is otherwise the same vehicle that has been wrecked and fully repaired. The difference is what the plaintiffs refer to as the "diminished value" of a repaired vehicle.

The plaintiffs filed this class action, alleging that the defendants have failed to pay them for the diminished value of their wrecked but repaired vehicles as they contend is required by the policy language and Florida law. They further allege that the defendants "knowingly, intentionally, and wrongfully charged and received premiums for full coverage . . . with no intent to provide Diminished Value Coverage and have established a practice of not paying diminished value loss." The plaintiffs seek to certify the following class and subclass:

a "Policyholder Class" consisting of all persons residing in the Sate of Florida, who during the Class Period . . . have or had purchased motor vehicle insurance policies from one or more of the Defendants providing `first party' motor vehicle physical damage coverage . . . but whom Defendants have deprived and are depriving of the benefit of `Diminished Value' coverage (i.e., coverage for the risk of diminution in value to their vehicles in the event their vehicles are physically damaged and later fully repaired, but still have a lower market value after repairs have been completed due to the seriousness of the physical damage); and (b) a "Damaged Vehicle Subclass" consisting of all persons residing in the State of Florida who have not been paid Diminished Value compensation by respective Defendants as their

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"first party" insurer after their insured vehicle has actually been damaged and suffered Diminished Value and has been repaired.3

According to the plaintiffs' allegations, the size of the policyholder class exceeds one million, but they do not allege a specific number of members in the Damaged Vehicle Subclass. Each of the named plaintiffs is a member of the subclass.

On behalf of the entire Policyholder Class, the plaintiffs assert three claims: (1) breach of contract, (2) unjust enrichment, and (3) injunctive relief. Although styled as separate claims, both the breach of contract and unjust enrichment claims are based on the theory that the class members have paid premiums for diminished value coverage which the defendants have not provided, and have no intention of providing, and thus, the defendants have been unjustly enriched by the amount of the premiums attributable to diminished value coverage. In both claims, the plaintiffs allege that they "suffered damages including the actuarial value of the Diminished Value Coverage."

In the claim for injunctive relief, the plaintiffs request that the defendants be permanently enjoined from: (1) depriving their insureds of diminished value coverage required by the insurance policies, (2) failing to disclose to insureds, whose vehicles have been damaged and repaired, the defendants' obligation to pay for diminished value, and (3) failing to pay for diminished value loss on vehicles actually damaged. The plaintiffs also request that the defendants be required to provide written notice to class members, and future insureds, disclosing to them that diminished value coverage is provided by their insurance policies.

In addition to the three claims asserted on behalf of the entire class, the plaintiffs also assert a claim for breach of contract on behalf of the Damaged Vehicle Subclass. Under this claim, the plaintiffs maintain the defendants breached the terms of the policies by failing to pay compensation for the diminished value incurred by the policyholders who have filed claims. They seek damages for the uncompensated diminished value to their vehicles and attorney's fees and costs pursuant to Fla. Stat. § 627.428.

The defendants filed separate motions to dismiss. The district court granted the defendants' motions to dismiss, holding that the plaintiffs failed to state a claim upon which relief can be granted. The court reasoned that Florida law did not automatically impose diminished value coverage absent a specific agreement, and therefore, the plaintiffs' complaint did not sufficiently allege a breach of contract. The plaintiffs appealed.

On appeal, we raised the issue of whether the putative class action involved a sufficient amount in controversy to sustain federal diversity jurisdiction under 28 U.S.C. § 1332. At our request, the parties submitted supplemental briefs on that issue. Having reviewed the supplemental briefs and the record in this case, as well as having discussed the the issue extensively at oral argument, we conclude that the jurisdictional issue is dispositive of the case - at least for the time being - and accordingly, we do not address the merits of the plaintiffs' contention that the district court erred in dismissing the complaint for failure to state a claim.


Federal courts have limited subject matter jurisdiction, or in other words, they have the power to decide only certain

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types of cases. See University of South Alabama v. American Tobacco Co., 168 F.3d 405, 410 (11th Cir. 1999). While Article III of the Constitution sets the outer boundaries of that power, it also vests Congress with the discretion to determine whether, and to what extent, that power may be exercised by lower federal courts. See Palmore v. United States, 411 U.S. 389, 400-01, 93 S.Ct. 1670, 1678 (1973). Consequently, lower federal courts are empowered to hear only cases for which there has been a congressional grant of jurisdiction, and once a court determines that there has been no grant that covers a particular case, the court's sole remaining act is to dismiss the case for lack of jurisdiction. See University of South Alabama, 168 F.3d at 409- 10.

In the present case, the plaintiffs contend that subject matter jurisdiction exists pursuant to 28 U.S.C. § 1332, the diversity jurisdiction statute. Under § 1332, a district court has jurisdiction over any civil case if (1) the parties are "citizens of different States" and (2) "the matter in controversy exceeds the sum or value of $75,000, exclusive of interests and costs." 28 U.S.C. § 1332. It is the latter requirement - an amount in controversy exceeding $75,000 - that poses the jurisdictional hurdle in this case. This is true even though the defendants do not dispute that this case involves the requisite amount in controversy for diversity jurisdiction.4

Subject matter jurisdiction...

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