Lovell v. State Farm Mut. Auto. Ins. Co.

Decision Date18 October 2006
Docket NumberNo. 04-1429.,04-1429.
Citation466 F.3d 893
PartiesLois LOVELL, Plaintiff-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois corporation, Defendant-Appellee.
CourtU.S. Court of Appeals — Tenth Circuit

Michael G. Sawaya (Donald J. Banovitz with him on the briefs), Sawaya, Rose & Sawaya, P.C., Denver, CO, for Plaintiff-Appellant.

Heather Perkins (Michael S. McCarthy and Michael S. Freeman with her on the briefs), Faegre & Benson, LLP, Denver, CO, for Defendant-Appellee.

Before KELLY and BRISCOE, Circuit Judges, and JOHNSON, District Judge.*

JOHNSON, District Judge.

I. BACKGROUND

Plaintiffs below, Lois Lovell and Floyd Gibson,1 brought a putative class action lawsuit in Colorado state court seeking reimbursement from their automobile insurer, State Farm Mutual Automobile Insurance Company ("State Farm"), for the diminution in value of their vehicles. Lovell and Gibson were involved in separate automobile collisions in which their vehicles were damaged. Each vehicle was insured by State Farm and it reimbursed Lovell and Gibson for repairs to their respective vehicles, but Lovell and Gibson sought additional reimbursement for the diminished value of their vehicles. In their First Amended Class Action Complaint, Lovell and Gibson alleged that the Colorado Auto Reparations Act, hereinafter referred to as the "No Fault Act," mandates that insurers provide diminished value compensation through collision insurance.2

Lovell and Gibson alleged that State Farm, with knowledge of its statutory obligation to provide diminished value compensation through collision insurance, failed to pay diminished value compensation and in some insurance contracts expressly excluded diminished value as a covered loss. They also alleged that State Farm failed to inform policyholders of diminished value coverage and failed to establish proper procedures for handling the diminution in value component of claims.

Lovell and Gibson brought their action on behalf of themselves and all others who were not informed or notified of their diminished value coverage and who were not paid diminished value compensation by State Farm. They sought declaratory relief in the form of a declaration that all automobile policies issued by State Farm in which the insureds selected collision coverage include diminished value coverage. They also sought a declaration that a failure to inform policyholders of diminished value coverage and the failure to pay diminished value claims is contrary to Colorado law, and that it is State Farm's obligation to give notice to insureds of the element of diminished value coverage, to evaluate all claims to determine if diminution in value is owed, and to pay diminution in value if owed. Lovell and Gibson sought equitable and injunctive relief to require State Farm to notify its insureds of diminished value coverage and to establish a procedure to handle claims in order to honor its obligation to pay diminution in value.

State Farm removed the action to federal court alleging removal jurisdiction on the basis of diversity of citizenship under 28 U.S.C. § 1441 and 28 U.S.C. § 1332. After removing the case to federal court, State Farm filed a motion to dismiss under Fed.R.Civ.P. 12(b)(6) arguing that Lovell's and Gibson's insurance policies expressly stated that their collision coverage did not include payment for any diminished value of the vehicles after repair, and that these provisions were entirely consistent with the No Fault Act. In response, Gibson and Lovell argued that the No Fault Act requires insurers to offer collision coverage, that collision coverage under the No Fault Act must include coverage for losses resulting from the diminution of value of an insured vehicle, and thus policy exclusion of diminished value compensation is void as against public policy.

Plaintiff Gibson subsequently moved for remand arguing that the district court lacked subject matter jurisdiction because the amount in controversy requirement of 28 U.S.C. § 1332 was not met.3 He stated that the damages he sought for diminished value could not be more than $9,000.00, the full value of his vehicle before his automobile accident. He argued that the amount in controversy must be met by each Plaintiff, and that the Plaintiff class members' damages could not be aggregated to meet the amount in controversy requirement.

In response to the motion to remand, State Farm argued that the amount in controversy requirement was met because its costs of compliance with any declaratory or injunctive relief may be considered to determine the amount in controversy, this amount would far exceed the $75,000.00 requirement and the costs may be aggregated among the class of plaintiffs because the class has a common interest in the relief such that it could only benefit the class as a whole. State Farm also urged that the amount in controversy requirement is met because the cost of compliance for any single plaintiff would exceed $75,000.00.

By Memorandum Opinion and Order, the district court denied Gibson's motion to remand concluding that it had subject matter jurisdiction over the case and granted State Farm's motion to dismiss. The district court entered judgment for State Farm on September 20, 2004.

Lovell appeals the district court's dismissal of her claims on the merits but does not appeal the district court's determination that it had subject matter jurisdiction over those claims. Since federal courts are courts of limited jurisdiction, this Court has an independent obligation to examine its own jurisdiction and the jurisdiction of the lower court in a case under review even when the parties have not raised jurisdiction as an issue. Bender v. Williamsport Area School Dist., 475 U.S. 534, 541, 106 S.Ct. 1326, 1331, 89 L.Ed.2d 501 (1986); Kennedy v. Lubar, 273 F.3d 1293, 1301-02 (10th Cir.2001).

Upon review of the jurisdictional issue, we conclude that the district court had subject matter jurisdiction of this cause of action. Upon further review of the district court's dismissal of the Plaintiffs' claims under Fed.R.Civ.P. 12(b)(6), we AFFIRM for the following reasons.

II. DISCUSSION
A. JURISDICTION

This Court reviews a district court's ruling on the propriety of removal de novo. Martin v. Franklin Capital Corp., 251 F.3d 1284, 1289 (10th Cir.2001). Jurisdiction based on diversity of citizenship exists when a dispute between citizens of different states involves an amount in controversy exceeding $75,000. 28 U.S.C. § 1332(a). State Farm presented undisputed evidence below that its costs of compliance with Lovell's and Gibson's requested injunctive and equitable relief exceeded $75,000. In this case, it is undisputed that there is complete diversity among the parties. The jurisdictional issue then is whether the amount in controversy requirement is met.

In cases seeking declaratory and injunctive relief, "the amount in controversy is measured by the value of the object of the litigation." Hunt v. Washington State Apple Adver. Comm'n, 432 U.S. 333, 347, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977). The Tenth Circuit has followed what has commonly been referred to as the "either viewpoint rule" which considers either the value to the plaintiff or the cost to defendant of injunctive and declaratory relief as the measure of the amount in controversy for purposes of meeting the jurisdictional minimum. Justice v. Atchison, Topeka and Santa Fe Ry. Co., 927 F.2d 503, 505 (10th Cir.1991). However, in multiple plaintiff cases, including class actions, the "either viewpoint rule" does not override the well established principle that each plaintiff or member of the class must individually satisfy the amount in controversy requirement. Snyder v. Harris, 394 U.S. 332, 335, 89 S.Ct. 1053, 22 L.Ed.2d 319 (1969); Lonnquist v. J.C. Penney Co., 421 F.2d 597, 599 (10th Cir.1970).

Class members' claims may be aggregated to meet the amount in controversy requirement only when they "unite to enforce a single title or right in which they have a common and undivided interest."4 Snyder, 394 U.S. at 335, 89 S.Ct. 1053. When plaintiffs' claims arise from individual contracts with a defendant, the plaintiffs are not suing to enforce a common title or right to which they have a common and undivided interest. See Kessler v. Nat'l Enter., Inc., 347 F.3d 1076, 1079-80 (8th Cir.2003) (holding that class members seeking to enforce rights obtained through individual contracts could not aggregate their claims in order to meet the amount in controversy requirement); Smith v. GTE Corp., 236 F.3d 1292, 1309 (11th Cir.2001) ("When plaintiffs assert rights that arise from individual contracts with a defendant, those rights are separate and distinct, and thus, their claims may not be aggregated.") (citing Oliver v. Alexander, 31 U.S. (6 Pet.) 143, 145-48, 8 L.Ed. 349 (1832)).

In this case, each Plaintiff's and putative class member's claims arise from individual insurance contracts, and the Plaintiffs are not uniting to enforce a single title or right in which they have a common interest. Thus, the claims of the Plaintiffs and putative class members cannot be aggregated to meet the requisite amount in controversy.

The district court concluded that the amount in controversy requirement was met in this case because the injunctive relief sought by the Plaintiffs would not inure to any single plaintiff but would benefit the class as a whole. However, the test for whether multiple plaintiffs' claims may be aggregated requires a court to look at the nature of the claims. See Lonnquist, 421 F.2d at 599. There is no authority in this Circuit for looking at the divisibility of the benefit of injunctive relief to determine whether claims can be aggregated. While there are cases from other jurisdictions, cited by the district court, supporting this method of determining the amount in controversy, this method cannot be reconciled with this Court's holding in Lonnquist.

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