Am. Family Mut. Ins. Co. v. Vein Ctrs. for Excellence, Inc.

• Decision Date: 03 January 2019
• Docket Number: No. 17-3266,17-3266
• Citation: 912 F.3d 1076
• Parties: AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Plaintiff - Appellee v. VEIN CENTERS FOR EXCELLENCE, INC., Defendant St. Louis Heart Center, Inc., Defendant - Appellant
• Court: U.S. Court of Appeals — Eighth Circuit

912 F.3d 1076

AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Plaintiff - Appellee

v.VEIN CENTERS FOR EXCELLENCE, INC., Defendant

St. Louis Heart Center, Inc., Defendant - Appellant

No. 17-3266

United States Court of Appeals, Eighth Circuit.

Submitted: September 26, 2018

Filed: January 3, 2019

Kenneth M. Lander, KORTENHOF & MCGLYNN, Saint Louis, MO, Anthony L. Martin, Stephen Michael Murphy, SANDBERG & PHOENIX, Saint Louis, MO, for Plaintiff-Appellee.

Jeffrey A. Berman, ANDERSON & WANCA, Rolling Meadows, IL, Max G. Margulis, MARGULIS LAW GROUP, Chesterfield, MO, David Max Oppenheim, BOCK & HATCH, Chicago, IL, for Defendant-Appellant.

Before COLLOTON, BEAM, and GRASZ, Circuit Judges.

GRASZ, Circuit Judge.

American Family Mutual Insurance Company ("American Family") filed a complaint for declaratory judgment against its insured, Vein Centers for Excellence, Inc. ("Vein Centers"), disputing American Family’s duty under certain policies to defend and indemnify Vein Centers in a class action lawsuit. St. Louis Heart Center, Inc. ("St. Louis Heart") was the class representative in the underlying suit against Vein Centers and was later joined as a defendant in the declaratory action. The district court¹ concluded American Family’s insurance policies did not cover the claims against Vein Centers in the class action lawsuit and awarded summary judgment in favor of American Family. On appeal, St. Louis Heart argues that subject matter jurisdiction is lacking and that summary judgment in favor of American Family was improper. We affirm.

I. Background

In 2011, St. Louis Heart filed a class action petition against Vein Centers for sending unsolicited advertisements via facsimile to multiple recipients, alleging a violation of the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227.² The district court granted St. Louis Heart’s motion for class certification on December 11, 2013. Vein Centers subsequently moved to decertify the class and the district court granted that motion in 2017.

The merits of the class action are not the subject of this appeal. Rather, the issue presented is whether the insurance policies of Vein Centers obligated its insurance provider, American Family, to defend and indemnify the lawsuit.

Vein Centers tendered the lawsuit to American Family for defense and indemnification under two insurance policies: a Businessowners Policy and a Commercial Liability Umbrella Policy. American Family agreed to provide a defense to Vein Centers subject to a full reservation of rights.

Both policies contained an exclusion for the "Distribution of Material in Violation of Statutes." Under the Businessowners Policy,³ the relevant portion of this exclusion barred coverage for:

"Bodily injury", "property damage", or "personal and advertising injury" arising directly or indirectly out of any action or omission that violates or is alleged to violate:

(1) The Telephone Consumer Protection Act (TCPA), including any amendment of or addition to such law[.]

In 2015, American Family filed a complaint for declaratory judgment seeking a declaration that coverage did not exist for the claims alleged in the underlying lawsuit. American Family later amended its complaint in 2016, adding St. Louis Heart as an additional defendant.

St. Louis Heart moved to dismiss the declaratory action, claiming the district court lacked subject matter jurisdiction because the amount in controversy did not exceed $75,000 as required for diversity jurisdiction under 28 U.S.C. § 1332. St. Louis Heart contended the class members’ claims were improperly aggregated to satisfy the amount-in-controversy threshold. The district court rejected this position and denied the motion to dismiss.

The parties filed cross-motions for summary judgment in 2017. American Family argued that neither the Business nor Umbrella policies provided coverage for the TCPA claim in part because both explicitly excluded coverage for violations of the TCPA. St. Louis Heart conceded the TCPA exclusion was enforceable under the Umbrella Policy. However, St. Louis Heart contended the exclusion in the Businessowners Policy never took effect because American Family failed to properly notify Vein Centers of the provision’s addition when the policy was renewed. On this basis, St. Louis Heart argued Missouri law dictated it was entitled to indemnification under the Businessowners Policy.

The district court awarded summary judgment in favor of American Family. St. Louis Heart timely appealed both the district court’s denial of its motion to dismiss for lack of subject matter jurisdiction and the district court’s summary judgment order.

II. Discussion

We begin our discussion with the jurisdictional question raised in St. Louis Heart’s motion to dismiss.

A. Subject Matter Jurisdiction

Subject matter jurisdiction of the district courts where based on diversity of citizenship of the parties is governed by 28 U.S.C. § 1332(a)(1), which provides: "The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between citizens of different States."

St. Louis Heart argues the district court lacked subject matter jurisdiction under 28 U.S.C. § 1332 because the $75,000 amount-in-controversy requirement was not met. "The existence of subject-matter jurisdiction is a question of law that this court reviews de novo." ABF Freight Sys., Inc. v. Int’l Bhd. of Teamsters , 645 F.3d 954, 958 (8th Cir. 2011). However, we review the district court’s factual findings made in conjunction with its amount-in-controversy ruling for clear error. Scottsdale Ins. Co. v. Universal Crop Prot. All., LLC , 620 F.3d 926, 930–31 (8th Cir. 2010).

Typically, complaints need only allege the jurisdictional amount in good faith and will be dismissed only if it "appear[s] to a legal certainty that the claim is really for less than the jurisdictional amount." Scottsdale , 620 F.3d at 931 (alteration in original) (quoting Kopp v. Kopp , 280 F.3d 883, 884 (8th Cir. 2002) ). However, "[i]f the defendant challenges the plaintiff’s allegations of the amount in controversy, then the plaintiff must establish jurisdiction by a preponderance of the evidence." Id. (quoting Kopp , 280 F.3d at 884–85 ).⁴ St. Louis Heart’s challenge required American Family to prove, by a preponderance of evidence, that the amount in controversy did not appear to a legal certainty to be $75,000 or less.

"[T]he amount in controversy is measured by the value to the plaintiff of the right sought to be enforced." Federated Mut. Ins. Co. v. Moody Station & Grocery , 821 F.3d 973, 977 (8th Cir. 2016) (quoting Schubert v. Auto Owners Ins. Co. , 649 F.3d 817, 821 (8th Cir. 2011) ). This value is assessed at the time of filing the action. Scottsdale, 620 F.3d at 931. "Subsequent events reducing the amount in controversy do not destroy diversity jurisdiction," but they may "be relevant to prove the existence or nonexistence of diversity jurisdiction at the time of filing." Id. In measuring the value of the plaintiff’s right to be enforced, this Court has recognized a "general rule [ ] that ‘individual class members’ distinct claims for actual damages may not be aggregated to satisfy the ... amount-in-controversy requirement for diversity jurisdiction.’ " Kessler v. Nat’l Enters., Inc. , 347 F.3d 1076, 1078 (8th Cir. 2003) (omission in original) (quoting Crawford v. Hoffman–La Roche Ltd. , 267 F.3d 760, 765 (8th Cir. 2001) ).

Application of the foregoing legal standards convinces us the district court did not err in concluding American Family satisfied its burden of establishing the minimum amount in controversy for the reasons set forth below.

"In a declaratory judgment action such as this one, wherein an insurer sues an insured to determine its obligation to defend and indemnify, the amount in controversy ... ordinarily equals the probable costs of defense and indemnification of the underlying litigation less any applicable deductible." Scottsdale , 620 F.3d at 932. An adverse judgment against Vein Centers would have entitled St. Louis Heart to an award far exceeding the threshold, as evidenced by St. Louis Heart’s motion for summary judgement requesting $17,605,500 plus prejudgment interest. American Family’s insurance policies created the potential for a single indemnity obligation to Vein Centers in the millions of dollars.⁵ While the coverage limit is not the measure of the amount in controversy, the indemnification amount is, and in this case that amount clearly exceeds the jurisdictional threshold. And that is to say nothing of the costs of defending the underlying action, which would have likely exceeded $75,000.

On appeal, St. Louis Heart does not argue the potential indemnification was inaccurately calculated. Instead, it argues the cost of indemnification was only arrived at by improperly aggregating the claims of all the class plaintiffs. It is true that the class members here cannot aggregate the indemnification value of their claims to satisfy diversity jurisdiction. "[W]here [plaintiffs’] interests are distinct, and their only relationship is that ‘they form a class of parties whose rights or liabilities arose out of the same transaction, or have a relation to a common fund or mass or property sought to be administered, such distinct demands or liabilities cannot be aggregated.’ " Crenshaw v. Great Cent. Ins. Co. , 482 F.2d 1255, 1259 (8th Cir. 1973) (quoting Eagle Star Ins. Co. v. Maltes , 313 F.2d 778, 780 (5th Cir. 1963) ). But that is not what occurred here. "From [American Family’s] perspective, there is only one claim—by its insured," Vein Centers, "for the sum of defense and indemnity costs."

Meridian Sec. Ins. Co. v. Sadowski , 441 F.3d 536, 539 (7th Cir. 2006).

American Family relies only on its own potential indemnification liability and defense costs to satisfy the jurisdictional threshold, which distinguishes this case from the various cases cited...