Adams v. Am. Family Mut. Ins. Co.

• Decision Date: 08 November 2013
• Docket Number: No. 4:13–CV–226.,4:13–CV–226.
• Citation: 981 F.Supp.2d 837
• Parties: Michael ADAMS and Colleen Adams, on behalf of themselves and all others similarly situated, Plaintiffs, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Iowa

981 F.Supp.2d 837

Michael ADAMS and Colleen Adams, on behalf of themselves and all others similarly situated, Plaintiffs,

v.AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant.

No. 4:13–CV–226.

United States District Court,

S.D. Iowa,

Central Division.

Nov. 8, 2013.

Travis James Burk, Andrew Larry Hope, Hope Law Firm PLC, Des Moines, IA, James C. Larew, Larew Law Office, Iowa City, IA, Ronald R. Parry, Parry Deering Futscher & Sparks PSC, Covington, KY, for Plaintiffs.

Ryan P. Howell, Ross W. Johnson, Faegre Baker Daniels, LLP, Des Moines, IA, Michael S. McCarthy, Faegre Baker Daniels, LLP, Denver, CO, for Defendant.

ORDER ON PLAINTIFFS' MOTION TO REMAND

ROBERT W. PRATT, District Judge.

On October 12, 2012, Michael Adams and Colleen Adams (the “Adamses”) commenced an action against American Family Mutual Insurance Company (“American Family” or “Defendant”) in the Iowa District Court for Polk County. Clerk's No. 1–1 at 5–11.¹ On January 7, 2013, the Adamses filed a Motion to Amend their state court Petition to include class claims and requests for declaratory and injunctive relief. Id. at 22–55. On April 18, 2013, Iowa District Court Judge Dan Wilson granted the Adamses' request to amend and simultaneously certified the matter as a class action. Clerk's No. 1–3 at 22–27. On May 9, 2013, Judge Wilson deemed the Amended Petition to have been filed as of April 19, 2013. Id. at 95.

On May 15, 2013, Defendant removed the action to this Court, contending that jurisdiction is proper under the Class Action Fairness Act of 2005 (“CAFA”). Clerk's No. 1 at 1–3. The Adamses, on behalf of themselves and the now-certified class, filed a Motion to Remand the Action to state court on June 7, 2013. Clerk's No. 17. Defendant filed a resistance to the Motion to Remand on June 24, 2013. Clerk's No. 21. Plaintiff filed a Reply on July 12, 2013. Clerk's No. 26. The Court held a hearing on the Motion on August 26, 2013. Clerk's No. 35. The matter is fully submitted.

I. FACTUAL BACKGROUND

Plaintiffs claim in their Amended Petition that they had a homeowners' insurance policy on their West Des Moines property with Defendant. Am. Pet. (Clerk's No. 1–3 at 54–83) ¶¶ 16–17. On October 17, 2011, a pipe burst in the Adamses' home, causing significant structural damage. Id. ¶ 18. Defendant made payment for the damages pursuant to the Adamses' insurance policy. Id. ¶ 21. After receiving payment, the Adamses discovered additional damage to their home, but Defendant refused to consider the additional losses. Id. ¶¶ 22–23. The Adamses thereafter invoked their right to an appraisal under Iowa law on October 10, 2012, but were informed by Defendant that their policy had only an arbitration clause—not an appraisal clause. Id. ¶¶ 26–27.

The Adamses, on behalf of themselves and a class of Iowa Policyholders ² (hereinafter “Plaintiffs”), assert that since 1994, Defendant has issued homeowners insurance policies and farm and ranch insurance policies in the State of Iowa that do not contain the right to appraisal guaranteed by Iowa Code § 515.109³ in the event of a dispute over the value or amount of loss. Id. ¶ 28. Rather, Plaintiffs claim Defendant has issued these policies with arbitration clauses, in direct violation of Iowa Code § 679A.1.⁴Id. ¶ 29. Plaintiffs further allege that Defendant was aware it was violating Iowa law at the latest by July 10, 2012, before the Adamses requested an appraisal, because Defendant was “ordered by the Insurance Commissioner of the State of Iowa to remove its Arbitration Clauses from all policies issued in the State of Iowa because these clauses are in violation of Iowa law.” ⁵Id. ¶ 30.

Plaintiffs claim that Defendant's use of an illegal arbitration clause in its policies, its failure to include a required appraisal clause in its policies, and its failure to apprise policyholders of their right to an appraisal under Iowa law, constitutes bad faith toward them and other Iowa Policyholders. Id. ¶¶ 31–34. Plaintiffs, therefore, request that the Court enter the following relief: 1) a declaratory judgment “to the effect that Defendant has acted wrongfully and in violation of Iowa law by inserting the illegal binding arbitration clause into its homeowners insurance contracts and farm and ranch insurance contracts, thus depriving the Iowa Policyholders of their right to appraisal” ( id. ¶¶ 42–45); 2) a finding that Defendant “has acted in bad faith toward each and every Iowa Policyholder who is a member of the class” ( id. ¶¶ 46–54); 3) “a mandatory injunction requiring that Defendant advise all Class members that they had a right to appraisal of their losses, under Iowa law, when they submitted claims under their homeowners or farm/ranch insurance policies” ( id. ¶¶ 55–56); and 4) “attorneys' fees and litigation costs in this action.” Id. at 66.

Plaintiffs attached several exhibits to the Amended Petition: 1) the affidavit of Paul Norcia ( id. Ex. 1), discussing insurance practices regarding appraisals and arbitration; 2) the affidavit of John Trave (id. Ex. 2), an American Family policyholder who received an additional $157,742.91 for losses from American Family after engaging in the appraisal process; 3) the affidavit of Nicole Young ( id. Ex. 3), an American Family policyholder who received an additional $29,551.35 for losses from American Family after engaging in the appraisal process; 4) a “Sworn and Binding Stipulation” ( id. Ex. 4) wherein Plaintiffs “stipulate that they will not be seeking in this action damages greater than the jurisdictional minimum set forth in [CAFA]”; and 5) the July 10, 2012 letter to American Family from Thomas O'Meara of the Iowa Insurance Division ( id. Ex. 5). Pursuant to the Federal Rules of Civil Procedure, these exhibits are incorporated into and comprise a part of Plaintiffs' Amended Petition.⁶SeeFed.R.Civ.P. 10(c) (“A statement in a pleading may be adopted by reference elsewhere in the same pleading or in any other pleading or motion. A copy of a written instrument that is an exhibit to a pleading is a part of the pleading for all purposes.”).

II. LEGAL STANDARD

Under 28 U.S.C. § 1441(a), a civil action brought in state court may be removed by a defendant to federal court if it could have been brought there originally. 28 U.S.C. § 1441(a); Mot. Control Corp. v. SICK, Inc., 354 F.3d 702, 705 (8th Cir.2003). A case that is not removable when it is initially filed may be removed to federal court at a later date if the case becomes removable. See28 U.S.C. § 1446(b). Here, Defendant argues that Plaintiffs' Amended Petition is removable because Plaintiffs' addition of class claims subjects the case to CAFA, which permits removal of a class action ⁷ to federal court when the amount in controversy “exceeds the sum or value of $5,000,000, exclusive of interest and costs.” ⁸See28 U.S.C. §§ 1332(d)(2); 1453(b). The sole issue regarding the propriety of removal in this case is whether the amount in controversy satisfies the $5,000,000 jurisdictional threshold.

“[A] party seeking to remove under CAFA must establish the amount in controversy by a preponderance of the evidence regardless of whether the complaint alleges an amount below the jurisdictional minimum.” Bell v. Hershey Co., 557 F.3d 953, 958 (8th Cir.2009). “Under the preponderance standard, ‘[t]he jurisdictional fact ... is not whether the damages are greater than the requisite amount, but whether a fact finder might legally conclude that they are....’ ” Id. at 959 (quoting Kopp v. Kopp, 280 F.3d 883, 885 (8th Cir.2002)) (alteration in original). “The inquiry described is fact intensive.” Id. Importantly, the removing party's “ ‘burden of describing how the controversy exceeds $5 million’ constitutes ‘a pleading requirement, not a demand for proof. Discovery and trial come later.’ ” Hartis v. Chi. Title Ins. Co., 694 F.3d 935, 944–45 (8th Cir.2012) (quoting Spivey v. Vertrue, Inc., 528 F.3d 982, 986 (7th Cir.2008)). “Once the removing party has established by a preponderance of the evidence that the jurisdictional minimum is satisfied, remand is only appropriate if the plaintiff can establish to a legal certainty that the claim is for less than the requisite amount.” Bell, 557 F.3d at 956 (citing Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d 536, 543 (7th Cir.2006)).

Notably, CAFA was “intended to expand substantially federal court jurisdiction over class actions.” See S. Comm. on the Judiciary, Class Action Fairness Act of 2005, S.Rep. No. 109–14, at 41 (Feb. 28, 2005), reprinted in 2005 U.S.C.C.A.N. 3, 41, 2005 WL 627977 (hereinafter “Senate Report”). Accordingly, “[i]ts provisions should be read broadly, with a strong preference that interstate class actions should be heard in a federal court if properly removed by any defendant.” Id. Moreover, “if a federal court is uncertain about whether ‘all matters in controversy’ in a purported class action ‘do not in the aggregate exceed the sum or value of $5,000,000,’ the court should err in favor of exercising jurisdiction over the case.” ⁹Id.

III. ANALYSIS

A. Has Defendant Proven by a Preponderance of the Evidence that the Amount in Controversy Exceeds $5 Million?

Defendant recounts in its Notice of Removal four separate ways in which the $5,000,000 jurisdictional requisite is satisfied. See Notice of Removal (Clerk's No. 1) at 4–9. Plaintiffs counter in their Motion to Remand that the jurisdictional minimum cannot be satisfied in this action because Plaintiffs seek only declarative and injunctive relief, and because they filed a Post–Class Certification Sworn and Binding Stipulation that “damages will not be sought in this action greater than the jurisdictional minimum set forth in [CAFA].” See Clerk's No. 1–3 at 34. Thus, the sole matters for resolution at this time are whether the action was properly removed to this Court pursuant to CAFA, and if so, whether Plaintiffs have proven to a legal certainty that the value of their claims falls below the jurisdictional...