Burk v. Medical Savings Ins. Co.

• Decision Date: 08 December 2004
• Docket Number: No. CV 04-1802-PHX-NVW.,CV 04-1802-PHX-NVW.
• Citation: 348 F.Supp.2d 1063
• Parties: Dennis Ray BURK; Betty Burk, Plaintiffs, v. MEDICAL SAVINGS INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Arizona

348 F.Supp.2d 1063

Dennis Ray BURK; Betty Burk, Plaintiffs, v. MEDICAL SAVINGS INSURANCE COMPANY, Defendant.

No. CV 04-1802-PHX-NVW.

United States District Court, D. Arizona.

December 8, 2004.

COPYRIGHT MATERIAL OMITTED

Michael John Raymond, Esq., Randy L. Sassaman, Esq., Raymond Greer & Sassaman PC, Phoenix, AZ, for Plaintiffs.

Donald L. Myles, Jr., Esq., Jones Skelton & Hochuli PLC, Larry R. Jackson, Jackson Law Firm LLC, Fishers, IN, for Defendant.

ORDER

WAKE, District Judge.

The Court has reviewed Defendant Medical Savings Insurance Company's ("MSIC") Supplemental Brief in Support of Federal Diversity Jurisdiction Based on Amount in Controversy in Excess of $75,000 Under 28 U.S.C. § 1332. (doc. # 11.) Defendant submitted that brief in response to the Court's Order of November 12, 2004, requiring Defendant to either acknowledge that it does not contend that it is more likely than not that Plaintiffs will recover more than $75,000 if they prevail on their claims or submit admissible evidence that Plaintiffs' damages meet the jurisdictional amount for this Court's jurisdiction under 28 U.S.C. § 1332. (doc. # 9.) The Court now concludes that it does not have subject matter jurisdiction over this action and therefore must remand the case to state court.

I. Background

Plaintiffs Dennis Ray Burk and Betty Burk ("the Burks") purchased a health insurance policy from MSIC which became effective on June 1, 1999. The insurance policy provides, in relevant part, that MSIC "will pay the coinsurance percentage in excess of the deductible amount for services and supplies that qualify as covered expenses." (doc. # 4, ex. 1, § 6.) The policy also contains a general exclusion of charges in excess of the reasonable and customary charge. (doc. # 4, ex. 1, § 7.)

On April 26, 2002, Dennis Burk underwent an out-patient procedure including a post-cardiac heart catheterization at Scottsdale Healthcare Shea. The hospital billed MSIC $10,075.95 for the procedure. MSIC determined that the reasonable and customary charges for those services totaled only $3,054.81 and submitted a payment to the hospital for what it termed the reasonable value of the services. The hospital rejected the payment.

On December 16, 2002, Betty Burk was admitted to Desert Samaritan Medical Center ("Desert Samaritan") for a surgical procedure to her colon. Desert Samaritan billed MSIC $10,564.35 for the procedure. On January 17, 2003, MSIC issued an "explanation of benefits" stating that the reasonable and customary charges for Betty Burk's surgical procedure totaled only $3,438.76. MSIC submitted a payment in that amount to Desert Samaritan but the check was returned.

MSIC and the two hospitals continue to dispute the charges owed for the Burks' medical treatments. In the interim, the Burks have received bills from the hospitals requesting payment on the disputed charges. MSIC contends that it "made [] clear at all times that they would defend and indemnify the Burks in any proceeding instituted by any of the medical care providers wherein MSIC made a determination that the charges were deemed to be above what was reasonable and customary." (doc. # 4 at 3.) The Burks dispute the level of support MSIC offered in the event of proceedings brought by the hospitals against them, arguing "MSIC vaguely and ambiguously stated that it would `provide reasonable assistance to [them]' in that event." (doc. # 7 at 2.)

Plaintiffs filed a complaint against MSIC in Maricopa County Superior Court on May 27, 2004, alleging breach of contract, breach of covenant of good faith and fair dealing, and a violation of the Arizona Consumer Fraud Act, A.R.S. § 44-1521-1534. MSIC removed the case to this Court on August 27, 2004. Its Petition for Removal stated "the amount in controversy exceeds the sum or value of $75,000, exclusive of interest or costs."

On September 27, 2004, MSIC filed a Motion to Compel Arbitration and to Stay Litigation. On November 12, 2004, the Court issued an Order in which it explained that it could not rule on MSIC's motions at that time because it was not yet satisfied that MSIC had discharged its burden to prove by a preponderance of the evidence that the amount in controversy exceeds the jurisdictional threshold. The Court noted that the amount in controversy was not evident from the face of the Complaint and MSIC had not presented any facts in the removal petition relevant to the amount in controversy other than an insufficient conclusory allegation. Accordingly, the Court ordered MSIC to support its contention that the amount in controversy exceeds $75,000 with evidence in the form of affidavits or otherwise. On November 22, 2004, MSIC filed a Motion to Join Indispensable Parties. As is the case with MSIC's previous motions, the Court cannot rule on this motion unless it has subject matter jurisdiction. MSIC filed its supplemental brief regarding subject matter jurisdiction on November 24, 2004.

II. Legal Standards

Federal courts may exercise removal jurisdiction over a case only if jurisdiction existed over the suit as originally brought by the plaintiff. 28 U.S.C. § 1441(a). The removing party bears the burden of establishing federal subject matter jurisdiction. Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 (9th Cir.1988). There is a strong presumption against removal jurisdiction. See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.1992). If at any time before final judgment it appears that the district court lacks subject matter jurisdiction over a case removed from state court, the case must be remanded. 28 U.S.C. § 1447(c).

District courts have diversity jurisdiction over civil actions between citizens of different states where the amount in controversy exceeds $75,000. 28 U.S.C § 1332. In the removal context, the inquiry into the amount in controversy is not confined to the face of the complaint. See Valdez v. Allstate Ins. Co., 372 F.3d 1115, 1117 (9th Cir.2004). The Court may also consider facts presented in the removal petition and "summary-judgment-type evidence relevant to the amount in controversy at the time of removal." Id. If the amount in controversy is not facially evident from the complaint, the removing party must prove by a preponderance of the evidence that the amount in controversy exceeds the jurisdictional threshold. Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir.2003); Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir.1996).

III. Discussion

MSIC continues to assert that the amount in controversy exceeds $75,000. It should be noted that its effort to prove this assertion is somewhat complicated by the Arizona state court procedural rules, which prohibit plaintiffs from pleading specific amounts for unliquidated damages. Ariz. R. Civ. P. 8(g). Other states have similar rules. See, e.g., Cal.Civ.Proc.Code § 425.10(b) (prohibiting plaintiffs in a personal injury or wrongful death action from stating the amount of damages demanded); Nev. R. Civ. P. 8(a) ("Where a claimant seeks damages of more than $10,000, the demand shall be for damages `in excess of $10,000' without further specification of the amount."). One effect of these state court rules is to make it more difficult for federal courts to determine whether they have jurisdiction over actions removed from state court on the basis of diversity. See Alice M. Noble-Allgire, Removal of Diversity Actions When the Amount in Controversy Cannot be Determined from the Face of Plaintiff's Complaint: The Need for Judicial and Statutory Reform to Preserve Defendant's Equal Access to Federal Courts, 62 Mo. L.Rev. 681 (1997). However, the Ninth Circuit has emphasized that such rules do not "present an insurmountable obstacle to quantify the amount at stake when intangible harm is alleged; the parties need not predict the trier of fact's eventual award with one hundred percent accuracy." Valdez, 372 F.3d at 1117. Thus, even where there is tension between the state court pleading rules and the traditional federal removal framework, the defendant must present facts to show that the amount in controversy exceeds the jurisdictional threshold. Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373 (9th Cir.1997); McCaa v. Mass. Mut. Life Ins. Co., 330 F.Supp.2d 1143, 1150 (D.Nev.2004)

MSIC asserts that "the compensable damages in controversy are approximately $20,640.30 in hospital bills plus any compensable damages for policy premiums under the Consumer Fraud Act claim." (doc. # 11 at 5.) MSIC also notes that the Burks seek to recover for "monetary loss or damage to their credit reputation, as well as emotional distress, humiliation, inconvenience, anxiety and worry." MSIC does not estimate Plaintiffs' likely recovery for these alleged losses. Nor does it suggest that their cumulative value, when added to the $20,640.30 in hospital bills, raises the amount in controversy above $75,000. Therefore, the Court will not consider the policy premiums, credit damages, or emotional distress damages in determining whether the amount in controversy requirement has been satisfied. See Miller v. Michigan Millers Ins. Co., 1997 WL 136242 at *5 (N.D.Cal. Mar.12, 1997) ("[I]n the absence of papers suggesting this claim will yield an adequate amount in controversy, the court will not speculate as to the damages potentially embodied in plaintiffs' vague request for emotional distress [damages]."); see also Wilson v. Union Security Life Ins. Co., 250 F.Supp.2d 1260, 1265 (D.Idaho 2003) ("[W]here the Defendant relies on the damages that might flow from the Plaintiff's causes of action, it must provide evidence that would permit a reasoned calculation of those damages."). MSIC's assertion of federal subject matter jurisdiction rests on its argument that Plaintiffs' claims are worth more than $75,000 based on recoverable attorneys' fees and punitive damages. MSIC also requests that the Court require the Burks to stipulate that their damages are...