Conrad Associates v. Hartford Acc. & Indem. Co.

• Decision Date: 10 February 1998
• Docket Number: No. C97-20917 EAI.,C97-20917 EAI.
• Citation: 994 F.Supp. 1196
• Court: U.S. District Court — Northern District of California
• Parties: CONRAD ASSOCIATES, Plaintiff, v. HARTFORD ACCIDENT & INDEMNITY COMPANY, Defendant.

994 F.Supp. 1196

CONRAD ASSOCIATES, Plaintiff, v. HARTFORD ACCIDENT & INDEMNITY COMPANY, Defendant.

No. C97-20917 EAI.

United States District Court, N.D. California, San Jose Division.

February 10, 1998.

William Green, Jeffrey Brandstetter, Brandstetter & Green, San Francisco, CA.

James P. Wagoner, Robert K. Landen, Alyson A. Berg, McCormick, Barstow, Sheppard, Wayte & Carruth LLP, Fresno, CA.

ORDER GRANTING PLAINTIFF'S MOTION TO REMAND

INFANTE, United States Magistrate Judge.

I. INTRODUCTION

Plaintiff Conrad Associates moves to remand on the grounds that the amount in controversy in this diversity case does not exceed $75,000. Plaintiff also seeks sanctions against Defendant Hartford Accident and Indemnity Company for improperly removing this case. For the reasons set forth below, plaintiff's motion to remand is GRANTED and plaintiff's motion for sanctions is DENIED.

II. BACKGROUND

On February 1, 1983, Conrad Associates ("Conrad") entered into a contract to design a two-story parking structure located at the Del Monte Shopping Center in Monterey, California. The parking structure included Unicon pre-cast modules fabricated by Conrad Constructors, a division of Conrad Building Systems. Contained within these concrete units were horizontal cables (tendons) with anchor plates for cables placed against the surface of the Unicon modules. In June 13, 1984, while an insurance policy with Hartford was in effect, a "blow out" occurred in which at least seventeen anchors tore through the upper concrete deck of the parking structure. An action relating to the parking structure was commenced against Conrad and several defendants, alleging negligence in connection with the work performed on the parking structure, and Hartford defended and indemnified Conrad in a settlement of that case under a reservation of rights.

On December 28, 1988, four anchor plates broke through the concrete deck of the shopping center's parking lot, and the owner's insurer filed suit against Conrad Associates, alleging defective construction. Plaintiff tendered its defense to Hartford, which Hartford refused. Plaintiff contributed $16,500 towards the settlement of that case, and spent approximately $40,000 defending the action.

On August 19, 1997, plaintiff filed the instant action for breach of contract and breach of the implied covenant of good faith and fair dealing in the Superior Court for the County of Monterey. The complaint alleges that Conrad incurred $56,500.00 in expenses from Hartford's alleged breach of contract, seeks damages in the form of attorneys' fees and costs incurred in seeking policy benefits from Hartford, and punitive damages. Defendant received notice of the complaint on September 15, 1997, and filed a Notice of Removal based on diversity jurisdiction on October 14, 1997.

III. LEGAL STANDARDS

The removal statute, 28 U.S.C. § 1441, provides in part, "[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant ... to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). District courts have diversity jurisdiction over all civil actions between citizens of different states where the amount in controversy exceeds $75,000, exclusive of interest and costs. 28 U.S.C. § 1332.¹ If at any time before final judgment it appears that the district court lacks subject matter jurisdiction over a case that has been removed to federal court, the case must be remanded. 28 U.S.C. § 1447(c).

In a motion to remand to state court, the party asserting federal jurisdiction has the burden of proof. "The burden of establishing federal jurisdiction is upon the party seeking removal, and the removal statute is strictly construed against removal jurisdiction." Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 (9th Cir.1988) (citations omitted). "The strong presumption against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper." Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.1992) (quotation omitted).

In cases in which the existence of diversity jurisdiction depends on the amount in controversy, "[t]he district court may consider whether it is `facially apparent' from the complaint that the jurisdictional amount is in controversy." Singer v. State Farm Mutual Auto. Ins. Co., 116 F.3d 373, 377 (9th Cir.1997), citing Allen v. R & H Oil & Gas Co., 63 F.3d 1326 (5th Cir.1995). If the complaint is silent on the amount of damages claimed, "the court may consider facts in the removed petition and may `require the parties to submit summary-judgment-type evidence relevant to the amount in controversy at the time of removal.'" Singer, 116 F.3d at 377. A speculative argument regarding the potential value of the award is insufficient. Id. at 376; Gaus v. Miles, 980 F.2d 564, 567 (9th Cir.1992). The amount in controversy includes claims for general and special damages (excluding costs and interests), including attorneys fees, if recoverable by statute or contract, and punitive damages, if recoverable as a matter of law. See Richmond v. Allstate Ins. Co., 897 F.Supp. 447 (S.D.Cal.1995); Miller v. Michigan Millers Ins. Co., 1997 WL 136242 (N.D.Cal.1997).

IV. DISCUSSION

Plaintiff asserts that Hartford cannot meet its burden of proving, by a preponderance of the evidence, that the amount in controversy exceeds the jurisdictional minimum of $75,000. Defendant contends that the amount in controversy, which includes contract damages in the amount of $56,500, plus attorneys fees, plus punitive damages, exceeds $75,000.

Defendant advances three arguments in support of its contention that plaintiff's claim is worth more than $75,000. First, defendant contends that Conrad's refusal to stipulate to damages less than $75,000 "conclusively" establishes that plaintiff deems the amount in controversy to be in excess of $75,000. Second, defendant asserts that plaintiff's request for attorneys' fees incurred in seeking to enforce insurance benefits is likely to reach at least $20,000 by the conclusion of this litigation since the parties have agreed to have the issue of Hartford's duty to defend addressed in a motion for summary judgment. Third, defendant asserts that a punitive damage award would likely exceed the jurisdictional amount since the average punitive damage award in a bad faith claim for the past year in the State of California was $6,720,222.23.

A. Plaintiff's Refusal to Stipulate to Lessor Damages

Defendant's assertion that it is "conclusively established" that the amount in controversy in this case exceeds $75,000 by plaintiff's refusal to stipulate that the case is not worth $75,000 is not convincing. First, defendant cites no cases permitting such a conclusion from a failure to so stipulate. Two cases in this district have expressly declined to find that a refusal to stipulate to damages below the jurisdictional amount is even persuasive in evaluating the worth of the claims in a complaint. See Valle v. State Farm Mutual Automobile Ins., 1997 WL 564047 (N.D.Cal.1997) and Miller v. Michigan Millers Ins. Co., 1997 WL 136242 (N.D.Cal.1997). Moreover, since a defect in subject matter jurisdiction cannot be stipulated to or waived, attempting to force the plaintiff to enter a stipulation regarding the potential amount of damages would serve no effect in determining the actual amount in controversy at the time of removal. See, e.g., Angus v. Shiley, Inc., 989 F.2d 142 (3rd Cir.1993).²

B. Attorneys' Fees

California law permits recovery of attorneys fees incurred by the insured in obtaining the benefits due under the policy when the insurer's conduct in withholding benefits was tortious. Brandt v. Superior Court, 37 Cal.3d 813, 816-819, 693 P.2d 796, 210 Cal.Rptr. 211 (1985). The theory permitting this recovery is that "[w]hen an insurer's tortious conduct reasonably compels the insured to retain an attorney to obtain the benefits due under a policy, it follows that the insurer should be liable in a tort action for that expense." Id. However, only attorney fees attributed to an attorney's efforts in obtaining benefits due under the insurance contract are recoverable, and "[f]ees attributable to obtaining any portion of the plaintiff's award which exceeds the amount due under the policy are not recoverable." Id. Since the amount in controversy may include attorneys fees if recoverable by statute or contract, attorney fees recoverable under Brandt may be considered in determining whether the amount in controversy exceeds the jurisdictional floor. Richmond, 897 F.Supp. at 450; Miller, 1997 WL 136242, *4.

Defendant states that it sought documentation from plaintiff of its attorney fees expended in this litigation thus far, but plaintiff has failed to provide documentation to date despite its promises to do so. Defendant asserts that plaintiff's failure to provide billing statements precludes the determination that the amount in controversy is not satisfied.³ Alternatively, defendant provides its estimate of recoverable attorneys fees as exceeding $20,000. In support of this contention, defendant points out that Conrad has confirmed that it has expended at least $4000 in attorney fees thus far. Based upon the parties' agreement that the issue of Hartford's duty to defend should be addressed by a motion for summary judgment, and that plaintiff's counsel charges fees of $200 per hour (see plaintiff's request for sanctions), defendant contends that "Conrad will necessarily spend at least eighty hours in prosecuting the coverage phase of this action and incur at least an additional $16,000.00 in fees." Wagoner Decl. ¶ 4. Based upon the $56,500 claimed damages for breach of contract, plus a minimum of $20,000 in attorneys fees, Mr. Wagoner concludes that the total amount of damages incurred in this litigation will probably...