Doss v. Am. Family Home Ins. Co., Case No. 4:14–cv–04007.

• Decision Date: 19 September 2014
• Docket Number: Case No. 4:14–cv–04007.
• Court: U.S. District Court — Western District of Arkansas
• Parties: Lee Ann DOSS, et al., Plaintiffs v. AMERICAN FAMILY HOME INSURANCE COMPANY, Defendants.

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Lee Ann DOSS, et al., Plaintiffs
v.
AMERICAN FAMILY HOME INSURANCE COMPANY, Defendants.

Case No. 4:14–cv–04007.

United States District Court, W.D. Arkansas, Texarkana Division.

Signed Sept. 19, 2014.

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D. Matt Keil, Attorney At Law, George L. McWilliams, Law Office of George L.

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McWilliams, P.C., John C. Goodson, Keil & Goodson, Texarkana, AR, James M. Pratt, Jr., James M. Pratt, Jr., P.A., Camden, AR, Stevan Earl Vowell, Timothy J. Myers, W.H. Taylor, Taylor Law Firm, William B. Putman, Taylor Law Partners, Fayetteville, AR, Stephen C. Engstrom, Stephen Engstrom Law Office, Little Rock, AR, Jason Earnest Roselius, The Roselius Law Firm, Oklahoma, OK, Richard A. Russo, Jr., Sharan Nirmul, Matthew L. Mustokoff, Sean M. Handler, Kessler Topaz Meltzer & Check LLP, Radnor, PA, A.F. (Tom) Thompson, III, Kenneth (Casey) Castleberry, Murphy, Thompson, Arnold, Skinner & Castleberry, Batesville, AR, Richard E. Norman, Crowley Norman LLP, Houston, TX, for Plaintiffs.

Andrew Evan Samuels, Mark A. Johnson, Robert J. Tucker, Rodger L. Eckelberry, Baker & Hostetler LLP, Columbus, OH, W. Kelvin Wyrick, Sr., Texarkana, AR, for Defendants.

ORDER

SUSAN O. HICKEY, District Judge.

Currently before the Court is Plaintiffs' Motion to Remand. (ECF No. 24). Defendant American Family Home Insurance Company has responded. (ECF No. 36). Plaintiffs filed a reply to Defendant's response. (ECF No. 43). The Court finds this matter ripe for consideration. Plaintiff argues that this Court does not have jurisdiction over this lawsuit because Defendant has not shown that the amount in controversy exceeds the $5 million minimum for federal court jurisdiction under the Class Action Fairness Act. For reasons reflected herein, Plaintiff's Motion to Remand (ECF No. 24) is DENIED.

I. Background

Plaintiffs filed an amended putative class action complaint in state court in Miller County, Arkansas on December 3, 2013. (ECF No. 5). On January 6, 2014, Defendant removed the case to this Court. (ECF No. 1). Defendant filed a Motion for Judgment on the Pleadings on February 17, 2014. (ECF No. 20). On March 18, 2014, Plaintiff filed a Motion to Remand. The Court will resolve the pending Motion to Remand first because it concerns a question of federal jurisdiction, a threshold matter. See Counts v. Cedarville Sch. Dist., 295 F.Supp.2d 996, 998 (2003).

The named Plaintiffs, Lee Ann Doss and B.G. Peavy (“Doss and Peavy”), were under a homeowner's insurance policy issued by the Defendants American Family Home Insurance Company (“American Family”). (ECF No. 1). Doss and Peavy suffered a covered loss to their insured property on August 13, 2008. On October 17, 2008, American Family estimated the cost to repair the property at $5,330.95, a total that included the cost of labor and materials. American Family paid Doss and Peavy the “actual cash value” of their loss, which was $4,620.77 after subtracting depreciation and the amount of the deductible. The depreciated amount included both the cost of labor and materials. Doss and Peavy, in their Complaint, argue that Arkansas law prohibits an insurance company from depreciating the cost of labor. Therefore, by depreciating this cost, Plaintiffs claim that American Family (1) breached their contract with Plaintiffs and (2) were unjustly enriched.

American Family has removed this case to federal court, asserting that jurisdiction is proper under the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d). For a federal court to have jurisdiction under CAFA, the removing party must demonstrate that there is (1) a proposed plaintiff class of 100 or more members, (2) minimal diversity, and (3) more than $5 million in controversy, exclusive of interest and

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costs. 28 U.S.C. § 1332(d). The parties only dispute is whether the aggregate amount in controversy exceeds $5 million.

II. Discussion

“[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). If a defendant meets its burden, then a plaintiff seeking remand must establish to a legal certainty that the amount in controversy is less than the statute requires. Bell, 557 F.3d at 956. The legal-certainty standard is not met if even a possibility exists of recovering more than the statutory minimum. Back Doctors Ltd. v. Metro. Prop. & Cas. Ins. Co., 637 F.3d 827, 831 (7th Cir.2011).

A. Compensatory Damages

To support their claim that the amount in controversy exceeded the jurisdictional minimum, American Family submitted the affidavit of Denise Rice, Claims Data Specialist for American Family. (ECF No. 1, Ex. 3). She gathered information from American Family's records to identify the “approximate number of insureds of American Family who received payment for loss or damage under a policy providing insurance coverage for a dwelling or other structure located in the State of Arkansas [from May 2004 to December 3, 2013].” (ECF No. 1, Ex. 3 ¶ 6–7). The records indicated that American Family paid out approximately $27,000,000 in indemnity payments on 8,838 claims for property damage during that time.

The Complaint asserts damages only for the allegedly unlawful depreciation of labor costs. Because American Family's Adjuster Summary does not separately itemize material and labor for every item of work, it is difficult to reach an exact amount of damages. Thus, American Family has utilized four different methods of calculating approximate compensatory damage amounts to aid in determining the amount in controversy for CAFA jurisdiction.

The first two calculations were based on sales tax. Because sales tax in Arkansas is not added to labor costs, but only to material costs, the first estimation was reached by multiplying the total sales tax on Doss and Peavy's Adjuster Summary by the tax rate in Arkansas. This calculation yielded the approximate amount of the total actual value allocated to materials. That number was used to determine the percentage of the total allocated to both labor and materials. American Family applied those percentages to the total depreciation to estimate the amount of depreciation for labor costs on Doss and Peavy's claim. When applying the same percentages to the total of indemnity payments paid out by American Family, $27,000,000, the first estimated depreciation deduction for labor charges for the class was approximately $1,566,000. Using the same percentages, and assuming that Doss and Peavy's claims were typical of the class, American Family also estimated the damages for the class by multiplying Doss and Peavy's estimated labor depreciation deductions by the total amount of claims in Arkansas for the relevant time period, 8,838, yielding an estimated $2,668,369 total compensatory damages.

The next two calculations were based on the percentage of payment allocated to labor on the specific projects where labor

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and materials were separately itemized in the Adjuster's Summary. American Family, using the project with the lowest percentage attributable to labor, multiplied the percentage attributed to labor by the total replacement cost to reach a total amount of payment allocated to labor. American Family then applied the percentage to the depreciation deductions to determine the approximate amount of depreciation deduction attributed to labor. By multiplying this percentage by the total amount of money paid out on claims in Arkansas, the estimation was...