Jones v. Allstate Ins. Co.

• Decision Date: 17 April 2003
• Docket Number: No. 2:02-0797-18.,2:02-0797-18.
• Citation: 258 F.Supp.2d 424
• Parties: Ian T. JONES and Chris S. Duvall, individually and on behalf of all others similarly situated in the State of South Carolina, Plaintiffs, v. ALLSTATE INSURANCE COMPANY and Allstate Indemnity Company, Defendants.
• Court: U.S. District Court — District of South Carolina

Page 424

258 F.Supp.2d 424

Ian T. JONES and Chris S. Duvall, individually and on behalf of all others similarly situated in the State of South Carolina, Plaintiffs, v. ALLSTATE INSURANCE COMPANY and Allstate Indemnity Company, Defendants.

No. 2:02-0797-18.

United States District Court, D. South Carolina, Charleston Division.

April 17, 2003.

Mark C. Janenbaum, Fred Thompson, III, Charleston, WV, for plaintiffs.

Thomas C. Salane, Columbia, WV, for defendant.

ORDER

NORTON, District Judge.

This matter is before the court on plaintiffs' motion to remand for lack of subject matter jurisdiction.

I. Background

Plaintiffs Jones and Duvall were insured under Allstate¹ automobile insurance policies in 2001 when they were involved in accidents that caused property damage to their vehicles. (Am.Compl.¶¶ 34-35.) When plaintiffs filed their claims with Allstate, the Allstate adjuster determined plaintiffs' claims based on what their repairs would cost, but "did not consider, reimburse, or compensate Plaintiffs for the inherent diminished value to their vehicles." (Am.Compl.¶ 36.) Plaintiffs allege that "damaged vehicles, though subsequently repaired, have a lesser value than a similar vehicle with no damage history" and their Allstate insurance contracts should be interpreted as providing coverage for such "diminished value." (Am. Compl.¶ 38.) As a result, plaintiffs filed this proposed class action in South Carolina state court "on behalf of all Allstate policyholders in South Carolina who, from February 1, 1996 until the trial of this cause ..., sustained unibody structure and/or frame damage to a covered vehicle owned by him, made a claim for vehicle damage pursuant to their automobile insurance policy, and who, either directly or indirectly, did not receive compensation for the diminished market value of that covered vehicle after Allstate elected to make repairs on said vehicle." (Am.Compl.¶ 1.) In their Amended Complaint, plaintiffs allege the following causes of action: (1) Breach of Express Contract; (2) Breach of Covenant of Good Faith and Fair Dealing in the Performance of Insurance Contracts; (3) Unfair of Deceptive Insurance Practice; (4) Restitution; (5) Voluntary Payment and Mistake of Fact; (6) Breach of Fiduciary Relationship; and (7) Declaratory and Injunctive Relief. (Am. Compl.¶¶ 44-73.) On March 11, 2002, Allstate removed the case based on diversity jurisdiction. Plaintiffs then filed a motion to remand for lack of subject matter jurisdiction.

II. Law/Analysis

Allstate removed this case based on diversity jurisdiction under 28 U.S.C. § 1332. The diversity of citizenship of the parties is not in dispute; the named plaintiffs are citizens of South Carolina and Allstate is incorporated and headquartered in Illinois. The contested issue for purposes of diversity jurisdiction is whether the "matter in controversy exceeds $75,000, exclusive of interest and costs." 28 U.S.C. § 1332 (West 2003). "When two or more plaintiffs, having separate and distinct demands, unite for convenience and economy in a single suit, it is essential that the demand of each be of the requisite jurisdictional amount; but when several plaintiffs unite to enforce a single title or right, in which they have a common and undivided interest, it is enough if their interests collectively equal the jurisdictional amount." Zahn v. Int'l Paper Co., 414 U.S. 291, 295, 94 S.Ct. 505, 38 L.Ed.2d 511 (1973) (internal citations and quotation marks omitted). Thus, in a class action, if there are "separate and distinct claims by two or more plaintiffs, the determination of the amount in controversy is based upon each plaintiffs claims and not upon the aggregate." Glover v. Johns-Manville Corp., 662 F.2d 225, 231 (4th Cir.1981) (citing Zahn, 414 U.S. at 293-96, 94 S.Ct. 505). However, if any named representative plaintiff has a claim in excess of $75,000, a federal court has jurisdiction over the entire class based on 28 U.S.C. § 1367, the supplemental jurisdiction statute. Rosmer v. Pfizer, 263 F.3d 110, 122 (4th Cir.2001). Therefore, under Zahn, as interpreted by Rosmer, the requisite amount in controversy for diversity jurisdiction is met in a class action if at least one of the named plaintiffs has a claim exceeding $75,000. Id.

The first issue is the effect of plaintiffs' disclaimer on damages, which provides as follows:

"The total amount in controversy as to each Plaintiffs and each individual member of the Class does not exceed seventy-four thousand dollars ($74,000) each, exclusive of interests and costs. Plaintiffs therefore disclaim any damages, injunctive relief and/or restitution greater than seventy-four thousand [dollars] ($74,000) per Plaintiffs or individual Class Member."

(Am.Compl.¶ 10.) As a general rule, the sum claimed by a plaintiff in his complaint determines the jurisdictional amount, and a plaintiff may plead less than the jurisdictional amount to avoid federal jurisdiction. See St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 294, 58 S.Ct. 586, 82 L.Ed. 845 (1938) ("If [the plaintiff] does not desire to try his case in the federal court he may resort to the expedient of suing for less than the jurisdictional amount, and though he would be justly entitled to more, the defendant cannot remove."); Spann v. Style Crest Prods., Inc., 171 F.Supp.2d 605, 608-09 (D.S.C.2001); Charles A. Wright, Arthur R. Miller, and Edward H. Cooper, 14A Federal Practice and Procedure § 3702 [hereinafter "Wright & Miller"] ("Under well-settled principles, the plaintiff is the master of his or her claim; if plaintiff chooses to ask for less than the jurisdictional amount, only the sum actually demanded is in controversy.").² Plaintiffs' disclaimer therefore effectively limits their claim for damages to less than the jurisdictional amount. Plaintiffs also seek restitution for monies that Allstate allegedly retained by failing to pay diminished value payments under their insurance policies. Plaintiffs' restitution claims are theoretically distinct from their claims for damages because they are based on the amount that Allstate was improperly enriched rather than the amount that plaintiffs were damaged. However, the restitution claims seek monetary relief for past inequities and therefore are also subject to plaintiffs' disclaimer.

Plaintiffs' attempt to discount the value of their requested injunctive relief, however, is more problematic. Plaintiffs are seeking "an order of this Court ordering Allstate to immediately cease all acts complained of herein and enjoining Allstate from continuing to refuse to properly pay and notify members of the Class of their respective rights under the policies in question." (Am. Compl. Prayer for Relief ¶ B.) This request for prospective injunctive relief could require Allstate to make diminished value payments and incur compliance costs after this lawsuit is concluded. Unlike plaintiffs' claims for damages and restitution, which would result in monetary recovery for Allstate's past conduct, the value of this future injunctive relief would not be part of any monetary judgment in this case. Thus, plaintiffs' disclaimer does not effectively limit the value of such prospective injunctive relief. Accordingly, the court must determine whether plaintiffs' Complaint—including the claims for damages, restitution, and injunctive relief—cause the amount in controversy in this case to exceed $75,000. See Spann, 171 F.Supp.2d at 607 n. 3 (noting that when a complaint only limits part of the demand, the total amount in controversy has not been specified and must be evaluated by the court).

A defendant who has removed an action to federal court has the burden of establishing subject matter jurisdiction. Mulcahey v. Columbia Organic Chems. Co., 29 F.3d 148, 151 (4th Cir.1994). On a motion to remand, courts should construe removal jurisdiction strictly in favor of state court jurisdiction. Id. "If federal jurisdiction is doubtful, a remand is necessary." Id. The Fourth Circuit has not decided the precise standard on a motion to remand for determining the value of an unspecified damage claim. See Rota v. Consolidation Coal Co., 175 F.3d 1016 n. 4 (4th Cir.1999) (UNPUBLISHED TABLE OPINION) (noting that the proper standard for assessing the value of an unspecified damage claim is subject to "debate" and declining to adopt a particular standard). Courts have required the removing party to meet one of several different standards to show that the amount in controversy has been satisfied: (1) "legal certainty," White v. J.C. Penney Life Ins. Co., 861 F.Supp. 25, 27 (S.D.W.V.1994); (2) "preponderance of the evidence," Tapscott v. MS Dealer Service Corp., 77 F.3d 1353, 1357 (11th Cir.1996); (3) "reasonable probability," Reason v. General Motors Corp., 896 F.Supp. 829, 834 (S.D.Ind.1995); and (4) inverse legal certainty, Hale v. Billups of Gonzales, Inc., 610 F.Supp. 162, 163-64 (D.La.1985); Woodward v. Newcourt Commercial Fin. Corp., 60 F.Supp.2d 530, 531 (D.S.C.1999) ("[T]he defendant must show that it does not appear to a legal certainty that the removed claim is for less than the jurisdictional amount."). This court has declined to apply the "inverse legal certainty" standard because it would shift the burden of showing grounds for removal from the defendant to the plaintiff. Spann, 171 F.Supp.2d at 607. However, this court need not adopt a particular standard in this case because Allstate has not shown to a "legal certainty," "by a preponderance of the evidence," or to a "reasonable probability" that plaintiffs' complaint causes the total amount in controversy to exceed $75,000.

Allstate makes two arguments as to why the jurisdictional amount is satisfied. First, it argues that the value of the requested declaratory and injunctive relief, when measured from the viewpoint of Allstate, satisfies the jurisdictional amount regardless of the number of named plaintiffs or putative class members. The first issue raised...