Melkus v. Allstate Ins. Co.

• Citation: 503 F. Supp. 842
• Decision Date: 03 October 1980
• Docket Number: No. 78-40120.,78-40120.
• Parties: N. Anthony MELKUS, Ind. and on behalf of Others Similarly Situated, Plaintiff, v. ALLSTATE INSURANCE COMPANY, a Foreign Corporation, Defendant.
• Court: U.S. District Court — Western District of Michigan

503 F. Supp. 842

N. Anthony MELKUS, Ind. and on behalf of Others Similarly Situated, Plaintiff, v. ALLSTATE INSURANCE COMPANY, a Foreign Corporation, Defendant.

No. 78-40120.

United States District Court, E. D. Michigan, S. D.

October 3, 1980.

David Melkus, Flint, Mich., for plaintiff.

Joseph A. Sullivan, David G. Chardavoyne, Detroit, Mich., for defendant.

MEMORANDUM OPINION

NEWBLATT, District Judge.

On August 18, 1978, Plaintiff filed this lawsuit in Genesee County Circuit Court against Defendant Allstate Insurance Co. (Allstate) to recover property damage to Plaintiff's automobile sustained in a hit and run accident while Plaintiff's vehicle was parked. Plaintiff alleges a violation of an insurance contract and seeks equitable relief, clarification of policy language as well as money damages, including a compensatory damage award for aggravation, vexation and annoyance, and exemplary damages for Defendant's bad faith. Plaintiff will seek class certification. On September 21, 1978, Defendant Allstate removed the lawsuit to this Court pursuant to 28 U.S.C. § 1441, basing jurisdiction on diversity, 28 U.S.C. § 1332.

This case is here on Plaintiff's motion to remand to the State Court pursuant to 28 U.S.C. § 1447(c).

ARGUMENTS OF THE PARTIES

Plaintiff's motion to remand is based on his assertion that this Court lacks subject matter jurisdiction since the $10,000 amount in controversy requirement of 28 U.S.C. § 1332 is not satisfied.

Plaintiff states that while he was clearly able to assert a claim for more than $10,000 in State Court, he may be unable to do so in Federal Court due to the different treatment in the two forums of the aggregation of claims for class action to establish the jurisdictional amount.¹ Thus, focussing on his individual interest in the suit, Plaintiff concludes that, while it is not impossible, he is unable to establish a claim for the requisite amount with certainty.

Plaintiff's complaint seeks relief in money damages of $750.58 for out-of-pocket expenses spent repairing his truck, exemplary damages for Defendant's bad faith in failing to pay his insurance claim, and injunctive and declaratory relief regarding the language of the insurance policy.

While Plaintiff recognizes that his individual claim for out of pocket expenses is well below the statutory minimum of 28 U.S.C. § 1332, he contends that his claim for exemplary damages may satisfy the jurisdictional amount in controversy. Since it is clear that exemplary damages may be taken into account in determining whether the jurisdictional requirement has been met, state law must be looked to in order to determine whether exemplary damages are recoverable. Hamilton v. Hartford Ins. Co. 425 F.Supp. 224 (DC Pa.1977); Bell v. Preferred Life Assurance Co., 320 U.S. 238, 64 S.Ct. 5, 88 L.Ed. 15 (1943). Plaintiff engages in an analysis of state law and concludes that while the issue is unsettled in Michigan, Fletcher v. Aetna Casualty and Surety Co., 80 Mich.App. 439, 264 N.W.2d 19 (1978) leave to appeal granted on other grounds, 402 Mich. 950s (1978) may preclude recovery in this case. In addition to suggesting that this uncertainty requires remand,² Plaintiff suggests that remand is appropriate in order to provide Plaintiff with an opportunity to litigate this question in state court.

While Plaintiff also recognizes the possibility that the value of the action or cost to Defendant in the action may be considered when evaluating whether the requisite jurisdictional amount in controversy is met, nevertheless, Plaintiff dismisses that possibility relying on Snow v. Ford, 561 F.2d 787 (9th Cir. 1977). In Snow, the court refused to consider the "total detriment" to the Defendant despite Defendant's argument that the injunctive relief sought would affect all of the manufacturer's future sales to individual consumers. See 14 Wright 3703 n. 15.1.

DEFENDANT'S ARGUMENT

Defendant stresses that the amount in controversy has been measured by the value of the lawsuit to the Plaintiff and by the cost to the Defendant of complying with the required injunctive relief and further argues that jurisdiction in this case is proper by way of either approach. Defendant also calls attention to the standard of proof required in order to grant a remand for failure to meet the requisite amount in controversy-that is-the court must find that Plaintiff is incapable to a legal certainty of recovering the jurisdictional amount.

Regarding the value of the lawsuit to the Plaintiff, Defendant argues that remand is not appropriate inasmuch as Plaintiff himself acknowledges that it is not impossible for him to recover in excess of $10,000. Furthermore, Defendant engages in an exhaustive analysis of Michigan law on the recovery of exemplary damages. While Defendant, like Plaintiff, recognizes the question is unsettled, Defendant concludes that Michigan law on the subject indicates a willingness to grant such damages in appropriate cases.³ See Fletcher, supra; Kewin v. Massachusetts Mutual Life Insurance Co., 79 Mich.App. 639, 263 N.W.2d 258 (1977) (but note recent reversal by Michigan Supreme Court, 295 N.W.2d 50, 1980). Thus, Defendant concludes that remand would be inappropriate since the "no recovery to a legal certainty" test has not been met.

As for cost to Defendant and Defendant's interest in the action, Defendant argues that, were Plaintiff to prevail, and were the injunctive relief sought by Plaintiff to be granted, compliance with such an order could cost Defendant in excess of $10,000, thereby establishing the required amount in controversy. In this regard, Defendant places substantial reliance on a line of cases which evaluate and recognize Defendant's interest in evaluating whether the jurisdictional requirement has been met. See Miller v. Standard Federal Savings & Loan Association, 347 F.Supp. 185 (ED Mich.1972) and the line of cases cited in Snow v. Ford, supra at 788-9. By focussing on the cost of implementing the injunctive relief sought by Plaintiff himself rather than the sum of the various claims of each potential member of the possible class action, Defendant implies that it does not rely on the presence or absence of a class action in order to meet the jurisdictional test. In this way, Defendant attempts to distinguish the Snow decision discussed infra.

DISCUSSION

In order to remand this case, the Court must find that Plaintiff is incapable, to a legal certainty, of recovering the jurisdictional amount. The Defendant bears the burden of making this showing.⁴ 14 Wright Federal Practice & Procedure § 3702 p. 374-5 n. 77. See e. g.

Generally speaking, the "certainty test" makes it very difficult to secure dismissal of a case on the ground that it does not appear to satisfy the jurisdictional requirement.⁵

One of the few situations where such a burden may be met is when a specific rule of law or measure of damages limits the amount of damages recoverable. 14 Wright, Federal Practice & Procedure § 3702 p. 394.⁶ Plaintiff's Motion to remand is premised on this exceptional situation.

Normally, the sum demanded by Plaintiff controls if made in good faith and if Plaintiff chooses to ask for less than the jurisdictional amount, only the sum actually demanded is in controversy. See Horton v. Liberty Mutual Ins. Co., 367 U.S. 348, 353, 81 S.Ct. 1570, 1573, 6 L.Ed.2d 890 (1961); Tullos v. Corley, 337 F.2d 384 (6th Cir. 1974); Wells v. Insurance Co., 452 F.Supp. 304 (ND Tenn., 1978). In this case, Defendant is put in a somewhat awkward position since the Plaintiff himself questions his chances of recovering the requisite amount in controversy while maintaining it is not impossible for him to so recover. Plaintiff recognizes that his individual claim might exceed $10,000 depending upon the Court's evaluation of the law regarding the claim made for exemplary damages. Plaintiff's caution is due to the unsettled nature of case law in Michigan regarding the recovery of exemplary damages. Despite Plaintiff's uncertainty, for the purposes of its analysis, this Court will assume Plaintiff has made a good faith demand for $10,000 individual damages. Thus, the only remaining question is whether the Court finds to a legal certainty that such a claim may not properly be made.

The question of which party's interest may be considered in evaluating the jurisdictional amount remains unsettled. See Miller supra at p. 138. See 14 Wright § 3702. The courts have taken three (3) approaches to this issue. First there are those courts that consider only the Plaintiff's view point when making this determination and hold that this should be the sole criterion. Few cases are cited for this position. Plaintiff relies primarily upon the Snow decision in dismissing consideration of Defendant's view point in this case. Snow v. Ford, supra and Zep Mfg. Corp. v. Haber, 202 F.Supp. 847 (SD Tex. 1962). The second approach taken by the courts considers both the Plaintiff's and the Defendant's viewpoints. Miller, supra, is one of the most recent and important case in this category. See also Cate v. Blue Cross and Blue Shield of Alabama, 434 F.Supp. 1187 (ND Tenn.1977); cases cited in Snow v. Ford, supra at 788 including Ridder Bros., Inc. v. Blethen, 142 F.2d 395, 398-99 (9th Cir. 1974); Ronzio v. Dener & RQWR Co., 116 F.2d 604, 606 (10th Cir. 1940). A third approach taken or suggested in dicta by a few courts, considers the value to the party seeking to invoke jurisdiction. It has been pointed out that the last approach may have some anomalous results. 14 Wright § 3703.

This Court finds that the better approach, depending upon the nature of the case, the relief sought, and the underlying basis for jurisdiction, is that taken by courts in the second category whereby both the interests of the Plaintiff and the Defendant may be taken into consideration under proper circumstances. Compare Snow, supra, and Miller, supra. Since this Court concludes that the requisite...