Miera v. Dairyland Ins. Co.

Decision Date07 May 1998
Docket Number97-2135,Nos. 97-2048,s. 97-2048
Citation143 F.3d 1337
Parties98 CJ C.A.R. 2247 Renetta M. MIERA, Plaintiff-Appellant, v. DAIRYLAND INSURANCE COMPANY, Defendant-Appellee.
CourtU.S. Court of Appeals — Tenth Circuit

Edmund R. Pitts (David Graham with him on briefs), Law Firm of David Graham, Taos, NM, for Plaintiff-Appellant.

Kathryn D. Lucero (J. Douglas Foster with her on briefs), Foster, Johnson, Harris, and McDonald, Albuquerque, NM, for Defendant-Appellee.

Before PORFILIO, LOGAN, and MURPHY, Circuit Judges.

JOHN C. PORFILIO, Circuit Judge.

Renetta M. Miera instituted this action in New Mexico state court seeking a declaratory judgment and other relief to confirm the terms of an arbitration award assessing her property and personal injury damages resulting from a collision she had with an uninsured motorist. Dairyland Insurance Company, her insurer, removed the action to federal court based on diversity jurisdiction and obtained not only judgment on the merits but also attorney's fees and costs levied personally against Ms. Miera's attorney under 28 U.S.C. § 1927. We hold the district court properly exercised jurisdiction over this action and correctly applied Quinones v. Pennsylvania General Ins. Co., 804 F.2d 1167 (10th Cir.1986), to permit Dairyland to offset amounts previously paid against the total award of damages under the uninsured motorist provision of the insurance contract. However, the court erred in finding, under the circumstances of this case, Ms. Miera's counsel's failure to cite Quinones demonstrated reckless disregard of his duty of candor to the court, unreasonably and vexatiously multiplying the proceedings. Ms. Miera purchased her car on March 15, 1994, for $9,108.50, and the following month, on April 17, 1994, the collision occurred seriously injuring Ms. Miera and leaving her car totally damaged. Ms. Miera's automobile insurance policy with Dairyland (the Policy) included a provision for uninsured motorist insurance 1 as well as medical payment and collision coverage. Ms. Miera promptly notified Dairyland of the accident and submitted claims under the Policy's collision and medical payment coverage for which Dairyland respectively paid $5,137.50 to GMAC, the vehicle's lienholder, and $1,134.91 to Ms. Miera to reimburse her medical expenses. Later unable to resolve Ms. Miera's total personal and property losses, the parties submitted the dispute to arbitration, each side selecting one arbitrator and then agreeing to the selection of a third. Prior to the arbitration hearing, David Graham, Ms. Miera's attorney, wrote Dairyland to document four stipulations, one of which embodied the prior payments. 2 Dairyland, in turn, wrote back, articulating its understanding of the scope of the arbitration. 3 Mr. Graham did not respond to that letter. Subsequently, the Arbitration Panel found the total amount of damages was $17,134.91. Dairyland promptly paid Ms. Miera $10,862.50, a sum reflecting its deduction of the $6,272.41 already advanced.

Ms. Miera then filed the underlying action in the district court of Taos County seeking relief under three New Mexico statutory provisions: N.M. Stat. Ann. § 44-7-11 to confirm the arbitration award; N.M. Stat. Ann. §§ 59A-16-20 and 59A-16-30, Unfair Claim Practices Act; and §§ 57-12-2 and 57-12-10, Unfair Trade Practices. Alleging Ms. Miera was a citizen of New Mexico and it was not, and damages exceeded $50,000, Dairyland removed the action to federal court. Ms. Miera contested removal, alleging the amount in controversy on the face of her complaint did not exceed $50,000. The district court denied the motion to remand, concluding although the complaint alleged damages only of $41,028.51 were plaintiff to succeed on all of her claims, the Unfair Claim Practice Act and Unfair Trade Practice Act provided for the recovery of attorney's fees, potentially bumping up the total recovery to the $50,000 requisite. The district court then granted Dairyland's motion for summary judgment dismissing all of Ms. Miera's statutory causes of action. In a separate order, the court found Mr. Graham's failure to cite the controlling case law was "reckless" and a "needless" increase of the cost of litigation and awarded $2,584.17 in attorney's fees and costs to be paid personally by Mr. Graham to Dairyland.

I. Diversity Jurisdiction

Ms. Miera maintains the district court erred in denying her motion to remand, insisting the total damages sought in her underlying complaint cannot exceed $41,028.51. She contends this figure already contains an award of attorney's fees under N.M. Stat. Ann. § 59A-16-30 and N.M. Stat. Ann. § 57-12-10. Thus, the court's speculating an award of attorney's fees would increase the total to meet the $50,000 jurisdictional amount was unfounded, she insists.

The courts must rigorously enforce Congress' intent to restrict federal jurisdiction in controversies between citizens of different states. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288, 58 S.Ct. 586, 590, 82 L.Ed. 845 (1938). For diversity jurisdiction under 28 U.S.C. § 1332(a), the amount in controversy must exceed $50,000. St. Paul Mercury examined this rule:

The rule governing dismissal for want of jurisdiction in cases brought in the federal court is that, unless the law gives a different rule, the sum claimed by the plaintiff controls if the claim is apparently made in good faith. It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal. The inability of plaintiff to recover an amount adequate to give the court jurisdiction does not show his bad faith or oust the jurisdiction. Nor does the fact that the complaint discloses the existence of a valid defense to the claim. But if, from the face of the pleadings, it is apparent, to a legal certainty that the plaintiff cannot recover the amount claimed or if, from the proofs, the court is satisfied to a like certainty that the plaintiff never was entitled to recover that amount, that his claim was therefore colorable for the purpose of conferring jurisdiction, the suit will be dismissed.

Id. at 288-89, 58 S.Ct. at 590 (citations omitted). Once jurisdiction has attached, events subsequently defeating it by reducing the amount in controversy are unavailing. Id. Where a plaintiff has not instituted suit in federal court, "[t]here is a strong presumption that the plaintiff has not claimed a large amount in order to confer jurisdiction on a federal court...." Id. at 290, 58 S.Ct. at 591.

Nevertheless, plaintiff's claims for damages control if they are made "in good faith," that is, if they evince to a "legal certainty" the claims total at least $50,000. Here, although we indulge a presumption in plaintiff's favor, we look to the face of her complaint to decide whether the jurisdictional amount is satisfied. Accepting plaintiff's argument that New Mexico law does not allow duplicative damages, see Hale v. Basin Motor Co., 110 N.M. 314, 795 P.2d 1006, 1012 (1990), the Count III claim alone reasonably read totals more than $50,000. That claim under the Unfair Trade Practice Act sought "triple damages calculated at present to be $41,028.51, attorneys fees, pre-judgment interest at the maximum allowable rate of fifteen percent form [sic] the date of the breach of the defendant's obligations to the plaintiff, post-judgment interest, costs, the expenses in bringing this action and for such further relief as the court deems just, proper and necessary."

Thus, plaintiff sought in addition to $41,028.51 the attorney's fees permitted by statute. See N.M. Stat. Ann. § 57-12-10(C). The Supreme Court has long held that when a statute permits recovery of attorney's fees a reasonable estimate may be used in calculating the necessary jurisdictional amount in a removal proceeding based upon diversity of citizenship. Missouri State Life Ins. Co. v. Jones, 290 U.S. 199, 202, 54 S.Ct. 133, 133-34, 78 L.Ed. 267 (1933). Plaintiff alleged in the fact section of her complaint that she had incurred "attorneys' fees in the amount of $6,854.00 to date to prosecute her uninsured motorist claim against the Defendant." These fees, together with plaintiff's claim for $41,028.51 treble damages in Count III, amount to $47,882.51, $2,117.50 short of the $50,000 jurisdictional threshold. Considering the realities of modern law practice and the complexities of this case, we cannot say that, viewed as of the date of removal, it would be unreasonable to expect plaintiff to incur an additional $2,117.50 in attorney's fees. The court therefore agrees with the district court that a reasonable attorney's fee alone, when added to the $41,028.51, would push the amount of plaintiff's claim in Count III above $50,000, without consideration of the pre-judgment interest or other costs and expenses sought.

II. Offset under Quinones

Ms. Miera urges the district court ignored the dictates of Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and resolved Dairyland's motion for summary judgment under federal law while exercising its diversity jurisdiction. This result, she complains, overlooks a line of New Mexico cases prohibiting the insurer from offsetting any payments it made under the insured's uninsured motorist coverage (UMC).

The district court prefaced its reliance upon the Tenth Circuit case of Quinones, 804 F.2d at 1167, with the statement that New Mexico appellate courts had not yet decided whether an insurer is entitled to receive credit for amounts paid under medical payment and collision coverages prior to the entry of a final award. New Mexico has decided an insurer may not offset amounts paid under a separate workers' compensation policy from amounts paid under UMC, Continental Ins. Co. v. Fahey, 106 N.M. 603, 747 P.2d 249 (N.M.1987); the employee may retain the difference between uninsured motorist benefits and workers' compensation benefits, although the...

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