Steingerg v. Nationwide Mut. Ins. Co.
| Decision Date | 07 March 2006 |
| Docket Number | No. 2:05-CV-03340(ADS)(ARL).,2:05-CV-03340(ADS)(ARL). |
| Citation | 418 F.Supp.2d 215 |
| Parties | Stephen R. STEINBERG, individually and on behalf of all others similarly situated, Plaintiff, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Eastern District of New York |
Pomerantz Haudek Block & Grossman, New York City (D. Brian Hufford, Robert J. Axelrod, Stanley M. Grossman, and Susan Jessica Weiswasser, of Counsel), for the Plaintiff.
Nelson, Levine, DeLuca & Horst, Bluebell, Pa (Michael R. Nelson, of Counsel), for the Defendant.
This class action was originally brought by Stephen R. Steinberg ("Steinberg" or the "Plaintiff"), on behalf of himself and the putative class, against Nationwide Mutual Insurance Company ("Nationwide" or the "Defendant"), seeking a class certification, an injunction, compensatory damages, and attorney's fees. The case arises out of an alleged breach of Nationwide's contractual obligations under insurance policies it issued. Presently before the court is a motion by Nationwide to dismiss the Plaintiff's complaint for lack of subject matter jurisdiction, or, in the alternative, to abstain from exercising jurisdiction until the resolution of a parallel state action. In addition, both parties have filed motions for sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure ("Fed. R. Civ.P.").
This action arises out of an automobile insurance contract Nationwide sold Steinberg for his leased 1999 BMW 740i. In September 1999, Steinberg's BMW engine was damaged by water that entered the engine and caused a "hydraulic lock." On behalf of Nationwide, an adjuster consented to the replacement of the engine and agreed to pay the repairing dealer an unspecified amount for the replacement engine and related work that was made necessary by the loss. The dealer repaired the automobile and Nationwide tendered a check to the plaintiff. However, the check did not reflect the sum that the dealer, Nationwide's adjuster, and the plaintiff had agreed upon. Nationwide had subtracted from that agreed-upon sum the deductible, which is provided for in the insurance contract and varies among insureds. Nationwide also deducted a "betterment charge" deduction of $563.17. The term "betterment charge" is not contained in the automobile insurance contract between Nationwide and Steinberg.
In the complaint, Steinberg alleges that the deduction by Nationwide of the "betterment charge" constitutes a breach of the insurance contract between him and Nationwide because, under the contract, the only amount an insured must pay is the deductible. Steinberg further alleges that the term "deductible" as defined in the insurance contract does not reflect a "betterment charge." Steinberg also contends that Nationwide has breached the contract by applying the "betterment charge" to the loss of parts, such as the engine in this case.
The complaint further alleges that, since on or about January 1, 1993, Nationwide has entered into automobile insurance contracts that are substantially similar to the contract described above with "millions" of people in every state except Hawaii, Massachusetts, and New Jersey. Steinberg seeks to maintain a class action on behalf of all individuals who entered into automobile insurance contracts with Nationwide and have had, since January 1, 1993, a collision or comprehensive loss (1) for which Nationwide paid the amount necessary for repair minus the deductible and a "betterment charge"; or (2) that involved a vehicle that was repaired at a Blue Ribbon Repair Shop where the insured paid a deductible and a "betterment charge."
The Plaintiff commenced a class action against Nationwide nearly identical to the instant action on October 13, 1999, in the Supreme Court of the State of New York, Suffolk County. On November 24, 1999, Nationwide removed the action to this Court pursuant to 28 U.S.C. §§ 1441 and 1446. On December 9, 1999, Steinberg moved to remand the action to the state court on the ground that this Court lacked subject matter jurisdiction. In particular, the plaintiff argued that the amount in controversy did not exceed $75,000 as required by 28 U.S.C. § 1332(a).
On April 6, 2000, this Court denied Steinberg's motion to remand. Steinberg v. Nationwide, 91 F.Supp.2d 540 (E.D.N.Y.2000). The Court held that, although it "[would] not aggregate the potential value of the class in order to sustain the $75,000 jurisdictional amount," the injunctive relief sought by the plaintiff furnishes the basis for federal jurisdiction. Id. at 543-44. The Court found that, with reasonable certainty, the imposition of an injunction prohibiting the practice of recognizing "betterment charges" would cause economic harm to Nationwide in excess of $75,000. Id. at 544. Accordingly, the Court concluded that the plaintiffs request for injunctive relief met the jurisdictional minimum of $75,000. Id.
On September 12, 2001, Steinberg moved for permission to file a Second Amended Complaint in order to narrow the claims in the complaint. In particular, Steinberg sought to withdraw a claim that the defendant's use of used, reconditioned, or remanufactured parts when repairing a car is also a breach of contract. On September 19, 2001, Nationwide stated that it did not oppose the plaintiffs' motion. In an order dated September 22, 2001, the Court granted the plaintiffs' motion to file a Second Amended Complaint. Steinberg filed the Second Amended Class Action Complaint on September 26, 2001.
On October 5, 2001, Nationwide moved to dismiss the Second Amended Complaint on the ground that this Court lacked subject matter jurisdiction. In this motion, Nationwide stated that Steinberg's Second Amended Complaint did not request the injunctive relief that this Court previously held satisfied the amount in controversy element of diversity jurisdiction. Because the amount in controversy exclusive of the injunctive relief sought did not exceed $75,000, Nationwide asserted that the Court must dismiss the complaint for lack of subject matter jurisdiction. Steinberg conceded that the request for injunctive relief was missing from his Second Amended Complaint and explained that he had inadvertently deleted the request. On October 24, 2001, Steinberg requested permission to supplement the pleading pursuant to Fed.R.Civ.P. 15(a) so as to cure the jurisdictional defect and include the request for injunctive relief.
On July 27, 2002, the Court granted Nationwide's motion to dismiss the Second Amended Complaint for lack of subject matter jurisdiction. The Court also granted Steinberg's motion to file an amended complaint to include a request for injunctive relief, which would cure the jurisdictional defect. On August 7, 2002, Steinberg filed the Third Amended Class Action Complaint. In an order dated September 4, 2004, the Court granted Steinberg's motion for class certification pursuant to Fed. R.Civ.P. 23, certifying a national class of all Nationwide policyholders who had been injured by Nationwide's imposition of a "betterment charge," again on the basis that the Plaintiffs request for injunctive relief would satisfy the $75,000 jurisdictional minimum.
Following this Court's certification of the class action, Nationwide filed a petition under Fed.R.Civ.P. 23(f) for leave to appeal the order as to class certification to the Second Circuit. The Second Circuit elected not to hear the appeal. Instead, on December 30, 2004, it ruled, sua sponte, that there was no federal subject matter jurisdiction given that Plaintiff had damages of less than $75,000 and that the value of injunctive relief should not be considered in determining whether the monetary-limit had been reached. Steinberg v. Nationwide Mutual Ins. Co., No. 04-8018-cv (2d Cir. Dec. 30, 2004). On Much 16, 2005, following the Second Circuit's instructions, this Court remanded the case to the state court and dismissed the pending federal case. At the present time, that action ("Steinberg I") remains pending in New York Supreme Court.
On July 15, 2005, the Plaintiff filed the instant action, which is parallel to the pending state court action in form and in substance, in that it is based on the same transactions and occurrences; alleges identical claims; and seeks identical relief. However, Steinberg asserts that in this action, contrary to the original case for which there was no federal court jurisdiction, the new case was properly filed in federal court pursuant to the Class Action Fairness Act of 2005, Pub.L. No. 109-2, 119 Stat. 4 ("CAFA"). CAFA eliminates the general rule of non-aggregation for purposes of determining the amount in controversy. 28 U.S.C. § 1332(d). CAFA provides that federal courts will have jurisdiction over any proposed class action commenced after February 18, 2005 in which, as here, less than one-third of the putative class members reside in a particular state and the aggregate amount in controversy exceeds $5,000,000. Id. See Compl., ¶ 5.
On August 18, 2005, Nationwide filed the instant motion to dismiss the Plaintiffs complaint. Nationwide asserts several grounds in support of its motion to dismiss: (1) the action should be dismissed for lack of subject matter jurisdiction due to the commencement of Steinberg I prior to the enactment of CAFA; (2) the action should be dismissed under the theory of impermissible claim splitting; and (3) if the Court does not dismiss the case, the action should be stayed pursuant to the abstention doctrine in Colorado River Water Conservation District v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976).
The Court will begin its analysis with the issue of subject matter jurisdiction. "The first question necessarily is that of jurisdiction." Ex parte McCardle, 74 U.S. 506, 512, 7 Wall. 506, 19 L.Ed. 264 (1868). The district...
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