Derosa v. American Modern Select Insurance Co.

          MEMORANDUM AND ORDER

          Daniel D. Crabtree United States District Judge.

         This matter comes before the court following the court's Order to Show Cause. That order required defendant American Modern Select Insurance Company and plaintiff Lucinda W. Derosa to file responses explaining why the court should not remand this case to state court for lack of subject matter jurisdiction. Doc. 6. After considering the parties' arguments, the court remands this action to the Johnson County, Kansas District Court.

         I. Background

         Plaintiff filed this breach of contract action in the Johnson County, Kansas District Court on June 14, 2019. Doc. 1-2. Defendant removed the action to this court on July 12, 2019, claiming this court has diversity jurisdiction under 28 U.S.C. § 1332. Doc. 1. Plaintiff's state court complaint sought $8, 276.16 for the replacement of plaintiff's roof plus costs to repair damage to her drywall, ceiling, privacy fence, and deck. See Doc. 1-2 at 5-7. The state court complaint did not specify the cost to repair all of the damage but requested “damages in amount exceeding $25, 000, plus costs, pre-judgment interest, attorney's fees . . ., and all other relief [that is] just and proper.” Id. at 8. And, as Kansas law may permit plaintiff to recover her attorneys' fees, a reasonable estimate of attorneys' fees may count toward the amount in controversy. See Mo. State Life Ins. Co. v. Jones, 290 U.S. 199, 202 (1933); Miera v. Dairyland Ins. Co., 143 F.3d 1337, 1340 (10th Cir. 1998). Because plaintiff did not make a specific monetary demand but alleged major damage to her property, defendant asserted that plaintiff's damages, together with attorneys' fees, would reach the jurisdictional prerequisite for federal court of an amount in controversy exceeding $75, 000. Doc. 1 at 3-5.

         But, the court questioned whether the amount in controversy actually exceeds $75, 000. On July 16, 2019, the court ordered the parties to file responses explaining why the court should not remand this case to state court for lack of subject matter jurisdiction. Doc. 6. The court permitted defendant to conduct limited discovery about: (1) plaintiff's attorneys' fees to date, (2) information that will allow the parties and the court to estimate plaintiff's anticipated attorneys' fees, including plaintiff's counsel's hourly rate, and (3) plaintiff's anticipated costs in repairing the drywall, ceiling, privacy fence, and deck. Doc. 10.

         II. Legal Standard

         “Federal courts are courts of limited jurisdiction and, as such, must have a statutory basis to exercise jurisdiction.” Montoya v. Chao, 296 F.3d 952, 955 (10th Cir. 2002) (citation omitted). Federal district courts have original jurisdiction over all civil actions arising under the constitution, laws, or treaties of the United States or where there is diversity of citizenship. 28 U.S.C. §§ 1331-32. “A court lacking jurisdiction cannot render judgment but must dismiss the cause at any stage of the proceedings in which it becomes apparent that jurisdiction is lacking.” Basso v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir. 1974) (citation omitted). Since federal courts are courts of limited jurisdiction, the party invoking federal jurisdiction bears the burden to prove it exists. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).

         Defendant invokes the court's subject matter jurisdiction under the federal diversity statute. Under that provision, 28 U.S.C. § 1332, federal jurisdiction is proper when “the matter in controversy exceeds the sum or value of $75, 000 . . . and is between . . . citizens of different states.” Here, the Notice of Removal adequately alleges the parties are citizens of different states. But, the amount in controversy is in question.

         Under 28 U.S.C. § 1446(c)(2), the general rule is that the amount in controversy is the “sum demanded in good faith in the initial pleading.” If the “allegations of the complaint. . . are not dispositive, the allegations in the petition for removal” may be used to determine the amount in controversy. Lonnquist v. J. C. Penney Co., 421 F.2d 597, 599 (10th Cir. 1970). “[A] defendant's notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” Dart Cherokee Basin Operating Co. v. Owens, 574 U.S. 81, 135 S.Ct. 547, 554 (2014). But, if a court questions whether a removed action satisfies the amount in controversy requirement under § 1332, “evidence establishing the amount is required.” Id.

         “In such a case, both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied.” Id. at 554; see also 28 U.S.C. § 1446(c)(2)(B) (“[R]emoval of the action is proper on the basis of an amount in controversy asserted [in a notice of removal] if the district court finds, by a preponderance of the evidence, that the amount in controversy exceeds [$75, 000]”); Knight v. Allstate Ins. Co., No. 15-9103-KHV, 2016 WL 74402, at *2 (D. Kan. Jan. 5, 2016) (“To remain in federal court, defendant must prove by a preponderance of the evidence facts sufficient to establish that the amount in controversy may exceed $75, 000). “To satisfy the preponderance standard, a party must show a reasonable probability that the [amount in] controversy exceeds” $75, 000. Owens v. Dart Cherokee Basin Operating Co., No. 12-4157-JAR-JPO, 2015 WL 7853939, at *3 (D. Kan. Dec. 3, 2015) (internal quotations and citations omitted). The proponent of federal jurisdiction can establish “jurisdictional facts” to meet this standard by, among other alternatives, “interrogatories[, ] . . . calculation from the complaint's allegations[, ] referenc[ing] . . . the plaintiff's informal estimates or settlement demands[, ] or [ ] introducing evidence, in the form of affidavits from the defendant's employees or experts, about how much it would cost to satisfy the plaintiff's demands.” McPhail v. Deere & Co., 529 F.3d 947, 954 (10th Cir. 2008) (internal quotations and citations omitted).

         If the proponent of subject matter jurisdiction has “establish[ed] jurisdiction by proving jurisdictional facts that ma[k]e it possible that $75, 000 [is] in play” by a preponderance of the evidence, then it “is entitled to stay in federal court unless it is ‘legally certain' that less than $75, 000 is at stake.” Id. at 954-55; see also Hammond v. Stamps.com, Inc., 844 F.3d 909, 911- 12 (10th Cir. 2016) (explaining that (i) “the term ‘in controversy' has never required a party seeking to invoke federal jurisdiction to show that damages ‘are greater' or will likely prove greater ‘than the requisite amount' specified by statute” but instead must “show only and much more modestly that ‘a fact finder might legally conclude' that damages exceed the statutory amount” (quoting Hartis v. Chi. Title Ins. Co., 694 F.3d 935, 944 (8th Cir. 2012)) and (ii) “to justify dismissal under this standard ‘it must appear to a legal certainty that the claim is really for less than the jurisdictional amount'” (quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938))). Stated another way, “[o]nce the proponent of federal jurisdiction has explained plausibly how the stakes exceed [$75, 000] . . . the case belongs in federal court unless it is legally impossible for the plaintiff to recover that much.” Hammond, 844 F.3d at 914 (internal citations and quotations omitted).

         The court thus considers below, under the preponderance of the evidence standard, whether defendant plausibly has established the requisite amount in controversy exceeding $75, 000.^[1]

         III. Analysis

         Defendant contends that “the facts are sufficient to establish that the amount in controversy may exceed $75, 000.” Doc. 14 at 1. Limited discovery here revealed that plaintiff's total alleged damages based on repair bids are $19, 540.83, exclusive of attorneys' fees. Doc. 14-1 at 2. And, plaintiff's attorneys' fees as of August 29, 2019 were just $3, 785. Docs. 14 at 1-2, 14-1 at 2. So, “to reach the $75, 000.01 threshold” defendant argues plaintiff could “reasonably incur an additional $51, 674.17 in attorney's fees.” Doc. 14 at 2. This argument is based on plaintiff's attorney's rate of $300/hour and an assumption that plaintiff's attorney would work at least an additional 172 hours on this matter. Id.; Doc. 14-1 at 2. Defendant asserts another 172 hours is “not an unreasonable estimate” considering the early stage of the litigation and “the fact that extensive depositions will be needed.” Doc. 14 at 2-3; see also Doc. 1 ...