Opinion
3:24-cv-00020 KGB
10-03-2024
PHYLLIS DONLEY, on behalf of herself and all others similarly situated PLAINTIFFS v. SOUTHERN FARM BUREAU CASUALTY INSURANCE COMPANY DEFENDANT
ORDER
Kristine G. Baker, Chief United States District Judge
On September 27, 20242, the Court entered an under seal Order (Dkt. No. 32). When the Court entered its Order, the Court stated that it would confer with all counsel and parties to release a redacted version that redacts the sealed portions of the record but makes public all other portions of the Order (see Dkt. No. 32, at 1 n.1). The parties agreed on a redacted version of the Order, which is acceptable to the Court. Accordingly, the Court hereby issues the following unsealed Order. See Court's Exhibit A.
So ordered.
In this Order, the Court quotes certain exhibits the parties have placed under seal. Because it does so, the Court seals this Order. Upon entry of this sealed Order, the Court will confer with all counsel and parties to release a redacted version of this Order that redacts the sealed portions of the record but makes public all other portions of the Order.
Before the Court are defendant Southern Farm Bureau Casualty Insurance Company's (“Southern Farm Bureau”) motions to dismiss declaratory judgment claim and declaratory judgment claim of second amended complaint (Dkt. Nos. 4; 15). Plaintiffs Phyllis Donley and Donald Donley, on behalf of themselves and all others similarly situated, filed oppositions to Southern Farm Bureau's motions to dismiss their claims for declaratory relief (Dkt. Nos. 9; 18). Also pending is plaintiffs' motion to remand (Dkt. No. 20). Southern Farm Bureau filed a response to plaintiffs' motion to remand (Dkt. No. 23). Plaintiffs filed an under seal reply in support of their motion to remand (Dkt. No. 31). For the following reasons, the Court grants the plaintiffs' motion to remand (Dkt. No. 20). Because the Court is remanding the case to the Circuit Court of Craighead County, Arkansas, the Court declines to rule on Southern Farm Bureau's motions to dismiss (Dkt. Nos. 4; 15).
I. Background
On January 2, 2024, plaintiffs, on behalf of themselves and all others similarly situated, filed a class action complaint against Southern Farm Bureau in the Circuit Court of Craighead County, Arkansas (Dkt. No. 2). Before serving the complaint, the plaintiffs filed an amended class action complaint (Dkt. No. 3). On February 7, 2024, Southern Farm Bureau filed a notice of removal asserting that this Court has original jurisdiction of this matter under the Class Action Fairness Act (“CAFA”), 28 U.S.C. §§ 1332(d) (Dkt. No. 1). In its notice of removal, Southern Farm Bureau based its calculation of the amount in controversy on the declaration of Justin Moody (Id., at 136-138).
In the amended class action complaint in effect at the time of removal, plaintiffs alleged:
52. This action is brought by Plaintiff as a class action, on her own behalf and on behalf of all others similarly situated, under the provisions of Rules 23(a) and 23(b)(2), or, alternatively, 23(b)(3), of the Arkansas Rules of Civil Procedure, for damages, plus interest, costs, and attorney's fees. Plaintiff seeks certification of this action as a class action on behalf of the following class (the "Class"):
All persons who made a first-party claim on a policy of insurance issued by Southern Farm Bureau Casualty Insurance Company in Arkansas where the claim was submitted from the earliest allowable time through the date an order granting class certification is entered, and Southern Farm Bureau Casualty Insurance Company determined that the vehicle was a total loss and based its claim payment on an Mitchell Report where a Projected Sold Adjustment was applied to at least one comparable vehicle.(Dkt. No. 3, ¶ 52).
At the time of removal, plaintiffs sought to bring a class action to represent those individuals insured by Southern Farm Bureau in Arkansas who received a payment for the loss of a totaled vehicle where Southern Farm Bureau used valuation reports prepared by Mitchell International (“Mitchell”), called Mitchell Vehicle Valuation Reports (“Mitchell Reports”), to determine the actual cash value (“ACV”) of the loss vehicle (Dkt. No. 3, ¶ 1). In the event of a total loss to an insured vehicle, Southern Farm Bureau's uniform insurance policies with plaintiffs and putative class members, promised to pay the loss, limited to the ACV of the vehicle based on “consideration of [the vehicle's] fair market value, age, and condition” “at the time of loss.” (Id., ). Plaintiffs maintain that by using the Mitchell Reports, Southern Farm Bureau systematically thumbed the scale against its insureds by calculating the ACV of their loss vehicles by applying so-called “Projected Sold Adjustments.” (Id.).
The Court refers to the second paragraph numbered paragraph one in the amended complaint. Due to a scrivener's error in the amended complaint, there are two paragraphs numbered paragraph one (Dkt. No. 3, at 1-2).
Plaintiffs allege that in June 2020, their car was deemed a total loss (Id., ¶ 13). To calculate the ACV of plaintiffs' totaled car, Southern Farm Bureau used Mitchell Reports and based its claim payment on the Mitchell Reports (Id., ¶¶ 19-20). The Mitchell Reports compared the prices of vehicles comparable to plaintiffs' vehicle and applied a Projected Sold Adjustment (Id., ¶ 23). In the complaint in effect at the time of removal, plaintiffs alleged that, until July 2021, Farm Bureau excluded from the calculation of the Projected Sold Adjustment all transactions in which the list price of a vehicle equaled the sold price and that, even after July 2021, Farm Bureau still excludes some transactions in which the list price of a vehicle equals the sold price (Id., ¶¶ 32-33). Plaintiffs allege that Farm Bureau has excluded and continues to exclude from the calculation of the Projected Sold Adjustment all transactions in which the sold price of a vehicle is greater than the list price (Id., ¶ 34). Plaintiffs filed this class action alleging that Southern Farm Bureau breached its contractual duty to its clients by using improper and unfounded Projected Sold Adjustments in Mitchell Reports that paid class members in an amount less than the actual cash value of a loss vehicle as required by its contractual obligations and representations (Id., ¶¶ 50, 62-63). Plaintiffs, individually and on behalf of the class of individuals, brought claims for breach of contract and declaratory judgment (Id., ¶¶ 60-73).
On March 19, 2024, plaintiffs filed a second amended class action complaint (“the operative complaint”) with the written consent of Southern Farm Bureau pursuant to Federal Rule of Civil Procedure 15(a)(2) (Dkt. No. 10, at 1, n.1). The proposed class definition remained the same (Id., ¶ 53). In the operative complaint, plaintiffs estimated, based on the declaration of Justin Moody, that the putative class would be comprised of thousands of members and the amount in controversy would exceed $5,000,000.00 (Id., ¶ 12).
On March 28, 2024, Southern Farm Bureau responded to plaintiffs first set of interrogatories and provided documentation to support Mr. Moody's declaration (Dkt. Nos. 23-1; 30, Ex. 1).
Plaintiffs move to remand the case to the Circuit Court of Craighead County, Arkansas, pursuant to 28 U.S.C. § 1447(c) (Dkt. No. 20). Plaintiffs argue that Southern Farm Bureau's removal of the action was improper under CAFA because Southern Farm Bureau has failed to prove, by a preponderance of the evidence, that the amount in controversy exceeds $5,000,000.00 as required by CAFA (Dkt. No. 21, at 2). Plaintiffs contend that, based on limited discovery they received from Southern Farm Bureau, damages in this case will not exceed $3,084,237.98 (Dkt. No. 30, at 8).
Southern Farm Bureau responds that, based on the allegations in the operative complaint, the amount in controversy exceeds $5,000,000.00 (Dkt. No. 23, at 1). Further, Southern Farm Bureau states that the only thing that has changed since plaintiffs' filing of the operative complaint is that plaintiffs have realized that their theory of recovery regarding Southern Farm Bureau's alleged application of Mitchell Reports' Projected Sales Adjustment may not result in damages of more than $5,000,000.00 when the case is decided on the merits based on Southern Farm Bureau's limited discovery responses refuting plaintiffs' liability theory (Dkt. No. 23, at 1-2 (citing Dkt. No. 23-1)).
II. Motion To Remand
A. Legal Standard
“Under CAFA, federal courts have jurisdiction over class actions in which the amount in controversy exceeds $5,000,000.00 in the aggregate; there is minimal (as opposed to complete) diversity among the parties, i.e., any class member and any defendant are citizens of different states; and there are at least 100 members in the class.” Westerfield v. Independent Processing, LLC, 621 F.3d 819, 822 (8th Cir. 2010). “A primary purpose in enacting CAFA was to open the federal courts to corporate defendants out of concern that the national economy risked damage from a proliferation of meritless class action suits.” Bell v. Hershey Co., 557 F.3d 953, 957 (8th Cir. 2009). If the class action complaint does not allege that more than $5,000,000.00 is in controversy, “a defendant's notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” Id. (quoting Dart Cherokee Basin Operating Co. v. Owens, 574 U.S. 81, 89 (2014)). If the class action plaintiffs challenge the notice of removal allegation, “removal is proper on the basis of an amount in controversy asserted by the defendant if the district court finds, by the preponderance of the evidence, that the amount in j controversy exceeds the jurisdictional threshold.” Id. (quoting Dart Cheokee Basin Operating Co., 574 U.S. at 88, (quoting § 1446(c)(2)(B))).
While generally a court must resolve all doubts about federal jurisdiction in favor of remand to state court, In re Prempro, 591 F.3d at 620, “no antiremoval presumption attends cases invoking CAFA[.]” Dart Cherokee, 574 U.S. at 89; see also Ahmad v. Panera Bread Co., Case No. 4:21-cv-311 CDP, 2021 WL 5447000, at *2 (E.D. Mo. Nov. 16, 2021).
This Court must review the complaint, which was pending at the time of removal, to determine whether this Court has subject-matter jurisdiction over the case. St. Paul Mercury Indem. Co., 303 U.S. at 291; see also Grawitch v. Charter Commc'ns, Inc., 750 F.3d 956,959 (8th Cir. 2014) (“The court's jurisdiction is measured at the time of removal.”) (citing Hargis v. Access Capital Funding, LLC, 674 F.3d 783, 789 (8th Cir. 2012)).
The disputed factor here is whether the amount in controversy exceeded $5,000,000.00 at the time of removal, which defendants must establish by a preponderance of the evidence at this stage of the proceeding. Hartis v. Chicago Title Ins. Co., 694 F.3d 935, 944 (8th Cir. 2012). Southern Farm Bureau does not have to prove by a preponderance of the evidence that the amount in controversy is more than $5,000,000.00, but rather, Southern Farm Bureau must prove a fact finder might legally conclude that it is. Id. (citing Bell v. Hershey Co., 557 F.3d 953, 959 (8th Cir. 2009)). “If a defendant meets its burden, then a plaintiff seeking remand must establish to a legal certainty that the amount in controversy is less than the statute requires.” Basham v. Am. Nat. Cnty. Mut. Ins. Co., 979 F.Supp.2d 883, 885-86 (W.D. Ark. 2013) (citing Bell, 557 F.3d at 956). “The legal-certainty standard is not met if even a possibility exists of recovering more than the statutory minimum.” Id. (citing Back Doctors Ltd. v. Metro. Prop. & Cas. Ins. Co., 637 F.3d 827, 831 (7th Cir. 2011)).
B. Analysis
Plaintiffs maintain that defendants have not met their burden of establishing by a preponderance of the evidence that the amount in controversy exceeded $5,000,000.00 at the time of removal in order to establish subject matter jurisdiction under CAFA (Dkt. No. 20, ¶ 1 (citing 28 U.S.C. § 1332(d))). Plaintiffs argue that Southern Farm Bureau erred in its calculation of the amount in controversy by including in its putative class insureds whose claims were not paid on a valuation based on the Mitchell Report (Id., ¶ 2). After being provided limited discovery, plaintiffs discovered that Mr. Moody's calculations were based on estimates of every total loss claim when the class definition is only for insureds whose claims were paid based on valuations in a Mitchell Report (Id., ¶ 7). According to plaintiffs, this error calculated the class size to be over 500% larger than it is and overestimated the amount in controversy (Id., ¶ 8). Plaintiffs maintain that calculations using the actual class size, contained in Mr. Moody's spreadsheet, show that the actual amount in controversy is well below the CAFA $5,000,000.00 threshold (Id., ¶ 9).
Southern Farm Bureau responds that it has met its burden of establishing the amount in controversy for federal subject matter jurisdiction based on 28 U.S.C. § 1332(d), and the Donleys' motion to remand should be denied (Dkt. No. 23, ¶ 8). In their notice of removal, Southern Farm Bureau argues that the $5,000,000.00 statutory minimum is met based on the declaration of Mr. Moody who estimates the amount in controversy to exceed $5,000,000.00 (Dkt. No. 3, at 136-38). Southern Farm Bureau contends that it “used the Mitchell valuation report's Projected Sold Adjustment as ‘only one factor' and ‘each individual claim was evaluated after an inspection, comparison with NADA data, and taking into account the condition of the automobile.'” (Dkt. No. 23, at 2-3). According to Southern Farm Bureau, the plaintiffs' complaint alleges that Southern Farm Bureau applied the Mitchell Projected Sold Adjustment as the only factor (Id., at 3 (citing Dkt. No. 3, ¶¶ 4, 20-24)). Southern Farm Bureau states that it will demonstrate that this is not true, as indicated in its limited discovery responses, and it did not err in calculating the amount in controversy (Id., at 3, (citing Dkt. No. 23-1)).
In the complaint pending at the time of removal, plaintiffs sought to represent a class of the following:
All persons who made a first-party claim on a policy of insurance issued by Southern Farm Bureau Casualty Insurance Company in Arkansas where the claim was submitted from the earliest allowable time through the date of an order granting class certification is entered, and Southern Farm Bureau Casualty Insurance Company determined that the vehicle was a total loss and based its claim payment on an [sic] Mitchell Report where a Projected Sold Adjustment was applied to at least one comparable vehicle.(Dkt. No. 3, ¶ 52). The proposed class definition remained the same in the operative complaint (Dkt. No. 10, ¶ 53). There is no dispute that Southern Farm Bureau no longer used the Projected Sold Adjustment after June 19, 2021, and so the relevant time period for determining damages to the class is January 2,2019, to June 21, 2021 (Dkt. No. 24, at 2 (confirming that “the Declaration of Justin Moody established that [Southern Farm Bureau] did not use the Mitchell Reports in its claims adjustment practices after June 19, 2021 and limited the calculation of the amount in controversy to the shorter period of 216 years” and agreeing that, with a five-year statute of limitations, the start date for any putative class is January 2, 2019)). According to data provided by Southern Farm Bureau, only 2,014 total loss claim payments made by Southern Farm Bureau were based on the Mitchell Reports during the relevant time period (Dkt. No. 30, Ex. 1).
Further, the Court agrees with plaintiffs that the calculation of the amount in controversy only includes the claims of 2,014 insureds who meet the class definition because Southern Farm Bureau used the Mitchell Reports to assess its claim payment. It was error for Southern Farm Bureau to include in its calculation of the amount in controversy the claims of 8,342 insureds who are not members of the putative class because Southern Farm Bureau's claim payment was not based on the Mitchell Reports for all of those insureds during that period, even if a Projected Sold Adjustment or substantially similar adjustment was applied (Dkt. No. 30, at Ex. 1). Southern Farm Bureau argues that the Court may include these plaintiffs at this stage because, in the operative complaint, the plaintiffs “allege broadly” that there is a “common question” whether Southern Farm Bureau “applied either a Projected Sold Adjustment ‘or substantially similar adjustments.”' (Dkt. No. 24, at 10 (emphasis added) (citing Dkt. No. 3, ¶ 55(a); see also Dkt. No. 10, ¶ 56(a)). The Court does not read the language of the class definition in the context of the overall allegations in the complaint - either the complaint in effect at the time of removal or the operative complaint - to support Southern Farm Bureau's assertion.
The Court understands, based on the limited record before it, that for the 8,342 insureds Southern Farm Bureau deviated and that the claim payment was not based on the Mitchell Reports (Dkt. Nos. 21, at 6; 30, at 6, Ex. 1). This fact was reiterated by Southern Farm Bureau in its response to plaintiffs' interrogatory number three, where Southern Farm Bureau explained:
the Mitchell Projected Sold Adjustment was only one factor considered by adjusters in Arkansas as each individual claim was evaluated after an inspection, comparison with NADA data, and taking into account the condition of the automobile. For the class period of 2 ‘A years, there were only 20% (2,014) of the total loss claims where the ACV paid was equal to the TLV. . . . [Southern Farm Bureau] has used the Mitchell Projected Sold Adjustment data as one factor in adjusting claims to arrive at the ACV payment in every county in Arkansas. Stated another way, for 80% of the total loss claims, the ACV payment did not equal the TLV.(Dkt. No. 23-1, at 3). Accordingly, the Court determines that the 8,342 individuals, where
The Court does not address whether use of NADA guidebooks complies with Southern Farm Bureau's contractual obligations and applicable Arkansas regulations (Dkt. No. 31, at 2-3, Ex. 2).
Southern Farm Bureau did not base its' claim payment on the Mitchell Reports Projected Sold
Adjustment, are not part of the putative class as defined in the complaint (Dkt. No. 31, at 2). Those 8,342 individuals had a distinct experience dissimilar to plaintiffs, and plaintiffs do not seek to represent those 8,342 individuals in this action (Id.).
After removing the damages data for the individuals who the Court has determined are not a part of the putative class as defined by the complaint, Mr. Moody's fourth table in his summary chart provides that, of the claims that were paid out based on the Mitchell Reports' Projected Sold Adjustment, Southern Farm Bureau estimates that the aggregate underpayments of ACV due to the 2,104 insureds who meet the putative class definition is $1,385,203.17. Plaintiffs represent that the accurate calculation is as follows:
[Redacted]
Plaintiffs have challenged whether the amount in controversy is below the $5,000,000.00 threshold for establishing jurisdiction under CAFA. This Court determines by a preponderance of the evidence, based on the record before it and having considered all arguments and matters presented, that Southern Farm Bureau has not met its burden of proving the $5,000,000.00 amount in controversy required by CAFA. Basham, 979 F.Supp.2d at 888. Even if Southern Farm Bureau met that burden at the time of removal, plaintiffs have now come forward with evidence establishing a legal certainty that the amount in controversy is less than the statute requires. Id. at 885-86 (citing Bell, 557 F.3d at 956). Based on the record before the Court at this stage in the proceedings, the Court does not see a possibility that the amount in controversy, considering the putative class definition, is more than the statutory minimum required to establish jurisdiction. Id. The Court grants plaintiffs' motion to remand (Dkt. No. 20).
III. Motions To Dismiss
Because the Court grants plaintiffs motion to remand (Dkt. No. 20), the Court will not address Southern Farm Bureau's motions to dismiss (Dkt. Nos. 4; 15).
IV. Conclusion
The Court grants plaintiffs' motion to remand (Dkt. No. 20). The case is remanded to the Circuit Court of Craighead County, Arkansas. The Court declines to address Southern Farm Bureau's motions to dismiss (Dkt. Nos. 4; 15).
So ordered.