Opinion
No. 2:03-CV-343 PS.
March 16, 2005
ORDER
This matter arises out of an automobile accident that occurred on December 28, 1998. Plaintiff, Leonard Mangione, had automobile insurance through Defendant, State Farm Mutual Automobile Insurance Company ("State Farm"). In the months following the accident, State Farm paid for damage to Plaintiff's vehicle and for a number of medical bills for injuries caused by the accident, totaling in excess of $30,000. But, in 2000 State Farm initially contested a certain category of medical bills totaling approximately $4,828, arguing that they were not covered under the terms of the policy because they did not relate to treatment for injuries caused by the car accident. In early 2002, after State Farm received additional medical records from the Plaintiff, it made payment on all of the outstanding medical bills. Notwithstanding State Farm's full payment of all bills submitted, Mangione filed this lawsuit.
PROCEDURAL BACKGROUND
On July 1, 2003, Mangione filed his complaint in Lake Superior Court against State Farm and its employee, Janice Bobele for breach of duty of good faith based on State Farm's initial denial to pay all of his medical bills and the unfair delay due to the amount of time it took State Farm to pay the claim. Mangione also alleges violation of Indiana Code § 27-4-1-4.5, and claims he is entitled to punitive damages for emotional distress. He also is seeking to recover his attorney fees.
On August 12, 2003, State Farm and Bobele filed a notice of removal in this case stating that this Court has subject-matter jurisdiction because this is an action between citizens of different states and the matter in controversy exceeds $75,000. ( See [Doc. 1].) On September 12, 2003, the Plaintiff filed objections to the notice of removal and a motion to remand. ( See [Doc. 8].) On October 17, 2003, before the Court ruled on the Plaintiff's motion to remand, the Plaintiff filed a Notice of Withdrawal of Objection to Removal. ( See [Doc. 18].) At this time, the Court should have independently assessed whether it had subject-matter jurisdiction over this matter, but unfortunately it failed to do so.
The case continued on in federal court, and on May 14, 2004, State Farm filed its motion for summary judgment. This motion is still pending. In the process of reviewing the motion, the Court realized that it had serious concerns regarding its subject-matter jurisdiction over this matter.
On December 22, 2004, the Court held a telephonic status conference with the parties and raised its concerns. ( See [Doc. 33].) At that time it was unclear to the Court whether Janice Bobele remained a party in this matter, and if so, whether the Court had jurisdiction. The Court ordered that any briefs regarding jurisdiction be filed by January, 2005. On February 15, 2005, the Court held a hearing regarding the jurisdictional issues.
DISCUSSION
This Court, like all federal courts, has a continuing obligation to determine whether it has subject-matter jurisdiction over the disputes coming before it. Christianson v. Colt Indus. Operating Corp., 798 F.2d 1051, 1055 (7th Cir. 1986) (citations omitted). Moreover, a district court possesses only the jurisdiction conferred to it by Congress. State of S.C. v. Katzenbach, 383 U.S. 301 (1966). Upon close review, the Court has determined that it does not have subject-matter jurisdiction over this action.Defendants removed this matter pursuant to 28 U.S.C. § 1441 alleging that the district court would have had original jurisdiction under 28 U.S.C. § 1332(a). But, the amount in controversy does not meet the jurisdictional threshold.
A district court has subject matter jurisdiction over "all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . . citizens of different states." 28 U.S.C. § 1332(a).
It is also likely that this Court does not have subject-matter jurisdiction for a separate and independent reason — the parties are not diverse. Plaintiff Mangione and Defendant Bobele are both citizens of Indiana. While State Farm has argued that Bobele was fraudulently joined to defeat diversity jurisdiction, the Court need not address the merits of that argument here and refuses to do so.
Defendants seeking removal must establish federal jurisdiction by a reasonable probability. Defendants may not simply rely on general allegations in a complaint that a Plaintiff has "sustained injury and damage of a personal and pecuniary nature" and seeks a punitive damages award, like State Farm did here, to establish a dollar amount in controversy of at least $75,000. See King v. Wal-Mart Stores, Inc., 940 F. Supp. 213, 216-17 (S.D. Ind. 1996).
In Munro v. Golden Rule Insurance Co., 393 F.3d 720 (7th Cir. 2004), the Seventh Circuit held that a district court did not have subject-matter jurisdiction over an insurance bad-faith claim that was removed from state court because the amount in controversy was below the $75,000 threshold for diversity jurisdiction. Specifically, the plaintiffs had incurred a number of medical bills in connection with a series of hospital visits and submitted them to their health insurance company. The defendant health insurance company had paid $289,650.91 of these bills but contested inpatient expenses totaling $3,885.01. Id. at 721. While the case was pending, the insurance company paid the outstanding charges. The plaintiffs responded by dismissing their breach of contract claim, but continued to press their bad-faith claim. Id. The Circuit Court held that since the plaintiffs never paid the contested bill — because it was eventually paid by the insurer — their actual damages were not $3,885.01, but zero. Id. at 722. As a result, when the court considered the maximum possible recovery, including attorney fees, the plaintiffs fell far short of the jurisdictional threshold.
Under Wisconsin law, which applied in the Munro case, an insured who is successful in a bad-faith action can recover attorney fees as compensatory damages. See De Chant v. Monarch Life Ins. Co., 547 N.W.2d 592 (Wis. 1996). Indiana law, which applies to this case, follows the American Rule wherein each party must pay its own attorney fees. Coffman v. Rohrman, 811 N.E.2d 868, 872 (Ind.Ct.App. 2004) (citing Salcedo v. Toepp, 696 N.E.2d 426, 435 (Ind.Ct.App. 1998)). "Generally, attorney's fees are not recoverable from the opposing party as costs, damages, or otherwise, in the absence of an agreement between the parties, statutory authority, or rule to the contrary." Swartz v. Swartz, 720 N.E.2d 1219, 1223 (Ind.Ct.App. 1999). Accordingly, any potential attorney fee award cannot be considered as compensatory damages in this case.
Here, the circumstances are very similar. While State Farm contested certain medical bills totaling approximately $4,800, it eventually paid them before this lawsuit was even filed, reducing Mangione's actual damages to zero. But, even assuming Plaintiff was entitled to compensatory damages in the amount of $4,800, his punitive damages award would need to be more than fifteen times that amount to meet the statutory threshold. Such an award is not only entirely speculative, it would not pass constitutional muster. Recently, the Supreme Court set constitutional limits on the punitive damages multiplier in simple economic-loss cases, such as nonpayment of insurance in State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003). The Supreme Court found that "few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process." Campbell, 538 U.S. at 410.
Moreover, emotional distress damages are not likely recoverable as compensatory damages for an insurance bad-faith claim. See Erie Ins. Co. v. Hickman by Smith, 622 N.E.2d 515, 519 (Ind. 1993) (". . . in most instances, tort damages for the breach of the duty to exercise good faith will likely be coterminous with those recoverable in a breach of contract action"). Taking all of these factors into account, the Court is not convinced that there is a reasonable probability that the amount in controversy meets or exceeds the $75,000 the jurisdictional amount.
It is therefore ORDERED that this case is REMANDED back to the Lake Superior Court. The clerk shall treat this civil action as TERMINATED. All further settings in this action are hereby VACATED.
SO ORDERED.