Opinion
Civil Action No. 04-2383 Section "R" (4).
December 15, 2004
ORDER AND REASONS
The defendants move the Court to dismiss the action for lack of subject matter jurisdiction under Rule 12(b)(1) and 12(b)(6). For the following reasons, the Court GRANTS the motion to dismiss under Rule 12(b)(1) and therefore does not reach the motion to dismiss under Rule 12(b)(6).
I. BACKGROUND
Reliance Insurance Company allegedly provided business auto insurance coverage to the defendants, several Louisiana corporations, under two policies of insurance, one covering March 20, 1997 to March 20, 1998 and the other covering March 24, 1998 to March 24, 1999. The defendants include Airport Shuttle, Inc., Hospitality Enterprises, Inc., New Orleans Tours, Inc., New Orleans Paddle Wheels, Inc., New Orleans Paddle Wheels (Texas), Inc., New Orleans International Cruise Terminal, Inc., Destination Management, Inc., RSC Holding, Inc., Lodging, Inc., Delta Transit, Inc., Queen and Crescent Hotel, L.L.C., Visitor Cellular, L.L.C., Chicory Building, Inc., Visitor Marketing, Inc., and On the Town, Inc. Each of the policies established a deductible amount of $50,000.00 per occurrence for bodily injury liability and property damage liability. (Pl.'s Am. Compl. ¶ 37.) Reliance alleges that the defendants failed to pay several deductibles for claims they made under the insurance policies. Reliance alleges that the unpaid deductibles total $234,905.80.
On August 19, 2004, Reliance sued all of the defendants for breach of contract and unjust enrichment, and Reliance sued Airport Shuttle alone for failure to settle an open account. Reliance is a Pennsylvania corporation that is currently in liquidation. The defendants are all Louisiana corporations. Reliance alleges that this court has diversity jurisdiction.
On October 1, 2004, Airport Shuttle, Hospitality Enterprises, New Orleans Tours, New Orleans Paddle Wheels, New Orleans Paddle Wheels (Texas), New Orleans International Cruise Terminal, RSC Holding, Lodging, Delta Transit, Queen and Crescent Hotel, Visitor Cellular, and Chicory Building moved the Court to dismiss the action for lack of subject matter jurisdiction under Rules 12(b)(1) and 12(b)(6). Destination Management, Visitor Marketing, and On the Town later joined the motion. The defendants assert that the amount in controversy is below the $75,000.00 minimum for diversity jurisdiction. Although Reliance claimed the amount in controversy is $234,905.80 in the complaint, this amount is an aggregate amount of unpaid deductibles. The defendants contend that Reliance is not entitled to aggregate the sums to meet the jurisdictional amount.
II. DISCUSSION
A. Legal Standard
Reliance alleges that this Court has diversity jurisdiction. To properly invoke the Court's diversity jurisdiction, the parties must be from different states and the amount in controversy must exceed $75,000.00. 28 U.S.C. § 1332(a)(1). The defendants argue that the amount in controversy is less than $75,000.00. Therefore, according to the defendants, this Court lacks jurisdiction.
Federal Rule of Civil Procedure 12(b)(1) governs challenges to a district court's subject matter jurisdiction. The Court must grant a motion to dismiss for lack of subject matter jurisdiction when it lacks the statutory or constitutional power to adjudicate the case. See Home Builders Ass'n of Miss., Inc., v. City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998) ( quoting Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d 1182, 1187 (2d Cir. 1996)). A district court may dismiss an action for lack of subject matter jurisdiction based on (1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the Court's resolution of disputed facts. See Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir. 1981); see also Robinson v. TCI/US West Communications Inc., 117 F.3d 900, 904 (5th Cir. 1997) (citations omitted).
The party who invokes federal court jurisdiction bears the burden of showing that jurisdiction is proper. Dow Agrosciences, LLC v. Bates, 332 F.3d 323, 326 (5th Cir. 2003). Typically, the plaintiff's allegation that the amount in controversy satisfies the jurisdictional minimum is sufficient to invoke diversity jurisdiction. See De Aguilar v. Boeing Co., 47 F.3d 1404, 1408 (5th Cir. 1995) (citing St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288 (1938)); Opelika Nursing Home, Inc. v. Richardson, 448 F.2d 658, 665-666 (5th Cir. 1971). If, however, the defendant challenges the amount in controversy in an appropriate manner, the plaintiff must show by a preponderance of the evidence that it does not appear to a legal certainty that its claim is for less than the jurisdictional amount. Lister v. Comm'r's Court, Navarro County, 566 F.2d 490, 492; Opelika, 448 F.2d at 665-66. See also Wright, Miller, Cooper, Federal Practice and Procedure: Jurisdiction 3d § 3702 (1998).
Reliance alleges that $234,905.80 of unpaid deductibles is in controversy. To reach that amount, Reliance admits that it aggregated the unpaid deductibles of all of the defendants under the policies. As noted supra, the deductible amount on the insurance policies is $50,000.00 per occurrence. (Pl.'s Am. Compl. ¶ 37.) Thus, it appears that no single claim will satisfy the jurisdictional minimum. Notably, a plaintiff generally may not aggregate claims against two or more defendants to satisfy the jurisdictional minimum for diversity. Jewell v. Grain Dealers Mut. Ins. Co., 290 F.2d 11, 13 (5th Cir. 1961); Lathem v. State Farm Mut. Auto. Ins. Co., 339 F.Supp.2d 767, 771-772 (S.D. Miss. 2004). If, however, the defendants are jointly liable to the plaintiff, the plaintiff may aggregate its claims against the defendants to determine the jurisdiction amount. Jewell, 290 F.2d at 13; Lathem, 339 F.Supp.2d at 772.
B. Analysis
At the outset, Reliance disputes whether the defendants have challenged the jurisdictional amount in an appropriate manner. In essence, Reliance argues that the defendants have not submitted any evidence that the amount in controversy is less than the jurisdictional amount and that, therefore, the Court should accept Reliance's formal allegation of the amount in controversy. (Pl.'s Mem. Opp'n Mot. Dismiss at 2.) The Court, however, finds that the defendants have challenged the amount in controversy in an appropriate manner. Specifically, the defendants filed a motion to dismiss in which they (1) pointed out Reliance's admission that the deductible amount is $50,000.00 per occurrence, (2) argued that no single deductible could satisfy the jurisdictional amount, and (3) posed a legal challenge to Reliance's aggregation of deductibles among the defendants. The defendants' motion to dismiss constitutes an appropriate challenge to Reliance's allegation of the amount in controversy. Compare Opelika, 488 F.2d at 666 (finding that the defendant challenged the amount in controversy in an appropriate manner when it alleged that the plaintiffs may not suffer pecuniary losses in its motion to dismiss), with Travelers Ins. Co. v. Badine Land Ltd., 1994 WL 247377, at *1 (E.D. La. May 27, 1994) (finding that the defendant did not challenge the jurisdictional amount in an appropriate manner when it offered only the bare assertion that the amount in controversy was insufficient). Since the defendants have challenged Reliance's allegation of the amount in controversy in an appropriate manner, Reliance bears the burden to prove to the Court by a preponderance of the evidence that it does not appear to a legal certainty that its claim is for less than the jurisdictional minimum. This means that Reliance must show that it can aggregate the amounts owed to meet the jurisdictional minimum.
The Court finds that Reliance cannot carry its burden. Aggregation of the amounts owed in this case is improper because the defendants are not jointly liable for the deductibles. Absent express policy language to the contrary, an insured under a policy is not liable for another insured's unpaid deductibles. Reliance has provided the Court with no policies or other documents to show that the defendants agreed to assume liability for each other's deductibles. Therefore, the Court must conclude that the defendants are not jointly liable for each other's deductibles. Cf. Metropolitan Life Ins. Co. v. Ditmore, 729 F.2d 1, 8 (2d Cir. 1984) (noting that the plaintiff could not aggregate the overpaid benefits to individual group health plan participants, and that none of the plan participants satisfied the jurisdictional minimum because the deductible amount was $500.00 per claimant per year).
Reliance points to cases that hold that multiple named insureds on a policy of insurance are jointly liable for the payment of premiums under the policy. See In re Mountaineer Coal Co., Inc., 247 B.R. 633, 640 (W.D. Va. 2000); Marine Office of America Corp. v. J.E. Brenneman Co., 1992 WL 8247, at *6-8 (S.D.N.Y. Jan. 10, 1002). Reliance's reliance on Mountaineer Coal and Brenneman is misplaced. Liability for payment of insurance premiums is distinguishable from liability for payment of deductibles for specific claims made under the policy. The insureds on the policy pay the premiums to keep the policy in effect for their mutual protection. In contrast, liability for a deductible does not arise until an insured has made a claim under the policy. The insured does not pay the deductible for the group's benefit. Instead, the insured pays the deductible as part of its contractual agreement to shoulder a portion of the costs for its liabilities. The insured incurs these liabilities individually, and not in conjunction with the group. Thus, the defendants are not jointly liable for each other's unpaid deductibles. Aggregation of the outstanding deductible amounts to satisfy the jurisdictional minimum is therefore improper. Accordingly, Reliance has not carried its burden to show that jurisdiction in this Court is proper.
Reliance points out that it has sued Airport Shuttle alone under the Louisiana open accounts statute for all of the unpaid deductibles. This, however, does not save Reliance's claim against Airport Shuttle from dismissal for lack of subject matter jurisdiction. This is because it appears to a legal certainty that Reliance cannot recover the total amount demanded because that amount represents an aggregate amount of unpaid deductibles for all of the defendants. Furthermore, Reliance has not even argued that Airport Shuttle owes at least $75,000.00 in unpaid deductibles for its own account. As the party asserting the Court's jurisdiction, Reliance has the burden to prove that jurisdiction in this Court is proper. The Court finds that Reliance has failed to carry its burden. See Lister, 566 F.2d at 493 (finding that the plaintiffs failed to carry their burden because they failed to specify the pecuniary value of the amount in controversy in response to the defendant's challenge).
III. CONCLUSION
For the foregoing reasons, the Court GRANTS the motion to dismiss under Rule 12(b)(1), and therefore the Court does not reach the motion to dismiss under Rule 12(b)(6).