Opinion
No. CV-18-00470-TUC-JAS (JMR)
10-24-2018
Jon Weigen, Plaintiff, v. American Family Mutual Insurance Company SI, et al., Defendants.
REPORT AND RECOMMENDATION
Pending before the Court is a Motion to Remand (Doc. 6) filed by Plaintiff Jon Weigen. Defendant American Family Mutual Insurance Company, S.I. ("American Family"), filed a response (Doc. 9) and Plaintiff filed a reply (Doc. 14). In accordance with 28 U.S.C. § 636(b)(1) and Rules 72.1 and 72.2 of the Local Rules of Civil Procedure, this matter was referred to the Magistrate Judge for report and recommendation. For the reasons explained herein, the Magistrate Judge recommends that the District Court deny the motion.
A motion to remand is a case dispositive motion that requires the issuance of findings and recommendations if initially reviewed by a magistrate judge. See Flam v. Flam, 788 F.3d 1043, 1047 (9th Cir. 2015). --------
I. Background
Plaintiff Weigen is a resident of the state of Arizona. (American Family's Notice of Removal to United States District Ct. [hereafter "Notice of Removal"], Ex. 1, Complaint, ¶ 1.) American Family is a Wisconsin corporation with its principal place of business in Madison, Wisconsin. (Notice of Removal, ¶ 1(b).) During the time period relevant to the Complaint, Plaintiff held an American Family insurance policy which covered his motor vehicles. (Id., ¶6.) His coverage included $100,000.00 per person and $300,000.00 per occurrence of uninsured and underinsured motorist benefits ("UM/UIM"). (Id., ¶¶ 6-7.)
On October 19, 2015, Plaintiff was driving his 2015 Ford pickup in Phoenix, Arizona, when he was involved in an automobile accident with another vehicle owned and operated by Alena Statler. (Id., ¶¶ 6 & 10.) Statler maintained insurance on her vehicle with Legacy Insurance with liability limits of $15,000.00 per person. (Id., ¶ 15-16.) In January 2018, Plaintiff settled his claim against Statler for the Legacy Insurance policy limit of $15,000.00. (Id., ¶16.) Pursuant to the provisions of his American Family policy, Plaintiff then made a claim for UM/UIM benefits and, on January 11, 2018, submitted his demand for payment of the UIM policy limits of $100,000.00. (Id., 17.) After Plaintiff submitted additional documentation of his injuries, American Family denied Plaintiff's UIM claim and stated that Plaintiff had been adequately compensated by the $15,000.00 paid by Legacy Insurance on Statler's behalf. (Id., ¶ 20 & 22.)
On August 15, 2018, Plaintiff filed the present action in state court against American Family, alleging breach of contract and bad faith claims. (Notice of Removal, Ex. 1, Complaint.) On September 19, 2018, American Family removed the case to this Court. (Notice of Removal, Doc. 1.)
II. Discussion
A. Legal Standard
Removal jurisdiction under 28 U.S.C. § 1441(a) gives federal district courts original jurisdiction over "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." Federal district courts have jurisdiction over civil actions "where the matter in controversy exceeds the sum or value of $75,000" and where the matter is between "citizens of different States." 28 U.S.C. § 1332. Remand is a proper remedy if the federal court lacks subject matter jurisdiction, or if a case is otherwise improperly removed. 28 U.S.C. § 1447.
Removing defendants bear the burden of proving by a preponderance of the evidence that the amount in controversy meets the jurisdictional threshold. See Valdez v. Allstate Ins. Co., 372 F.3d 1115, 1117 (9th Cir. 2004); Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003) ("Where it is not facially evident from the complaint that more than $75,000 is in controversy, the removing party must prove, by a preponderance of the evidence, that the amount in controversy meets the jurisdictional threshold. Where doubt regarding the right to removal exists, a case should be remanded to state court.") (footnotes omitted); see also Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 376 (9th Cir.1997) ("Where the complaint does not demand a dollar amount, the removing defendant bears the burden of proving by a preponderance of evidence that the amount in controversy exceeds [the jurisdictional minimum]."). "If it is unclear what amount of damages the plaintiff has sought . . . then the defendant bears the burden of actually proving the facts to support jurisdiction, including the jurisdictional amount." Gaus v. Miles, Inc., 980 F.2d 564, 566-67 (9th Cir.1992).
B. American Family has met its burden as to the amount in controversy.
In the Motion to Remand, Plaintiff contends that American Family has not met its burden of showing that the amount in controversy is greater than $75,000. In response, American Family notes that in the Complaint, Plaintiff alleges that, on January 11, 2018, he "submitted his UIM demand letter claim to American Family, demanding the policy limits of $100,000.00." See Notice of Removal, Ex. 1, Complaint, ¶ 17. Additionally, attached to the response is a copy of the demand letter in which Plaintiff alleges that "this case has a settlement value in excess of $115,000.00," and indicates his willingness to settle the matter for the policy limit of $100,000.00. Response, Ex. 1, p. 5. Rather than disavow the demand, Plaintiff argues that Federal Rule of Evidence 408(a) prevents the Court from considering the settlement demand and states that "although it is likely American Family can demonstrate that the claim exceeds $75,000 'exclusive of interests and costs,' American Family has not yet done so in accordance with the statutory rule and the Ninth Circuit's established precedent." The Court disagrees.
Rule 408(a) prohibits the use of statements made in settlement discussions when used to prove liability. See Fed. R. Evid. 408(a). American Family is not attempting to use the settlement demand letter for that purpose. Moreover, the Ninth Circuit has held that a "settlement letter is relevant evidence of the amount in controversy if it appears to reflect a reasonable estimate of the plaintiff's claim." Cohn v. Petsmart, Inc., 281 F.3d 873, 840 (9th Cir. 2001); see also Del Real v. Healthsouth Corp., 171 F.Supp.2d 1041, 1043 (D.Ariz. 2001) ("[M]any courts have ruled that even if initial pleadings in a case do not support the amount in controversy requirement for diversity jurisdiction, defendants may use a variety of documents, including a written settlement demand, as 'other paper,' to determine if the case is removable.") (citing sources). Here, Plaintiff does not argue that his case is worth less than $100,000.00 he demanded. Rather, he asserts that while his case is likely worth more than $75,000.00, American Family has not carried its burden to prove that the amount in controversy exceeds $75,000. Plaintiff's willingness to settle this case for $100,000.00 is strong evidence that he considers the case to be worth more than this amount. Plaintiff has left this evidence unrebutted and Defendant has therefore established by a preponderance of the evidence that the case meets the amount in controversy requirements for removal under 28 U.S.C. §§ 1441(a) and 1332(a).
C. American Family has established that the parties are diverse.
In the Motion to Remand, Plaintiff also contends that American Family has not established diversity as required under 28 U.S.C. § 1332. Plaintiff does not dispute that he is a citizen of Arizona or that American Family is a Wisconsin corporation with its principal place of business in Madison, Wisconsin. Rather, Plaintiff contends that this matter is a "direct action" as described in 28 U.S.C. § 1332(c)(1) and, therefore, American Family's citizenship for diversity purposes is determined by that of the non-joined tortfeasor, Alena Statler. As American Family notes, the Ninth Circuit has rejected this argument.
Section 1332(c)(1) governs the citizenship of corporations for diversity purposes and provides that:
A corporation shall be deemed to be a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business, except that in any direct action against the insurer of a policy or contract of liability insurance, whether incorporated or unincorporated, to which action the insured is not joined as a party, such insurer shall be deemed a citizen of-(A) every state and foreign state of which the insured is a citizen . . . .28 U.S.C. § 1332(c)(1). In Searles v. Cincinnati Ins. Co., 998 F.2d 728 (1993), the Ninth Circuit reiterated that the "direct action" limitation under § 1332(c)(1) applies to:
those cases in which a party suffering injuries or damage for which another is legally responsible is entitled to bring suit against the other's liability insurer without joining the insured or first obtaining a judgment against him. . . .Id. at 728-29 (quoting Beckham v. Safeco Ins. Co., 691 F.2d 898, 902 (9th Cir.1982). The Searles court explained that, " 'unless the cause of action urged against the insurance company is of such nature that the liability sought to be imposed could be imposed against the insured, the action is not a direct action.' " Searles, 998 F.2d at 729 (quoting Beckham, 691 F.2d at 901-902). The interpretation of the direct action exception in 28 U.S.C. § 1332(c)(1) in Searles and Beckham makes clear that in a suit brought by an injured or damaged party, unless the action brought against the insurer could have been brought against the party who is legally responsible for the injury or damage, the action is not a "direct action" under 28 U.S.C. § 1332(c)(1). See Beckham, 691 F.2d at 901-902; Searles, 998 F.2d at 730.
Here, Plaintiff's complaint alleges a breach of contract and bad faith claim against his own insurer, American Family. Those claims and this action could not be brought against Statler. Thus, the action is a not a direct action and the rule set forth in § 1332(c)(1) for determining the citizenship of insurance companies in direct action suits does not apply in this case. Defendant American Family's citizenship for purposes of diversity jurisdiction should be determined by "every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business. . . ." 28 U.S.C. § 1332(c)(1). It is undisputed that American Family is incorporated in and has its principal place of business in the State of Wisconsin for purposes of evaluating diversity. Plaintiff is a citizen of the State of Arizona. Thus, the Court concludes that complete diversity exists between the parties and § 1332(c)(1) does not compel a different result.
III. Recommendation
Based on the foregoing, the Magistrate Judge RECOMMENDS that the District Court, after its independent review, issue an Order: (1) accepting the Report and Recommendation and (2) denying Plaintiff's Motion to Remand (Doc. 6).
This Recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of the District Court's judgment.
However, the parties shall have fourteen days from the date of service of a copy of this recommendation within which to file specific written objections with the District Court. See 28 U.S.C. § 636(b)(1) and Rules 72(b), 6(a) and 6(e) of the Federal Rules of Civil Procedure. Thereafter, the parties have fourteen days within which to file a response to the objections. Replies shall not be filed without first obtaining leave to do so from the District Court. If any objections are filed, this action should be designated case number: CV 18-470-TUC-JAS. Failure to timely file objections to any factual or legal determination of the Magistrate Judge may be considered a waiver of a party's right to de novo consideration of the issues. See United States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc).
Dated this 24th day of October, 2018.
/s/_________
Honorable Jacqueline M. Rateau
United States Magistrate Judge