Memorandum in Support of Plaintiff’s Motion to Remand

Steuben v. Life Partners, Inc.

Description: In this case, Heygood, Orr & Pearson filed a putative class action on behalf of certain California residents in California state court against Life Partners, Inc., a company that sells investments in life insurance policies.  This particular brief was filed in federal court in California after the defendant removed the case.  We argued that the court should remand the case to state court because the defendant failed to demonstrate that the amount in controversy exceeded $5 milllion floor for federal jurisdiction under the Class Action Fairness Act of 2005.  The judge agreed and remanded the case to the California state court where it had originally been filed. This brief was filed by Heygood, Orr & Pearson on behalf of their client.

 

No. 2:11-cv-10212-PSG-CW
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA – WESTERN DIVISION
MARILYN STEUBEN, on behalf of Herself and all other California citizens similarly situated,Plaintiff,v.LIFE PARTNERS, INC.,Defendant. MEMORANDUM IN SUPPORT OF PLAINTIFF’S MOTION TO REMANDDATE: March 26 2012TIME: 1:30 PMPLACE: Los Angeles, CA 90012

Attorney for Plaintiff

CHARLES W. MILLER., California Bar No. 276523
HEYWOOD, ORR & PEARSON
2331 W. Northwest Hwy., 2nd Floor
Dallas Texas 75220
Telephone: (214) 337-9001
Facsimile: (214) 237-9002
charles@hop-law.com

TABLE OF CONTENTS

I.       SUMMARY OF MOTION……………………………………………2

II.      STATEMENT OF ISSUE TO BE DECIDED…………………………2

III.     STATEMENT OF FACTUAL ALLEGATIONS……………………..2

IV.     LEGAL STANDARDS FOR REMOVAL AND REMAND…………6

V.      LEGAL AUTHORITIES IN SUPPORT OF MOTION TO

REMAND……………………………………………………………..8

A.      Removal jurisdiction here requires more than $5 million

In controversy…………………………………………………..8

B.      The amount in controversy is determined based on the

Allegations in the Plaintiff’s complaint………………………..8

C.      Defendant’s evidence is grossly over-inclusive and does

not address the amount placed in controversy by the

complaint……………………………………………………….10

D.      Defendant’s evidence is insufficient to support removal

jurisdiction………………………………………………………12

VI      CONCLUSION………………………………………………………..21

 

TABLE OF AUTHORITIES

CASES

Gaus v. Miles, Inc.,

980 F.2d 564, 566 (9th Cir.1992)……………………………………………9

St. Paul Mercury Indem. Co. v. Red Cab Co.,

303 U.S. 283, 288-290, 58 S.Ct. 586, 590-591, 82 L.Ed. 845 (1938)………9

Lowdermilk v. United States Bank Nat’l Assoc.,

479 F.3d 994, 997 (9th Cir. 2007)……………………………………………10

Abrego Abrego v. The Dow Chemical Co.,

443 F.3d 676, 685 (9th Cir.2006)…………………………………………….10

Sanchez v. Monumental Life Ins. Co.,

102 F.3d 398, 404 (9th Cir. 1996)……………………………………………10

Korn v. Polo Ralph Lauren Corp.,

536 F.Supp.2d 1199, 1205 (E.D.Cal. 2008)………………………………….10

Valdez v. Allstate Ins. Co.,

372 F.3d 1115, 1117 (9th Cir. 2004)…………………………………………11

Ray v. Wells Fargo Bank, N.A.,

2011 WL 1790123, *5 (C.D.Cal. May 09, 2011)……………………………11

Bell v. Hershey Co., 557 F.3d 953, 956 (8th Cir. 2009)…………………………….12

Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 449 (7th Cir.2005)………..12

Zackaria v. Wal-Mart Stores, Inc.,

2011 WL 6065169 (C.D.Cal. December 05, 2011)…………………………15

Miedema v. Maytag Corp., 450 F.3d 1322 (11th Cir. 2006)………………………15

Thomas v. Southern Pioneer Life Ins. Co.,

2009 WL 4894695 (E.D.Ark. December 11, 2009)…………………………16

Fiddler v. AT & T Mobility, LLC,

2008 WL 2130436, *2 (N.D.Ill. May 20, 2008)…………………………….16

 

Chochorowski v. Home Depot USA,

585 F. Supp. 2d 1085, 1091-93 (E.D. Mo. 2008)……………………………16

Paz v. Playtex Products, Inc.,

          2008 WL 111046, *3 (S.D.Cal. January 10, 2008)…………………………16

Roth v. Comerica Bank, 799 F.Supp.2d 1107 (C.D.Cal. 2010)……………………17

Pereira v. Gate Gourmet, Inc., 2009 WL 1212802 (C.D.Cal. April 30, 2009)……17

Amoche v. Guarantee Trust Life Insurance Co.,

          556 F.3d 41, 51 (1st Cir. 2009)………………………………………………19

Myrick v. Nationwide Mut. Ins. Co.,

2008 WL 53183 (W.D.Wash. Jan. 3, 2008)………………………………….20

Lewis v. Verizon Communications, Inc., 627 F.3d 395 (9th 2010)…………………22

  1. I.                  SUMMARY OF MOTION

Defendant has removed claiming jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”), 28 U.S.C. § 1332(d)(2)(A).  However, Defendant has failed to demonstrate the amount in controversy exceeds the requisite $5 million.

Plaintiff has not alleged a specific amount in controversy because Defendant alone has access to the information necessary to make such a calculation. Despite having such access, Defendant has failed to present evidence of the amount in controversy. Instead, Defendant has offered only an over-inclusive, irrelevant figure that is clearly not the amount that has been placed in controversy by the complaint. Defendant has failed to meet its burden, all doubts must be resolved against removal jurisdiction, and this case should be remanded to state court.

  1. II.                STATEMENT OF ISSUE TO BE DECIDED

Whether Defendant has demonstrated by a preponderance of the evidence that the amount in controversy is more than $5 million.

  1. III.           STATEMENT OF FACTUAL ALLEGATIONS

Plaintiff filed this putative class action on behalf of only California residents in California state court. (Complaint, Ex. A to Notice of Removal).  Defendant is engaged in the secondary market for life insurance known generally as “life settlements.” (Id., at ¶ 10).   A “life settlement” is the sale of an existing life insurance policy by the policyholder to another party.  (Id.) By selling a life insurance policy, the policyholder receives an immediate cash payment while the purchaser takes an ownership interest in the policy at a discount to its face value and later receives the full amount of the death benefit paid out under the policy when the insured dies.  (Id., at ¶ 11).

This suit asserts claims on behalf of California residents who purchased life settlements from Defendant. (Id., at ¶ 9).  In addition to providing money to Defendant that was used by Defendant to initially purchase the policy from the policyholder, Plaintiff and the class members were also required by Defendant to place money in escrow accounts that was then used by Defendant to pay premiums to keep the policies in force until they mature (i.e. the death of the insured). (Id., at ¶ 20).   The amount required by Defendant to be placed into escrow and paid to insurers to maintain the policies was determined entirely by Defendant. (Id., at ¶¶ 20-22).

The yield that a purchaser of a life settlement from Defendant ultimately receives is computed from the difference between the initial cost basis of acquiring his interest in the policy and the amount later paid out under the policy upon the demise of the insured. (Id., at ¶ 15). The acquisition cost includes all of Defendant’s fees and costs associated with the initial acquisition of the policy as well as amounts for the payment of premiums to maintain the policy until it matures. (Id.).

This suit concerns “universal life insurance policies” which allow different approaches to the payment of premiums. (Id., at ¶ 17). One can choose to pay the minimum necessary to maintain the policy, so-called “optimized premiums.” (Id.). Alternatively, one can choose to pay so-called “level premiums” which include additional amounts beyond the cost-of-insurance that can build up the “cash value” of the policy. (Id.).  An original policyholder might choose to make such additional payments and increase the cash value of his policy as a form of savings/investment or perhaps as a way to decrease the cost of premiums later in life. (Id.). Such a policyholder might even borrow money against the “cash value” of the policy. (Id.).

The purchaser of a life settlement from Defendant is only interested in the death benefit policy proceeds and not the “cash value” of a policy. (Id., at ¶ 18).    The “cash value” is not paid to a purchaser of a life settlement interest in the policy at the death of the policyholder and is worthless to the purchaser of a life settlement from or through Defendant. (Id.). Rather, the less that a life settlement purchaser pays to the insurer prior to the policy maturing, the greater the yield on the investment. (Id.).  No reasonably prudent purchaser of such a life settlement would pay more to the insurer than the minimum (cost of insurance) required to maintain the policy. (Id.).

Unbeknownst to Plaintiff and class members and in violation of its obligations to Plaintiff and the class members, Defendant did not pay only “optimized” premiums for the policies in question. (Id., at ¶¶ 27-28).  Instead, Defendant paid “level premiums” which senselessly increased the cost (to Plaintiff and class members) of maintaining the policies without providing any benefit to Plaintiff and the class members. (Id., at ¶ 27-28). Although Plaintiff and class members agreed to pay premiums to maintain the policies, they certainly never agreed to simply give extra money to an insurer that would provide no added benefit whatsoever for Plaintiff and class members. (Id.; see also id. at ¶ 18).

The Complaint alleges that “Plaintiff and the class members were wrongfully injured and suffered damages because the Plaintiff and the class members were made to pay more than the minimum (cost of insurance) required to maintain the policy as a direct result of Defendant’s wrongful conduct …” (Id., at ¶ 32).  The Complaint alleges damages as follows:

72.     Plaintiff and the class members seek to recover their money that has been wrongfully paid to insurers.  They do not seek to recover all amounts paid to Defendant or to insurers; rather, Plaintiff and the class she seeks to represent seek to recover only those amounts paid to insurers over and above the “cost of insurance,” i.e. the minimum necessary to keep a policy in force at the time of any such payment to the insurer.

(Id. at ¶ 72) (emphasis supplied).  In other words, the “amount in controversy” in this action is clearly not the total amount placed in escrow by Plaintiff and the class members, but rather only a portion of that amount which Defendant “paid to insurers over and above the ‘cost of insurance.’”  (Id.).  Defendant obviously understands what is truly “in controversy.” The amount in controversy is, in the words of Defendant’s own President, “the difference, if any, between the so-called ‘cost of insurance,’ had ‘premium optimization’ been utilized with respect to Plaintiff’s and the putative class members’ interests in such polices, versus the use of level premiums.” (Declaration of R. Scott Peden, Exhibit C to Notice of Removal, at ¶ 8).

  1. IV.           LEGAL STANDARDS FOR REMOVAL AND REMAND

“If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c). “In diversity cases, where the amount in controversy is in doubt, the Supreme Court has drawn a sharp distinction between original jurisdiction and removal jurisdiction.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.1992), citing St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-290, 58 S.Ct. 586, 590-591, 82 L.Ed. 845 (1938). In the removal context, “[t]here is a strong presumption that the plaintiff has not claimed a large amount in order to confer jurisdiction on a federal court.” Gaus, 980 F.2d at 566. “The ‘strong presumption’ against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper.” Id. Although CAFA amends 28 U.S.C. § 1332(d) for class action lawsuits, the Ninth Circuit has “affirmed that ‘under CAFA, the burden of establishing removal jurisdiction remains, as before, on the proponent of federal jurisdiction.’” Lowdermilk v. United States Bank Nat’l Assoc., 479 F.3d 994, 997 (9th Cir. 2007) quoting Abrego Abrego v. The Dow Chemical Co., 443 F.3d 676, 685 (9th Cir.2006)).

“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, 980 F.2d at 566-67 (emphasis in original). Of course, removal jurisdiction cannot be based on conclusory allegations by the removing defendant. Abrego Abrego, 443 F.3d at 685; see also Gaus, 980 F.2d at 567.  Rather, “the defendant must provide evidence that it is ‘more likely than not’ that the amount in controversy” satisfies the federal diversity jurisdictional amount requirement.” Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996).  The removing defendant is required to provide “summary-judgment-type-evidence” as to the amount in controversy. See, e.g., Korn v. Polo Ralph Lauren Corp., 536 F.Supp.2d 1199, 1205 (E.D.Cal. 2008), citing Valdez v. Allstate Ins. Co., 372 F.3d 1115, 1117 (9th Cir. 2004)

V.      LEGAL AUTHORITIES IN SUPPORT OF MOTION TO REMAND

A.      Removal jurisdiction here requires more than $5 million in controversy.

Defendant has attempted to base jurisdiction in this Court pursuant to 28 U.S.C. § 1332(d)(2), which was enacted as part of the Class Action Fairness Act of 2005 (“CAFA”).  Section 1332(d)(2) provides for diversity jurisdiction over class actions “in which the matter in controversy exceeds the sum or value of $5,000,000.” 28 U.S.C. § 1332(d)(2). Defendant does not assert any other possible basis for jurisdiction in this Court. (See Notice of Removal).

B.      The amount in controversy is determined based on the allegations in the Plaintiff’s complaint.

Because the complaint does not allege a specific amount in damages, Defendant bears the burden of proving that it is more likely than not that the amount in controversy exceeds $5 million.  See Abrego Abrego, 443 F.3d at 685; see also Gaus, 980 F.2d at 566-567; Sanchez, 102 F.3d at 404. The critical inquiry is the amount placed in controversy by the allegations in plaintiff’s complaint.” Korn, 536 F.Supp.2d at 1206 n. 4 (emphasis supplied); see gen., St. Paul Mercury, 303 U.S. at 291 (“status of the case as disclosed by the plaintiff’s complaint is controlling in the case of a removal”) (emphasis supplied); see also, e.g., Ray v. Wells Fargo Bank, N.A., Not Reported in F.Supp.2d, 2011 WL 1790123, *5 (C.D.Cal. May 09, 2011) (“the amount in controversy is determined at the time of removal and is to be decided based on the allegations in the operative pleading”).   CAFA did not alter the proposition that a plaintiff is the “master of her complaint.” Lowdermilk, 479 F.3d at 998-999. Thus, “a removing defendant can’t make the plaintiff’s claim for him.” Bell v. Hershey Co., 557 F.3d 953, 956 (8th Cir. 2009), quoting Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 449 (7th Cir.2005).

Here, Plaintiff alleges that Defendant failed to pay only “optimized” premiums for the policies in question. (Complaint, at ¶¶ 27-28).  Instead, Defendant paid “level premiums” which senselessly increased the cost (to Plaintiff and class members) of maintaining the policies without providing any benefit to Plaintiff and the class members. (Id., at ¶ 27-28).  The Complaint alleges that “Plaintiff and the class members were wrongfully injured and suffered damages because the Plaintiff and the class members were made to pay more than the minimum (cost of insurance) required to maintain the policy as a direct result of Defendant’s wrongful conduct …” (Id., at ¶ 32).  The Complaint alleges damages as follows:

72.     Plaintiff and the class members seek to recover their money that has been wrongfully paid to insurers.  They do not seek to recover all amounts paid to Defendant or to insurers; rather, Plaintiff and the class she seeks to represent seek to recover only those amounts paid to insurers over and above the “cost of insurance,” i.e. the minimum necessary to keep a policy in force at the time of any such payment to the insurer.

(Id. at ¶ 72) (emphasis supplied).  In other words, the “amount in controversy” in this action is clearly not the total amount placed in escrow by Plaintiff and the class members, but rather only that amount Defendant “paid to insurers over and above the ‘cost of insurance.’”   (Id.).

  1. C.      Defendant’s evidence is grossly over-inclusive and does not address the amount placed in controversy by the complaint.

The only evidence offered by Defendant in support of removal is the Declaration of R. Scott Peden, attached as Exhibit C to Defendant’s Notice of Removal.  Mr. Peden claims there are 843 class members and that “the aggregate sum of the funds placed in escrow by those 843 purchasers for the purpose of paying premiums to maintain Universal Life Insurance policies in which those 843 persons purchased an interest is $32,454,221.71.” (Peden Decl., at ¶ 6).  Of course, “the aggregate sum of the funds placed in escrow … for the purpose of paying premiums to maintain” the policies is simply not the amount placed in controversy by the complaint.  To the contrary, the complaint specifically explains that “Plaintiff and the class she seeks to represent seek to recover only those amounts paid to insurers over and above the ‘cost of insurance,’ i.e. the minimum necessary to keep a policy in force at the time of any such payment to the insurer.”  (Complaint, at ¶ 72) (emphasis supplied).  The total amount placed in escrow is thus a grossly over-inclusive exaggeration of the amount in controversy.  Plaintiffs are seeking a relatively small portion of that total amount—the difference between what should have been paid (optimized premiums) and what was paid (level premiums).

Defendant can hardly claim confusion because Mr. Peden’s declaration illustrates that Defendant not only understands what is actually “in controversy” but even acknowledges that Defendant has failed to present relevant evidence “at this juncture.”  (Id. at ¶ 8).  Mr. Peden obviously recognizes that the amount in controversy is “the difference, if any, between the so-called “cost of insurance,” had “premium optimization” been utilized with respect to Plaintiffs and the putative class members’ interests in such polices, versus the use of level premiums.” (Id.).  Rather than present evidence regarding the amount of this “difference,” Defendant attempts to meet its burden of proof simply by declaring that, “at this juncture,” Defendant is unable to provide an estimate of the amount in controversy.  (Id.).  If that is true, then Defendant obviously should not have removed this case.   There is not any one-year or other time limit on removal under CAFA. See 28 U.S.C. § 1453(b) (“A class action may be removed to a district court of the United States in accordance with section 1446 (except that the 1-year limitation under section 1446(b) shall not apply.”)). Thus, “at this juncture,” Defendant should have allowed this case to develop further until Defendant was at least able to make an estimate of the amount in controversy.  See, Zackaria v. Wal-Mart Stores, Inc., Not Reported in F.Supp.2d, 2011 WL 6065169 (C.D.Cal. December 05, 2011) (“Rather than moving ahead, relying largely upon conjecture, Wal–Mart could have waited for evidence that it is more likely than not that the amount in controversy requirement in this case is satisfied.  …At this time, however, the Court finds Wal–Mart fails to satisfy its burden in invoking the Court’s jurisdiction.”).

D.      Defendant’s evidence is insufficient to support removal jurisdiction.

Courts have consistently rejected efforts by Defendants to attempt to justify removal jurisdiction with over-inclusive figures that do not speak to damages actually sought by the complaint. For example, a product manufacturer relied on CAFA to remove a consumer class action alleging a product defect and asserting state-law claims in Miedema v. Maytag Corp., 450 F.3d 1322 (11th Cir. 2006).   The manufacturer attempted to justify removal jurisdiction by multiplying the number of range/ovens at issue by the manufacturer’s suggested retail price (“MSRP”). Id., at 1331-32.  The Eleventh Circuit, agreeing with the district court that the manufacturer failed to prove by a preponderance of the evidence that $5 million was in controversy, noted that “it is unclear whether those MSRPs would in any way reflect the compensatory damages, interest, and costs that Miedema seeks.” Id., at 1331-32; see also, e.g., Freebird, Inc. v. Merit Energy Co., 597 F.Supp.2d 1245, 1250 (D.Kan. 2009) (“Essentially, the Defendant has only provided total amounts-not the formulas used to calculate royalties, not a calculation from the complaint’s allegations-only one affidavit with conclusory remarks regarding total revenue and amounts paid. Regardless of what standard this Court were to apply-preponderance of the evidence, reasonable probability, reasonable certainty, legal certainty-the Defendant has failed to meet it. Figures of total revenue absent percentages or an explanation of the calculation of royalties are insufficient to establish the jurisdictional amount in controversy as to unpaid royalties.”); Thomas v. Southern Pioneer Life Ins. Co., 2009 WL 4894695 (E.D.Ark. December 11, 2009) (holding that defendant insurer failed to meet its burden where its evidence related to total value of its insurance policies rather than the damages sought); Fiddler v. AT & T Mobility, LLC, 2008 WL 2130436, *2 (N.D.Ill. May 20, 2008) (“[E]vidence of Defendants’ total sales during the relevant time period brings Defendants no closer to establishing the amount in controversy in this case since Defendants have not provided even an estimation of the portion of total sales implicated by [the plaintiff’s] claims.”); Chochorowski v. Home Depot USA, 585 F. Supp. 2d 1085, 1091-93 (E.D. Mo. 2008) (class action alleging class was wrongfully forced to pay a “damage waiver” when renting tools was remanded because  “defendant’s calculation of plaintiff’s compensatory damages … is over-inclusive and cannot be accepted.”;  the court found that the defendant’s evidence of “total” revenue from damage waivers included money it had collected under a newer, “optional” damage waiver agreement that was not put at issue by the plaintiff’s claims); Paz v. Playtex Products, Inc., 2008 WL 111046, *3 (S.D.Cal. January 10, 2008) (“While [removing defendant] asserts that total gross retail sales for the [product in question] will be about $9 million per year (about $42 million over four years), there is no showing that this is an appropriate measure of damages for the alleged [causes of action].”)

Courts in the Central District of California have also found over-inclusive calculations similar to the Defendant’s herein to be insufficient to justify removal jurisdiction under CAFA. See, e.g., Roth v. Comerica Bank, 799 F.Supp.2d 1107 (C.D.Cal. 2010); see also Pereira v. Gate Gourmet, Inc., Not Reported in F.Supp.2d 2009 WL 1212802 (C.D.Cal. April 30, 2009) (finding defendant’s evidence of the amount in controversy to be insufficient where defendant calculated value of claims based on 30-day period but facts alleged in complaint suggested no more than 10-day period); Zackaria, 2011 WL 6065169 (removing defendant failed to demonstrate its calculations were grounded in the claims asserted rather than mere conjecture which conveniently reached the jurisdictional threshold).

In Roth, a former employee brought a putative class action in state court against banking corporations, alleging hour and wage violations under California law, and the defendants removed. Roth, 799 F.Supp.2d at 1111. In attempting to establish the amount in controversy as to class claims for unpaid overtime, the defendants multiplied the number of hours in question by “$19.50, plaintiff’s standard overtime wage.”  Id. at 1119.  The district court found such a calculation unsupported by the claims alleged in the plaintiff’s complaint:

The hourly wage of $19.50 that defendants use in this calculation, however, does not reflect the overtime claim asserted in the complaint. Roth alleges that he “was often not paid an overtime rate for the overtime hours that he worked.” He does not allege that he was paid less than his regular wage of $13 an hour for such work. Defendants thus should have based their calculation on the additional $6.50 per hour Roth was entitled to receive for overtime work, not on the total overtime wage of $19.50.

Id.[1]   Similarly, in the present case, Defendant is trying to justify removal based on the total amounts placed in escrow, even though it “does not reflect the  … claim asserted in the complaint.” The claims asserted in the complaint are only for amount by which Defendant overpaid—the difference between optimized and level premiums.  The claims are not for anything close to the total placed in escrow.

In Roth, the court also noted that “in evaluating whether a party has met its burden of proof with respect to jurisdiction, several circuits have held that it is proper for district courts to consider which party has access to or control over the records and information required to determine whether the amount in controversy requirement is met.” Roth, 799 F.Supp.2d at 1129-1130; see, e.g., Amoche v. Guarantee Trust Life Insurance Co., 556 F.3d 41, 51 (1st Cir. 2009) (“[D]eciding whether a defendant has shown a reasonable probability that the amount in controversy exceeds $5 million may well require analysis of what both parties have shown…. In the course of that evaluation, a federal court may consider which party has better access to the relevant information.”); Brill, 427 F.3d at 447–48 (“Whichever side chooses federal court must establish jurisdiction; it is not enough to file a pleading and leave it to the court or the adverse party to negate jurisdiction. … When the defendant has vital knowledge that the plaintiff may lack, a burden that induces the removing party to come forward with the information—so that the choice between state and federal court may be made accurately—is much to be desired”).  In granting the motion to remand in Roth, the court noted that “defendants are in the best position to adduce evidence regarding the working hours and wages of their tellers.”  In the present case, Defendant alone has access to the information regarding the policies in question that could be used to determine the amount in controversy.

In Myrick v. Nationwide Mut. Ins. Co., Not Reported in F.Supp.2d, 2008 WL 53183 (W.D.Wash. Jan. 3, 2008), the Plaintiff asserted that Nationwide made Personal Injury Protection (“PIP”) coverage payments to insureds like Plaintiff and then inappropriately sought reimbursement for those payments from the insureds even though the insured had not been made whole by a third party tortfeasor.  Nationwide attempted to justify removal with evidence that it “made PIP payments to Washington insureds and later recovered in excess of $7,000,000 of these PIP payments.”  Myrick, 2008 WL 53183, at *2. The district court found this evidence insufficient to justify removal under CAFA:

But as Plaintiff points out, this evidence does not address the claims as pled in Plaintiff’s complaint. Plaintiff only seeks recovery for those PIP payments Nationwide sought to recover where its insureds had not been made whole by third party tortfeasors. Defendant does not argue or present any evidence suggesting that the subset of recovered PIP payments focused on in Plaintiff’s complaint is equal to the total number of PIP payments Nationwide actually recovered. If some of the $7,000,000 in PIP payments recovered by Nationwide were from insureds that had previously been made whole by third party tortfeasors, those recoveries would not be included within the recoveries at issue in this case. Moreover, if Nationwide recovered some of the PIP payments from someone other than the insured, those recoveries would fall outside the context of this lawsuit.

In effect, Nationwide has offered an overinclusive figure as its only evidence of federal CAFA jurisdiction. That evidence does not suffice. The Court will not speculate as to what percentage of the $7,000,000 in payment recoveries actually fall within the purview of Plaintiff’s claims.

Id. at * 2.  The court noted that the Defendant’s over-inclusive figure was insufficient under either a legal certainty or preponderance standard of review. Id., at n. 2.  Similarly, Defendant here has presented evidence of a figure “does not address the claims as pled in Plaintiff’s complaint.” Defendant “does not argue or present any evidence suggesting” that the difference between optimized and level premiums] focused on in Plaintiff’s complaint is equal to the total amount placed in escrow.  This Court, like the Myrick court, should “not speculate as to what percentage of the [total placed in escrow] actually fall within the purview of Plaintiff’s claims.”

Finally, nothing in the Ninth Circuit’s decision in Lewis v. Verizon Communications, Inc., 627 F.3d 395 (9th 2010) supports the Defendant’s attempt to justify removal in the present case.  In Lewis, the Plaintiff alleged “that she and the other putative class members are being billed by Verizon for premium services they never ordered.”

In the complaint the charges at issue are termed “unauthorized” charges. To support removal, Verizon submitted an affidavit that its total billings for all ESBI services in California exceeded $5 million.

[…]  The district court …  assumed total billings would include both authorized and unauthorized charges and held that the Defendant had failed to meet its burden under our case law to show the amount in controversy, i.e., unauthorized charges, exceeded the jurisdictional amount. …

There is no evidence or allegation to support this assumption, however. The Plaintiff has alleged that the putative class has been billed for unauthorized charges; the Defendant has put in evidence of the total billings and the Plaintiff has not attempted to demonstrate, or even argue, that the claimed damages are less than the total billed.

… To establish the jurisdictional amount, Verizon need not concede liability for the entire amount, which is what the district court was in essence demanding by effectively asking Verizon to admit that at least $5 million of the billings were “unauthorized” within the meaning of the complaint.

Id., at 399-400 (emphasis supplied).

Unlike Lewis, in the present case, Plaintiff is indeed “arguing” and “demonstrating” that the claimed damages are less than the total amounts placed in escrow. The complaint is clear:

72.     Plaintiff and the class members seek to recover their money that has been wrongfully paid to insurers.  They do not seek to recover all amounts paid to Defendant or to insurers; rather, Plaintiff and the class she seeks to represent seek to recover only those amounts paid to insurers over and above the “cost of insurance,” i.e. the minimum necessary to keep a policy in force at the time of any such payment to the insurer.

(Complaint. at ¶ 72) (emphasis supplied). Plaintiff is the “master of her complaint” and is obviously not seeking to recover all amounts placed by Plaintiff and the class members in escrow for the purpose of maintaining the policies.  The majority of the money placed in escrow by Plaintiff and the class members would have covered the “cost of insurance.” Plaintiffs are seeking to recover only that portion that was paid over and above the cost of insurance, i.e. the difference between optimized and level premiums.  According to the declaration filed by Defendant’s President, there may not even been “any” difference between optimized and level premiums.  (See Peden Decl. at ¶ 8 (describing “the difference, if any, between the so-called ‘cost of insurance,’ had ‘premium optimization’ been utilized … versus the use of level premiums.”).  In other words, according to Defendant, there may not be “any” amount in controversy.

Further unlike Lewis, Defendant here would obviously not have to admit liability in order to present evidence regarding the amount in controversy. To merely calculate the difference in amount between optimized and level premiums has nothing at all to do with whether or not Defendant was obligated to optimize premiums.  The rationale underlying Lewis does not apply here, and this action should be remanded.

VI.    CONCLUSION

Defendant has failed to meets it burden to demonstrate by a preponderance of the evidence that the amount in controversy is in excess of $5,000,000.  Plaintiff respectfully requests that the Court grant Plaintiff’s Motion to Remand, remand the case to the Superior Court of the State of California for the County of Los Angeles, and grant Plaintiff such other and further relief to which they may show themselves to be justly entitled.

DATED:   January 12, 2012             HEYGOOD, ORR & PEARSON

 

By: /s/ Charles W. Miller

Charles W. Miller

Heygood, Orr & Pearson

2331 W. Northwest Highway, 2nd Floor

Dallas, Texas 75220

Telephone: (214) 237-9001

Facsimile: (214) 237-9002

 

CERTIFICATE OF SERVICE

 

I, Charles W. Miller, certify that on January 12, 2012, the foregoing document

entitled MEMORANDUM IN SUPPORT OF PLAINTIFF’S MOTION TO REMAND

was filed electronically in the Court’s ECF; thereby upon completion the ECF system automatically generated a “Notice of Electronic Filing” (“NEF”) as service through CM/ECF to registered e-mail addresses of parties of record in the case.

 

/s/ Charles W. Miller  

Charles W. Miller



[1] The court also found the defendants’ use of 3 to 5 lost overtime for every class member to be unsupported by evidence or the allegations in the plaintiff’s complaint.   Id.   And, the court found similar problems with the defendants’ calculations as to plaintiff’s other claims.