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James River Insurance Co. v. William Kramer & Associates, LLC

United States District Court, D. South Carolina, Florence Division

February 14, 2018

James River Insurance Company, individually and a/a/o The Caravelle Resort Owners Association, Inc., Plaintiff,
William Kramer & Associates, LLC, Defendant.


          R. Bryan Harwell United States District Judge

         This matter is before the Court on Plaintiff's motion to remand. See ECF No. 13. The Court grants the motion for the reasons herein.[1]


         Plaintiff commenced this action by filing a complaint in state court on May 4, 2017. See Complaint [ECF No. 1-1]. In its complaint, Plaintiff alleges it and three other companies insured property located in Myrtle Beach, South Carolina. Id. at ¶¶ 7, 9-10. Two companies provided primary insurance of $10 million, while Plaintiff and another company provided excess insurance of approximately $34 million. Id. at ¶¶ 9-10. The Myrtle Beach property sustained damage from Hurricane Matthew in October 2016, and Defendant was hired to investigate and administer the ensuing insurance claims.[2] Id. at ¶¶ 8, 12, 14. Ultimately, the $10 million primary coverage was exhausted, and Plaintiff and the other excess insurer agreed to pay approximately $13.5 million in excess coverage-consequently, Plaintiff paid over $6.7 million in excess coverage.[3] Id. at ¶¶ 1, 17. Plaintiff alleges that it is “entitled to unfettered access to [Defendant]'s adjustment file, ” but that Defendant “refuses to provide [Plaintiff] with access to its file, ” “presumably to conceal how the primary policy limits of $10, 000, 000 were squandered.” Id. at ¶¶ 1, 19. Plaintiff asserts claims for injunctive relief and breach of contract, and it seeks as relief “[a]n injunction requiring [Defendant] to produce its entire file for the Hurricane Matthew Claim[.]” Id. at p. 8. Besides this injunctive relief, Plaintiff also seeks “all other actual, consequential, incidental, and compensatory damages to which [Plaintiff] is entitled.” Id.

         Defendant removed the action to this Court asserting federal diversity jurisdiction was available under 28 U.S.C. § 1332.[4] See ECF No. 1. Plaintiff filed the instant motion to remand, and Defendant filed a response in opposition.[5] See ECF Nos. 13 & 18. Additionally, the Court entered a Sua Sponte Text Order to Show Cause stating:

Defendant bases federal jurisdiction upon diversity jurisdiction pursuant to § 1332. However, the Plaintiff did not specify any monetary amount of damages or clearly allege the jurisdictional amount in the Complaint, and the Defendant's notice of removal fails to allege facts adequate to establish that the amount in controversy exceeds the jurisdictional amount. Additionally, Plaintiff has filed a motion to remand arguing the amount in controversy is not met. Thus, the amount in controversy is unclear, and this Court may lack diversity jurisdiction.

ECF No. 16. The parties filed responses to the Court's show cause order. See ECF Nos. 18 & 20.


         Plaintiff argues the Court must remand this case because the amount in controversy is less than $75, 000, and therefore diversity jurisdiction is lacking. The Court agrees.

         The party seeking to remove a case to federal court bears the burden of establishing federal subject matter jurisdiction. Mulcahey v. Columbia Organic Chemicals Co., 29 F.3d 148, 151 (4th Cir. 1994). Thus, Defendant bears the burden to establish federal jurisdiction is proper in this case. “Because removal jurisdiction raises significant federalism concerns, ” the Court “must strictly construe removal jurisdiction. If federal jurisdiction is doubtful, a remand is necessary.” Id. (internal citation omitted).

         State court defendants may remove a civil action to federal district court if it has original subject matter jurisdiction over the action. 28 U.S.C. § 1441(a). District courts have original jurisdiction over actions between citizens of different states in which the amount in controversy exceeds $75, 000, exclusive of interest and costs. 28 U.S.C. § 1332(a)(1). “The removability of a case ‘depends upon the state of the pleadings and the record at the time of the application for removal.'” Francis v. Allstate Ins. Co., 709 F.3d 362, 367 (4th Cir. 2013) (quoting Alabama Great S. Ry. Co. v. Thompson, 200 U.S. 206, 216 (1906)). “If diversity of citizenship, under 28 U.S.C. § 1332(a), provides the grounds for removal, then ‘the sum demanded in good faith in the initial pleading shall be deemed to be the amount in controversy.'” Id. (quoting 28 U.S.C. § 1446(c)(2)). “If a complaint does not allege a specific amount of damages, the removing defendant must prove by a preponderance of the evidence that the amount in controversy exceeds $75, 000.” Id. (internal quotation marks and alteration omitted). “[A] claim not measurable in ‘dollars and cents' fails to meet the jurisdictional test of amount in controversy.” McGaw v. Farrow, 472 F.2d 952, 954 (4th Cir. 1973).

         When a plaintiff seeks injunctive relief, “‘the amount in controversy is measured by the value of the object of the litigation.'” Francis, 709 F.3d at 367 (quoting Hunt v. Washington State Apple Advert. Comm'n, 432 U.S. 333, 347 (1977)); see also JTH Tax, Inc. v. Frashier, 624 F.3d 635, 639 (4th Cir. 2010) (“[R]equests for injunctive relief must be valued in determining whether the plaintiff has alleged a sufficient amount in controversy.”). The object may be valued from either party's perspective-i.e., what the plaintiff stands to gain, or what the defendant stands to lose. See Dixon v. Edwards, 290 F.3d 699, 710 (4th Cir. 2002); Gov't Emp. Ins. Co. v. Lally, 327 F.2d 568, 569 (4th Cir. 1964). In other words, the Court must consider the monetary effect that a judgment would have on either party to the litigation. Dixon, 290 F.3d at 710. The Fourth Circuit has explained that courts “ascertain the value of an injunction for amount in controversy purposes by reference to the larger of two figures: the injunction's worth to the plaintiff or its cost to the defendant.” JTH Tax, 624 F.3d at 639.

         Here, the object of the litigation is Defendant's claims adjustment file-more specifically, an injunction requiring Defendant to produce this file. Defendant has not carried its burden to prove the value of the file exceeds $75, 000. Whether the file will lead to unfavorable evidence of Defendant's adjustment practices is purely speculative at this time, and if such evidence existed, it would be the basis for a subsequent, different lawsuit. The only monetary benefit or detriment that a judgment (i.e., an injunction) in this lawsuit will have is the cost of producing the file. See DiTolla v. Doral Dental IPA of New York, 469 F.3d 271, 276 (2d Cir. 2006) (observing that when “the remedy sought is equitable, and not legal, a monetary value cannot be easily assigned”). The benefit to Plaintiff of having the file is purely speculative at this time because its contents are unknown to both Plaintiff and the Court, and the cost to Defendant of producing it (i.e., sending the original or photocopying/scanning a copy) is negligible. See Grubb v. Jos. A. Bank Clothiers, Inc., 2005 WL 1378721, at *9 (S.D. W.Va. June 2, 2005) (“In the case of injunctive relief, this burden requires the defendant to quantify the cost of compliance.”). If the Court granted the requested injunctive relief, Plaintiff would simply recover the adjustment file, and Defendant would simply bear the cost of producing it. In short, there is nothing that suggests how much Plaintiff would gain and Defendant would lose as a result of the requested injunctive relief. See, e.g., Macken ex rel. Macken v. Jensen, 333 F.3d 797, 799-801 (7th Cir. 2003) (holding the plaintiff's demand for “an accounting and unredacted copies of the trust documents” did not satisfy the amount-controversy-requirement, and concluding that “[n]ot until it becomes evident that the information in these trust instruments is worth more than $75, 000 should anyone knock on the federal court's door”); DiTolla, 469 F.3d at 274-77 (citing Macken; finding that although the plaintiff alleged in his complaint that the defendants “‘fraudulently bilked'” a healthcare reimbursement pool, it was “mere speculation” as to whether damages would exceed the jurisdictional requirement; and upholding the district court's conclusion that “because [the plaintiff] sought only information, and the value of that information could not be estimated, [the defendants] had failed to meet their burden of establishing federal jurisdiction”); Sierp v. DeGreen Partners LP, 2015 WL 464338, at *3 (D. Ariz. Feb. 4, 2015) (“Plaintiffs simply seek to inspect [the defendants'] records. Although they may hope or even expect to eventually bring additional claims for concrete sums, the [c]ourt cannot say with any certainty that they will do so.”); Ditolla v. Doral Dental IPA of New York, LLC, 2006 WL 5618179, at *3 (E.D.N.Y. Apr. 21, 2006) (“Plaintiff in the instant case, like the plaintiff in Macken, seeks information only. Because Plaintiff has not, and apparently cannot estimate the value of this information, Defendant fails to meet its burden of establishing jurisdiction.”); Doe v. Montgomery Cty., No. 8:01-cv-02267-DKC, at ECF No. 22 pp. 9-10 (D. Md. Mar. 19, 2002) (finding an investigative file sought from the defendants was the object of the litigation and did not satisfy the amount-in-controversy requirement), aff'd, 47 F. App'x 260, 261 (4th Cir. 2002).

         Defendant attempts to prove the amount in controversy is satisfied by relying on Plaintiff's allegations that the $10 million primary coverage was “squandered, ” and that Plaintiff had to pay over $6.7 million in excess coverage.[6]Compare Def.'s Resp. in Opp. [ECF No. 18] at pp. 1-3, 7-8, with Complaint at ¶¶ 1, 17. However, these allegations simply explain the reason why Plaintiff wants Defendant's adjustment file-to determine whether such “squandering” even happened. Significantly, Plaintiff has not alleged that Defendant breached the contract by misadjusting the Hurricane Matthew claim; instead, Plaintiff simply alleges that Defendant's breach is its refusal to provide access to the adjustment file, and that ...

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