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LM General Insurance v. Frederick

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

March 1, 2019

LM GENERAL INSURANCE, Plaintiff,
v.
DAISY FREDERICK, Defendant.

          ORDER

          R. Bryan Harwell United States District Judge.

         This matter is before the Court on Defendant Daisy Frederick's ("Frederick") motion to dismiss [ECF No. 14]. For the reasons set forth below, the Court denies Defendant Frederick's motion to dismiss.[1]

         Factual Background and Procedural History

         The instant lawsuit is a declaratory judgment and breach of contract action brought by Plaintiff LM General Insurance ("LM General") against Defendant Daisy Frederick. LM General seeks an Order finding that Frederick breached an agreement to settle a personal injury claim, or alternatively, for an Order declaring that LM General complied with Frederick's demand letter, or alternatively, that Frederick's demand letter is invalid.

         On April 29, 2015, in Anson County, North Carolina, Defendant Frederick was involved in a motor vehicle accident with Daniel Lee McDowell (“McDowell”). Compl. at ¶ 4. At the time, Frederick was operating a vehicle owned Christine Howard (“Howard”), and McDowell was operating his own vehicle. Id. Plaintiff LM General insured McDowell's vehicle with a policy in effect at the time of the accident (the “Policy”). Id. at ¶ 5. The Policy has liability limits of $50, 000 per person, $100, 000 per accident, and $50, 000 in property damage. Id.; see Policy [ECF No. 1-1]. After the accident, Frederick hired counsel from the Anastopoulo Law Firm to represent her for her bodily injury claim resulting from the accident. Compl. at ¶ 6; see Letter of Representation [ECF No. 1-2]. Howard's automobile insurer, Allstate Insurance, paid $5, 211.60 for property damage to her vehicle, which it subsequently recouped from LM General. Compl. at ¶¶ 7-8.

         On February 16, 2016, Frederick's counsel sent a demand letter to LM General on Frederick's behalf, requesting the policy limits. Id. at ¶ 9; see Demand Letter [ECF No. 1-3]. The demand letter contained numerous conditions and requirements, including requiring an affidavit from McDowell and receipt of the policy proceeds by certified check no later than March 1, 2016.[2]Compl. at ¶ 9.

         On February 29, 2016, LM General responded to the demand letter, tendering checks for the $50, 000 bodily injury limit and the remaining $44, 788.40 property damage limit, the requested affidavit from McDowell, and a draft covenant not to execute against McDowell to be signed by Frederick. Compl. at ¶ 10; see Response to Demand Letter [ECF No. 1-4].

         On March 1, 2016, Frederick's counsel received LM General's checks and documents, but on March 4, 2016, Frederick's counsel returned the checks with a letter stating that LM General failed to accept Frederick's offer of compromise by failing to tender the policy limits by certified check[3] and include the requested affidavit by the deadline. Compl. at ¶¶ 11-12; see Proof of Delivery [ECF No. 1-5]; see Mar. 4, 2016 Letter [ECF No. 1-6]. On March 30, 2016, LM General sent Frederick's counsel a letter stating that it complied with the demand by tendering the policy limits and McDowell's affidavit. Compl. at ¶ 13; see Mar. 30, 2016 Letter [ECF No. 1-7].

         On April 1, 2016, Frederick filed a lawsuit against McDowell in South Carolina state court. Compl. at ¶ 14. After a trial from January 29 to 30, 2018, a $5 million verdict was rendered against McDowell, which was in excess of McDowell's insurance coverage under the LM General policy. Compl. at ¶ 15. As of the filing of the instant federal lawsuit, there are post-trial motions still pending in the underlying state court action. Id.

         On May 8, 2018, LM General filed its complaint in this case, asserting diversity jurisdiction and alleging causes of action for breach of contract and a declaratory judgment. Compl. at ¶ 3, pp. 7-8. LM General contends that it “complied with all essential terms” of the demand letter and that the parties had a valid contract, which Frederick breached by rejecting the payment of policy limits without good cause. Compl. at ¶¶ 11-12. As relief, LM General asks the Court “for an Order finding that the Defendant breached the [Contract], or alternatively, for an Order declaring that LM General complied with [the] demand letter, or alternatively, that the demand letter is invalid[, ] and any other relief” the Court deems just and proper.” Id. at 8.

         On August 1, 2018, Frederick filed a motion to dismiss the action. LM General filed its response on August 15, 2018. Frederick then filed a Reply.

         Discussion

         Defendant Frederick moves to dismiss this action arguing: 1) the Court lacks subject matter jurisdiction because the amount in controversy is not met and the matter is not ripe for adjudication; 2) the complaint fails to state a valid claim; 3) LM General lacks standing to bring this action; 4) LM General has failed to join indispensable parties; and 5) LM General's claims were waived and/or have already been judicially determined.

         I. Subject Matter Jurisdiction

         Frederick argues the Court lacks subject matter jurisdiction because the amount in controversy does not exceed $75, 000.00 and the matter is not ripe for adjudication.

         A. Amount in Controversy

         Under 28 U.S.C. § 1332(a), district courts have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000.00. 28 U.S.C. § 1332(a). Courts have typically applied the “legal certainty” test in determining whether the amount in controversy requirement is met. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289, 58 S.Ct. 586, 590, 82 L.Ed. 845 (1938); Shanaghan v. Cahill, 58 F.3d 106, 112 (4th Cir.1995). Under this test, a plaintiff asserting federal jurisdiction has the burden of proving to a “legal certainty” that the claim is not less than the jurisdictional amount. Shanaghan, 58 F.3d at 112. When a plaintiff seeks declaratory relief, the amount in controversy is the "value of the object of the litigation." Francis v. Allstate Ins. Co., 869 F.Supp.2d 663, 668 (D. Md. 2012).

         In this case, LM General has alleged a breach of contract claim and, alternatively, seeks declaratory relief. LM General claims that it had an agreement with Frederick to settle Frederick's personal injury claim with LM General's insured (McDowell) in exchange for payment of approximately $94, 000.00 in insurance proceeds. On the breach of contract claim, LM General seeks either specific performance of the agreement to settle, which would involve the payment of $94, 000.00 in insurance proceeds, or damages in the amount of $4, 905, 211.60, which is the difference between the amount agreed upon to settle the underlying lawsuit and the verdict in the underlying lawsuit See [LM General's Motion for Default Judgment and/or Summary Judgment, ECF No. 8 at 8]. On its claim for declaratory relief, LM General seeks a declaration that LM General complied with Frederick's demand letter, or alternatively, that Frederick's demand letter is invalid.

         At a minimum, the object of the litigation in this case is the $94, 000.00 in insurance proceeds that LM General offered to pay in response to Frederick's demand letter. Additionally, the amount of monetary damages sought on the breach of contract ($4, 905, 211.60) claim far exceeds the jurisdictional amount. LM General has demonstrated to a ...


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