In Motion for Remand of Class Action Against Insurer for Failure to Provide No-Fault Insurance, both Plaintiff and Defense Failed to Present Admissible Evidence of Amount in Controversy so Court had Insufficient Evidence to Determine Whether Removal Jurisdiction Existed Under CAFA (Class Action Fairness Act) Arkansas Federal Court Holds
Plaintiff filed a putative class action in Arkansas state court against her automobile insurance carrier, Sagamore Insurance, alleging various breaches of the terms of the auto policy. Toller v. Sagamore Ins. Co., 514 F.Supp.2d 1111, 1113-14 (E.D. Ark. 2007). The class action complaint alleged that Sagamore “has consistently issued automobile liability insurance policies without providing no-fault coverages or obtaining waivers of such coverage as required by Arkansas law.” Id., at 1114. Defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA); plaintiff’s lawyer moved to remand the class action on the ground that removal jurisdiction did not exist under CAFA because the requisite amount in controversy had not been established. Id. The district court found that it lacked sufficient evidence from either side to rule on the remand motion and, accordingly, held the motion in abeyance pending receipt of such evidence.
Plaintiff’s class action alleged that Sagamore issued her an automobile insurance policy without providing her no-fault coverage and without obtaining from her a waiver of such coverage in writing. Toller, at 1114. Following a car accident in which she suffered $48,000 in medical costs, Toller filed her lawsuit alleging that Sagamore wrongly denied her claim. The class action complaint provided no further information regarding alleged damages, and plaintiff did not limit her damages to an amount under $75,000. Id. The relief sought in the complaint includes attorney fees, penalties for breach of contract, and declaratory and injunctive relief, but the class action provides that “the amount in controversy will not exceed the sum or value of $4,999,999, and she specifically waives any amount of compensatory damages, restitution, interest, costs, and attorneys’ fees above that amount.” Id. Defense attorneys removed the class action to federal court alleging both diversity jurisdiction and CAFA removal jurisdiction: we do not discuss here the district court’s conclusion that the requirements for diversity jurisdiction had not been met, see id., at 1116-18; rather, we discuss here solely removal jurisdiction under CAFA, and Sagamore’s argument “that this case is a class action, that the class has more than 100 members, that the amount in controversy exceeds $5,000,000, and that minimal diversity exists, so this Court has jurisdiction pursuant to the Class Action Fairness Act, codified at 28 U.S.C. § 1332(d),” id., at 1114.
The minimal diversity element of CAFA was clearly present, so the district court focused its analysis on whether her attempt to limit damages to less than $5,000,000 succeeded and, if not, whether defense counsel had shown that the aggregate amount in controversy exceeds $5,000,000. Toller, at 1115. In this regard, the court observed that the defendant, as the party seeking removal, bore the burden of proving the requisite amount in controversy, id. The court noted that under the facts of this particular case, the equitable relief sought could possibly exceed the $5 million limit, so the attempt to limit the class action monetary relief to less than $5 million would be ineffective. Id., at 1118. Specifically, the equitable relief sought by the class action complaint would require Sagamore “to provide the statutory mandated no-fault coverages to all of its insureds in Arkansas who have not rejected those coverages in writing.” Id. The parties agree that this would affect more than 35,000 insureds, id., at 1118-19. The federal court noted at page 1119 that “[i]f Sagamore were to pay $42,800 to each of the 35,663 persons who lacked no-fault coverage, the amount paid would exceed a billion and one-half dollars.”
Mathematically, then, it was possible that the amount in controversy would far exceed $5 million, and the fact that the class action complaint alleged “that the amount in controversy will not exceed $4,999,999, and her statement that she waives any amount in controversy in excess of that amount, would have no affect on the amount that Sagamore could ultimately be called upon to pay if Toller obtains the equitable relief that she seeks.” Id. In other words, even assuming plaintiff could limit the action’s monetary recovery to less than $5 million, “there is no practical way to require Sagamore to provide no-fault coverages totaling $42,800 per policy for 35,663 policies and then say that, after Sagamore has paid $4,999,999 in no-fault benefits, no other policyholders will be entitled to make claims for those benefits.” Id. Nonetheless, the district court found wanting sufficient admissible evidence to resolve the amount in controversy issue, id., at 1120. While defense attorneys argued that the class action easily involved more than $5 million, plaintiff’s lawyer estimated that less than $2 million was at issue, and neither side provided admissible evidence in support of their figures. Id. Accordingly, the court held the motion in abeyance pending submittal of evidence by the parties, id.
NOTE: The district court recognized that “[s]ome courts have held that the Class Action Fairness Act…shifts the burden from the defendant to the party seeking remand,” and that neither the Supreme Court nor the Eighth Circuit had yet addressed “whether the burden of proof should be different under the Class Action Fairness Act than it is under traditional diversity.” Toller, at 1116 (citations omitted). But the court chose instead to follow the decisions that adhere to the “‘well-established rule of law that the removing party bears the burden of establishing federal subject-matter jurisdiction’ because ‘[t]here is simply nothing in [the Class Action Fairness Act] that contemplates such a change.’” Id. (citation omitted)