Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_07-cv-02072/USCOURTS-azd-2_07-cv-02072-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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Defendant’s request for oral argument is denied because the parties have fully briefed

the issues and oral argument will not aid the Court’s decision. See Mahon v. Credit Bur. of

Placer County, Inc., 171 F.3d 1197, 1200 (9th Cir. 1999).

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Annelynn Schorzman,

Plaintiff, 

vs.

State Farm Fire & Casualty Company, 

Defendant. 

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No. CV-07-2072-PHX-DGC

ORDER

On September 24, 2007, Plaintiff Annelynn Schorzman filed suit against State Farm

Fire & Casualty Company in Arizona state court. Dkt. #7, Ex. A. Plaintiff holds an

insurance policy issued by State Farm and alleges, among other things, that State Farm’s

failure to pay all of her home repair costs constitutes a breach of contract and a breach of the

duty of good faith and fair dealing. Id. Defendant removed the action to this Court. Dkt.

#1. Plaintiff has filed a motion to remand. Dkt. #7. Defendant has filed a motion to stay the

action and to compel appraisal of Plaintiff’s repair costs. Dkt. #8. Plaintiff has filed a

motion for a hearing on Defendant’s motion. Dkt. #15. The Court will grant Plaintiff’s

motion to remand and deny the remaining motions as moot.1

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I. Removal and Remand Standards.

Any civil action brought in state court over which the federal district courts have

original jurisdiction may be removed to the federal district court for the district where the

action is pending. 28 U.S.C. § 1441(a). Courts strictly construe the statute against removal

jurisdiction. See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992); see also Shamrock

Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-109 (1941); Healy v. Ratta, 292 U.S. 263, 270

(1934). Indeed, there is a “strong presumption” against removal and “[f]ederal jurisdiction

must be rejected if there is any doubt as to the right of removal in the first instance.” 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. 

II. Motion to Remand.

Defendant asserts that the Court has subject matter jurisdiction pursuant to 28 U.S.C.

§ 1332, which confers jurisdiction to adjudicate cases where the parties are diverse and the

amount in controversy exceeds $75,000. Dkt. #1, Ex. 1. The complaint in this case does not

demand a dollar amount. See Dkt. #7, Ex. A. Defendant therefore “bears the burden of

establishing, by a preponderance of the evidence, that the amount in controversy exceeds

[$75,000].” Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996). To

meet its burden, Defendant “must provide evidence establishing that it is ‘more likely than

not’ that the amount in controversy exceeds [$75,000].” Id.; see Gaus, 980 F.2d at 566-67

(“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.”) (emphasis in original); McNutt v. GM Acceptance Corp. of Ind., 298

U.S. 178, 189 (1936) (“[T]he court may demand that the party alleging jurisdiction justify

his allegations by a preponderance of evidence.”).

Plaintiff’s prayer for relief includes an award of compensatory damages and attorney’s

fees. See Dkt. #7, Ex. A. Plaintiff also filed an offer of judgment in state court stating that

she will accept $62,000 to settle the underlying action and $6,200 in attorney’s fees. See id.,

Ex. B.

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Defendant argues that the $75,000 threshold amount will be exceeded if Plaintiff can

prove her allegations of bad faith. See Dkt. #16. This argument “neither overcomes the

‘strong presumption’ against removal jurisdiction, nor satisfies [Defendant’s] burden of

setting forth . . . the underlying facts supporting its assertion that the amount in controversy

exceeds [$75,000].” Gaus, 980 F.2d at 567 (emphasis in original); see Singer v. State Farm

Mut. Auto. Ins. Co., 116 F.3d 373, 375 (9th Cir. 1997) (stating that “removal cannot be based

simply upon conclusory allegations where the [complaint] is silent” as to the amount of

damages) (internal quotes and citation omitted). The Court reaches this determination even

though Defendant has submitted information regarding the awards of damages in other cases

involving claims of bad faith. See Paliwoda v. Metro. Life Ins. Co., No. CV-05-0233, 2005

WL 5672339, at *2 (D. Ariz. June 5, 2005) (rejecting as unpersuasive the defendant-insurer’s

discussion of cases in which large amounts have been awarded, noting that the defendantinsurer “fail[ed] to explain how any of the cases are factually similar to the case here and

therefore could yield a similar award.”).

Defendant also asserts that the jurisdictional amount will be exceeded because

Plaintiff’s attorney’s fees will bring the total amount at issue above $75,000. See Dkt. #16.

Attorneys’ fees may count towards the amount in controversy if they are recoverable by

statute. See Lowdermilk v. U.S. Bank Nat’l Ass'n, 479 F.3d 994, 1000 (9th Cir. 2007).

Arizona law authorizes a discretionary award of attorneys’ fees in contract actions. A.R.S.

§ 12-341.01(A). 

“[D]istrict courts in this circuit have disagreed whether attorneys’ fees incurred after

the date of removal are properly included in the amount in controversy.” Burk v. Med. Sav.

Ins. Co., 348 F.Supp.2d 1063, 1068 (D. Ariz. 2004); compare Faulkner v. Astro-Med, Inc.,

No. 99-CV-2562, 1999 WL 820198, at *4 (N.D. Cal. Oct. 4, 1999) (“When estimating

attorney’s fees for the purposes of establishing jurisdiction, the only fees that can be

considered are those incurred as of the date of removal.”); Conrad Assoc. v. Hartford Acc.

& Indem. Co., 994 F.Supp. 1196, 1200 (N.D. Cal. 1998) (declining to consider attorney’s

fees spent after the date of removal) with Brady v. Mercedes-Benz USA, Inc., 243 F.Supp.2d

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1004, 1010-11 (N.D. Cal.2002) (including “a reasonable estimate of attorneys fees likely to

be expended” in calculating the amount in controversy); Simmons v. PCR Tech., 209

F.Supp.2d 1029, 1034-35 (N.D. Cal.2002) (same). 

Even assuming that future fees can be considered, the Court does not conclude that

the jurisdictional amount has been established. Defendant has provided evidence that

Plaintiff’s counsel seeks fees of $350 per hour in insurance bad faith cases. See Dkt. #16,

Ex. B. Defendant contends that Plaintiff’s attorney’s fees “are likely to substantially

increase[] as the parties resolve the matters currently before the court let alone the fees [to

be] incurred during the course of discovery and, if necessary, trial.” Id. at 4. 

Whether the recoverable attorneys’ fees in this case will exceed the $13,000 needed

to clear the jurisdictional threshold is, at this point, speculative. Although litigation often is

expensive and frequently proceeds beyond the early stages, the Court will not assume that

to be inevitable. Defendant itself suggests that this case should be stayed and the litigation

resolved through the relatively inexpensive route of an appraisal under the insurance policy.

Dkt. #8. Because the Court cannot conclude that Plaintiff’s attorney’s fees inevitably will

push the amount in controversy over the jurisdictional limit, and because “[f]ederal

jurisdiction must be rejected if there is any doubt as to the right of removal in the first

instance,” Gaus, 980 F.2d at 566, the motion to remand will be granted.

IT IS ORDERED:

1. Plaintiff’s motion to remand (Dkt. #7) is granted.

2. The remaining motions (Dkt. ##8, 15) are denied as moot.

3. The Clerk shall remand this case to state court.

DATED this 13th day of December, 2007.

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