Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_07-cv-00770/USCOURTS-caed-1_07-cv-00770-1/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1441 Petition for Removal- Contract Default

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 Although Plaintiff initially purports to move for an order “permitting leave to file a Fourth Amended 1

Complaint in this action,” (Mot., p. 1, ll. 22-23), review of the entire motion reveals that the relief that Plaintiff seeks

is the remand of the action to the state court.

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

KAREN VALENTE, )

)

Plaintiff, )

v. )

)

COLONIAL LIFE & ACCIDENT )

INSURANCE, a South Carolina )

Corporation, et al., )

)

Defendants. )

)

 )

1:07-CV-00770-LJO-SMS

FINDINGS AND RECOMMENDATION TO

GRANT PLAINTIFF’S MOTION TO

REMAND CASE (DOC. 17)

Defendants removed this action for damages from the

Calaveras County Superior Court on May 21, 2007. The matter has

been referred to the Magistrate Judge pursuant to 28 U.S.C. §

636(b) and Local Rules 72-302 and 72-304.

I. Background 

Pending before the Court is Plaintiff’s motion to remand the

action, filed on June 5, 2007. Defendant Colonial Life and 1

Accident Insurance (Colonial) filed opposition on July 16, 2007;

Defendants Stone Hill and Associates Insurance Brokerage, Inc.

(Stone Hill), Jed Miner (Miner), and Rite of Passage (ROP) joined

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in the opposition. Plaintiff filed a reply on July 27, 2007. By

separate order, the hearing on the motion has been vacated, and

the matter has been submitted to the Court.

Plaintiff is the widow of Stephen Valente, who died on March

16, 2005, and who during his employment at ROP made premium

payments by way of payroll deductions for a life insurance policy

from Colonial with a benefit in the amount of $50,000.00.

Plaintiff, who was named the beneficiary in her husband’s

application for the policy, alleges that due to the wrongful

conduct of Colonial (the insurer), Stone Hill and Miner

(insurance broker and employee thereof, respectively), and ROB

(employer of Stephen Valente), Plaintiff was denied the benefit

of the policy. Against Colonial, Plaintiff alleges claims for 1)

breach of a contract or interim contract formed by the

application and payment of premiums, 2) breach of the covenant of

good faith and fair dealing, 3) negligence for failure to advise

the decedent that his application had been rejected and that his

premiums had been returned, and 4) reformation. Plaintiff alleges

negligence claims against Stone Hill and Miner for failure to use

reasonable efforts to obtain insurance, and against ROP for

failure to inform the decedent of an underwriting failure and to

take action to obtain the anticipated insurance.

II. Magistrate Judge’s Jurisdiction

Title 28 U.S.C. § 636(b) provides in pertinent part:

(1) Notwithstanding any provision of law to the contrary--

(A) a judge may designate a magistrate to hear

and determine any pretrial matter pending before

the court, except a motion for injunctive relief,

for judgment on the pleadings, for summary judgment,

to dismiss or quash an indictment or information

made by the defendant, to suppress evidence in a

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criminal case, to dismiss or to permit maintenance

of a class action, to dismiss for failure to state

a claim upon which relief may be granted, and to 

involuntarily dismiss an action. A judge of the 

court may reconsider any pretrial matter under

this subparagraph (A) where it has been shown that

the magistrate’s order is clearly erroneous or

contrary to law.

(B) a judge may also designate a magistrate to

conduct hearings, including evidentiary hearings,

and to submit to a judge of the court proposed

findings of fact and recommendations for the 

disposition, by a judge of the court, of any

motion excepted in subparagraph (A), of applications

for posttrial relief made by individuals convicted

of criminal offenses and of prisoner petitions

challenging conditions of confinement.

Fed. R. Civ. P. 72 provides in pertinent part:

(a) Nondispositive Matters. A magistrate judge to whom

a pretrial matter not dispositive of a claim or defense

of a party is referred to hear and determine shall 

promptly conduct such proceedings as are required and

when appropriate enter into the record a written

order setting forth the disposition of the matter. 

Within 10 days after being served with a copy of 

the magistrate judge’s order, a party may serve and 

file objections to the order; a party may not 

thereafter assign as error a defect in the magistrate

judge’s order to which objection was not timely made.

The district judge to whom the case is assigned shall

consider such objections and shall modify or set aside

any portion of the magistrate judge’s order found to 

be clearly erroneous or contrary to law.

(b) Dispositive Motions and Prisoner Petitions. A

magistrate judge assigned without consent of the

parties to hear a pretrial matter dispositive of a

claim or defense of a party or a prisoner petition

challenging the conditions of confinement shall 

promptly conduct such proceedings as are required.

A record shall be made of all evidentiary proceedings

before the magistrate judge, and a record may be made

of such other proceedings as the magistrate judge

deems necessary. The magistrate judge shall enter 

into the record a recommendation for disposition

of the matter, including proposed findings of fact

when appropriate. The clerk shall forthwith mail

copies to all parties. 

The question presented is whether a motion to remand a

proceeding to state court is a nondispositive motion that a

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magistrate judge can determine, or a dispositive motion that a

district judge must determine the matter so that a magistrate

judge may only issue only findings and recommendations. Some of

the circuit courts of appeals have held that motions to remand

are dispositive, and thus a magistrate judge does not have

jurisdiction to determine such a motion. The reasoning is that

although such motions are not enumerated in § 636(b)(1)(A), they

nevertheless are functionally the equivalent of a motion for

involuntary dismissal because they determine that there will not

be a federal forum available to entertain a particular dispute.

Vogel v. U.S. Office Products Co., 258 F.3d 509, 514-17 (6 Cir. th

2001) (noting a lack of decisions from other circuits); First

Union Mortgage Corp. v. Smith, 229 F.3d 992, 994-97 (10 Cir. th

2000); In re U.S. Healthcare, 159 F.3d 142, 145-46 (3d Cir.

1998). The Ninth Circuit has not taken a position on whether or

not a Magistrate Judge can rule on a motion to remand an action

to state court. Some district courts have taken the position that

a motion to remand is not dispositive and thus may be determined

by a magistrate judge. See Bearden v. PNS Stores, Inc., 894 F.

Supp. 1418, 1419 n. 1 (D. Nev. 1995). The present motion involves

a determination of subject matter jurisdiction and, if granted,

will determine the availability of a federal forum. The

Magistrate Judge will thus proceed by way of findings and

recommendations.

III. Legal Standards

Title 28 U.S.C. § 1447(c) provides:

A motion to remand the case on the basis of any defect

other than subject matter jurisdiction must be made

within 30 days after the filing of the notice of

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removal under section 1446(a). If at any time before

final judgment it appears that the district court lacks

subject matter jurisdiction, the case shall be remanded.

An order remanding the case may require payment of 

just costs and any actual expenses, including

attorney fees, incurred as a result of the removal.

A certified copy of the order of remand shall be

mailed by the clerk to the clerk to the clerk of 

the State court. The State court may thereupon proceed

with the case (emphasis added).

Plaintiffs are alleging a lack of subject matter

jurisdiction; thus, their motion, made within months of removal

and before final judgment, is timely.

The federal removal statute permits the removal from state

court to federal court of cases that might have been filed in

federal court originally. 28 U.S.C. § 1441(a). Only state court

actions that originally could have been filed in federal court

may be removed to federal court by the defendant; otherwise,

federal question jurisdiction is required. Caterpillar Inc. v.

Williams, 482 U.S. 386, 392 (1987). Here, it is undisputed that

the parties are of diverse citizenship. (Pltf.’s Mem. p. 5.)

Thus, removal may have been proper pursuant to 28 U.S.C. §

1332(a)(1), which grants the district courts original

jurisdiction of all civil actions where the amount in controversy

exceeds the sum or value of $75,000, exclusive of interest and

costs, and is between citizens of different states. 

The issue is whether the amount in controversy exceeds

$75,000, exclusive of interest and costs.

The statute regarding removal is strictly construed against

removal jurisdiction, and federal jurisdiction must be rejected

if there is any doubt as to the right of removal; the removing

defendant bears the burden of establishing that removal is proper

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by proving facts sufficient to establish jurisdiction by a

preponderance of the evidence. Gaus v. Miles, Inc., 980 F.2d 564,

566-67 (9 Cir. 1992) (holding that where the amount in th

controversy was not alleged in the complaint, and where the

Plaintiff provided no factual support for the assertion that the

amount was sufficient to support federal diversity jurisdiction,

the presumption of an absence of jurisdiction was not overcome);

Sanchez v. Monumental Life Ins. Co., 95 F.3d 856, 861-62 (9 Cir. th

1996) (holding that in an action removed from state court and in

which summary judgment for the defendant was granted in federal

district court, where a complaint did not specify the amount in

controversy, the defendant’s reliance on potential disgorging of

premiums was insufficient to establish the jurisdictional amount

where there was no evidence of what the amount of premiums would

be). Generally the defendant’s burden is satisfied if the

plaintiff claims a sum greater than the jurisdictional

requirement; however, if it is unclear what amount of damages the

plaintiff has sought, then the defendant has the burden of

actually proving the facts to support jurisdiction, including the

jurisdictional amount. Id. The facts must be assessed on the

basis of the complaint at the time of removal. St. Paul Mercury

Indemnity Co. v. Red Cab Co., 303 U.S. 283, 292 (1938). Thus,

where the amount claimed is not stated in the complaint or it is

not clear from the complaint that the amount in controversy is

sufficient, the defendant must go beyond the notice of removal

and provide actual evidence to the Court regarding the amount in

controversy.

/// 

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IV. Analysis

It is alleged in the various claims that Plaintiff was

deprived of, and is entitled to recover, $50,000.00, representing

the amount of the death benefit pursuant to the life insurance

contract or interim contract that Plaintiff alleges was formed

for her benefit. (Cmplt. ¶¶ 32, 44, 50, 56, 59.) 

However, in the remainder of the complaint, there is no

specification of a precise amount of the other damages claimed.

In the breach of contract claim, Plaintiff alleges additional

damage “plus other amounts to be proven at trial.” (¶ 32.) In the

bad faith claim, Plaintiff alleges she was forced to retain

counsel to obtain her benefits and suffered emotional and

physical distress, and she was entitled to punitive damages for

malicious and oppressive conduct “in an amount sufficient to make

an example of Defendant COLONIAL.” (¶¶ 36-38.) In the reformation

claim, she alleged that as the unnamed but intended beneficiary,

she “will suffer pecuniary loss unless the interim contract is

reformed....” (¶ 61.) In the prayer (Cmplt. pp. 9-10), she seeks

on the breach of contract claim “Special damages in an amount yet

unknown, but in excess of the minimum jurisdictional limit of

this Court”; she further seeks “Prejudgment interest on general

and special damages as permitted by law....” On the bad faith

claim, she prays for “General and special damages in an amount

yet unknown, but in excess of the minimum jurisdictional limit of

this Court,” “Prejudgment interest on general and special damages

as permitted by law,” an unspecified amount of punitive or

exemplary damages, and attorney’s fees “as permitted by law.”

(Id. p. 10.) With respect to the several negligence claims

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against Colonial, Stone Hill and Miner, and ROP (claims three

through five), in each claim she prays for “General and special

damages in an amount yet unknown, but in excess of the minimum

jurisdictional limit of this Court,” as well as “Prejudgment

interest on general and special damages as permitted by law.”

(Id.) 

Thus, with respect to meeting the $75,000.00 jurisdictional

floor of 28 U.S.C. § 1332(a)(1), Plaintiff has not affirmatively

pled that more than $75,000.00 is at issue. See, Valdez v.

Allstate Ins. Co., 372 F.3d 1115, 1117 (9 Cir. 2004). Thus, th

Defendants must provide admissible evidence to establish that it

is more likely than not that the amount in controversy exceeds

$75,000.00.

A. Interest

Defendants point to the allegation that Plaintiff is

entitled to statutory interest pursuant to Cal. Ins. Code §

10172.5, which provides for interest at the current rate on

payments of life insurance policy benefits that are delayed over

thirty days after death; Defendants assert that Plaintiff could

recover $5,416.00 in interest, computed at a rate of 5 per cent

until May 21, 2007 (the date of removal). However, § 28 U.S.C. §

1332(a)(1) expressly provides that the amount in controversy must

exceed $75,000.00 “exclusive of interest and costs,” and thus the

Court will not consider the amount of such interest in

determining the jurisdictional amount.

 B. Bad Faith Damages and Attorney’s Fees 

Defendants point to Plaintiff’s prayers for bad faith

damages, including emotional distress damages and attorneys’ fees

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incurred to obtain the policy benefits. Plaintiff prayed for

special and general damages in an amount yet unknown but in

excess of the minimum jurisdictional limit of the court.

Defendants argue that these allegations must be understood to

mean an amount greater than $25,000.00, which Defendants assert,

without citation to authority, is the minimum jurisdictional

amount of the state superior court. However, this is not clear

from the face of the complaint and has not been established by

Defendants. Further, these allegations are nevertheless not

specific.

Defendants argue that if Plaintiff proves that Defendants

breached the duty of good faith and fair dealing, she may be

awarded damages for emotional distress under California law.

There is case authority permitting an insured to recover such

damages against an insurer in some circumstances. See, Gruenberg

v. Aeta Ins. Co., 9 Cal. 3d 566, 578-81 (1973). However, no

evidence has been offered regarding the likely amount of such

damages in this case. Defendants assert that Plaintiff will

undoubtedly argue that she suffered emotional distress because

Colonial Life allegedly forced her, a widow, to sue to recover

benefits of the policy. (Opp. p. 5.) However, Defendants’

assertions do not amount to competent evidence that establishes

the extent of the unspecified mental and physical damages claimed

by Plaintiff, or of the pain and distress that she generally

claims to have suffered.

Defendants argue that in the bad faith claim, Plaintiff

seeks attorney’s fees, the amount of which should be included in

the determination of the amount in controversy. Defendants cite

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to Galt G/S v. JSS Scandinavia, 142 F.3d 1150, 1155-56 (9 Cir. th

1998), which held that where there is an underlying statute

authorizing an award of attorney’s fees, fees may be included in

the amount in controversy. The court in Galt further noted case

law in other circuits to the effect that a provision for an award

of attorney’s fees in a contract would render such fees an

appropriate factor to consider in determining the amount in

controversy. Id. However, Galt does not include other attorney’s

fees in the determination. Defendants base Plaintiff’s

entitlement to fees on Brandt v. Superior Court, 37 Cal.3d 813

(1985), in which the court held that when an insurer tortiously

withholds benefits, attorney’s fees reasonably incurred to compel

payment of policy benefits are recoverable as an element of the

damages of the tortious conduct. Defendant thus appears to rely

on case law and has cited no statute or contractual provision

that would permit recovery of fees in this situation.

Nevertheless, even if attorney’s fees were to be considered,

the amount in controversy is to be tested as of the time of

removal of the action. St. Paul Mercury Indemnity Co. v. Red Cab

Co., 303 U.S. 283, 292 (1938); see, Conrad Associates v. Hartford

Accident & Indemnity Co., 994 F.Supp. 1196, 1200 (N.D.Cal. 1998). 

The declaration of David D. Cheng, counsel for Plaintiff,

submitted in support of the motion to remand, establishes that on

May 21, 2007, the date of removal, Plaintiff had incurred “well

under $10,000 in attorney’s fees.” (¶ 2.) The amount of any

future fees to be earned in connection with the second claim is

speculative at this point.

///

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C. Punitive Damages

Defendants argue that Plaintiff’s allegation of cruel,

malicious, and despicable conduct undertaken by Colonial in

conscious disregard of Plaintiff’s rights and safety, and her

claim for punitive damages, supply the required amount in

controversy. However, an award of punitive damages is solely

within the discretion of the trier of fact. See, Brewer v. Second

Baptist Church, 32 Cal.2d 791, 800-01 (1948). The mere fact that

an insurer is determined to have breached its duty to deal

reasonably and in good faith with the insured, and thereby to be

liable for compensatory damages, does not automatically entitle

the insured to punitive damages. Neal v. Farmers Ins. Exchange,

21 Cal.3d 910, 922 (1978). Such damages must be proven by clear

and convincing evidence. Cal. Civ. Code § 3294(a). At this point,

the Defendants have not established by a preponderance of the

evidence that such an award is likely or the amount of any such

damages if awarded. See, Conrad Associates, 994 F.Supp. at 1201.

D. General Damages

Defendants argue that because of the number of defendants,

the allegations against all of them concerning a duty of care,

and the overall allegations of Plaintiff’s complaint, it is

reasonable to believe that Plaintiff will obtain an award of

general damages of more than $15,000.00. Defendants assert that

Plaintiff may allege, for example, that she was unable to pay

utilities, mortgage, car payment, etc., and would presumably seek

compensation from all defendants for such harm. However, none of

these possible factual scenarios are established by evidence, as

distinct from generalized allegations of harm.

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V. Recommendation

Given the strong presumption against removal jurisdiction

and in favor of remand, the Court finds that Defendants have not 

shown, by a preponderance of the evidence, that the amount in

controversy exceeds the jurisdictional minimum of more than

$75,000. The Court therefore lacks diversity jurisdiction to hear

this case. 

Accordingly, it IS RECOMMENDED that

1) Defendants’ motion to remand the action to the Superior

Court of Calaveras County BE GRANTED, and

2. The action BE ORDERED remanded to the Superior Court for

the County of Calaveras.

This report and recommendation is submitted to the United

States District Court Judge assigned to the case, pursuant to the

provisions of 28 U.S.C. § 636 (b)(1)(B) and Rule 72-304 of the

Local Rules of Practice for the United States District Court,

Eastern District of California. Within thirty (30) days after

being served with a copy, any party may file written objections

with the Court and serve a copy on all parties. Such a document

should be captioned “Objections to Magistrate Judge’s Findings

and Recommendations.” Replies to the objections shall be served

and filed within ten (10) court days (plus three days if served

by mail) after service of the objections. The Court will then

review the Magistrate Judge’s ruling pursuant to 28 U.S.C. § 636

(b)(1)(C). The parties are advised that failure to file

objections within the specified time may waive the right to

/

//

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appeal the District Court’s order. Martinez v. Ylst, 951 F.2d

1153 (9th Cir. 1991).

IT IS SO ORDERED.

Dated: August 1, 2007 /s/ Sandra M. Snyder 

icido3 UNITED STATES MAGISTRATE JUDGE

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