Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-02425/USCOURTS-caed-2_05-cv-02425-0/pdf.json

Parties Involved:
Fidelity and Guaranty Life Insurance Company
Defendant
Old Mutual Financial Network
Defendant
Linda Saiyad
Plaintiff

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1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

LINDA SAIYAD, No. 2:05-cv-2425-MCE-PAN

Plaintiff,

v. MEMORANDUM AND ORDER

OLD MUTUAL FINANCIAL NETWORK,

FIDELITY AND GUARANTY LIFE

INSURANCE COMPANY, and DOES

ONE THROUGH THIRTY-FIVE,

inclusive,

Defendants.

----oo0oo----

The present action concerns an allegedly improper denial of

insurance benefits to Plaintiff Linda Saiyad (“Plaintiff”) by

Defendants Fidelity and Guaranty Life Insurance Company, Old

Mutual Financial Network, and Does one through thirty-five

(collectively, “Defendants”). Plaintiff brought suit in the

Solano County Superior Court on September 28, 2005. Defendants

removed the action to the United States District Court pursuant

to 28 U.S.C. § 1441. 

///

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Case 2:05-cv-02425-MCE -PAN Document 18 Filed 03/09/06 Page 1 of 11
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Because oral argument will not be of material assistance, 1

the Court orders this matter submitted on the briefs. E.D. Cal.

Local Rule 78-230(h).

2

Plaintiff has now filed a Motion to Remand on the grounds that

Defendants failed to demonstrate the requisite amount in

controversy necessary for diversity jurisdiction. For the

reasons set forth below, Plaintiff’s Motion for Remand is

granted.1

BACKGROUND

Plaintiff purchased a disability insurance policy from

Defendant Fidelity and Guaranty Life Insurance Company on or

around February 25, 2003. The policy was specifically marketed

to Plaintiff as a way to ensure Plaintiff’s ability to pay her

mortgage in the event she became disabled and could not work. 

The policy provided for a monthly disability payment of

$2,056.00, capped by a total maximum benefit of $30,000.00.

In the summer of 2003, Plaintiff began suffering from panic

attacks, anxiety and depression. In August 2003, she was

diagnosed by her Primary Care Physician as suffering from acute

and severe depression. The diagnosis was confirmed by several

other medical professionals. Plaintiff’s depression left her

unable to work, and Plaintiff went on disability leave on or

around August 30, 2003. Plaintiff remained on disability leave

for approximately ten months. She finally returned to her job as

an administrative assistant on July 1, 2004.

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3

Plaintiff’s inability to work and resultant loss of income

prompted her to file a claim with Defendants to obtain benefits

for the ten month period during which she was on leave. 

Defendants initially denied Plaintiff’s claim, finding that

Plaintiff’s depression was not severe enough to prevent her from

working. Defendants later changed their position and paid

Plaintiff benefits for three of the ten months that Plaintiff

claimed she was disabled.

According to Plaintiff, Defendants’ decision to pay only a

fraction of her claim stemmed from a determination by Defendants

that Plaintiff’s disability began on or around February 28, 2005,

nearly six months after her initial diagnosis. Plaintiff alleges

that Defendants’ determination was made without any factual

support and in contravention of the terms of her policy. 

Plaintiff additionally alleges that Defendants acted in bad

faith. Plaintiff claims that, as a direct result of Defendants’

actions, she was unable to keep up with her mortgage payments,

causing her mortgage to fall into default. When Plaintiff’s

attempts to catch up on her loan payments proved unsuccessful,

she was forced to sell her home to avoid foreclosure.

In the instant action, Plaintiff alleges breach of contract,

breach of the covenant of good faith and fair dealing and

violation of fiduciary duties, intentional infliction of

emotional distress, negligent infliction of emotional distress,

and negligence. Plaintiff seeks damages for the insurance

benefits she claims are due and owing and for other costs

associated with selling her home. 

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4

Plaintiff’s claimed damages with respect to the sale of her home

include moving expenses, penalties and interest due the lender,

and loss of appreciation. Plaintiff additionally seeks emotional

distress damages, punitive damages, prejudgement interest, and

attorney’s fees. 

Plaintiff made at least one attempt to settle this dispute

prior to trial. On February 17, 2005, Plaintiff sent a demand

letter to Defendants offering to settle the matter for

$32,000.00. The amount proposed included $14,392.00 for the

seven months of unpaid benefits Plaintiff claims she is due, and

$8,280.00 for moving costs. The balance represents interest and

the cost of attorney’s fees. Defendants rejected the offer. It

is unclear whether further negotiations have taken place. 

STANDARD

A defendant may remove any civil action from state court to

federal district court if the district court has original

jurisdiction over the matter. 28 U.S.C. § 1441(a). Generally,

district courts have original jurisdiction over civil actions in

two instances: (1) where there is complete diversity between the

parties, or (2) where a federal question is presented in an

action arising under the Constitution, federal law, or treaty. 

28 U.S.C. §§ 1331 and 1332. 

The removing party bears the burden of establishing federal

jurisdiction. Ethridge v. Harbor House Rest., 861 F.2d 1389,

1393 (9th Cir. 1988). Furthermore, courts construe the removal

statute strictly against removal. 

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5

Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108 (1941);

Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (citations

omitted). If there is any doubt as to the right of removal in

the first instance, remand must be granted. See Gaus, 980 F.2d

at 566. Therefore, if it appears before final judgment that a

district court lacks subject matter jurisdiction, the case shall

be remanded to state court. 28 U.S.C. § 1447(c).

Where jurisdiction is founded on diversity, 28 U.S.C. § 1332

requires that the amount in controversy exceed $75,000.00. 

Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090

(9th Cir. 2003). In removal cases, if the state court complaint

does not specify the amount of damages being sought, the

defendant bears the burden of demonstrating, by a preponderance

of the evidence, that the amount in controversy requirement is

satisfied. Gaus, 980 F.2d at 567; Singer v. State Farm Mut.

Auto. Ins. Co., 116 F.3d 373, 376 (9th Cir. 1997). The district

court has broad discretion in determining whether the defendant

has made the requisite showing. See Liberty Mut. Ins. Co. v.

Ward Trucking Corp., 48 F.3d 742, 749-750 (3rd Cir. 1995); Rubel

v. Pfizer, Inc., 361 F.3d 1016, 1019-1020 (7th Cir. 2004).

If the district court determines that removal was improper,

then the court may also award the plaintiff costs and attorney

fees accrued in response to the defendant’s removal. 28 U.S.C. §

1447(c). The court has broad discretion to award costs and fees

whenever it finds that removal was wrong as a matter of law.

Balcorta v. Twentieth-Century Fox Film Corp., 208 F.3d 1102, 1106

n.6 (9th Cir. 2000).

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 Attorney’s fees may be included in the amount in 2

controversy if they are recoverable pursuant to statute or

(continued...)

6

ANALYSIS

When federal jurisdiction is sought on the basis of

diversity, jurisdiction will lie if the matter in controversy

exceeds the sum or value of $75,000.00, and is between citizens

of different states. See 28 U.S.C. § 1332(a)(1). The Parties

concede that this matter is between citizens of different states. 

The salient issue raised by this motion, therefore, is whether

Defendants have satisfactorily demonstrated that the value of the

matter in controversy exceeds $75,000.00.

 In cases such as this one, where a plaintiff's state court

complaint does not specify a particular amount of damages, the

removing defendant bears the burden of establishing, by a

preponderance of the evidence, that the amount in controversy

exceeds $75,000.00. See Sanchez v. Monumental Life Ins. Co., 102

F.3d 398, 404 (9th Cir. 1996). Under this burden, the defendant

must provide evidence establishing a likelihood that the amount

in controversy exceeds the jurisdictional minimum. Id. (internal

citations and quotations omitted.) Defendants may rely upon

facts presented in the removal petition as well as any summary

judgment type evidence relevant to the amount in controversy at

the time of removal. See Matheson, 319 F.3d at 1090-1091.

Here, Plaintiff’s Complaint makes claims for actual 

pecuniary losses, emotional distress and punitive damages,

attorney’s fees, and pre-judgment interest. 

2 3

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(...continued) 2

contract. Neither circumstance is applicable in this case.

Pre-judgment interest is not taken into account in 3

calculating the amount in controversy. 18 U.S.C. § 1332.

7

Plaintiff’s alleged pecuniary losses include insurance benefits

she claims were wrongfully withheld as well as various other

costs associated with the sale of her home. With respect to the

sale of her home, Plaintiff specifically seeks moving expenses,

loss of appreciation, and penalties and interest due the lender. 

After reviewing the evidence, the Court finds that

Plaintiff’s claims for realized pecuniary loss fall well below

the jurisdictional minimum for federal diversity jurisdiction. 

Plaintiff’s insurance policy provides for a total maximum benefit

of $30,000.00, of which Plaintiff claims only $14,392.00 for the

seven months in which benefits were denied. Even if the Court

were to assume that Plaintiff incurred significant moving

expenses and severe penalties and interest for her late mortgage

payments, the amount in controversy would still come nowhere near

the $75,000.00 threshold. 

Likewise, Plaintiff’s claim for loss of appreciation is too

uncertain and speculative to sway the Court from its belief that

Plaintiff’s claims, when viewed in the aggregate, simply does not

add up to $75,000.00. The Court finds particularly significant

Plaintiff’s counsel’s February 17, 2005, letter to Defendants in

which Plaintiff offered to settle all of her claims for

$32,000.00. Settlement offers provide strong evidence of a

party’s assessment of the value of their case. 

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8

See Chase v. Shop ‘N Save Warehouse Foods, Inc., 110 F.3d 424,

428-430 (7th Cir. 1997). Offers of settlement are particularly

relevant in removal cases to determine the amount in controversy. 

See Cohn v. Petsmart, Inc., 281 F.3d 837, 840 (9th Cir. 2002)

(holding that “a settlement letter is relevant evidence of the

amount in controversy if it appears to reflect a reasonable

estimate of the plaintiff’s claim”). Here, Plaintiff was willing

to settle all of her claims for $32,000.00. If the amount in

controversy truly exceeds $75,000.00, as Defendants contend, it

is extremely doubtful that Plaintiff would offer to settle the

case for less than one half of that amount.

Defendants next contend that Plaintiff’s claims for punitive

and emotional distress damages, when combined with Plaintiff’s

other claims, make it “facially apparent” from the Complaint that

the amount in controversy requirement is satisfied. Punitive

damages may be considered in determining the amount in

controversy if they are recoverable as a matter of state law. 

Anthony v. Security Pac. Fin. Serv.s, Inc., 75 F.3d 311, 315 (7th

Cir. 1997). California law allows for the recovery of punitive

damages in bad faith actions if there is clear and convincing

evidence that the defendant is guilty of oppression, fraud, or

malice. Cal. Civ. Code § 3294(a); Campbell v. Cal-Guard Surety

Services, Inc., 62 Cal.App.4th 563, 570 (1998). Emotional

distress damages may also be considered when calculating the

amount in controversy. Simmons v. PCR Technology, 209 F.Supp.2d

1029 (N.D. Cal. 2002).

///

/// 

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9

The Court has significant discretion in removal cases when

considering a motion to remand. Even assuming that emotional

distress and punitive damages are appropriate in the instant

case, the Court will not speculate as to what would constitute a

reasonable estimate of those damages. Defendants have submitted

jury awards from several other insurance-related cases

highlighting the potential for high emotional distress and

punitive damage awards in the insurance context. Defendants

contend that these large awards provide sufficient evidence that

the amount in controversy in the present dispute exceeds

$75,000.00. 

While acknowledging the potential for large punitive damage

and emotional distress awards in insurance cases, the Court does

not believe that the cases submitted by Defendants provide a

reliable guidepost. Although Defendants successfully identify

several insurance-specific cases involving large damage awards,

the Court can point to numerous other cases where the emotional

distress and punitive damage awards pale in comparison. See,

e.g., Berglund v. State Farm Mut. Auto. Ins. Co., 121 F.3d 1225,

1226-1227 (8th Cir. 1997) (upholding a jury’s award of

$515,831.42 in compensatory damages and $15,000.00 in punitive

damages in a bad faith action against the insurer by the

insured); Burger v. Time Ins. Co., Inc., 992 F.2d 873 (8th Cir.

1993)(noting state court jury’s award of $50,000.00 in

compensatory damages and $1.00 in punitive damages in bad faith

action against insurer by insured). 

///

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10

In addition, the present dispute involves facts entirely

different from the facts upon which Defendants’ proffered jury

awards were predicated. Most importantly, however, the cases

upon which Defendants rely appear to involve conduct

substantially more egregious than the conduct alleged in the

instant matter. Consequently, the Court finds that Plaintiff’s

claims for emotional distress and punitive damages do not satisfy

the amount in controversy requirement, nor do they push the

amount in controversy over the $75,000.00 limit when combined

with Plaintiff’s other causes of action.

In order to avoid remand, Defendants have the burden of

demonstrating, by a preponderance of the evidence, that the

present dispute involves claims exceeding $75,000.00. Defendants

have not met this burden. 

CONCLUSION

Given the strong presumption against removal and Defendant’s

failure to demonstrate the requisite amount in controversy, the

Court must remand this case to the state court. Accordingly,

Plaintiff’s Motion to Remand is GRANTED. Plaintiff shall bear

her own costs in seeking remand of this action.

IT IS SO ORDERED.

DATE: March 8, 2006

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_____________________________

MORRISON C. ENGLAND, JR

UNITED STATES DISTRICT JUDGE

 

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