Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-04653/USCOURTS-cand-3_05-cv-04653-0/pdf.json

Parties Involved:
Clarendon America Insurance Company
Defendant
Pennsylvania General Insurance Company
Plaintiff

Document Text:

United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

PENNSYLVANIA GENERAL INSURANCE

COMPANY,

Plaintiff,

 v.

CLARENDON AMERICA INSURANCE

COMPANY; and DOES 1 through 25,

inclusive,

Defendants. /

No. C 05-4653 JSW

ORDER GRANTING MOTION TO

REMAND

Now before the Court is Plaintiff Pennsylvania General Insurance Company’s

(“Pennsylvania”) Motion to Remand to state court the action against Defendant Clarendon

America Insurance Company (“Clarendon”). The Court finds the present motion suitable for

resolution without oral argument and hereby VACATES the hearing date of January 27, 2006. 

Having carefully reviewed the parties’ papers and considered their arguments and the relevant

legal authority, and good cause appearing, the Court hereby GRANTS Pennsylvania’s motion.

FACTUAL AND PROCEDURAL BACKGROUND

This action arises out of a dispute between Pennsylania and Clarendon, which both

issued commercial general liability insurance policies to Wayne D. Cochran Construction, Inc.

(“WDCC”). (Pennsylvania Complaint (“Compl.”) ¶¶ 6-7.)

Around March 1999, WDCC entered into a subcontract with Pavex Construction 

requiring WDCC to provide the necessary labor and materials to perform certain concrete work

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United States District Court

For the Northern District of California

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in the construction of the Scotts Valley High School. (Id. ¶ 8.) On or about May 31, 2002, the

Scotts Valley Unified School District brought the underlying action (“Scotts Valley Action”)

against WDCC and other entities, alleging causes of action for negligence, breach of contract,

breach of warranty, breach of third party beneficiary contract and professional negligence

because of numerous alleged construction deficiencies, including deficiencies related to

defective concrete and other work that WDCC and Pavex Construction performed. (Id. ¶ 9.) In

or about September 2003, Pavex Construction brought a cross-complaint against WDCC

alleging various causes of action for indemnity, breach of warranties, negligence, breach of

contract and declaratory relief. (Id. ¶ 9.)

WDCC tendered its defense and indemnity of the Scotts Valley Action to Pennsylvania,

and Pennsylvania did defend and indemnify WDCC. (Id. ¶¶ 10-11.) In or about September

2005, Pennsylvania settled the claims for damages alleged against WDCC in the Scotts Valley

Action. (Id. ¶ 15.) WDCC also tendered its defense and indemnity to Clarendon, but

Clarendon refused to defend and replied that it had no insuring obligation to WDCC with

respect to the Scotts Valley Action claims and allegations. (Id. ¶¶ 12-13.)

As a result, Pennsylvania brought the current action in Superior Court for the County of

San Francisco against Clarendon on October 20, 2005. Pennsylvania alleges five causes of

action for declaratory relief, equitable contribution, total equitable indemnity, partial equitable

indemnity, and subrogation. Making no dollar demand, Pennsylvania prays, in pertinent part,

for relief in “an amount equal to all the sums” it expended in defending and indemnifying

WDCC in the Scotts Valley Action, including attorney fees and costs. Alternatively,

Pennsylvania prays for an amount equal to Clarendon’s appropriate or proportional share of all

defense fees and costs. Pennsylvania also seeks an award of prejudgment interest, costs of suit,

and compensatory damages arising from Clarendon’s alleged breach of contract of insurance.

On November 10, 2005, Clarendon filed a Notice of Removal in the United States

District Court for the Northern District of California. Clarendon alleged that “the matter in

controversy exceeds the sum of $75,000.00 exclusive of interests and costs because the costs of

defense allegedly incurred by USF Insurance Company in the defense of the mutual insured

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For the Northern District of California

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exceeds [sic] $75,000.00.” Clarendon Notice of Removal (“NOR”) ¶ 3. Pennsylvania filed this

Motion to Remand on December 12, 2005. Pennsylvania argues that Clarendon’s conclusory

and false allegations fail to meet its burden of showing that the amount in controversy exceeds

$75,000. In opposition, Clarendon argues that it has met its burden and that Pennsylvania

knows, or should know, that the amount in controversy exceeds $75,000. As a result,

Clarendon further argues that the burden shifted to Pennsylvania to show that the amount in

controversy does not exceed $75,000.

ANALYSIS

A. Legal Standard.

Because federal courts have limited subject matter jurisdiction, the district court may

only hear cases arising under federal law or cases between parties of diverse citizenship. 28

U.S.C. §§ 1331, 1332. An action originally filed in state court may be removed to federal court

only if the district court could have exercised jurisdiction over such action if initially filed there. 

28 U.S.C. § 1441(a); Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987). A district court

must remand the case if it appears before final judgment that the court lacks subject matter

jurisdiction. 28 U.S.C. § 1447(c). Moreover, a court must construe the removal statute strictly

and reject jurisdiction if there is any doubt regarding whether removal was proper. Duncan v.

Stuetzle, 76 F.3d 1480, 1485 (9th Cir. 1996).

The party seeking removal has the burden of showing that federal jurisdiction exists. 

Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). When the complaint does not demand a

dollar amount, the removing defendant bears the burden of establishing by a preponderance of

the evidence that the amount in controversy exceeds the minimum requirement of $75,000. 

Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996). Defendants must meet

that burden by “proving the facts to support jurisdiction, including the jurisdictional amount.” 

Gaus, 980 F.2d at 566. Such facts must appear in the notice of removal itself. Id. at 567. 

Unsubstantiated allegations alone do not suffice. Id. The court also may “require parties to

submit summary-judgment type evidence relevant to the amount in controversy at the time of

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removal.” Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th Cir. 1997) (quoting

Allen v. R & H Oil & Gas Co., 63 F.3d 1326, 1335-36 (5th Cir. 1995)).

B. Pennsylvania’s Motion to Remand.

Because Pennsylvania’s state court complaint is silent on the amount of damages

Pennsylvania is seeking, Clarendon, as the removing party, bears the burden of establishing by a

preponderance of the evidence that this action satisfies the amount in controversy requirement. 

See Sanchez, 102 F.3d at 404. In its Notice of Removal, Clarendon concluded that the matter in

controversy exceeds the amount requirement, furnishing only the explanation that “the costs of

defense allegedly incurred by USF Insurance Company in the defense of the mutual insured

exceeds [sic] $75,000.00.” NOR ¶ 3 (emphasis added). The declaration of Matthew Adler,

authorized Pennsylvania representative, however, states that USF Insurance Company did not

participate in the defense of WDCC in the Scotts Valley Action at any time. (Adler Decl. ¶¶ 5-

7.) Furthermore, Clarendon has failed to show facts in its Notice of Removal that would

support its allegation that USF Insurance Company incurred costs exceeding the jurisdictional

amount. Thus, Clarendon has merely made unsubstantiated allegations failing to establish that

the amount in controversy exceeds $75,000. See Gaus, 980 F.2d at 567. Therefore, Clarendon

has failed to meet its burden. See Duncan, 76 F.3d at 1485.

Clarendon offers two arguments in opposition to this motion to remand. First,

Clarendon contends that the allegations of Pennsylvania’s complaint indicate that the claim is

likely to be in excess of $75,000. In particular, Clarendon argues that the complaint’s

references to “all sums expended,” the “substantial” sums Pennsylvania has expended in

defending and indemnifying WDCC, and Pennsylvania’s prayer for compensatory damages and

prejudgment interest all suggest that the amount and controversy requirement is met. 

Nevertheless, Ninth Circuit law is clear that Clarendon bears the burden to show facts

supporting the jurisdictional question “where a plaintiff’s state court complaint does not specify

a particular amount of damages.” Sanchez, 102 F.3d at 404 (emphasis added). Drawing

inferences from the words in Pennsylvania’s complaint does not satisfy this burden. See Gaus,

980 F.2d at 567.

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Second, Clarendon relies on an unfiled bad faith complaint, which WDCC intended to

file against Clarendon in this Court, to carry its burden. (Clarendon Opposition at 3.) This

intended WDCC complaint contains the same incantation that the matter in controversy

exceeds, exclusive of interest, $75,000. Id. As a preliminary matter, such a showing must

appear in the notice of removal itself. Gaus, 980 F.2d at 567. This incantation is an

unsubstantiated allegation, only this time by another party. Moreover, WDCC’s bad faith claim

against Clarendon is not probative of facts that would support jurisdiction in this action by

Pennsylvania against Clarendon on different theories. Clarendon then cites the fact that the

claim against WDCC was resolved for $750,000 on December 29, 2005, to bolster its showing. 

(See Declaration of Karen-Denise Lee ¶ 2.) Evidence, however, must be “relevant to the

amount in controversy at the time of removal.” Singer, 116 F.3d at 377 (emphasis added). 

Thus, this post-removal settlement amount evidence is not relevant.

Even if Clarendon’s showings raised some doubt as to whether the amount in

controversy exceeds $75,000, the Court must refuse to exercise jurisdiction if there is any doubt

regarding the propriety of removal. See Duncan, 76 F.3d at 1485. Therefore, Clarendon has

failed to show by a preponderance of the evidence that the amount in controversy requirement is

satisfied. Because on this basis, the Court declines to exercise jurisdiction, the Court need not

address Clarendon’s argument that the burden has shifted to Pennsylvania.

CONCLUSION

For the foregoing reasons, the Court hereby GRANTS Pennsylvania’s Motion to

Remand.

IT IS SO ORDERED.

Dated: January 24, 2006 

JEFFREY S. WHITE

UNITED STATES DISTRICT JUDGE

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