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McMahon v. Westgate Resorts, Inc.

United States District Court, D. Nevada

July 24, 2014

MICHAEL R. McMAHON, an individual; and KRYSTAL R. McMAHON, an individual, Plaintiffs,
WESTGATE RESORTS, INC., a Florida Corporation; WESTGATE PLANET HOLLYWOOD LAS VEGAS, LLC, a Florida Limited Liability Company; DOES I-X; and ROE COMPANIES I-X, inclusive, Defendants.


GLORIA M. NAVARRO, Chief District Judge.

Pending before the Court is Plaintiffs' Motion to Remand. (ECF No. 13.) For the reasons discussed below, the Court GRANTS Plaintiffs' motion and remands this case to state court.


On November 18, 2013, Plaintiffs Michael R. McMahon and Krystal R. McMahon (collectively "Plaintiffs") filed a Complaint (ECF No. 1-1) in Nevada state court asserting claims of fraudulent misrepresentation, negligent misrepresentation, and unjust enrichment against Defendants Westgate Resorts, Inc. and Westgate Planet Hollywood Las Vegas, LLC (collectively "Defendants") arising out of a timeshare agreement entered into between the parties. (Compl. ¶¶ 59-87, ECF No. 1-1.) Defendants received service of the Complaint on November 21, 2013. (Statement Regarding Removal ¶ 1, ECF No. 9.) On December 18, 2013, Defendants filed a timely Notice of Removal (ECF No. 1), seeking to remove the case to this Court on the basis of diversity jurisdiction. Defendants then filed their Statement Regarding Removal (ECF No. 9) on January 2, 2014.

On January 10, 2014, Plaintiffs filed a Motion to Remand to State Court (ECF No. 13) asserting that the parties were not diverse and that the amount in controversy did not exceed $75, 000. Defendants filed a Response to the Motion to Remand (ECF No. 23) on February 3, 2014, asserting that the parties were diverse and the amount in controversy requirement had been met. On February 13, 2014, Plaintiffs filed their Reply (ECF No. 29), in which they respond to an assertion by Defendants that Plaintiffs will not stipulate to the amount in controversy by offering to stipulate that "the value of their case does not exceed $75, 000.00, exclusive of attorney's fees and costs, if Defendants stipulate that jurisdiction over this matter is proper in the Eighth Judicial District Court of Nevada." ( Id. 5:2-5.) In response to the proposed stipulation, on February 26, 2014, Defendants filed a Motion for Leave to File a Surreply (ECF No. 32), arguing that they should be allowed to present arguments relating to this new argument raised in Plaintiffs' Reply.[1]


"Federal courts are courts of limited jurisdiction, " and "possess only that power authorized by Constitution and statute, which is not to be expanded by judicial decree." Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994) (internal citations omitted). "It is to be presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction." Id. (internal citations omitted).

The federal removal statute provides that a defendant may remove an action to federal court based on federal question jurisdiction or diversity jurisdiction. 28 U.S.C. § 1441. To remove a state law civil action to federal court on the basis of diversity jurisdiction, a removing defendant must show that the parties are completely diverse and that the matter in controversy exceeds the sum or value of $75, 000. 28 U.S.C. § 1332(a).

Furthermore, "[r]emoval statutes are to be strictly construed' against removal jurisdiction. Nevada v. Bank of America Corp., 672 F.3d 661, 667 (9th Cir. 2012) (quoting Syngenta Crop Prot., Inc. v. Henson, 537 U.S. 28, 32 (2002)). "The strong presumption against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper, ' and that the court resolves all ambiguity in favor of remand to state court." Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009) (quoting Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (per curiam)). Federal courts must reject federal jurisdiction "if there is any doubt as to the right of removal in the first instance." Gaus, 980 F.2d at 566 (quoting Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 1979)); see also Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090-91 (9th Cir. 2003) (per curiam) (noting that "[w]here it is not facially evident from the complaint that more than $75, 000 is in controversy, the removing party must prove, by a preponderance of the evidence, that the amount in controversy meets the jurisdictional threshold"). "If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c).


Defendants based their removal of this action solely on diversity of citizenship pursuant to 28 U.S.C. § 1332(a)(1). However, Defendants have failed to carry their burden of establishing that this Court has subject matter jurisdiction over this case. Although Defendants established that the diversity of citizenship requirement is satisfied, [2] Defendants have failed to show, by a preponderance of the evidence, that the amount in controversy exceeds $75, 000.

In their Complaint, Plaintiffs are seeking to rescind a timeshare agreement which obligates them to pay $12, 615.00 to Defendants, of which Plaintiffs have already paid $7, 859.43 toward their total obligation as well as an additional $550.96 in maintenance fees. (Compl. ¶¶ 53-55, ECF No. 1-1.) For relief, Plaintiffs seek an award of "general and special damages in excess of Ten Thousand Dollars (USD $10, 000), [3] including... rescinding all contracts[, ] compensatory damages[, ] punitive damages[, ] pre-judgment and post-judgment interest[, and] reasonable attorney's fees." ( Id. p. 14.) Plaintiffs also request an arbitration exemption in their Complaint and state that an "[a]mount in excess of $50, 000" is sought as relief. ( Id. p. 1.)

Defendants assert in their Notice of Removal that "the value of the amount in controversy exceeds the sum of $75, 000.00, " and they base this assertion on Plaintiffs' statement in the Complaint that "the amount in controversy is in excess of $50, 000'" and on Plaintiffs' unspecified requests for attorney's fees and for punitive damages, the latter of which is capped at $300, 000. (Statement Regarding Removal ¶¶ 11-14, ECF No. 1); NEV. REV. STAT. § 42.005.1(b) ("[P]unitive damages... may not exceed:... (b) Three hundred thousand dollars if the amount of compensatory damages awarded to the plaintiff is less than $100, 000."). In their Statement Regarding Removal, Defendants reiterate these factors and suggest that Plaintiffs' request for $10, 000 plus rescission of the contract and punitive damages could potentially lead to an award over $92, 615.[4] (Statement Regarding Removal ¶ 3.E, ECF No. 9.)

Defendants are correct that Plaintiffs' requests for punitive damages and attorney's fees may be taken into account when determining the amount in controversy in a case. See Guglielmino v. McKee Foods Corp., 506 F.3d 696, 700 (9th Cir. 2007) (noting that, among other things, any exemplary or punitive damages or attorney fees that are sought in the complaint are included in the calculation to determine the amount in controversy). However, Defendants' bare assertions that "the amount in controversy exceeds the sum of $75, 000" based upon the compensatory and punitive damages pled in the Complaint is insufficient to establish federal jurisdiction. See Matheson, 319 F.3d at 1091 (finding that a request in the complaint for an award "in excess' of ...

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