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Estate of Klementi v. Hartford Underwriters Insurance Co.

United States District Court, D. Nevada

July 3, 2018

THE ESTATE OF EGON KLEMENTI BY AND THROUGH THE SPECIAL ADMINISTRATOR ELFRIEDE KLEMENTI and ELFRIEDGE KLEMENTI, individually Plaintiff,
v.
HARTFORD UNDERWRITERS INSURANCE COMPANY, A CONNECTICUT CORPORATION; JEFFREY SPENCER; Does I-XXX; and ABC CORPORATIONS A-Z; inclusive, Defendants.

          ORDER (ECF 7, 10, 17)

          MIRANDA M. DU UNITED STATES DISTRICT JUDGE

         I. SUMMARY

         This case comes before the Court through Defendant Hartford Underwriters Insurance Company's (“Hartford”) petition to remove (“Petition”). (ECF No. 1.) The Estate of Egon Klementi and Elfriedge Klementi's (collectively, “the Klementis”) filed the action in the Second Judicial District Court of the State of Nevada in and for the County of Washoe. (ECF No. 1-1.) Defendant removed on the basis of diversity jurisdiction under 28 U.S.C. § 1332(a). In turn, the Klementis moved to remand (“Remand Motion”) (ECF No. 10), Hartford filed an opposition to the Remand Motion (ECF No. 16), and Plaintiff replied (ECF No. 19). Hartford also filed a motion to realign the parties (ECF No. 17), as an alternative to remand. Additionally before the Court is Hartford's partial motion to dismiss (ECF No. 7), the Klementis response to that motion (ECF No. 9) and Hartford's reply (ECF No. 15).

         For the reasons set out below, the Remand Motion (ECF No. 10) is denied, the motion to realign (ECF No. 17) is denied as moot, and the partial motion to dismiss (ECF No. 7) is granted in part and denied in part.

         II. RELEVANT BACKGROUND

         The following facts are taken from the Complaint unless otherwise noted. The Klementis assert that, contrary to its obligation under a homeowner's insurance policy and an umbrella policy, Hartford refused to comply with its duty to defend a separate lawsuit filed against them by Defendant Jeffrey Spencer (“Spencer”) in 2014 (“Spencer Lawsuit”). (ECF No. 1-1.) As a result, the Klementis were forced to retain counsel at their own costs as well as separate coverage counsel to determine whether Hartford should provide a defense under the applicable policies. (Id. at 4.) The Klementis allege that subsequently, in September 2017, Hartford determined coverage was available, and agreed to provide a defense. (Id. at 7.) Hartford, however, insisted on substituting counsel selected by Hartford, and refused to provide for Cumis counsel after the Klementis insisted on proceeding with existing counsel. (Id. at 7-9.)

         The Complaint states one claim for declaratory relief against Hartford and Spencer, and three other claims against only Hartford-breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of “Nevada's Unfair Trade Practices”[1]. (ECF No. 1-1.) The Klementis claim that as of mid-October 2017 their counsel had jointly billed $42, 476.30 in legal fees and costs in defending the Spencer Lawuit and in pursuing coverage under the applicable policy. (Id. at 8.) Hartford's alleged failure to defend and to pay these fees and costs is associated with the Klementis' breach of contract claim. (Id. at 10; ECF No. 19 at 4, 6 (asserting the breach of contract damages were $49, 666, at the time of removal).) The Complaint otherwise seeks “damages in excess of $10, 000, ” attorneys' fees, special and consequential damages, punitive damages, and interest. (ECF No. 1-1 at 9, 13.)

         Hartford removed the case on April 23, 2018 (ECF No. 1). Spencer did not join in the removal, and did not appear in this litigation until June 29, 2018 (ECF No. 25). The Klementis claim they were unable to effectuate service on Spencer until May 9, 2018, because Spencer had been avoiding service (ECF No. 10 at 9).

         III. REMAND MOTION

         A. Legal Standard

         Federal courts are courts of limited jurisdiction, having subject matter jurisdiction only over matters authorized by the Constitution and Congress. U.S. Const. art. III, § 2, cl. 1; e.g., Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). A suit filed in state court may be removed to federal court if the federal court would have had original jurisdiction over the suit. 28 U.S.C. § 1441(a). However, courts strictly construe the removal statute against removal jurisdiction, and “[f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (emphasis added). The party seeking removal bears the burden of establishing federal jurisdiction. Durham v. Lockheed Martin Corp., 445 F.3d 1247, 1252 (9th Cir. 2006).

         To establish subject matter jurisdiction pursuant to diversity of citizenship under section 1332(a), the party asserting jurisdiction must show: (1) complete diversity of citizenship among opposing parties and (2) an amount in controversy exceeding $75, 000. 28 U.S.C. § 1332(a). Where it is not facially evident from the complaint that $75, 000 was in controversy at the time of removal, a defendant seeking removal must prove, by a preponderance of the evidence, that the amount in controversy requirement is met. Valdez v. Allstate Ins. Co., 372 F.3d 1115 (9th Cir. 2004).

         Under a preponderance of the evidence standard, a removing defendant must “provide evidence establishing that it is ‘more likely than not' that the amount in /// controversy exceeds” the jurisdictional minimum. Id. at 1117 (citations omitted). As to the kind of evidence that may be considered, the Ninth Circuit has adopted the “practice of considering 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.'” Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003) (quoting Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th Cir. 1997)). Conclusory allegations are insufficient. Matheson, 319 F.3d at 1090 (citation omitted).

         B. Discussion

         Hartford removed based on diversity jurisdiction, contending that the jurisdictional amount has been met and relying on the fraudulent joinder and misjoinder doctrines to argue that the parties are diverse. (ECF No. 1.) The Klementis challenge jurisdiction on both grounds. (ECF No. 10.) The Court agrees that both requirements for diversity jurisdiction are met.

         1. Amount in Controversy

         The Klementis argue that the damages as pleaded and existing at the time of removal did not exceed the jurisdictional $75, 000 requirement. (ECF No. 10 at 4; ECF No. 19 at 3-4, 6.) In light of a recent decision by the Ninth Circuit, the Court finds the Klementis' argument is misguided.

         Specially, the Klementis' position is that for purposes of removal, the amount in controversy is determined at the time of removal, and therefore the Court may only consider damages incurred by that time. (Id.) They are wrong. The Ninth Circuit clarified this point in Chavez v. JPMorgan Chase & Co., 888 F.3d 414 (9th Cir. 2018). In Chavez, the Ninth Circuit noted its “oft-repeated statement that the amount in controversy is assessed as of the ‘time of removal'.” Id. at 417. There, like the Klementis, the plaintiff argued that this statement “means that the amount in controversy does not include any damages incurred after the time of removal.” Id. The Ninth Circuit explained that the amount in controvery means “the amount at stake in the underlying ...


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