The opinion of the court was delivered by: Judge Patricia A. Gaughan
Memorandum of Opinion and Order
This matter is before the Court upon Plaintiff's Motion for Remand to State Court (Doc. 8). This is a class action involving the payment of death benefits. For the reasons that follow, the motion is GRANTED.
Plaintiffs, Stanley Andrews and Donald C. Clark, filed this lawsuit in state court on behalf of themselves and other similarly situated individuals, against defendants, Nationwide Mutual Insurance Company and Nationwide Life Insurance Company (collectively "defendants").
Plaintiff Andrews is 77 years old and plaintiff Clark is 81 years old. Plaintiffs allege that, based on the actuarial tables, there is 76% and 87% probability that they should not be alive. Plaintiffs further allege that, "while the plaintiffs are alive, nevertheless, ...many of their class members are deceased, and as to such deceased members policy proceeds are owing...." (Compl. ¶ 19). Generally speaking, the complaint alleges that defendants fail to make a determination as to whether their insureds are still alive. As a result, defendants improperly retain death benefits. According to plaintiffs, defendants should inquire on at least an annual basis as to whether they owe death benefits to any insured where the probability of death of the insured is at least 70%. The complaint contains four claims for relief. Count one seeks a mandatory injunction. Count two is a claim for declaratory relief. Count three is a claim for failure to act in good faith and to engage in fair dealings and count four is a claim for unjust enrichment.
Defendants removed this matter to this Court based on the diversity jurisdiction provisions of the Class Action Fairness Act ("CAFA"). Plaintiffs move to remand this matter to state court and defendants oppose the motion.
Defendants removed this case alleging jurisdiction under the Class Action Fairness Act of 2005 (CAFA), which expands this Court's diversity jurisdiction for certain class actions. Under this statute, district courts have original jurisdiction over any civil action which is a class action in which 1) any member of the class of plaintiffs is a citizen of a State different from any defendant and 2) the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs. 28 U.S.C. § 1332(d)(2). Additionally, this Court has jurisdiction only where the number of members in the class is at least 100. 28 U.S.C. § 1332(d)(5)(B).
Plaintiffs do not dispute the diversity of the parties herein or that the class is at least 100 in number. Rather, the parties dispute only whether the amount in controversy has been met.
Plaintiffs argue that defendants cannot establish that the amount in controversy exceeds $5,000,000. According to plaintiffs, defendants' notice of removal identifies three components of damages: (1) $826,000, which constitutes the face value of active life insurance policies for which the insured has been determined to be deceased, (2) $1,228,000, which constitutes the value of lapsed insurance policies during the past 15 years for which the insured has been determined to be deceased; and (3) the $10,200 annual cost to conduct yearly searches of the Death Master File ("DMF") for active life insurance policyholders and monthly searches for all lapsed policies. Defendants argue that the injunction plaintiffs seek is indefinite and perpetual and, as such, the amount in controversy is satisfied by category three alone. Plaintiffs claim that these components do not collectively exceed the $5,000,000 amount in controversy necessary for federal jurisdiction. According to plaintiffs, the Court should limit the annual cost associated with the injunctive relief request to a 30-year period, i.e., the time period insurers generally use for "pricing exercises."
Defendants argue that plaintiffs do not challenge the inclusion of the first two categories toward the amount in controversy. With respect to the third category, defendants argue that the complaint is not limited to a 30-year injunction and, as such, the Court should not impose a limitation on the monetary value of the injunctive relief. Defendants also argue that plaintiffs fail to address a major component of the damages. According to defendants, the imposition of the injunctive relief sought by plaintiffs would require defendants to alter their business practices. Defendants claim that plaintiffs are asking the Court to ignore the notice provision in defendants' policies. If the injunctive relief is obtained, defendants' entire book of business would be impacted as defendants would no longer be able to include notice provisions in their policies. Defendants claim that, on average, 100 insureds die each year without making a claim. The average death benefit for these claims would be $6,961. Even applying plaintiffs' suggested 30-year term, the value of the relief sought would total $20,883,000, which is far in excess of the $5,000,000 amount in controversy.
In reply, plaintiffs argue the defendants already perform searches of the DMF. Thus, this cost should not be included in determining the amount in controversy. Plaintiffs also claim that New York now requires life insurers to search the DMF or another competent database for deceased insureds. Plaintiffs also dispute that the amount in controversy should include the $6,961 average death benefits for the 100 insureds a year who die without filing a notice with defendants. According to plaintiffs, this number makes no sense based on the previous searches conducted by defendants. Plaintiffs point out that defendants discovered 1500 policies over the past ten years for which no proof of death was provided. Of those policies, defendants paid death benefits on all but 230. Thus, defendants rely on overinflated numbers in calculating the amount in controversy. In addition, plaintiffs argue that defendants are required to set reserves for these amounts and place money in the state's unclaimed funds account. Defendants fail to offer any explanation or analysis as to the amount of benefits ultimately retained by defendants. According to plaintiffs, the amount of money that is never claimed is what this Court should consider in determining the amount in controversy.
The removing defendant has the burden to prove diversity jurisdiction by a preponderance of the evidence. Hayes v. Equitable Energy Resources Co., 266 F.3d 560, 572 (6th Cir. 2001). More specifically, the Sixth Circuit "places a burden on a defendant seeking to remove an action to federal court to show by a preponderance of the evidence that the amount in controversy requirement has been met." Id. (citing Gafford v. General Electric Company, 997 F.2d 150, 158 (6th Cir. 1993) ). However, "[t]his standard does not place upon the defendant the daunting burden of proving, to a legal certainty, that the plaintiff's damages are not less than the amount-in-controversy requirement. Such a burden might well require the defendant to research, state and prove the plaintiff's claim for damages." Id. In cases seeking injunctive or declaratory relief, "it is well established that the amount in controversy is measured by the value of the object of the litigation." Cleveland Housing Renewal Project v. Deutsche Bank Trust Co., 621 F.3d 554, 560 ...