Papurello v State Farm Fire & Casualty Company, 144 F.Supp.3d 746 (W.D. Penn. Nov. 16, 2015).

In this action, the United States District Court, Western District of Pennsylvania (the “District Court”) denied the Plaintiffs Vincent and Linda Papurello’s (collectively, “Plaintiffs”) motion to remand finding Defendant State Farm Fire and Casualty Company (“Defendant”) clearly established diversity between the parties, and also showed that the class claims exceeded the Class Action Fairness Act’s (“CAFA”) jurisdictional threshold of $5 million.

Plaintiffs initially filed a class action on behalf of a putative class of homeowners in the Court of Common Pleas Allegheny County, Pennsylvania, alleging Defendant violated Pennsylvania law by paying initial amounts under the homeowners’ insurance policies determined by a two-step procedure. Under that procedure, Defendant made a payment under the first step equal to the amount of estimated replacement costs of materials, taxes, and labor less depreciation. Defendant removed the action pursuant to 28 U.S.C. §§ 1441, and 1453, asserting traditional diversity jurisdiction under 28 U.S.C. § 1332(a)(1), supplemental jurisdiction under 28 U.S.C. § 1367, and jurisdiction under CAFA. In response, Plaintiffs filed a motion to remand, and the District Court denied the motion.

Section 1332(a)(1) provides federal courts original jurisdiction over civil actions where (i) the parties are citizens of different states; and (ii) the matter in controversy exceeds $75,000, exclusive of interests and costs. Traditional diversity jurisdiction, however, requires complete diversity of citizenship, i.e., all the plaintiffs must be of diverse citizenship from all the defendants. Citizenship of natural persons is synonymous with domicile, and the domicile of an individual is his true, fixed and permanent home and place of habitation. A corporation, on the other hand, shall be deemed to a citizen of every state by which it has been incorporated and of the state where it has its principal place of business.

Plaintiffs alleged they and the class were all citizens of Pennsylvania, and were domiciled in Pennsylvania. Defendant provided evidence it was an Illinois corporation, organized and existing under the laws of Illinois, with its principal place of business and corporate headquarters in Illinois. Additionally, Plaintiffs sought $28,682.41 in individual compensatory damages, and sought individual punitive damages under Pennsylvania’s bad faith insurance statute per 41 PA Cons. Stat. § 8371. The District Court noted the Pennsylvania courts had approved § 8371 punitive damages awards of four to five times the amount of compensatory damages. The District Court remarked that four to five times of $28,682.41 clearly exceeded the jurisdictional threshold of $75,000. Accordingly, the District Court ruled that it had diversity jurisdiction over Plaintiffs’ individual and class-wide claims.

The District Court also found that since it had diversity jurisdiction over the Plaintiffs’ claims, it could exercise supplemental jurisdiction over the other claims in the action. The District Court found § 1367 supplemental jurisdiction was appropriate in this action because the Plaintiffs and putative class members entered into the identical State Farm homeowners’ insurance policy in issue, suffered partial damage to their Pennsylvania residences, and received initial payment estimations from Defendant equaling replacement cost less depreciation. Because the putative class members’ claims arose out of the same “case or controversy”, and they shared a “common nucleus of operative fact with, the Plaintiffs’ claims,” the District Court concluded it could exercise its discretion under § 1367 to hear putative class members’ claims, in addition to the Plaintiffs’ claims.

The District Court remarked that even in the absence of diversity and supplemental jurisdiction, it had federal subject matter jurisdiction over the claims pursuant to CAFA. CAFA, provides jurisdiction to federal courts over class actions where any class members and any defendant are citizens of different state. As the Defendant established the Plaintiffs were Pennsylvania citizens, and the Defendant was a citizen of Illinois this requirement was satisfied, the District Court concluded.

The District Court noted Defendant also established that the amount-in-controversy exceeded the $5 million requirement under CAFA. The District Court explained that, in their state court complaint, Plaintiffs alleged, inter alia, breach of contract claims seeking class-wide damages in the form of unpaid depreciation under their homeowners’ insurance policies. Plaintiffs alleged a putative class consisting of all persons who since January 1, 2011 (i) agreed to the defendant’s Pennsylvania “replacement cost” homeowners’ insurance policy; (ii) incurred covered partial damage to their Pennsylvania residences; and (iii) received replacement cost payment estimations less depreciation.

Defendant submitted declarations of its claim consultants, who stated that for the year 2014 alone, there were more than 16,000 estimates, uploaded to Defendant’s electronic structural damage estimating over $27 million of depreciation deductions. Plaintiffs did nothing more than criticize the declarations as being a guesstimate. The District Court found that a class action suit cannot be remanded based on Plaintiffs’ conclusory allegations, and ruled Defendant satisfied the amount-in-controversy requirement.

The District Court also concluded Plaintiffs satisfied CAFA’s class-size requirement as well. The District Court based its conclusion on the declaration of Defendant’s claims consultant that the claims for 2014 alone exceeded 16,000 claims. Accordingly, the District Court concluded that it had jurisdiction over Plaintiffs’ claims pursuant to the CAFA.

Finally, the plaintiffs argued that the court should decline to hear this putative class action under Burford v. Sun Oil Co., 319 U.S. 315 (1943) because “Pennsylvania should be allowed to continue the development of acceptable insurance claim procedures consistent with its law and not have unacceptable practices continue within Pennsylvania by development of inconsistent precedent outside Pennsylvania’s own system.” The District Court found the Burford abstention was inappropriate in this action, with respect to which the District Court had federal subject-matter jurisdiction because in extraordinary circumstances, Burford permits a federal court to dismiss a case only if it presents “difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar,” or if its adjudication in a federal forum “would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern.”

The District Court, however, found that its resolution of the parties’ insurance policy dispute would not disrupt Pennsylvania’s efforts to establish a coherent policy with respect to homeowners’ insurance payments. The District Court therefore declined to invoke Burford abstention with respect to this case.

Accordingly, the Court denied Plaintiffs’ motion for remand or abstention.

Yaron Shaham