Lavelle v. State Farm Mutual Automobile Insurance Co., 2017 WL 706157 (D.D.C. Feb. 22, 2017)

In denying a motion to remand, the District of Columbia found that a defendant is not obligated to present evidence regarding punitive damages in its notice of removal, particularly when the defendant relies on the plaintiff’s calculation for such claims. The Court further held that declarations of an insurer’s claims representative and economist were sufficiently reliable to satisfy the insurer’s burden of demonstrating the size of a putative class of insureds to determine the amount in controversy.

The plaintiffs brought this putative class action in state court, alleging the defendant breached its insurance contract with its insureds and committed unfair trade practices by failing to pay for the diminished value of the insureds’ vehicles after they were repaired to industry standards.

The action arose when an uninsured driver struck the plaintiffs’ vehicle and caused damages that required over $17,000 to repair. According to the plaintiffs, as a result of the damage suffered to the vehicle in the accident, the vehicle was worth less after it was repaired than it was before the accident. The defendant covered the vehicle’s repair costs, but did not cover the diminution of value damages the plaintiffs claimed.

The defendant removed the case to federal court pursuant to CAFA. The plaintiffs moved to remand, arguing that the defendant had failed to show by a preponderance of the evidence that the $5 million amount-in-controversy requirement had been satisfied. The parties agreed that each class member had an average damages amount of $1,429; however, the plaintiffs disputed the defendant’s calculations of three other factors: the class size, the amount of attorneys’ fees, and the amount of punitive damages.

As to attorneys’ fees and punitive damages, the plaintiffs argued that because the defendant did not put forth any evidence regarding the amounts of attorneys’ fees and punitive damages in its notice of removal, it waived those grounds upon which to contest the amount in controversy. The District Court, however, found that the defendant was not obligated to present evidence regarding attorneys’ fees and punitive damages in its notice of removal. The District Court further found that the plaintiffs pleaded 50% attorneys’ fees and 100% punitive damages in their complaint, and therefore the defendant appropriately relied on those percentages in calculating the amount in controversy. The District Court, however, held that because the defendant presented no evidence regarding an estimation of reasonable attorneys’ fees, such fees could not be included in calculating the amount in controversy.

As to the class size, the defendant generated a report of claims and argued that the putative class consisted of 1,171 members. The defendant limited the results of that report, which identified 1,221 unique claims. The defendant then retained an economist to identify only those claims involving “structural (frame) damage and/or deformed sheet metal and/or required body or paint work,” who derived a random sample of seventy claims. The defendant’s claims representative then reviewed the repair estimates for the sample of seventy claim files and determined that all of them involved structural or frame damage, deformed sheet metal, and/or body or paint work. The economist determined with 95% confidence that at least 1,171 of the 1,221 claims the defendant identified involved vehicles with the type of damage listed in the plaintiffs’ class definition and further determined with 99% confidence that there were at least 778 claims at issue.

The plaintiffs argued that the claim representative did not explain how he determined the type of damage or identify the criteria he used to determine that all seventy claims involved the same type of damage as the plaintiffs. Further, because the repair estimates themselves were not provided, it was impossible to check his work and assumptions. However, the claim representative stated in his declaration that he had “worked in auto claims for sixteen years and that the defendant had employed him for sixteen years,” and that his declaration was “based on his own personal knowledge, in reliance on the regular practices and procedures of the defendant in collecting and maintaining claims documentation.” The District Court found that assessing the type of damage a vehicle sustained was not a complex task, especially for someone with over sixteen years of experience in the auto insurance industry, and concluded that the claims representative’s failure to provide further detail regarding his determination did not render his assessment unreliable.

The plaintiffs also argued that the defendant’s economist failed to state the basis for his determination that a sample of seventy claims was a statistically significant sample size, and thus his conclusion that the sample adequately modelled the full population of similar claims amounted to pure conjecture and was insufficient to support its assertion of jurisdiction. The District Court, however, in the absence of any contradictory evidence offered by the plaintiffs, declined to reject the economist’s estimation, given his qualifications and experience.

Finally, the plaintiffs also challenged the class size based on the defendant’s reliance on the group of 1,177 claims, which the economist determined involved vehicles with damage similar to the plaintiffs’ vehicle with 95% confidence, rather than on the group of 778 claims, which the economist determined with over 99% confidence. The plaintiffs thus argued that the defendant’s reliance on the 95% confidence figure demonstrated the defendant failed to show it was more likely than not that the amount in controversy would exceed $5 million. The District Court, however, questioned how the plaintiffs could plausibly argue that the economist’s 95% confidence level failed to establish that it was “more likely than not” that the correct number of claims to evaluate was 1,177. The District Court found that even if it credited the economist’s lower figure of 778 claims, the amount in controversy nonetheless exceeded the $5 million threshold with the inclusion of the demand for punitive damages.

Based on its analysis of the class size, the amount of attorneys’ fees, and the amount of punitive damages, the District Court thus found that the amount in controversy exceeded the $5 million threshold required by CAFA. Even using the smaller class size of 778 claims, the total compensatory damages recoverable would equal $1,111,762, which would increase to $3,335,286 by adding treble damages available under state law. Along with a 100% award of punitive damages, the final amount in controversy totalled $6,670,572. Accordingly, the District Court ruled that the requirements for federal subject matter jurisdiction were satisfied and denied the plaintiffs’ motion for remand.


– Kevin Lampone