Hayrapetyan v. American Intern. Group, No. CV10-1590 GAFPJWX, 2010 WL 2044521 (C.D. Cal. May 18, 2010).

A District Court in California remanded the action to state court holding that the defendants failed to show, by a preponderance of the evidence, that the amount in controversy exceeded $5 million.  While holding so, the Court stated that generally, the California cases support a punitive damages award at a 1:1 ratio to compensatory damages.

The plaintiff filed a putative class action in state court alleging that the defendants, American International Group, Inc., Granite State Insurance Company, and 21st Century Insurance Company, uniformly failed to provide any payments under their automobile insurance policies for the loss of gasoline remaining in the vehicle after the automobile suffered a total loss. The plaintiff sought to represent a class of California policy holders whose automobiles suffered a total loss.

The defendants removed the action to the federal court under CAFA. 

The plaintiff sought to remand arguing that the defendants had not established by a preponderance of the evidence that the amount in controversy met the jurisdictional minimum; the District Court agreed. 

First, regarding compensatory damages, the defendants stated that from 2006 to the present, they paid approximately 71,399 automobile total loss claims.  The defendants argued that assuming that the average vehicle held 16 gallons of gas and had half a tank of gas at the time of total loss, each claim would average $24 (8 gallons x $3/gallon); thus, compensatory damages for gasoline loss alone would equal approximately $1,704,000.

The Court remarked that while defendants submitted the average price of gasoline for three grades of gasoline, no expert opinion or attorney declaration attested to the fact that $3.12 was indeed the average price of gasoline over the relevant period. The Court observed that the defendants failed to offer evidence to show that the California Energy Commission’s survey, which is based on a sample of only 38 California gasoline stations, was reliable or accurate.

With respect to the 16-gallon per vehicle estimate, the defendants examined the fuel tank capacity of the top ten selling vehicles in 2006 according to Forbes.com and determined that the average tank capacity was 19 gallons.  The Court stated that the defendant provided no evidence to support an inference that the top ten best sellers in the United States per the Forbes.com website were likewise the ten top sellers in California, or that the top ten sellers were disproportionately represented in accident data.  The Court observed that the defendants maintained all of the evidence necessary to meet their burden–the make, model and age of the 71, 399 cars at issue in this case–but had not presented any of this information to the Court to give an accurate picture of the average size of the gasoline tank in the totaled-car universe.

Second, concerning additional damages, the defendants claimed that the plaintiff’s claims for all other valuable property and all items of damage was at least equal to his “lost gasoline” claim for the putative class.  The Court found that the computation was based on an unreliable figure because the defendants had neither demonstrated what constituted “valuable property” or “items of damage” nor presented evidence regarding the putative value of such property.

Third, to the defendants’ assertion that punitive damages at a ratio of 2:1 to the compensatory damages helped meeting the amount in controversy, the Court remarked that the California law provides no support for a 2:1 punitive damages ratio. The Court stated that in two cases, the defendants cited, the jury awarded compensatory damages and punitive damages at substantially a 1:1 ratio. Only in Pestano v. Mid-Century Ins. Co., 1996 WL 402741 (Cal. Superior Apr. 2, 1996), the jury awarded $75,000 in economic and non-economic damages, and $1,000,000 in punitive damages because plaintiff alleged that defendant delayed payment of uninsured motorist benefits to compel plaintiff to take less than the full value in settlement of his claim. 

The Court remarked that the defendants offered no comparison of Pestano to the facts of this case.  Given the facts of this case and the increasing trend toward the downward adjustment of punitive damages to comport with due process, the Court observed that it was not persuaded that such a large punitive damages would be awarded. In addition, the Court found that the defendants made no evidentiary showing that punitive damages would be recoverable in this case.

Finally, the Court concluded that although the attorneys’ fees were properly included in the amount in controversy, the defendants’ failed to provide evidence showing what a reasonable attorney’s fee award might be in this case.