Scherrer v. Foremost Insurance Company Grand Rapids Michigan
4:17-cv-00855
E.D. Mo.Mar 27, 2018Background
- Plaintiff Nelson Scherrer sued Foremost in Missouri state court after rain caused water damage to his home; Foremost paid Actual Cash Value (ACV) after depreciating labor from the Replacement Cost Value (RCV).
- Scherrer alleges Foremost improperly depreciated labor costs and seeks class-wide declaratory relief and breach-of-contract damages for thousands of similarly affected policyholders.
- Foremost removed under the Class Action Fairness Act (CAFA), asserting the amount in controversy exceeds $5,000,000 based on aggregated depreciated labor across class claims.
- The parties conducted limited discovery on jurisdictional facts; Foremost produced claim data from two estimating systems (Xactimate/Xactware and Symbility) showing 9,271 potential class members but depreciation values for only 5,482 claims.
- Foremost averaged recorded depreciation ($607.59) across all 9,271 class members to compute >$5M in compensatory damages; Scherrer offered a more granular computation and adjustments (duplicates, amounts later paid) yielding a lower figure.
- The district court reviewed both computations, found Foremost’s method plausible under governing precedent, and denied remand to state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CAFA amount-in-controversy exceeds $5M | Scherrer: Foremost’s use of industry averages and assumptions is speculative; a more precise calculation (accounting for duplicates and later-paid amounts) shows <$5M | Foremost: Aggregating average depreciated labor across 9,271 class members (based on recorded claims) yields >$5M; future joiners may add more | Denied remand: a factfinder might legally accept Foremost’s computation, so CAFA threshold satisfied |
| Proper method to aggregate class damages under CAFA | Scherrer: Use more granular subgroup averages and subtract duplicates/amounts ultimately paid | Foremost: A class-wide average from available claim data is a reasonable aggregation method | Court: Class-wide averaging is permissible; removing party need only show a plausible calculation by preponderance |
| Effect of speculative assumptions (e.g., retention, future claimants) | Scherrer: Such assumptions are too speculative and should be excluded | Foremost: Some assumptions are reasonable and may be included to account for class definition covering up to trial | Court: Not necessary to rely on future-claim assumptions because compensatory damages alone meet threshold; nonetheless Foremost’s assumptions were sufficiently plausible if considered |
| Inclusion of attorney’s fees and declaratory relief value in amount-in-controversy | Scherrer: Fees shouldn’t be included or would not increase controversy; declaratory relief overlaps compensatory damages | Foremost: Attorney’s fees and value of declaratory relief could increase amount in controversy substantially | Court: Did not decide—threshold met on compensatory damages alone, so fees/declaratory value unnecessary to resolve |
Key Cases Cited
- Standard Fire Ins. Co. v. Knowles, 568 U.S. 588 (CAFA aggregation rule and amount-in-controversy framework)
- Hargis v. Access Capital Funding, LLC, 674 F.3d 783 (8th Cir.) (removing party must prove amount-in-controversy by preponderance)
- Bell v. Hershey Co., 557 F.3d 953 (8th Cir.) (amount-in-controversy evidentiary standard discussion)
- Hartis v. Chicago Title Ins. Co., 694 F.3d 935 (8th Cir.) (permitting class-wide averaging from limited representative data)