Sley v. USAA Casualty Insurance Company
5:16-cv-04882
N.D. Cal.May 16, 2017Background
- Plaintiff David Sley alleges his Toyota 4Runner suffered covered damage in a one-car accident and that USAA failed to increase his coverage as requested and then refused to pay benefits after timely notice.
- Sley sued in Santa Clara County Superior Court asserting breach of contract, breach of the covenant of good faith and fair dealing (bad faith), negligence, reformation, and declaratory relief; complaint checked "Unlimited" civil matter but did not state dollar amounts.
- USAA removed the action to federal court asserting diversity jurisdiction under 28 U.S.C. § 1332; parties are diverse but the amount in controversy is disputed.
- The sole jurisdictional question: whether USAA met its burden to show the amount in controversy exceeds $75,000 (exclusive of interest and costs).
- Plaintiff offered a post-removal stipulation capping recovery at $75,000 (including punitive damages and fees); the court gave this stipulation little weight for jurisdictional purposes.
- Court evaluated contract damages (~$50,000 for vehicle), attorney’s fees (pre- and post-removal), and punitive damages evidence and found USAA failed to prove by a preponderance that the jurisdictional threshold is met.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether post-removal stipulation defeats jurisdiction | Stipulation limiting recovery to ≤ $75,000 should support remand | Stipulation irrelevant; court must consider pre-removal posture | Court: post-removal stipulation given little weight; jurisdiction determined on pre-removal facts |
| Amount in controversy — contract damages | Actual vehicle value ~ $50,000 | Agrees vehicle value ~ $50,000 | Court accepts ~$50,000 in contract damages |
| Amount in controversy — attorney's fees (pre- and post-removal) | Include only fees incurred up to removal (here ≈ $1,190) | Include projected post-removal fees (USAA estimated ~$70,000–$94,400) | Court: pre-removal fees count but defendant’s projections of future fees are speculative and unsupported |
| Amount in controversy — punitive damages | No basis shown for large punitive award given facts | Past bad-faith cases show small economic awards yielded large punitive damages; punitive should be considered | Court: exemplar cases are not factually analogous and defendant’s punitive damage estimate is speculative; cannot rely on it to meet $75,000 threshold |
Key Cases Cited
- St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283 (1938) (post-removal events and stipulations do not oust jurisdiction once attached)
- Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241 (9th Cir. 2009) (removal statutes strictly construed against removal; defendant bears burden)
- Singer v. State Farm Mut. Auto. Ins., 116 F.3d 373 (9th Cir. 1997) (court may consider whether amount in controversy is facially apparent and may examine evidence when complaint omits damages)
- Cohn v. PetSmart, Inc., 281 F.3d 837 (9th Cir. 2002) (defendant must prove amount in controversy by a preponderance)
- Theis Research, Inc. v. Brown & Bain, 400 F.3d 659 (9th Cir. 2005) (amount in controversy is the total amount at stake in the underlying litigation)
- Galt G/S v. JSS Scandinavia, 142 F.3d 1150 (9th Cir. 1998) (attorney fees included in amount in controversy when authorized by statute or contract)
- Brandt v. Superior Court, 693 P.2d 796 (Cal. 1985) (insured may recover attorney’s fees reasonably incurred to obtain policy benefits from insurer)