MEMORANDUM OPINION AND ORDER
THIS MATTER comes before the Court on the Plaintiffs’ Memorandum Motion to Remand to State Court for Lack of Federal Jurisdiction, filed June 24, 2011 (Doc. 55)(“Motion”). The Court held a hearing on March 7, 2012. The primary issues are: (i) whether the Court has subject-matter jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d)(4)(A) (“CAFA”) or the traditional diversity-jurisdiction analysis, under 28 U.S.C. § 1332; and (ii) if the Court has jurisdiction, whether the Court should decline to exer
FACTUAL BACKGROUND
All of the Plaintiffs are New Mexico residents. See Petition for Declaratory Judgment and Injunctive Relief ¶¶ 1-6, at 1-2 (dated April 15, 2011), filed June 10, 2011 (Doc. 4)(“Complaint”). Defendants Metropolitan Property & Casualty Insurance Company (“Metropolitan Casualty”), Colorado Casualty Insurance Company (“Colorado Casualty”), Pacific Indemnity Insurance Company (“Pacific Indemnity”), The Travelers Insurance Company d/b/a The Travelers Home & Marine Insurance Company (“Travelers Insurance”), 21st Century Insurance Company (“21st Century Insurance”), and Arnica Mutual Insurance Company (“Arnica Insurance”) are foreign insurance companies authorized to issue automobile liability insurance policies within the State of New Mexico in compliance with all the rules and regulations promulgated by the Superintendent of Insurance as well as the applicable New Mexico statutes and case law. See Complaint ¶¶ 10-16, at 3-4. Defendant Desert Mountain Agency (“Desert Mountain”) is a New Mexico corporation authorized to sell automobile insurance policies in New Mexico. See Complaint ¶¶ 17-18, at 4-5.
Plaintiff Michael Valdez is a named insured in an insurance policy with Metropolitan Casualty, policy number 045192877-3, whose policy provides uninsured motorist coverage with limits that are less than the relevant liability limits in the same policy without a valid written rejection of equal uninsured motorist coverage. See Complaint ¶ 29, at 7. Plaintiff Kim Dressel is a named insured in an insurance policy with Pacific Indemnity, policy number 12714973-03, whose policy provides uninsured motorist coverage with limits that are less than the relevant liability limits in the same policy without a valid written rejection of equal uninsured motorist coverage. See Complaint ¶ 31, at 7. Plaintiff Dress Construction, Inc. is a named insured in an insurance policy with Colorado Casualty, policy number CBP08431076, whose policy provides uninsured motorist coverage with limits that are less than the relevant liability limits in the same policy without a valid written rejection of equal uninsured motorist coverage. See Complaint ¶ 33, at 8. Plaintiff Freddie Sue Gatewood is a named insured in an insurance policy with Travelers Insurance, policy number 979038Q62-1011, whose policy provides uninsured motorist coverage with limits that are less than the relevant liability limits in the same policy without a valid written rejection of equal uninsured motorist coverage. See Complaint ¶ 35, at 8. Plaintiff Mary Jo Vaughn is a named insured in an insurance policy with 21st Century Insurance, policy number 979038Q62-1011, whose policy provided uninsured motorist coverage with limits that were less than the relevant liability limits in the same policy without a valid written rejection of equal uninsured motorist coverage. See Complaint ¶ 38, at 9. Plaintiff Marcus Perkins is a named insured in an insurance policy with Arnica Insurance, policy number 910730-20FF, whose policy provides uninsured motorist coverage with limits that are less than the relevant liability limits in the same policy without a valid written rejection of equal uninsured motorist coverage. See Complaint ¶ 39, at 9.
The Plaintiffs initiated this action by filing the Complaint against six insurance companies and one New Mexico Insurance Agency in the First Judicial District Court, Santa Fe County, State of New Mexico. The Plaintiffs allege that the Defendants have failed to comply with the Supreme Court of New Mexico’s decisions in Progressive Northwestern Insurance Co. v. Weed Warrior Services,
In Jordan and Weed Warrior, the Supreme Court [of New Mexico] established, as a matter of New Mexico public policy, the following retroactive rules regulating all MFRAf1 ] policies and [uninsured or underinsured motorist] coverages issued in New Mexico since May 20, 2004: a) the purchase of less than equal limits [uninsured or underinsured motorist] coverage constitutes a “rejection” by the insured of the available equal limited [uninsured or underinsured motorist] coverage; b) an insured’s rejection of [uninsured or underinsured motorist] coverage or equal limits [uninsured or underinsured motorist] coverage under a New Mexico MFRA policy must be in writing and must be attached to, endorsed upon, or otherwise made a part of the MFRA/[uninsured or underinsured motorist] policy; c) every written rejection of [uninsured or underinsured motorist] coverage in New Mexico must include a “menu” showing each vehicle insured, each limit of [uninsured or underinsured motorist] coverage available for purchase for that vehicle (up to the policy’s limits for that type of coverage whether [uninsured or underinsured motorist] or [property damage]), and the premium prices for each available limit of [uninsured or underinsured motorist] coverage for each vehicle (hereinafter “the Jordan menu”); d) if an insurer does not, or did not after May 20, 2004, comply with these requirements for a written rejection, then any [uninsured or underinsured motorist] policy issued in New Mexico that provides, or provided, less than equal limits [uninsured or underinsured motorist] coverage must be retroactively reformed as a matter of law to provide equal limits [uninsured or under-insured motorist] coverage regardless of the payment of any premium or the intent of the parties so that all similarly situated insureds will be treated equally.
Complaint ¶ 27, at 6-7. The Plaintiffs assert that the Defendants are violating a retroactive duty to provide them with “full and complete information about all [uninsured or underinsured motorist] coverage available to them.” Complaint ¶ 42, at 9-10. The Plaintiffs assert that the Defendants engaged in “unconscionable trade
The Plaintiffs request the following relief against the insurer Defendants:
a) a Declaratory Judgment retroactively reforming all the [uninsured or underinsured motorist] policies issued in New Mexico to Plaintiffs and the class members since May 20, 2004, so as to provide equal limits [uninsured or underinsured motorist] coverage, where the policy did not already do so, without the payment of any premiums by the class members and regardless of the intent of the parties; b) injunctive relief ordering each Defendant to immediately notify all its insureds who were issued less than equal limits [uninsured or underinsured motorist] policies since May 20, 2004, that their policies have been retroactively reformed to provide equal limits [uninsured or underinsured motorist] coverage together with an explanation of the effect of this retroactive reformation that can be easily understood by the hypothetical average insured — including notice to seek independent legal advice or contract the Defendant if they have any questions about the legal impact of this retroactive reformation of their MFRA/[uninsured or underinsured motorist] policies, and especially if any insureds have been involved in an auto accident since May 20, 2004; and c) injunctive relief ordering each Defendant to adopt and immediately implement a [uninsured or underinsured motorist] selection form for use in New Mexico that fully and substantially complies with the retroactive requirements of Jordan.
Complaint ¶ 1, at 18. The Plaintiffs also separately ask for the following relief against Desert Mountain:
For the Court’s Order granting injunctive relief pursuant to the UTPA and/or [New Mexico Unfair Claims Practices Act, N.M.S.A.1978, § 59A-16-20] and/or the common law in equity ordering Defendant Agent in the future to affirmatively provide all applicants for a New Mexico MFRA policy with a written Jordan menu at the time the original policy is sold and again whenever one of Agent’s insureds requests a change in his or her MFRA policy including, but not limited to, a change in liability or [uninsured or underinsured motorist] limits or the addition of a vehicle.
Complaint ¶ 2, at 19.
1. Notice of Removal.
On June 10, 2011, the Defendants filed their Notice of Removal. See Doc. 1. They
The Defendants argue that CAFA was intended to “expand significantly the jurisdiction of the federal courts over class action lawsuits as well as to limit what were seen as typical abuses of the class action system at the state level.” Notice of Removal ¶ 14, at 5 (citing Kearns v. Ford Motor Co., No. 05-5644,
The Defendants assert that they need only “make it possible ” that the threshold is satisfied and that the United States Court of Appeals for the Tenth Circuit considers the higher of the “value to the plaintiff or the cost to the defendant” when determining the amount in controversy. Notice of Removal ¶¶ 23-24, at 8-9 (emphasis original) (citing Hunt v. Wash. State Apple Adver. Comm’n,
The Defendants argue that no CAFA exceptions apply and that the Plaintiffs bear the burden of establishing that a statutory exception applies. See Notice of Removal ¶ 48, at 19 (citing Coffey v. Freeport-McMoran Copper & Gold, Inc.,
Finally, the Defendants assert that, under a traditional diversity jurisdiction analysis, the Court also has subject-matter jurisdiction, because the Court can sever Desert Mountain from the case. The Defendants argue that the Tenth Circuit has recognized that courts “frequently employ Rule 21 to preserve diversity jurisdiction over a ease by dropping a non-diverse party if his presence is not required under Rule 19.” Notice of Removal ¶ 62, at 25 (quoting Miller v. Leavenworth-Jefferson Elec. Coop., Inc.,
2. Answers to the Complaint.
After removing the case to federal court, three of the insurer Defendants filed answers to the Complaint. 21st Century Insurance lists several affirmative defenses, including that: (i) the Plaintiffs fail to state a claim upon which relief can be granted; (ii) the Plaintiffs lack standing to pursue, for themselves or on behalf of the putative class, the relief sought; (iii) the Plaintiffs lack privity of contract with the purported entity “21st Century Insurance Company,”
The Plaintiffs move the Court to remand this case to state court for lack of federal jurisdiction. See Motion at 1. The Plaintiffs contend that the Notice of Removal fails to confer jurisdiction upon the Court, because there is a lack of complete diversity of citizenship as 28 U.S.C. § 1332 requires, or fraudulent joinder. See Motion at 1. In support of this argument, the Plaintiffs argue that: (i) the Notice of Removal fails to show that the CAFA applies; (ii) the Plaintiffs seek equitable relief only — and no monetary relief — to complete and enforce the Supreme Court of New Mexico’s retroactive mandate in Jordan v. Allstate Ins. Co.; and (iii) jurisdiction would violate the well-established rule in Wilton v. Seven Falls Co.,
The Plaintiffs note that a removing party carries a “heavy burden of persuasion” to show that a non-diverse party was fraudulently joined. Motion at 3 (citing B., Inc. v. Miller Brewing Co.,
The Plaintiffs also argue that CAFA’s local-controversy exception requires that the Court remand the case to state court. They assert that the Court “shall decline to exercise jurisdiction” where: (i) greater than two-thirds of the proposed class members are citizens of the State in which
granting of declaratory and injunctive relief to ensure that these named Defendants adhere in New Mexico to the unique holding of the New Mexico Supreme Court in Jordan, — which by definition will only apply to New Mexico [uninsured or underinsured motorist] policies and New Mexico policyholders— is a matter that uniquely affects the locality of New Mexico to the exclusion of all others.
Motion at 9 (emphasis original). The Plaintiffs assert that they meet each of the local-controversy exception requirements. The Plaintiffs contend that: (i) all class members are New Mexico residents; (ii) Desert Mountain is a New Mexico Corporation; (iii) the conduct involves uninsured motorist coverage in New Mexico; and (iv) they are aware of no similar actions being filed against the Defendants within the last three years. See Motion at 9.
The Plaintiffs assert that, because this case seeks only equitable relief, the Court should decline to accept jurisdiction. See Motion at 10. The Plaintiffs argue that the Supreme Court of the United States has repeatedly characterized the Declaratory Judgment Act, 28 U.S.C. § 2201, as “an enabling Act which confers a discretion on the courts rather than an absolute right upon the litigant.” Motion at 11 (quoting Pub. Serv. Comm’n v. Wycoff Co., Inc.,
On July 25, 2011, the Defendants filed the Insurer Defendants’ Joint Opposition to Motion to Remand. See Doc. 70 (“Response”). The Defendants assert that the Plaintiffs conceded in the Motion that CAFA’s requirements are met. See Response at 1. The Defendants emphasize that, under CAFA, the requirement is minimal diversity and not complete diversity. See Response at 2. They argue that the Plaintiffs are trying to “circumvent CAFA jurisdiction by asking this Court to make
The Defendants assert that fraudulent joinder is irrelevant under CAFA. They argue that CAFA jurisdiction exists when the proposed class contains at least one-hundred persons, the amount in controversy exceeds $5,000,000.00 and there is minimal diversity. See Response at 5. They contend that the presence of a non-diverse defendant does not defeat jurisdiction under CAFA. See Response at 6. The Defendants further assert that CAFA’s local-controversy exception does not apply, because Desert Mountain is not a party from whom significant relief is sought and whose alleged conduct forms a significant basis for the claims alleged. See Response at 6. The Defendants argue that the Plaintiffs bear the burden of establishing that an exception to CAFA jurisdiction applies and that the local-controversy exception is narrow, with all doubts resolved in favor of jurisdiction. See Response at 7 (citing Kaufman v. Allstate N.J. Ins. Co.,
The Defendants also argue that the Plaintiffs’ reliance on the Court’s discretion under the Declaratory Judgment Act is misplaced. They assert that this situation is not one where abstention is appropriate, because there is not a parallel state proceeding and because the Plaintiffs are seeking more than declaratory relief. See Response at 11. The Defendants contend that abstention arises more appropriately when a plaintiff sues a defendant in state court, and when the defendant subsequently sues the plaintiff in federal court in a competing and parallel action seeking declaratory relief on the same core issues. See Response at 11 (citing Brillhart v. Excess Ins. Co.,
On August 8, 2011, the Plaintiffs filed their Reply on Motion to Remand to State Court for Lack of Federal Jurisdiction. See Doc. 75 (“Reply”). The Plaintiffs assert that the Defendants “treat this case as if it were an ordinary insurance action brought to enforce some unresolved rule of law concerning [uninsured or underinsured motorist] insurance coverage.” Reply at 1 (emphasis original). The Plaintiffs argue that this case is unique, because
With respect to the local-controversy exception to CAFA, the Plaintiffs argue that: (i) the premium disclosure requirements of Jordan v. Allstate Ins. Co. is the most “substantial” element of that decision; and (ii) their request to enforce compliance with the premium disclosure ruling is the most “significant” relief sought against every Defendant. Reply at 5. The Plaintiffs assert that these facts establish that they seek significant relief from Desert Mountain. See Reply at 6. They contend that there is no statutory definition of “significant relief,” and that whether significant relief is sought is determined through a comparison of relief sought between all Defendants. Reply at 5-6. They argue that, because the same relief is sought against each Defendant, they have sought significant relief against Desert Mountain. Reply at 6. The Plaintiffs further assert that there is not support in the record for the Defendants’ allegation that Travelers Insurance is responsible for promulgating the uninsured motorist selection/rejection forms. See Reply at 7. They state that they specifically allege that Gatewood “seeks injunctive relief ... to affirmatively provide all applicants for a New Mexico MFRA policy with a written Jordan menu” and that the Defendants’ argument that “Gatewood seeks relief only against Travelers” is incorrect, because their allegations refer to every Desert Mountain customer. Reply at 9.
On March 7, 2012, the Court held a hearing. The Plaintiffs argued that the state courts have exclusive jurisdiction to enforce the state insurance regulations that were mandated in Montano v. Allstate Indem. Co.,
With respect to the Rooker-Feldman doctrine, the Plaintiffs argued that there can be no re-litigation of issues that are inextricably intertwined with Jordan v. Allstate Ins. Co. and cited DePasquale v. Allstate Ins. Co.,
The Plaintiffs then discussed several New Mexico cases related to automobile insurance policies. See Tr. at 21:17-30:11 (Berardinelli). They argued that the Supreme Court of New Mexico’s objective in Jordan v. Allstate Ins. Co. is that all insurance companies operating in New Mexico offer the menu that Jordan v. Allstate Ins. Co. mandated, which the Plaintiffs asserted has been universally ignored. See Tr. at 30:12-31:7 (Berardinelli). The Plaintiffs contended that the Superintendent of Insurance has not issued a regulation with respect to the Jordan v. Allstate Ins. Co. menu and stated that the only viable vehicle to enforce the Supreme Court of New Mexico’s mandate is through the state judicial courts. See Tr. at 35:19-37:7 (Berardinelli). They asserted that no insurance company has complied with Jordan v. Allstate Ins. Co. See Tr. at 39:8-40:1 (Berardinelli). The Plaintiffs stated that they seek equitable relief only: (i) a declaratory judgment stating that all insurance policies are retroactively reformed to provide equal-limits coverage; (ii) notice to the insureds of the policy changes; and (iii) a court order that the insurers must provide the menu that Jordan v. Allstate Ins. Co. requires. See Tr. at 40:2-14 (Berardinelli). The Plaintiffs argued that the only viable remedy is in state court and, under principles of comity and in deference to the regulatory system, the Court should find that it does not have jurisdiction. See Tr. at 41:23-42:7 (Berardinelli). They asserted that the Court must determine whether there is reverse preemption and noted that all of their claims apply equally to all of the Defendants, including Desert Mountain. See Tr. at 43:4-10 (Berardinelli).
The Court asked whether the purpose of the McCarran-Ferguson Act was to determine what law applies and whether it would deprive the Court of jurisdiction. See Tr. at 43:11-18 (Court). The Plaintiffs responded that the McCarran-Ferguson Act is jurisdictional and intended to bar the federal courts from exercising jurisdiction when a case involves state regulation of insurance. See Tr. at 43:19-25 (Berardinelli). They argued that this issue is one of extreme public interest which goes to the very essence of the Court’s jurisdiction and that Congress intended to withdraw federal jurisdiction from matters related to the regulation of insurance. See Tr. at 44:12-24 (Berardinelli). They further asserted that the Supreme Court of New Mexico has already determined that all insurers must provide this menu and coverage, and that the case before the Court is an attempt to enforce the Jordan v. Allstate Ins. Co. mandate. See Tr. at 44:24-45:22 (Berardinelli). The Plaintiffs explained that their argument is that, because CAFA is a federal statute, the Court cannot assume jurisdiction under CAFA in an insurance case if that exercise of jurisdiction would interfere with the State’s right to regulate insurance. See Tr. at 46:4-14 (Berardinelli). They clarified that there is not an insurance exception to CAFA and conceded that a case involving insurance would not divest the Court of CAFA jurisdiction. See Tr. at 46:24-47:16 (Berardinelli). The Court then asked about the Plaintiffs’ references to Rooker-Feldman and whether it would apply, because the Court is not being asked to determine the correctness of a state court judgment. See Tr. at 47:17-23 (Court). The Plaintiffs responded that they brought Rooker-Feldman up because the Defendants are arguing that they do not have to obey the Jordan v. Allstate Ins. Co. mandate and, if the Court agreed, the Court would be overruling the Supreme Court of New Mexico on an issue of New Mexico law. See Tr. at 47:24-18:10 (Berardinelli). They argued that, when the Supreme Court of New Mexico remands a case or
The Defendants then argued in opposition. The Defendants argued that the intent of Congress in adopting CAFA was to expand federal jurisdiction and that all doubts in interpreting the statute were to be resolved in favor of jurisdiction, with the exceptions construed narrowly. See Tr. at 55:6-10 (Strong). They argued that the Tenth Circuit has held that the Court has an unflagging obligation to exercise jurisdiction where it has it. See Tr. at 55:10-15 (Strong). The Defendants asserted that none of the Plaintiffs’ arguments regarding abstention under Burford v. Sun Oil Co., McCarran-Ferguson Act preemption, or Rooker-Feldman abstention were properly briefed. See Tr. at 55:16-56:6 (Strong). The Defendants then argued that this is not the type of complicated case that calls for abstention under Burford v. Sun Oil Co., because this case is an enforcement action and the Plaintiffs are taking the position that it is not a difficult question of state law. See Tr. at 56:7-24 (Strong). They contended that the case law is clear that the value of declaratory or injunctive relief include all benefits that logically flow from that relief. See Tr. at 56:25-57:7 (Strong). They asserted that the Senate Committee Report on CAFA commented that the value of the matter in litigation can be determined from the viewpoint of the plaintiff or defendant. See Tr. at 57:7-13 (Strong). They represented that the Senate Committee also stated that, in assessing declaratory relief, a court should include in its assessment the value of all relief and all benefits that would logically flow from the granting of the relief. See Tr. at 57:19-58:12 (Strong). The Defendants contended that the Plaintiffs have not disputed that billions of dollars could be at issue. See Tr. at 58:11-15 (Strong). They argued that the relief that the Plaintiffs seek has a monetary value, and that there will be lost premiums and administrative costs. See Tr. at 59:19-60:13 (Strong). The Defendants stated that they do not contest that Jordan v. Allstate Ins. Co. applies or its constitutionality. See Tr. at 60:18-61:11 (Strong).
With respect to the local-controversy exception to CAFA, the Defendants argued that an attorney’s affidavit and allegations do not establish that significant relief was sought against a non-diverse defendant. See Tr. at 61:11-25 (Strong). The Defendants asserted that the Plaintiffs bear the burden of establishing that a CAFA exception applies and that the Plaintiffs have not met that burden. See Tr. at 62:4-12
Regarding CAFA’s specific requirements, the Defendants asserted that: (i) there are at least one-hundred putative class members; (ii) that the aggregated amount in controversy is in excess of $5,000,000.00; and (iii) no exceptions apply. See Tr. at 73:10-21 (Spano). Focusing on the amount in controversy, the Defendants argued that the relief sought would be costly, because the Plaintiffs seek to reform all policies issued after May 2004, to have the Defendants notify all insureds of this change, and to have the insurers develop and implement a new uninsured motorist coverage selection form. See Tr. at 74:8-14 (Spano). The Defendants contended that they need show only that it is possible that the cost of relief would satisfy the amount in controversy standard, and that the Court should look at the benefits or costs of the relief sought. See Tr. at 74:15-75:21 (Spano). The Defendants then discussed the costs that they calculated in their Response and argued that they have met the amount-in-controversy requirement. See Tr. at 75:22-78:11 (Spano). The Defendants asserted that reverse preemption under the McCarran-Ferguson Act is not a jurisdictional issue, and that a federal court retains jurisdiction to adjudicate the rights of policyholders and insureds. See Tr. at 78:12-79:11 (Spano). The Court asked whether the Defendants had a response to the Plaintiffs’ argument that the McCarran-Ferguson Act affects congressional statutes and that CAFA is a congressional statute. See Tr. at 79:12-19 (Court). The Defendants responded that, for the McCarran-Ferguson Act to apply, CAFA would have to conflict with a state law that is designed to regulate insurance and ar
The Court then asked the Plaintiffs whether they conceded the amount in controversy requirement under CAFA is met. See Tr. at 83:24-84:9 (Court). The Plaintiffs asserted that they did not concede the amount in controversy issue and argued that, beyond the estimated $500,000.00 in administrative costs, the amount in controversy calculations are entirely speculative. See Tr. at 84:15-85:2 (Berardinelli). The Plaintiffs stated that they are not asking for payment of premiums. See Tr. at 85:3-4 (Berardinelli). The Court asked whether the Plaintiffs would agree that the relief they seek will, as a practical matter, have a financial impact and that the Court can look at the impact of these changes. See Tr. at 85:12-20 (Court). The Plaintiffs responded that whether policyholders can collect under the policies is not the Plaintiffs’ objective and argued that all the relief they seek is compliance with Jordan v. Allstate Ins. Co., See Tr. at 85:20-86:7 (Court, Berardinelli). They argued this case involves a regulatory action and the question is whether the federal court should be involved in telling insurance companies what is appropriate under the Supreme Court of New Mexico’s case law. See Tr. at 86:8-17 (Berardinelli). The Plaintiffs asserted that Desert Mountain is wrong when it argues that the Plaintiffs do not seek significant relief against it, because the Plaintiffs want insurance agents to have to comply with the law as well. See Tr. at 86:17-19 (Berardinelli). They also contended that there is no evidence to support the assertion that Desert Mountain cannot promulgate a form. See Tr. at 86:20-25 (Berardinelli). The Plaintiffs argued that comity, in its purest form, is at stake in this action and that, if the Court decides the case, then purpose of the McCarran-Ferguson Act will be defeated. See Tr. at 87:5-10 (Berardinelli). The Plaintiffs conceded that the only aspects of CAFA that they are challenging is the amount in controversy requirement and application of the local-controversy exception. See Tr. at 89:6-22 (Court, Berardinelli). The Plaintiffs asserted that they have satisfied the local-controversy exception, because the most significant relief is to obtain compliance and this case is dealing with significant public policy interests. See Tr. at 89:23-90:12 (Berardinelli). They also argued that, if the Court finds jurisdiction under CAFA, it will be in direct conflict with the McCarran-Ferguson Act. See Tr. at 90:13-22 (Berardinelli).
On March 14, 2012, Metropolitan Casualty and Travelers Insurance filed the Supplemental Memorandum of Defendants Metropolitan Property and Casualty Insurance Company and Travelers Home and Marin Insurance Company in Support of Their Joint Opposition to Motion to Remand. See Doc. 111 (“Sur-Reply”). Metropolitan Casualty and Travelers Insurance note that the Plaintiffs “never mentioned the McCarran-Ferguson Act, ‘reverse-preemption’ or the Burford Doctrine” in the Motion. Sur-Reply at 1. They argue that the McCarran-Ferguson Act does not divest federal courts of jurisdiction over cases involving the insurance industry. See Sur-Reply at 2 (citing Grimes v. Crown Life Ins.,
LAW REGARDING CAFA
CAFA jurisdiction exists when the proposed class contains at least one-hundred persons, the amount in controversy exceeds $5,000,000.00, and there is minimal diversity. See 28 U.S.C. § 1332(d)(2) and (5). “CAFA was enacted to respond to perceived abusive practices by plaintiffs and their attorneys in litigating major class actions with interstate features in state courts.” Coffey v. Freeport McMoran Copper & Gold,
1. Amount in Controversy.
The amount-in-controversy requirement is “an estimate of the amount that will be put at issue in the course of the litigation.” McPhail v. Deere & Co.,
The Senate Report also provides that, “in assessing the jurisdictional amount in declaratory relief cases, the federal court should include in its assessment the value of relief and benefits that would logically flow from the granting of the declaratory relief sought.” S.Rep. No. 109-14 at 42-43, 2005 U.S.C.C.A.N. 3, 41,
In determining the value of litigation which increases insurance coverage, several courts have held that the proper measure of the amount in controversy is the increase in coverage limits of the policy. In Whitehead-Rojas v. American Family Mutual Ins. Co., No. 08-0103,
Federal courts have also held that a court can calculate the costs associated with the relief sought for the defendants to determine the amount in controversy. The Seventh Circuit has held that, where an insurer-defendant would either have to “stop charging a premium or change the terms so that policyholders receive indemnity more frequently, it will suffer a financial loss” and that the $1,500,000.00 in lost premiums was part of the amount in controversy. Keeling v. Esurance Ins. Co.,
2. Local-Controversy Exception.
Congress created an exception to CAFA for those cases that “consist of primarily local, intrastate matters, which it characterized as the ‘Local Controversy Exception.’ ” Coffey v. Freeport McMoran Copper & Gold,
(I) greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed;
(II) at least 1 defendant is a defendant—
(aa) from whom significant relief is sought by members of the plaintiff class;
(bb) whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class; and
(cc) who is a citizen of the State in which the action was originally filed; and
(III) principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State in which the action was originally filed....
28 U.S.C. § 1332(d)(4)(A)(i). A plaintiff must also show that, during the three years preceding the filing of the class action, no other class action was filed asserting the same or similar allegations against any of the defendants. See 28 U.S.C. § 1332(d)(4)(A)(ii).
In Coffey v. Freeport McMoran Copper & Gold, the Tenth Circuit upheld the district court’s interpretation of 28 U.S.C. § 1332(d)(4)(A)(i)(II)(aa) that the significant relief requirement of the local-controversy exception is satisfied where the complaint “claims that every potential plaintiff is entitled to recover from [the local defendant] and the proposed class seeks to recover damages from all defendants jointly and severally.”
With respect to subsection (bb), the United States Court of Appeals for the Fifth Circuit, in Opelousas General Hospital Authority v. FairPay Solutions, Inc.,
THE ROOKER-FELDMAN DOCTRINE
Although it has a complex history and was for a long time shrouded in mystery, the Rooker-Feldman doctrine embodies the simple principle that federal district courts have no jurisdiction to sit as courts of appeal to state courts. “The Rooker-Feldman doctrine prevents the lower federal courts from exercising jurisdiction over cases brought by ‘state-court losers’ challenging ‘state-court judgments rendered before the district court proceedings commenced.’ ” Lance v. Dennis,
LAW REGARDING EXERCISE OF DISCRETIONARY JURISDICTION OVER DECLARATORY JUDGMENT ACTIONS
In Brillhart v. Excess Insurance Co. of America, the Supreme Court explained that district courts are “under no compulsion to exercise ... jurisdiction” under the Declaratory Judgment Act, 28 U.S.C. §§ 2201 to 2202.
Ordinarily it would be uneconomical as well as vexatious for a federal court to proceed in a declaratory judgment suit where another suit is pending in a state court presenting the same issues, not governed by federal law, between the same parties. Gratuitous interference with the orderly and comprehensive disposition of a state court litigation should be avoided.
Brillhart v. Excess Ins. Co. of Am.,
The Tenth Circuit has adopted a five-factor test for evaluating whether a district court should exercise its discretionary jurisdiction over a declaratory judgment action. See St. Paul Fire and Marine Ins. Co. v. Runyon,
whether a declaratory action would settle the controversy; [2] whether it would serve a useful purpose in clarifying the legal relations at issue; [3] whether the declaratory remedy is being used merely for the purpose of “procedural fencing” or “to provide an arena for a race to res judicata”; [4] whether use of a declaratory action would increase friction between our federal and state courts and improperly encroach upon state jurisdiction; and [5] whether there is an alternative remedy which is better or more effective.
St. Paul Fire and Marine Ins. Co. v. Runyon,
The Tenth Circuit in St. Paul Fire and Marine Insurance Co. v. Runyon explained:
The parties have a pending state contract action, which incorporates the identical issue involved in the declaratory judgment action. [The defendant’s] state breach of contract complaint against [the insurance-company plaintiff] alleges the coworkers’ lawsuit is a “covered claim” pursuant to the insurance policy. In resolving the insurance contract, the state court will necessarily determine rights and obligations under the contract. [The insurance-company plaintiff] is seeking a declaration by the federal court that the coworkers’ lawsuit is not a covered claim. The issue in the federal declaratory judgment action is identical to what would be a defense to the state court contract action — whether [the defendant’s insurance contract with [the insurance-company plaintiff] protects him from the coworkers’ lawsuit. Because the state court will determine, under state contract law, whether the tort action is covered by the insurance contract, it is not necessary for the federal court to issue a declaration on the insurance contract.
St. Paul Fire and Marine Ins. Co. v. Runyon,
LAW REGARDING THE McCARRANFERGUSON ACT AND FEDERAL JURISDICTION
The McCarran-Ferguson Act provides: “No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purposes of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance.” 15 U.S.C. § 1012(b). In Grimes v. Crown Life Ins. Co.,
We are skeptical that Congress intended, through the McCarran-Ferguson Act, to remove federal jurisdiction over every claim that might be asserted against an insurer in state insolvency proceedings. If nothing else, the argument proves too much, for it would operate to divest exclusively federal jurisdiction as effectively as it would diversity jurisdiction, leaving many plaintiffs with no forum in which to assert their federal rights. In any event, we do not believe that concurrent federal jurisdiction over the defendants’ counterclaims threatens to “invalidate, impair, or supersede” (as those terms are used in the McCarranFerguson Act) Virginia’s efforts to establish a single equitable proceeding to liquidate or rehabilitate insolvent insurers.
LAW REGARDING ABSTENTION UNDER BURFORD V. SUN OIL CO.
In Burford v. Sun Oil Co., the Supreme Court held that the federal proceedings should have been dismissed where the lawsuit’s subject matter in the federal district court involved a state agency’s review of oil drilling permits, because the state had established its own review system for the permits and a federal court ruling would have an impermissibly disruptive affect on state policy for management of the oil fields. See
Professors Charles Wright and Arthur Miller have commented that
the Court appears to sanction Burfordtype abstention where, as in the Burford and Alabama Public Service [Commission v. Southern Railway Co.,341 U.S. 341 ,71 S.Ct. 762 ,95 L.Ed. 1002 (1951) ] cases themselves, the state has a unified scheme for review of its administrative orders and federal intervention in cases in which diversity is present would have a disruptive effect on the state’s efforts to establish a coherent policy on a matter of substantial public concern.
17A Federal Practice & Procedure, Jurisdiction § 4244 (3d ed.2011). “While Bur-ford is concerned with protecting complex state administrative processes from undue federal interference, it does not require abstention whenever there exists such a process, or even in all cases where there is a ‘potential for conflict’ with state regulatory law or policy.” New Orleans Pub. Serv., Inc. v. Council of City of New Orleans,
In Grimes v. Crown Life Ins. Co., the Tenth Circuit held that the McCarranFerguson Act becomes relevant to Burford abstention, because it encourages the states to formulate their own systems to regulate insurers doing business in their states. See
in instances where states have responded to this congressional policy by formulating complex and specialized administrative and judicial to regulate insurers, especially the liquidation of insolvent insurers, it becomes increasingly possible that the exercise by a federal court of its jurisdiction will prove to be “disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern.”
Grimes v. Crown Life Ins. Co.,
SUPREME COURT OF NEW MEXICO CASES ON UNINSURED MOTORIST COVERAGE
N.M.S.A.1978, § 66-5-301(A) and (C), in relevant part, state:
A. No motor vehicle or automobile liability policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person and for injury to or destruction of property of others arising out of the ownership, maintenance or use of a motor vehicle shall be delivered or issued for delivery in New Mexico with respect to any motor vehicle registered or principally garaged in New Mexico unless coverage is provided therein or supplemental thereto in minimum limits for bodily injury or death and for injury to or destruction of property as set forth in Section 66-5-215 NMSA 1978 and such higher limits as may be desired by the insured, but up to the limits of liability specified in bodily injury and property damage liability provisions of the insured’s policy, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, and for injury to or destruction of property resulting therefrom, according to the rules and regulations promulgated by, and under provisions filed with and approved by, the superintendent of insurance.
C. [T]he named insured shall have the right to reject uninsured motorist coverage as described in Subsections A and B of this section; provided that unless the named insured requests such coverage in writing, such coverage need not be provided in or supplemental to a renewal policy where the named insured has rejected the coverage in connection with a policy previously issued to him by the same insurer.
N.M. Stat. § 66-5-30KA) & (C)(emphasis added). Regulation 13.12.3.9, which elaborates § 66-5-301, provides: “The rejection of the provisions covering damage caused by an uninsured or unknown motor vehicle as required in writing by the provisions of Section 66-5-301 NMSA 1978 must be endorsed, attached, stamped, or otherwise made a part of the policy of bodily injury and property damage insurance.” N.M.A.C. § 13.12.3.9.
The Supreme Court of New Mexico has recognized that § 66-5-301 “embodies a public policy of New Mexico to make uninsured motorist coverage a part of every automobile liability insurance policy issued in this state, with certain limited exceptions,” and that the statute is “intended to expand insurance coverage and to protect individual members of the public against the hazard of culpable uninsured motorists.” Romero v. Dairyland Ins. Co.,
[Regulation 13.12.3.9] ensurefs] that the insured has affirmative evidence of the extent of coverage. Upon further reflection, consultation with other individuals, or after merely having an opportunity to review one’s policy at home, an individual may well reconsider his or her rejection of uninsured motorist coverage. Providing affirmative evidence of the rejection of the coverage comports with a policy that any rejection of the coverage be knowingly and intelligently made. Any individual rejecting such coverage should remain well informed as to that decision. We find that the regulation of the superintendent of insurance furthers a legislative purpose to provide for the inclusion of uninsured motorist coverage in every automobile liability policy unless the insured has knowingly and intelligently waived such coverage.
Romero v. Dairyland Ins. Co.,
ministrative requirements, UM coverage shall be read into an insured’s policy regardless of the parties’ intent or the fact that a premium has not been paid. See Kaiser v. DeCarrera,
In Montano v. Allstate Indemnity Co.,
[I]n a multiple-vehicle policy insuring three cars, the insurer shall declare the premium charge for each of the three [uninsured or underinsured motorist] coverages and allow the insured to reject, in writing, all or some of the offered coverages. Thus, hypothetically, in the case of a $25,000 policy, if the premium for one [uninsured or underinsured motorist] coverage is $65, two coverages is an additional $60, and three coverages $57, the insured who paid all three (for a total premium of $182) would be covered up to $75,000 in [uninsured or underinsured motorist] bodily injury coverage. However, the insured may reject, in writing, the third available coverage and pay $125 for $50,000 of uninsured motorist coverage; or the insured may reject, in -writing, the third available coverage and pay $65 for $25,000 of [uninsured or underinsured motorist] coverage; or the insured may reject all three [uninsured or underinsured motorist] coverages. In any event, the coverage would not depend on which vehicle, if any, was occupied at the time of the injury. Thus, the insured’s expectations will be clear, and an insured will only receive what he or she paid for.
Montano v. Allstate Indem. Co.,
In Marckstadt v. Lockheed Martin Corp.,
in the affirmative the question, certified to us by the United States Court of Appeals for the Tenth Circuit, of whether election by an insured to purchase [uninsured or underinsured motorist] coverage in an amount less than the policy limits constitutes a rejection of the maximum amount of [uninsured orunderinsured motorist] coverage permitted under Section 66-5-301.
In Jordan v. Allstate Ins. Co., the Supreme Court of New Mexico held that “a rejection of [uninsured or underinsured motorist] coverage equal to the liability limits in an automobile insurance policy must be made in writing and must be made a part of the insurance policy delivered to the insured.”
In order to honor these requirements effectively, insurers must provide the insured with the premium charges corresponding to each available option for [uninsured or underinsured motorist coverage] so that the insured can make a knowing and intelligent decision to receive or reject the full amount of coverage to which the insured is statutorily entitled. If an insurer fails to obtain a valid rejection, the policy will be reformed to providing [uninsured or underinsured motorist] coverage equal to the limits of liability.
Jordan v. Allstate Ins. Co.,
When issuing an insurance policy, an insurer must inform the insured that heor she is entitled to purchase [uninsured or underinsured motorist] coverage in an amount equal to the policy’s liability limits and must also provide the corresponding premium charge for that maximum amount of [uninsured or underinsured motorist] coverage. The premium cost for the minimum amount of [uninsured or underinsured motorist] coverage allowed by Section 66-5-301(A) must also be provided, as well as the relative costs for any other levels of [uninsured or underinsured motorist] coverage offered to the insured. The insured must be informed that he or she has a right to reject [uninsured or underinsured motorist] coverage altogether. Providing the insured with a menu of coverage options and corresponding premium costs will enable the insured to make an informed decision....
Jordan v. Allstate Ins. Co., 149 N.M. at 169,
ANALYSIS
The Court will deny the Motion. The Defendants appropriately removed this case under CAFA, because the amount in controversy exceeds $5,000,000.00 and no exception applies. Furthermore, there is no basis on which the Court should decline to exercise jurisdiction.
I. THE COURT HAS JURISDICTION UNDER CAFA.
The Court finds that the McCarranFerguson Act does not reverse preempt CAFA, because the Court’s exercise of jurisdiction does not impair, supersede, or invalidate a state insurance statute. The Court concludes that the Defendants have proved, by a preponderance of the evidence, that the amount in controversy exceeds $5,000,000.00. Finally, the local-controversy exception to CAFA does not apply.
A. THE MCCARRAN-FERGUSON ACT DOES NOT REVERSE PREEMPT CAFA.
The Plaintiffs argued that the McCarran-Ferguson Act allows state law to reverse preempt an otherwise applicable federal statute, and that CAFA cannot invalidate, impair, or supersede the Supreme Court of New Mexico’s regulatory, retroactive ruling in Jordan v. Allstate Ins. Co. See Tr. at 17:12-18:14 (Berardinelli). They asserted that the McCarran-Ferguson Act is jurisdictional and intended to bar the federal courts from exercising jurisdiction when a case involves state regulation of insurance. See Tr. at 43:19-25 (Berardinelli).
Four circuit courts of appeals, including the Tenth Circuit, have held that the McCarran-Ferguson Act does not reverse preempt jurisdictional statutes or expressed skepticism that the McCarranFerguson Act would do so. See Safety National Casualty Corp. v. Certain Underwriters at Lloyd’s London,
In this case, there is an absence of any argument that CAFA would impair or supersede any state insurance jurisdictional statute.
B. THE DEFENDANTS HAVE MET CAFA’S JURISDICTIONAL REQUIREMENTS.
At the hearing, the Plaintiffs conceded that the only aspects of CAFA that they are challenging is the amount-in-controversy requirement and the local-controversy exception. See Tr. at 89:6-22 (Court, Berardinelli). The Plaintiffs also conceded that CAFA only requires minimal diversity. See Tr. at 89:6-13 (Court, Berardinel
The amount in controversy requirement is “an estimate of the amount that will be put at issue in the course of the litigation.” McPhail v. Deere & Co.,
1. The Plaintiffs Seek Relief Which Will Have a Monetary Impact, Even Though They Do Not Seek Monetary Damayes.
The Plaintiffs seek: (i) a declaratory judgment which retroactively reforms each of the insurer Defendants’ uninsured motorist policies, without the payment of
2. CAFA’S Amount-in-Controversy Requirement is Met When the Court Examines the Benefits of the Relief Sought to the Plaintiffs.
The Court first analyzes the amount in controversy from the Plaintiffs’ viewpoint. Athough the Plaintiffs assert that they do not seek any monetary damages, there is a monetary benefit to the equitable relief that they seek. See Reply at 4. The Senate Report instructs that the federal court should “include in its assessment the value of all relief and benefits that would logically flow from the granting of the declaratory relief sought by the claimants.” S.Rep. No. 109-14 at 42-43, 2005 U.S.C.C.A.N. 3, 41,
The Defendants assert that the aggregate increase in insurance coverage exceeds $1,500,000,000.00, because the increase in uninsured motorist coverage for Colorado Casualty alone is $1,470,000,000.00. See Notice of Removal ¶ 32, at 13. Brigitte Coulson, an Underwriting Consultant with Colorado Casualty, swore that she identified 4,799 Colorado Casualty policies that were issued or were in force after May 20, 2004, where uninsured motorist coverage was less than bodily injury coverage or rejected in its entirety. See Coulson Aff. ¶ 9, at 2. She calculated that the total coverage benefit to the putative class of an increase in uninsured motorist coverage would be “no less than $1.47 billion” and that when the increase in coverage is stacked per vehicle, the increase in coverage would be a benefit of “over $9 billion.” Coulson Aff. ¶ 11, at 2. She asserted that these figures represent the “total difference” between uninsured motorist and bodily injury coverage limits “as set forth in approximately one-half of the policies that would be encompassed in the putative class (those policies in force before 2008) and would be signifi
The Plaintiffs challenged these calculations as “entirely speculative,” but offered no caselaw, reasoning, or other calculations to support that statement. Tr. at 84:15-85:2 (Berardinelli). They asserted that the Defendants offered no statistics or information that would support a finding that the amount in controversy exceeds $5,000,000.00. See Tr. at 84:19-85:2 (Berardinelli). The specific calculations related to policy number 3013563 demonstrate the kind of calculations done to reach the $1,470,000,000.00 calculation for Colorado Casualty and the data for that policy alone satisfies the amount in controversy requirement. The Plaintiffs do not challenge the number of policies that Coulson asserts would be affected and do not argue that it is unreasonable for retroactive reformation of six large insurance companies’ policies to exceed $5,000,000.00. In fact, the Plaintiffs assert that Colorado Casualty is one of the smaller auto insurers in New Mexico and that it may be one of the smallest Defendants. See Motion at 14. A party seeking removal under CAFA need only establish the amount in controversy by a preponderance of the evidence “regardless of whether the complaint alleges an amount below the jurisdictional minimum.” Bell v. Hershey Co.,
3. CAFA’S Amount-in-Controversy Requirement is Met When the Court Examines the Costs to the Defendants of the Relief Sought.
When viewed from the perspective of costs to the Defendants, the Defendants also establish the amount in controversy by a preponderance of the evidence. The Senate Report establishes that the need to cease and desist from conduct will often “cost” a defendant in excess of $5,000,000.00. See S.Rep. No. 109-14 at 42^3,
The Plaintiffs did not dispute that the administrative costs of complying with their requested relief was appropriate for calculating the amount in controversy. See Tr. at 84:15-85:2 (Berardinelli). The Defendants assert that the administrative costs would be more than $493,358.00. See Notice of Removal ¶ 46, at 18 (citing Coulson Aff. ¶ 13, at 3; Schmidt Decl. ¶ 19, at 6; Mellino Aff. ¶ 10, at 3; Palazzolo Decl. ¶ 14, at 5). Colorado Casualty estimates that the lost premiums it will suffer amount to over $2,900,000.00. See Coulson Aff. ¶ 12, at 3. Coulson based her calculation on the number of policies within the putative class — 4,799—multiplied by the premium that Colorado Casualty would have charged for the increase in uninsured motorist coverage that the Plaintiffs seek. See Coulson Aff. ¶ 12, at 3. Schmidt estimates that 21st Century Insurance would lose in excess of $2,600,000.00 in lost premiums, if the Plaintiffs obtain the relief they seek. See Schmidt Decl. ¶ 13, at 3. She breaks down the average premium earned per policy for each of the 1,449 policies with no uninsured motorist coverage-calculating, for example, that a reformed policy increasing coverage to $25,000.00 uninsured motorist coverage would cost an average $242.13 in premiums — and determines that, in only one year, 21st Century Insurance would lose $938,729.74 in premiums. See Schmidt Decl. ¶ 14, at 4. Schmidt also discusses the difference in average premium per policy for the 6,404 policies with uninsured motorist coverage less than equal to the bodily injury coverage and provides a chart detailing the different adjustments that would need to be made in those policies. See Schmidt Decl. ¶ 15, at 4. She calculates that, in one year, 21st Century Insurance would lose $1,721,414.32 in premiums. See Schmidt Decl. ¶ 15, at 4-5. In total, 21st Century Insurance would lose $2,660,144.06 in premiums. Schmidt also estimates that 21st Century Insurance could become liable for $182,907.98 in new claims. See Schmidt Decl. ¶ 18, at 6. She calculated this figure by dividing the total indemnity paid on uninsured motorist claims from 2004 to 2011 ($2,444,405.11) with the number of New Mexico uninsured motorist policies (20,032) to obtain a $122.02 average amount paid per policy with some uninsured motorist coverage. See Schmidt Decl. ¶ 18, at 6. She then multiplied that figure by the 1,499 policies with no uninsured motorist coverage and determined that 21st Century Insurance would face at least $182,907.98 in potential claims. See Schmidt Decl. ¶ 18, at 6. Although they do not provide the same detailed calculations, employees of Travelers Insurance and Arnica Insurance also attested that their companies would lose premiums. Benjamin J. Mellino, Arnica Insurance’s Assistant Vice-President, swore that, if the policyholders in the putative class with uninsured motorist coverage less than liability limits had paid premiums for that coverage, Arnica Insurance would have received an additional $863,559.57 and $252,727.28 for those with no uninsured motorist coverage-a total of $1,126,286.85 in lost premiums. See Mellino Aff. ¶¶ 6-7, at 2-3. Jodi Ebersole, Travelers Insurance’s Vice President, Associate Group General Counsel, attests that there are thousands of policies where the policyholder purchased no uninsured motorist coverage or coverage less than liability limits. See Ebersole Aff. ¶ 5, at 2. She calculates that, if those policyholders who purchased coverage in 2010 had paid premiums for uninsured motorist coverage equal to their liability limits, they would have paid an additional $225,728.94. See Ebersole Aff. ¶ 7, at 3. Metropolitan Casualty identified 417 policies that had un
The Plaintiffs challenged these calculations as “entirely speculative,” but offered no caselaw, reasoning, or other calculations to support that statement. Tr. at 84:15-85:2 (Berardinelli). Although the Plaintiffs denied that the Defendants met the amount in controversy requirement at the hearing, they concede, in their Motion, that “the cost to the New Mexico auto insurance industry of complying with Jordan will certainly run well into the billions.” Motion at 14. The Plaintiffs offer no basis on which to challenge the calculations given, and offered no evidence to contradict the affidavits and declarations offered in support of removal. The Plaintiffs complained that the Defendants offered no statistics or information that would support a finding that the amount in controversy exceeds $5,000,000.00. See Tr. at 84:19-85:2 (Berardinelli). The calculations that Colorado Casualty and 21st Century Insurance offer are fairly detailed. and the lost premiums those two Defendants assert, alone, establish the an amount in controversy in excess of $5,000,000.00. The Defendants’ calculations establish that, when viewed from their prospective, the amount in controversy exceeds $5,000,000.00.
Because the Defendants have demonstrated by a preponderance of the evidence that the amount in controversy may in the aggregate exceed $5,000,000.00, it is incumbent on the Plaintiffs to demonstrate to a legal certainty that an amount less than $5,000,000.00 is at issue. See Woodmen of World Life Ins. Society v. Manganaro,
C. THE COURT WILL NOT DECLINE JURISDICTION UNDER THE LOCAL-CONTROVERSY EXCEPTION.
Congress created an exception to CAFA for those cases that “consist of primarily local, intrastate matters, which it characterized as the ‘Local Controversy Exception.’ ” Coffey v. Freeport McMoran Copper & Gold,
granting of declaratory and injunctive relief to ensure that these named Defendants adhere in Neio Mexico to the unique holding of the New Mexico Supreme Court in Jordan — which by definition will only apply to New Mexico [uninsured or underinsured motorist] policies and New Mexico policyholders— is a matter that uniquely affects the locality of New Mexico to the exclusion of all others.
Motion at 9 (emphasis original). The Plaintiffs contend that: (i) all class members are New Mexico residents; (ii) Desert Mountain is a New Mexico Corporation; (iii) the conduct involves uninsured motorist coverage in New Mexico; and (iv) they are aware of no similar actions being filed against the Defendants within the last three years. See Motion at 9. They argue that: (i) the premium disclosure requirements of Jordan v. Allstate Ins. Co. is the. most “substantial” element of that decision; and (ii) their request to enforce compliance with the premium disclosure ruling is the most “significant” relief sought against every Defendant. Reply at 5. The Plaintiffs assert that these facts establish that they seek significant relief from Desert Mountain. See Reply at 6. They contend that, because the same relief is sought against each defendant, they have sought significant relief against Desert Mountain. Reply at 6. The Defendants argue that only four of the eighty-two paragraphs in the Complaint are directed towards Desert Mountain, that the relief sought against it is not significant, and that its conduct does not form a significant basis of the claims asserted. See Notice of Removal ¶¶ 50-54, at 21-22.
The Plaintiffs bear the burden of establishing that a CAFA exception applies. See Evans v. Walter Indus., Inc.,
This case is not one where relief is sought jointly and severally against the Defendants, or where every potential plaintiff is entitled to recover from the local defendant. See Coffey v. Freeport McMoran Copper & Gold,
In Escoe v. State Farm Fire & Cas. Co., No. 07-1123,
The Tenth Circuit, in Coffey v. Freeport McMoran Copper & Gold, found that the district court had correctly interpreted the “significant relief’ provision of the local-controversy exception and affirmed the district court’s finding that it lacked jurisdiction under CAFA. See
Additionally, the case law suggests a putative class seeks “significant relief’ against a non-diverse defendant when the relief is a significant portion of the total relief sought by the class. Evans v. Walter Indus., Inc.,
[I]n a consumer fraud case alleging that an insurance company incorporated and based in another state misrepresented its policies, a local- agent of the company named as a defendant presumably would not fit this criteria. He or she would probably have had contact with only some of the purported class members and thus would not be a person from whom significant relief would be sought by the plaintiff class viewed as a whole. Obviously, from a relief standpoint, the real demand of the full class in terms of seeking significant relief would be on the insurance company itself.
S.Rep. No. 109-14 at 40, 2005 U.S.C.C.A.N. 3, 38,
With respect to subsection (bb), the Court finds that Desert Mountain is not a defendant whose conduct forms a significant basis for the conduct alleged in the Complaint. Again, the Court notes that: (i) very few paragraphs in the Complaint focus on Desert Mountain’s conduct; (ii) Desert Mountain is not an insurer and does not issue its own policies; and (in) Desert Mountain is only alleged to have sold policies for one insurer Defendant— Travelers Insurance. Relative to the other Defendants, Desert Mountain’s role appears to have been less significant; Desert Mountain relied on Travelers Insurance to supply the insurance policies. This conduct is much like the local defendant’s conduct in Opelousas General Hospital Authority v. FairPay Solutions, Inc., where the Fifth Circuit held that the plaintiff failed to meet the local-controversy exception’s requirements, because the plaintiffs’ claims against the local defendant rested on the allegation that the local
Because the Plaintiffs have failed to establish that Desert Mountain is a defendant from whom significant relief is sought and whose alleged conduct forms a significant basis for the claims asserted, the Court concludes that the local controversy exception does not apply. Accordingly, the Court will not decline to exercise jurisdiction or remand the case to state court under CAFA’s local-controversy exception.
II. THE COURT WILL NOT ABSTAIN FROM DECIDING THIS CASE.
The Court will not abstain or decline jurisdiction. The Rooker-Feldman doctrine does not apply in these circumstances, because there is no final state court judgment being challenged in federal court. The Court will not abstain under Brillhart v. Excess Insurance Co., because there is no pending state proceeding and the Plaintiffs have not established that the State Farm Fire and Cas. Co. v. Mhoon factors have been met. Finally, the Court will not abstain under Burford v. Sun Oil Co., because the Court’s exercise of jurisdiction will not have a disruptive effect on New Mexico’s efforts to establish a coherent insurance policy and will not force the Court to decide a difficult question of state law.
A. THE ROOKER-FELDMAN DOCTRINE DOES NOT APPLY.
The Plaintiffs argued that there can be no re-litigation of issues that are
“The Rooker-Feldman doctrine prevents the lower federal courts from exercising jurisdiction over cases brought by ‘state-court losers’ challenging ‘state-court judgments rendered before the district court proceedings commenced.’ ” Lance v. Dennis,
B. THE COURT WILL NOT ABSTAIN UNDER BRILLHART V. EXCESS INSURANCE CO.
The Plaintiffs argue that the Supreme Court has repeatedly characterized the Declaratory Judgment Act as “an enabling Act which confers a discretion on the courts rather than an absolute right upon the litigant.” Motion at 11 (quoting Pub. Serv. Comm’n v. Wycoff Co., Inc.,
Here, there is no state proceeding to which the Court should defer, and the Tenth Circuit has held that abstention, under Brillhart v. Excess Insurance Co., is an abuse of discretion when there is no pending state proceeding. See United States v. City of Las Cruces,
[1] whether a declaratory action would settle the controversy; [2] whether it would serve a useful purpose in clarifying the legal relations at issue; [3] whether the declaratory remedy is being used merely for the purpose of “procedural fencing” or “to provide an arena for a race to res judicata”; [4] whether use of a declaratory action would increase friction between our federal and state courts and improperly encroach upon state jurisdiction; and [5] whetherthere is an alternative remedy which is better or more effective.
St. Paul Fire and Marine Ins. Co. v. Runyon,
C. THE COURT WILL NOT ABSTAIN UNDER BURFORD V. SUN OIL CO.
The Plaintiffs did not raise abstention under Burford v. Sun Oil Co. until the hearing on March 7, 2012. The Plaintiffs stated that this is the rare case where the Court should remand to the state court, because the Plaintiffs are attempting to enforce the Supreme Court of New Mexico’s universal mandate regulating automobile insurance. See Tr. at 9:9-16 (Berardinelli). They pointed to Quackenbush v. Allstate Ins. Co., where the Supreme Court held that abstention under Burford v. Sun Oil Co. allows a federal court to abstain if it presents difficult questions of state law bearing on policy problems of substantial public import. See Tr. at 10:6-17 (Berardinelli). The Plaintiffs argued that the policies announced in Jordan v. Allstate Ins. Co. represent regulations of substantial public concern and that enforcement should take place in state court, because the Supreme Court of New Mexico prescribed certain procedures in the manner of a regulation. See Tr. at 10:17-11:6 (Berardinelli). They emphasized that abstention under Burford v. Sun Oil Co. stems from the discretion courts of equity traditionally enjoy and principles of federalism and comity. See Tr. at 11:7-19 (Berardinelli). The Plaintiffs asserted that the state’s interests in this case are paramount and that the dispute would best be adjudicated in a state forum. See Tr. at 11:20-12:6 (Berardinelli). The Defendants asserted that none of the Plaintiffs’ arguments regarding abstention under Burford v. Sun Oil Co. were properly briefed. See Tr. at 55:16-56:6 (Strong). The Defendants then argued that this case is not a complicated one that calls for abstention under Burford v. Sun Oil Co., because it is an enforcement action and the Plaintiffs are taking the position that it is not a difficult question of state law. See Tr. at 56:7-24 (Strong).
In Burford v. Sun Oil Co., the Supreme Court held that the federal proceedings should have been dismissed, because the state had established its own review system for the Texas oil permits and a federal court ruling would have an impermissibly disruptive affect on state policy for management of the oil fields. See
Abstention under Burford v. Sun Oil Co. does not depend on the existence of a pending state proceeding. See Stoe v. Flaherty,
When analyzing abstention under Burford v. Sun Oil Co., the policies behind the McCarran-Ferguson Act again become relevant. Where states have responded to the McCarran-Ferguson Act “by formulating complex and specialized administrative and judicial schemes to regulate insurers ... it becomes increasingly possible that the exercise by a federal court of its jurisdiction will prove to be ‘disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern.’ ” Grimes v. Crown Life Ins. Co.,
To justify declining jurisdiction under Burford v. Sun Oil Co., there must be a difficult question of state law whose importance transcends the case at bar or federal review of the question would be disruptive of state efforts to establish a coherent policy. See New Orleans Pub. Serv., Inc. v. Council of City of New Orleans,
The next question the Court must answer is whether the “exercise of federal review of the question in a case and in similar cases would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern.” New Orleans Pub. Serv., Inc. v. Council of City of New Orleans,
Abstention under Burford v. Sun Oil Co. should be exercised “only rarely.” Quackenbush v. Allstate Ins. Co.,
Even if there was a complex administrative process which might necessitate abstention under Burford v. Sun Oil Co., the Supreme Court has held that Burford v. Sun Oil Co. “does not require abstention whenever there exists such a [complex state administrative] process, or even in all eases where there is a ‘potential for conflict’ with the state regulatory law or policy.” New Orleans Pub. Serv., Inc. v. Council of City of New Orleans,
Because the Court has jurisdiction under CAFA and there is no sound basis on which to decline jurisdiction, the Court will deny the Motion.
IT IS ORDERED that the Plaintiffs’ Memorandum Motion to Remand to State Court for Lack of Federal Jurisdiction, filed June 24, 2011 (Doc. 55), is denied.
Notes
. Although the Complaint does not define the term "MFRA,” the Court is aware that the Mandatory Financial Responsibility Act, N.M.S.A.1978, §§ 66-5-201 to -239 is frequently abbreviated as "MFRA.” Whiting v. Hogan, No. 11-671,
. The Court notes that 21st Century Insurance was dismissed from the case on November 29, 2011. See Order Regarding Dismissal of 21st Century, filed November 29, 2011 (Doc. 89).
. The Court’s citations to the transcript of the hearing refer to the court reporter's original, unedited version. Any final transcript may contain slightly different page and/or line numbers.
. A federal district court should give a "sound respect" to comprehensive state statutory schemes, under Burford v. Sun Oil Co., and allow state administrative systems to deter
. The Rooker-Feldman doctrine derives from two Supreme Court of the United States cases, Rooker v. Fidelity Trust Co.,
. The Court relies upon several cases discussing the amount-in-controversy requirement in the context of a traditional diversity jurisdiction analysis. The Court found no cases suggesting that these cases would be inapplicable to CAFA, but found several cases, from other circuits and from within the Tenth Circuit, where a federal court cited a traditional diversity case to determine whether CAFA's amount-in-controversy requirement was met. See Rolwing v. Nestle Holdings, Inc.,
. The Tenth Circuit certified Federated Serv. Ins. Co. v. Martinez,
. The Tenth Circuit certified, in Progressive Northwestern Ins. Co. v. Weed Warrior Services,
. Additionally, the Court has held, in other contexts, that New Mexico cannot limit claims to state courts. In Clayton v. Pioneer Bank, No. 07-680,
. At the hearing, the Defendants argued that the Plaintiffs concede that the Defendants have met the CAFA’s amount-in-controversy requirement on page 14 of the Motion. See Tr. at 74:2-6 (Spano). In the Motion, the Plaintiffs recite the contents of Coulson's affidavit, and note that she calculates that the increase in uninsured motorist coverage could run into the billions and that Colorado Casualty could lose $3,000,000.00 in premiums. See Motion at 14. The Plaintiffs also state that the cost, to the New Mexico automobile insurance industry, of complying with Jordan v. Allstate Ins. Co. "will certainly run well into the billions." Motion at 14. The Court does not agree that the Plaintiffs concede that the amount-in-controversy is satisfied; rather, the Plaintiffs are reciting facts from the Notice of Removal and extrapolating that the cost to the entire insurance industry will be high. The Plaintiffs do not admit that these costs are permissible measurements of the amount-in-controversy or that the Defendants’ calculations are correct. Furthermore, because the amount-in-controversy goes to the Court’s jurisdiction, the Court has an independent obligation to analyze the amount-in-controversy requirement. See City of Hugo v. Nichols (Two Cases),
. Under New Mexico law, “collateral estoppel, also called issue preclusion, prevents a party from re-litigating ‘ultimate facts or issues actually and necessarily decided in a prior suit,’ ” and establishes that, for collateral estoppel to apply, four elements must be met: "(1) the parties in the current action were the same or in privity with the parties in the prior action, (2) the subject matter of the two actions in different, (3) the ultimate fact or issue was actually litigated, and (4) the issue was necessarily determined.” Cordova v. N.M. Taxation and Revenue Dep't, No. OS-681,
. Because the Court determines that it has jurisdiction under CAFA, it need not conduct a traditional diversity jurisdiction analysis and determine whether Desert Mountain was fraudulently joined or misjoined.
. The Court notes that several Defendants have challenged the Plaintiffs’ standing to assert their claims. See 21st Century Answer ¶ 85, at 13; Metropolitan Casualty Answer at 12-13; Pacific Indemnity Answer at 16-17. The Court has previously held that, under Tenth Circuit precedent, it should remand a case when lack of standing divests it of subject-matter jurisdiction over a case removed to federal court. See Hill v. Vanderbilt Capital Advisors, LLC,