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Swiech v. Fred Loya Insurance Co.

United States District Court, D. New Mexico

August 31, 2017

THOMAS J. SWIECH, Plaintiff,


         THIS MATTER comes before the Court on the Plaintiff's Motion to Remand, filed October 6, 2016 (Doc. 13)(“Motion”). The Court held a hearing on August 23, 2017. The primary issue is whether Defendant Fred Loya Insurance Company (“Fred Loya”) has met its burden in establishing, by a preponderance of the evidence, jurisdictional facts that make it plausible that the amount in controversy satisfies the jurisdictional threshold of $75, 000.00 for the Court's exercise of diversity jurisdiction. Because the Court concludes that Fred Loya has not met its burden, the Court will grant the Motion and remand this case to the First Judicial District Court, County of Santa Fe, State of New Mexico.


         The Court takes its recitation of the facts from Plaintiff Thomas J. Swiech's Complaint (filed in the First Judicial District Court, County of Santa Fe, State of New Mexico, on August 2, 2016), filed September 9, 2016 (Doc. 1-1)(“Complaint”), and Fred Loya's Notice of Removal, filed September 9, 2016 (Doc. 1)(“Removal”). The Court provides these facts for the purposes of establishing the background facts leading to this case, and does not adopt them as the truth for the purposes of this Memorandum Opinion and Order regarding the Motion. The Court recognizes the facts are largely Swiech's version.

         On June 21, 2013, Albuquerque Police Department officers responded to the Mission Hills Apartment in Albuquerque, New Mexico, following a shoplifting call. See Complaint ¶ 5, at 1. Apparently, a man named Brandon Sandoval -- an uninsured motorist -- fled from the officers “at a high rate of speed through an apartment complex parking lot and crashed into Plaintiff's vehicle.” Complaint ¶ 6, at 2. Officers tracked Sandoval to Swiech's vehicle, a Chevrolet Camaro, at which point Sandoval again fled the scene. See Complaint ¶¶ 7-11, at 2. In fleeing from the officers, Sandoval broke into and drove Swiech's Camaro at a high rate of speed to evade the officers. See Complaint ¶¶ 17-20, at 2-3. Sandoval crashed the Camaro into one of the officer's parked Chevrolet Suburbans, causing further damage to Swiech's Camaro. See Complaint ¶¶ 22-23, at 3.

         Sandoval is an uninsured driver, but Swiech holds an insurance policy with Fred Loya which provided “coverage in the amount of 25, 000.00 per person, $50, 000.00 per occurrence, and $10, 000.00 for property damage.” Complaint ¶¶ 30-32, at 4. Swiech “contracted and paid Defendant Loya for uninsured motorist coverage, ” Complaint ¶ 33, at 4, and made a “claim with Defendant Loya for vehicle property damage and punitive damages based on the damage to Plaintiff's vehicle, ” Complaint ¶ 37, at 4. Fred Loya first paid Swiech $3, 566.24 for the property damage, but did not pay punitive damages, causing Swiech to file suit in New Mexico state court against Fred Loya. See Complaint ¶¶ 38-42, at 4. “[T]he trial court issued a Scheduling Order requiring the parties to mediate their claims, ” and, at the mediation, “Loya made a single settlement offer . . . with a pre-drafted letter.” Complaint ¶¶ 43-45, at 4. Swiech's case proceeded to trial, and the trial court “made the following findings: . . . Sandoval's conduct was willful, wanton, malicious, reckless and oppressive[;] Sandoval was entirely responsible for the damages to Plaintiff's vehicle[;] Sandoval's conduct justifies a punitive damages award[; and] Loya acted unreasonably in Plaintiff's first party claim [and] breached its duty of good faith and fair dealing.” Complaint ¶ 46, at 4-5. “Plaintiff obtained a judgment in the district court concerning the underlying cause of action for damages for $32, 000 ($20, 000 recovery of punitive damages and $12, 000 in attorney's fees).” Removal ¶ 3, at 2. Swiech alleges that Fred Loya nonetheless disputed that “punitive damages were warranted, ” Complaint ¶ 65, at 6, and that, although Fred Loya then additionally paid Swiech “the undisputed remaining UM/PD limit in the amount of $6, 433.76, ” the payment was not for the purposes of satisfying punitive damages. Complaint ¶ 68, at 6. “Defendant Loya agreed that if punitive damages were awarded to Plaintiff, Defendant Loya would not be entitled to a credit because it did not pay for punitive damages.” Complaint ¶ 69, at 6. Ultimately, Fred Loya sued Swiech to “reduce Plaintiff's claim for punitive damages, ” Complaint ¶ 70, at 7, but lost, and that state trial court “[e]ntered its judgment that Fred Loya Insurance Company shall forthwith pay Swiech the amount of $20, 000 in punitive damages over and above the $10, 000 amount previously paid for such property damage-based compensatory damages, together with costs and such other further relief as may be warranted under the policy or law, ” Complaint ¶ 77, at 7. That award “beat Defendant Loya's best pretrial offer by eight times.” Complaint ¶ 79, at 7. The state trial court also “stated on the record that the conduct of Fred Loya failing to act in good faith with regard to the settlement conference certainly exists.” Complaint ¶ 83, at 8 (internal quotation marks omitted).


         Swiech filed the Complaint in New Mexico state court, alleging three counts against Fred Loya for: (i) Breach of Contract, Count I; (ii) Insurance Bad Faith, Count II; and (iii) violation of the Unfair Insurance Practices Act, N.M. Stat. Ann. § 59A-16-20 (“UIPA”), Count III. See Complaint ¶¶ 85-102, at 8-10. For relief, Swiech requests “judgment against Defendant Loya, including both compensatory and punitive damages, together with all available interest at the maximum legal rate; . . . costs incurred in pursuit of this action including attorney's fees[; and] any and all relief to which the Court deems appropriate.” Complaint at 10. On August 2, 2016, the same day that Swiech filed the Complaint in state court, Swiech offered to settle the claims against Fred Loya for $50, 000.00. See Email from Matthew Zamora to Elizabeth Hill (dated August 2, 2016), filed October 6, 2016 (Doc. 13-1)(“First Demand”). Fred Loya then removed the case on September 9, 2016. See Notice of Removal, filed September 9, 2016 (Doc. 1)(“Removal”). As grounds, Fred Loya asserts diversity of citizenship, and

that the matter in controversy exceeds the sum of $75, 000.00, exclusive of interest and costs, based on Plaintiff's allegations and alleged damages. Defendant need only include a “plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” See Dart Cherokee Basin Op. Co., LLC v. Owens, 135 S.Ct. 547, 554 (2014). Plaintiff seeks punitive damages against Defendant due to allegations of bad faith insurance practices and unfair trade practices and seeks attorney's fees as a matter of right under a claim of breach of contract. See Miera v. Dairyland Ins. Co., 143 F.3d 1337, 1340 (10th Cir. 1998). Plaintiff obtained a judgment in the district court concerning the underlying cause of action for damages for $32, 000 ($20, 000 recovery of punitive damages and $12, 000 in attorney's fees). Plaintiff alleges wanton, willful and bad faith acts on the part of the Defendant and seeks punitive damages pursuant to the insurance bad faith, breach of contract and unfair practices. Consequently, it is plausible, and likely, that Plaintiff's alleged damages exceed $75, 000.

Removal ¶ 3, at 2. Swiech now moves to remand the case to state court, because Fred Loya has not met its burden in establishing the requisite amount in controversy for the Court to exercise diversity jurisdiction. See Motion at 1.

         1. The Motion.

         Swiech seeks remand, because, “[b]efore filing suit, Plaintiff demanded an amount in controversy well below the jurisdictional limits of this Court.” Motion at 1. Swiech contends that the “amount in controversy requirement must . . . be satisfied by preponderance of the evidence, ” and that the “Defendants seeking removal must include a ‘plausible allegation that the amount in controversy exceeds the jurisdictional threshold.'” Motion at 3 (quoting Dart Cherokee Basin Op. Co., LLC v. Owens, 135 S.Ct. at 554). Swiech also provides that, where a plaintiff challenges a defendant's allegations regarding the amount in controversy upon removal, the defendants must “provide evidence establishing the amount.” Motion at 3 (internal quotation marks and alterations omitted). In this case, Swiech thus maintains that Fred Loya has “not shown all of the prerequisites” for removal, because, first, “Loya, in its Notice of Removal, has attached no relevant or meritorious evidence whatsoever, in support of its amount in controversy theory [and] Loya fails to advise the Court that Plaintiff's settlement demand was well below the jurisdictional requirements of this Court.” Motion at 4. Swiech next argues:

Loya also fails to discuss in detail the claim on which this bad faith case is based. This bad faith case is rooted in a punitive damage claim Loya refused to pay. A reckless tortfeasor hit and damaged Plaintiff's car. Plaintiff was not inside the car, and Loya did pay for the vehicle's value. Loya failed to pay Plaintiff punitive damages to which Plaintiff is entitled. The $20, 000.00 that Loya has not paid are solely for punitive damages for the tortfeasor's misconduct.

         Motion at 4. Accordingly, Swiech explains:

Unlike many bad faith cases, Plaintiff will not be able to offer evidence that the underlying failure to pay caused a financial hardship. There is no failure to pay medical bills, nor are there lost wages, either of which could cause a hardship. These facts diminish the likely jury award for bad faith. Plaintiff considered this in making his settlement demand. Defendant does not set forth damage model for compensatory or punitive damages or attorney fees. All Defendant has done is make its implausible characterizations of Plaintiff s demand. See Powell v. COBE Laboratories, Inc., 208 F.3d 227, 2000 U.S. App. Lexis 10794 (10th Cir. 2000)(stating that the arguments of counsel are not evidence).

         Motion at 4. Swiech then asserts that, after he had made a settlement demand below the jurisdictional amount, he also offered to limit damages to a number below the jurisdictional amount. See Motion at 4. Swiech then concludes his argument for removal by stating: “Loya has not met its burden in proving by preponderance of the evidence that the amount in controversy sought by Plaintiffs, or what a judgment would be worth, exceeds $75, 000.” Motion at 5. Swiech also requests attorney's fees, because “the Court may award attorney's fees to the prevailing party ‘where the removing party lacked any objectively reasonable basis for seeking removal.'” Motion at 5 (quoting Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005)).

         2. The Response.

         Fred Loya responded to the Motion with its Response and Brief in Opposition to Motion to Remand, filed October 20, 2016 (Doc. 17)(“Response”). Fred Loya argues:

While true that demands do provide some evidence of the amount in controversy, federal courts are not permitted to look at demands filed after removal in a self-serving manner. Swiech attempted to file a post-removal “offer of settlement” --a procedure not recognized in federal court if filed by a Plaintiff -- to urge this Court to remand. Suddenly, Swiech dropped his prior pre-suit demand for damages from $50, 000 to a mere $15, 000.

         Response at 1. Fred Loya thus first asks the Court not to give the post-removal offer of $15, 000.00 any weight. See Response at 1. Fred Loya then “advances evidence to meet its burden in showing that the amount in controversy may exceed the jurisdictional limits.” Response at 2 (citing Salazar v. GEICO Ins. Co., No., 2010 WL 2292930 (D.N.M. 2010 (Browning, J.)).

         According to Fred Loya, Swiech “demanded $50, 000 to avoid the filing of the complaint, ” but -- after removal -- “filed an ‘offer of settlement' [of] a mere 30 percent of the demand lodged by the Plaintiff immediately prior to the filing of the bad faith lawsuit.” Response at 3. Fred Loya asserts that “[w]hile true that pre-suit demands are some evidence of the amount in controversy, the Court must look to the evidence available at the time of the removal to determine whether the amount in controversy prong is met.” Response at 3. Fred Loya thus specifies its distaste with the post-removal offer of settlement and implores the Court not to consider such post-removal offers in its analysis. See Response at 3-4. Fred Loya, then, argues about what its estimation is for the actual amount in controversy. See Response at 4. Regarding the Complaint, Fred Loya explains that “Swiech did not provide an amount in controversy for the Court's review within his complaint. Nonetheless, Swiech alleged that he was entitled to new compensatory damages, as well as punitive damages.” Response at 5. This allegation is important, Fred Loya asserts, because

[t]he amounts obtained and the amounts demanded in the underlying vehicle accident case are at least instructive as to Swiech's claims here because the amount in controversy is not readily apparent from the complaint. In Swiech's proposed findings of fact and conclusions of law in the underlying case, Swiech proposed a judgment in the amount of $40, 000.00, arguing that the court should award a 4 to 1 ratio of his property damage policy limits of $10, 000 that had already been tendered ..... Swiech obtained a judgment in the amount of $20, 000.00 in punitive damages to punish the tortfeasor (an uninsured motorist). Consequently, Swiech obtained a total of $30, 000 from the policy limits in the underlying case. He did not obtain a remaining amount of $20, 000 as argued. Both of these amounts are instructive in determining the remaining amount of compensatory damages that Swiech is seeking, as well as any punitive damages, above and beyond those compensatory amounts.

Response at 5.

         Fred Loya then argues that, because “punitive damages and attorney's fees must be included in the calculation of the amount in controversy[, a] combination of different theories based on the complaint can support removal.” Response at 5. Fred Loya explains: “Here, Swiech obtained the following prior to this suit: (1) $10, 000 paid out of the property damage limits; (2) $20, 000 ordered to be paid in punitive damages due to the tortfeasor's acts; and (3) $12, 000 in attorney's fees.” Response at 5-6. Now, Fred Loya contends, Swiech first “apparently seeks additional compensatory damages, ” which he sought in the underlying case in the amount of $40, 000.00. Response at 6. Fred Loya argues that, because Swiech has “obtained $20, 000 of the proposed $40, 000.00 in punitive damages against the tortfeasor, ” “it is reasonable to conclude that Swiech still seeks the remaining $20, 000.00 in compensatory damages not awarded in the underlying case. Altogether, Swiech obtained $30, 000 from his policy's limits.” Response at 6. Fred Loya next contends that, second, “Swiech seeks punitive damages against Loya due to allegations of bad faith insurance practices and violations of the Unfair Insurance Practices Act of New Mexico, ” because

specifically Swiech has alleged extensive facts that support Swiech's claims that Loya [knowingly] did not attempt in good faith to effectuate a prompt, fair and equitable settlement, failed to properly investigate the coverage available, failed to promptly provide a reasonable investigation, failed to act in good faith, acted willfully, recklessly and without regard for the rights of the Plaintiff.

Response at 6. Fred Loya asserts that, under allegations such as those, there is potential for recovery of punitive damages, as well as UIPA “statutorily-available treble damages.” Response at 6. In that regard, Fred Loya maintains:

While true that a plaintiff may not recover both treble damages and punitive damages, a plaintiff may pursue both remedies until judgment, when the plaintiff must elect the remedy. . . . Therefore, if a plaintiff obtains treble damages, then the plaintiff is essentially guaranteed three times the compensatory damages by statute. On the other hand, if the plaintiff shows bad faith, then punitive damages may exceed three times the amount of compensatory damages and have been found to be constitutional, even in instances where punitive damages are ten times the compensatory damages.

Response at 7. Drilling down into the potential punitive damages recovery, Fred Loya explains that “many courts, both state and federal, have repeatedly held that a ratio of 3 to 1 is common place in punitive awards, ” and that, “[e]ven if the Court only evaluates as to the policy recovery of $30, 000, punitive damages at a common multiplier of 3 to 1 would exceed the jurisdictional limits alone.” Response at 7, 9. Next, drilling down into Swiech's potential recovery of attorney's fees, Fred Loya explains: “In the underlying cause of action, the Plaintiff[] submitted a comprehensive attorney's fees bill that provided time entries and totals of fees, amounting to $17, 956.30.” Response at 8. Accordingly, Fred Loya presents the following scenarios of amounts in controversy:

1. Swiech urged the underlying district court to award his alleged damages of $40, 000.00, in addition to the already received $10, 000.00 to reach a total of $50, 000 in payment as a result of the tortfeasor's conduct in the car accident.
3. Swiech obtained a judgment of $20, 000.00 in punitive damages (for the tortfeasor's conduct) and $12, 000.00 in attorney's fees.
4. By Swiech's own bad faith insurance complaint, he now seeks both compensatory and punitive damages, as well as attorney's fees, as a matter of right. . . .
5. In comparing Swiech's prior and present sought remedies, we can determine the following:
• Swiech obtained a total of $30, 000.00 from the policy limits. . . . If this amount is utilized as the multiplier (common 3 to 1 ratio) to reach the punitive damages amounts, then the amount in controversy far exceeds the jurisdictional minimum at $90, 000, plus attorney's fees.
• Swiech also may claim entitlement to the remaining alleged damages not previously obtained in the lower court, but sought of $20, 000.00. . . . The punitive damages resulting from a new recovery of $20, 000.00 at the suggested multiplier of Swiech of 3 to 1 would add punitive damages of $60, 000.00.
• Based on Swiech's own counsel's attorney's fees statement and affidavit, the attorney's fees amount of $17, 956.30 is reasonable to be expected in this lawsuit. . . . It is likely the attorney's ...

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