Defense Claims of $75,000 Controversy for Diversity Jurisdiction and $5 Million Controversy for Removal Jurisdiction under Class Action Fairness Act of 2005 (CAFA) were Speculative Warranting Remand of Class Action to State Court
Plaintiff filed a putative class action against Esurance Insurance in Illinois state court alleging bad faith in the processing of insurance claims. Defense attorneys removed the class action to federal court arguing diversity jurisdiction and removal jurisdiction under the Class Action Fairness Act of 2005 (CAFA). Atteberry v. Esurance Ins. Services, Inc., 473 F.Supp.2d 876, 877 (N.D. Ill. 2007). Faced with the issue of whether the class action should be remanded to state court, the defense conceded that the class action was not subject to removal at the time it filed the notice of removal, but argued that plaintiff’s subsequent amendment of the class action complaint “operated to trigger potential removability.” Id. The district court disagreed and remanded the class action to state court.
The thrust of the defense argument was its interpretation of state law permitting a statutory award of up to $60,000 plus attorney fees for the bad faith handling of an insurance claim. Atteberry, at 877. The district court found the argument wanting in two respects. First, the federal court held that the defense failed to establish that the maximum statutory penalty would be awarded, characterizing the defense evidence as a “hypothetical valuation,” id. Second, the defense improperly assumed attorney fees in excess of $15,000 because “only fees already incurred at the time that federal jurisdiction is invoked, not anticipated fees, may be counted toward the requisite amount in controversy.” Id. (citing Gardynski-Leschuck v. Ford Motor Co., 142 F.3d 955, 958 (7th Cir. 1998)). In the words of the Seventh Circuit, “jurisdiction depends on the state of affairs when the case begins; what happens later is irrelevant.” Gardynski-Leschuck, 142 F.3d at 958.
Turning to the question of removal jurisdiction under CAFA, the district court held that the defense “has indulged [in] nothing beyond unsupported speculation as to the size of the potential class and hence as to the prospect . . . that the $5 million jurisdictional minimum under CAFA is at issue.” Id., at 878. Accordingly, the federal court remanded the lawsuit to the Illinois state court.
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