UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
November 28, 2012
MICHAEL SQUILLANTE, PLAINTIFF,
CIGNA CORPORATION, LIFE INSURANCE COMPANY OF NORTH AMERICA, STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY, STATE FARM FIRE AND CASUALTY COMPANY, STATE FARM GENERAL INSURANCE COMPANY, DEFENDANTS.
The opinion of the court was delivered by: Shira A. Scheindlin, U.S.D.J.
OPINION AND ORDER
Michael Squillante commenced this action in the Supreme Court of New York County, New York, against Cigna Corporation ("Cigna"); Life Insurance Company of North America ("LINA"); and State Farm Mutual Automobile Insurance Company, State Farm Life and Accident Assurance Company, State Farm Fire and Casualty Company, and State Farm General Insurance Company (collectively "State Farm"). Squillante alleges four causes of action: (1) breach of contract against Cigna and LINA; (2) deceptive business practices under New York General Business Law ("NYGBL") Section 349 against Cigna and LINA; (3) declaratory judgment against Cigna and LINA; and (4) breach of contract against State Farm. Defendant LINA timely removed this action to this Court based on diversity of citizenship. Presently pending before the Court is Squillante's motion to remand. For the reasons that follow, the motion is granted.
Michael Squillante is a citizen of
New York who worked as an
independent contractor for State Farm prior to becoming
disabled.*fn2 State Farm is a group of Illinois
corporations with principal places of business in Illinois.*fn3
Cigna is a Delaware corporation of which LINA, another
Delaware corporation, is a subsidiary.*fn4 LINA issued
the Group Long Term Disability Policy, Policy Number LK6903 (the
"Policy"), effective January 1, 1999, to State Farm, allegedly for
the benefit of State Farm's independent contractors.*fn5
Subject to a 180-day waiting period, the Policy provides for the
payment of up to one thousand dollars per month in the event that a
covered individual becomes disabled. Subject to another 180-day
waiting period, the Policy also provides for the payment of up to
fourteen thousand dollars per month if the covered individual's State
Farm Agent's Agreement is terminated at any time prior to two years
and 180 days of the date of disability.*fn6
Squillante allegedly became disabled on April 2, 2010, when he fell off a ladder and injured his back.*fn7 He then timely filed a claim under the Policy with LINA, which investigated his claim.*fn8 Ultimately, Cigna and LINA denied his long-term disability claim based on the terms of the Policy.*fn9 As a result, Squillante "seeks monetary damages in an amount to be determined by the trier of fact after trial, but not less than . . . $1,000 per month for each month from September 29, 2010," as well as interest and costs.*fn10
In the alternative, Squillante seeks the same amount from State Farm, on the theory that he was an intended third party beneficiary of the Policy.*fn11 As another alternative, Squillante seeks the same amount, plus attorneys' fees, on the theory that each refusal to pay his disability claim was an unfair or deceptive trade practice in violation of NYGBL § 349.*fn12
Finally, Squillante seeks a declaratory judgment that: (1) he is "disabled" under the Policy; (2) Cigna and LINA are obligated to make payments under the Policy for as long as Squillante remains disabled; and (3) Squillante may seek another declaratory judgment should it be necessary.*fn13
By a Notice of Removal dated August 6, 2012, LINA removed the action
to this Court under 28 U.S.C. § 1441 on the basis of diversity of
citizenship pursuant to 28 U.S.C. § 1332 ("section 1332").*fn14
The Notice of Removal alleges that "[c]ombining all of
[Squillante]'s claims, the amount in controversy is in
excess of $75,000."*fn15 LINA argues that this
assertion is justified because: (1) the value of future, unaccrued
benefits under the Policy exceeds seventy-five thousand dollars; and
(2) the benefits accrued under the Policy, combined with Squillante's
possible recovery under NYGBL § 349, exceed seventy-five thousand
III. STANDARD OF REVIEW
A. Federal Removal Jurisdiction
Any civil action brought in state court may be removed to federal court if the federal court could exercise jurisdiction over the action.*fn17 A federal district court may exercise jurisdiction only if so authorized by the Constitution and by statute.*fn18 Under section 1332, district courts have original jurisdiction over "all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . . citizens of different states . . . ."*fn19 The "existence of federal subject matter jurisdiction over an action removed from state court to federal court is normally to be determined as of the time of removal . . . ."*fn20
"On a motion to remand, the party seeking removal from state court bears the burden of establishing that federal jurisdiction is proper."*fn21 Due to concerns of comity and federalism, the removal statute is generally strictly construed against the party seeking removal.*fn22 Moreover, the party asserting federal jurisdiction bears the burden of proving that federal jurisdiction exists.*fn23
Generally the "sum demanded in good faith in the initial pleading" is deemed to be the amount in controversy.*fn24 However, when the initial pleading seeks either non-monetary relief, or monetary relief in a circumstance where the state's pleading rules "either [do] not permit demand for a specific sum or permit recovery of damages in excess of the amount demanded[,]"*fn25 the proponent of federal jurisdiction must prove that the amount in controversy exceeds the jurisdictional amount by a preponderance of the evidence.*fn26 Proof of such may be drawn from the initial pleading,*fn27 or else "an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable . . . ."*fn28
C. Fee Shifting Under the Removal Statute
Section 1447(c) of Title 28 of the United States Code ("section 1447(c)") states that "[a]n order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." Ordinarily, "'attorney's fees should not be awarded when the removing party has an objectively reasonable basis for removal,'"*fn29 measured at the time of removal."A federal district court retains jurisdiction to decide a motion for fees and costs under [section] 1447(c) after it has remanded a case to state court."*fn30
D. Disability Benefits Under New York Law
"In actions seeking declaratory or injunctive relief, it is well established that the amount in controversy is measured by the value of the object of the litigation."*fn31 However, in cases where the claim to relief is based on the denial of a disability benefits claim, "only the withheld benefits that have accrued up to the date of the commencement of the suit can be relied upon to satisfy the amount in controversy requirement."*fn32 This is so because, under New York law, "it is well-established that a plaintiff cannot recover anticipatory breach benefits under a disability insurance policy."*fn33
This rule is subject to the "narrow exception" that future benefits are considered only "where the insurer has repudiated the entire policy[,]"*fn34 not when it merely disclaims coverage under the policy.*fn35 Thus, for both breach of contract actions to recover disability benefits and declaratory judgment actions seeking to establish a right to recover allegedly past-due disability benefits, the amount in controversy is equal to the amount in arrears at the time the action is commenced.
E. Deceptive Trade Practices Under New York Law
Section 349(a) of the NYGBL makes unlawful "[d]eceptive acts or practices in the conduct of any business, trade or commerce . . . ." In addition to granting a right of action to the Attorney General to enjoin and seek damages for such practices, the statute creates a private right of action for those injured by violations of the statue. The elements of a deceptive trade practices action are: "'(1) the defendant's challenged acts or practices are directed at consumers, (2) the acts or practices are misleading in a material way, and (3) the plaintiff sustains injury as a result.'"*fn36 Section 349(h) permits a plaintiff "to recover his actual damages or fifty dollars, whichever is greater . . . ."*fn37 Upon a finding of a wilful or knowing violation of the statute, a court may treble plaintiff's actual damages, up to one thousand dollars.*fn38 The statute further provides that, in such private actions, the court in its discretion may provide for reasonable attorneys' fees.*fn39
A. Unaccrued Benefits Under the Policy
Squillante argues that the amount in controversy does not exceed seventy-five thousand dollars because, at the time this action commenced, "LINA owed him a maximum of 20 months of arrears totaling $20,000."*fn40 LINA does not dispute that, at all relevant periods, the accrued benefits under the Policy were less than seventy-five thousand dollars. Instead LINA argues that, reduced to present value, the total value of the Policy is over the jurisdictional threshold.*fn41
Alternatively, LINA argues that, "at the monthly rate of $12,844, it would only take several months of benefits for [Squillante] to reach $75,000 in damages, which is likely to be within the pendency of this action . . . ."*fn42
Neither of LINA's arguments is persuasive. Under New York law, an
action to recover disability benefits implicates only those benefits
that have accrued prior to the commencement of the action. This rule
is subject to the narrow exception that, in cases of anticipatory
breach, the total value of the policy is implicated. "Repudiation
occurs when the insurer completely abrogates any
obligation [ever] to make monthly disability payments[,]"*fn43
even in the face of overwhelming evidence of disability.
Nothing before this Court indicates that this case fits this exception. Instead, it appears that rather than completely repudiate the Policy, LINA investigated Squillante's claim and denied it pursuant to the terms of the Policy.*fn44 Consequently, it is not proper to consider unaccrued benefits under the Policy for the purposes of determining the amount in controversy.*fn45
B. Squillante's Possible Recovery Under NYGBL § 349
LINA's argument that the jurisdictional threshold may be reached by aggregating Squillante's unfair and deceptive trade practices claim with his other claims fares no better. As an initial matter, it is likely that the deceptive trade practices claim will be dismissed because it does not concern acts or practices directed at consumers.*fn46
Even assuming that Squillante's deceptive practices claim is viable, the amount in controversy is still not met. NYGBL § 349(h) provides for the award of actual damages (or fifty dollars, whichever is greater), treble damages up to one thousand dollars, and, at the court's discretion, reasonable attorneys' fees. It is only appropriate to aggregate the treble damages and the attorneys' fees with Squillante's breach of contract claim.*fn47
At the commencement of the action, Squillante was owed a maximum of twenty thousand dollars.*fn48 Even granting LINA the one thousand dollars in treble damages, it is LINA's burden to prove, by a preponderance of the evidence, that the attorneys' fees awarded under section 349(h) will be over fifty-four thousand dollars (that is, greater than seventy-five thousand dollars less twenty-one thousand dollars). LINA has not met this burden. The grant of attorneys' fees under section 349(h) is discretionary, and the size of the possible fee award is completely speculative at this time.
Squillante does not seek punitive damages, and the possible award of costs does not affect this analysis. Accordingly, the motion to remand is granted.
C. Attorneys' Fees and Costs
The only remaining issue is whether to grant Squillante the attorneys' fees and costs he incurred as a consequence of LINA's removal. It appears that LINA, with the consent of the other defendants, removed this case on the strength of several non-precedential District of Connecticut cases.*fn49 Moreover, the defendants declined to voluntarily remand to state court after being apprised by Squillante's counsel of the controlling precedents laid out above.*fn50 And they continued to oppose Squillante's motion for remand even after being advised by this Court in a pre-motion conference that the Connecticut cases LINA cited were unpersuasive.*fn51
Because the defendants have not presented an objective basis for removal, Squillante is entitled to his "just costs and any actual expenses, including attorney fees, incurred as a result of the removal."*fn52
Squillante is directed to submit to the defendants, and the defendants are ordered to pay, Squillante's reasonable attorneys' fees and costs. If the parties cannot agree on the amount to be reimbursed within fourteen (14) days of the date of this Opinion and Order, Squillante should submit a bill of costs and fee application to the Court.
For the reasons set forth above, this action is remanded. This Court will retain jurisdiction over this case for the limited purpose of overseeing the cost and fee shifting discussed above. The Clerk of the Court is directed to close the motion (Docket No. 21) and this case. The Clerk of the Court is further directed to remand this action to the New York State Supreme Court, New York County.