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Scherrer v. Foremost Insurance Company of Grand Rapids Michigan

United States District Court, E.D. Missouri, Eastern Division

March 27, 2018

NELSON C. SCHERRER, individually and on behalf of others similarly-situated Plaintiff,



         This matter is before the Court on Plaintiff Nelson C. Scherrer's Motion to Remand. (Doc. 13.) Defendant Foremost Insurance Company of Grand Rapids Michigan responded (Doc. 22), and Plaintiff replied (Doc. 27). Thereafter, the Court ordered limited discovery regarding jurisdiction under the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d)(2), (5). (Doc. 28.) Defendant then filed a supplemental memorandum in opposition incorporating the data from discovery (Doc. 34), and Plaintiff filed a supplemental reply doing the same (Doc. 35).

         1. Background

         On January 10, 2017, Plaintiff filed his Petition for Declaratory and Class Action Relief in the Circuit Court of the City of St. Louis, Missouri (Doc. 4), alleging the following: In August 2016, a severe rainstorm caused water damage to the living room, bedrooms, closets, foyer, hallways, bathroom, and kitchen of his St. Louis home. The house was covered by an insurance policy issued by Defendant that indemnified Plaintiff for structural damage. Defendant confirmed that the damage was covered under the policy and sent an adjuster to inspect the structure. The adjuster calculated a replacement cost value (“RCV”) of $53, 834 but reduced that amount to account for depreciation of materials and labor, resulting in an actual cash value (“ACV”) of $47, 838. Plaintiff received that amount less his deductible.

         Plaintiff asserts that labor costs do not depreciate and that “depreciating labor costs is inconsistent with the universally accepted premise that the fundamental purpose of property insurance is to provide indemnity to policy holders.” (Id. at 4.) On behalf of himself and the “thousands” of others whose ACVs were improperly reduced by labor cost depreciation, Plaintiff filed suit, seeking a declaratory judgment that such depreciation is contrary to the language of Defendant's policy and compensatory damages for Defendant's breach of contract. (Id. at 8.)

         On March 8, 2017, Defendant removed the suit to federal court, asserting that CAFA's $5 million jurisdictional threshold was likely met based on calculations based on market share and an industry average for depreciated labor cost per claim, in addition to other costs, which yielded a total of $15, 496, 198 in controversy. (Doc. 1 at 6.) Plaintiff now moves to remand the case, arguing that Defendant's use of industry-wide averages and assumed numbers was unsupported by evidence and far too speculative to satisfy CAFA. (Doc. 14 at 2-3.) Instead, Plaintiff asserted, the greatest evidence-based amount in controversy was $4, 196, 887. (Id. at 11.) The Court ordered limited discovery on the jurisdictional issue. Thereafter, the parties filed supplemental briefing incorporating Defendant's actual claim data. For the reasons set forth below, the Court will deny Plaintiff's Motion to Remand.

         2. Discussion

         Under CAFA, federal district courts have jurisdiction over class actions when the class has more than 100 members, the parties are minimally diverse, and the “matter in controversy exceeds the sum or value of $5, 000, 000.” Standard Fire Ins. Co. v. Knowles, 568 U.S. 588, 592 (2013) (quoting 28 U.S.C. § 1332(d)(2), (d)(5)(B)). Plaintiff does not dispute the size or diversity of the proposed class, but he argues that the amount in controversy is less than $5 million. (See Doc. 13.) “To ‘determine whether the matter in controversy' exceeds that sum, ‘the claims of the individual class members shall be aggregated.'” Standard Fire, 568 U.S. at 592 (quoting § 1332(d)(6)).

         As the removing party, Defendant must establish the amount in controversy by a preponderance of the evidence; that is, it must show that the “fact finder might legally conclude that” the damages are greater than $5 million. Hargis v. Access Capital Funding, LLC, 674 F.3d 783, 789 (8th Cir. 2012) (quoting Bell v. Hershey Co., 557 F.3d 953, 959 (8th Cir. 2009)). Defendant calculates the amount in controversy in three parts: compensatory damages; attorney's fees; and the value of declaratory judgment.

         (a) Compensatory Damages

         During the class period, Defendant used two claims-adjustment software products: Xactware and Symbility. (Doc. 34-1 at 6-7.) Defendant asserts that there are 9, 271 potential class members-8, 135 policy holders whose RCV was reduced by labor depreciation and 1, 136 who received no payment because their ACV was less than their deductible.[1] (Id.) Defendant provided the corresponding individual claim numbers to Xactware and Symbility, but the software providers returned depreciation figures for only 5, 482. Without a complete record of depreciation for each claim, the parties cannot simply “add[] up the value of the claim of each person who falls within the definition of [the] proposed class and determine whether the resulting sum exceeds $5 million.” Standard Fire, 568 U.S. at 592. Instead, both parties compute compensatory damages by calculating an average per-claim amount of labor depreciation from the 5, 482 recorded claims and then multiply that average by the 9, 217 class members. (Doc. 34 at 5-16; Doc. 35 at 2-11.) However, the parties draw different conclusions from the data, most notably different per-claim averages. In addition, Defendant argues that an amount must be added to account for later-joined class members, while Plaintiff argues that an amount must be subtracted to account for duplication of claims and for amounts already paid to claimants.

         i. Defendant's Computation

         The 5, 482 claims recorded on the Xactware and Symbility spreadsheets total $3, 514, 930.30 in depreciated labor cost-a per-claim average of $607.59. (Id. at 7-8.) Multiplying that average by the 9, 271 qualifying claims yields a total of $5, 633, 002.39 in damages. (Id. at 8.) Thus, Defendant concludes, the jurisdictional amount is met.

         Defendant also argues that $358, 478.10 must be added to account for additional class members that might join before trial because the proposed class definition includes policyholders whose ACV was reduced by labor depreciation “during the time period from January XX, 2007 to the date of trial, inclusive.” (Id. at 9 (quoting Doc. 4 at ¶ 40).)[2] To determine that additional amount, Defendant multiplied the number of current Missouri policyholders by its 55.03% yearly retention rate, its 5.6% yearly claim rate, and the Court's 26.7-month ...

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