Amundson & Assoc. Art v. Nat. Council On Comp. Ins.

977 F.Supp. 1116

AMUNDSON & ASSOCIATES ART STUDIO, LTD., d/b/a the Amundson Group, individually and representing a class of similarly situated persons, Plaintiff, v. NATIONAL COUNCIL ON COMPENSATION INSURANCE, INC.; Aetna Casualty & Surety Company; Commercial Union Insurance Company; Continental Insurance Company; Continental Western Insurance Company; Employers Insurance of Wausau; Fireman's Fund Insurance Company; Granite State Insurance Company; Hartford Underwriters Insurance Company; Houston General Insurance Company; Insurance Company of North America; Liberty Mutual Insurance Company; National Surety Corporation; Travelers Insurance Company; and United States Fidelity & Guaranty Company, Defendants.

Civil Action No. 96-2488-KHV.

United States District Court, D. Kansas.

September 17, 1997.

COPYRIGHT MATERIAL OMITTED

Scott A. McCreight, Lawrence Ray Lassiter, McCreight & Lassiter, L.C., Steven M. Sprenger, Sprenger Law Firm, Craig M. Leff, Kansas City, MO, for Amundson & Associates Art Studio, Ltd.

Wyatt A. Hoch, Martha Aaron Ross, Foulston & Siefkin L.L.P., Wichita, KS, Gary R Carney, Rogers & Wells, New York City, John Karaczynski, Rogers & Wells, Los Angeles, CA, for National Council on Compensation Ins. Co.

Reid F. Holbrook, Thomas M. Sutherland, Brent G. Wright, Holbrook, Heaven & Fay, P.A., Kansas City, KS, Mark F Horning, Steptoe & Johnson, Washington, DC, Jerome T. Wolf, Curtis E Woods, Sonnenschein, Nath & Rosenthal, Kansas City, MO, Shannen W. Coffin, for Aetna Cas. and Surety Co.

Edward M. Boyle, Payne & Jones, Chtd., Overland Park, KS, for Commercial Union Ins. Co.

Reid F. Holbrook, Thomas M. Sutherland, Brent G. Wright, Holbrook, Heaven & Fay, P.A., Kansas City, KS, Timothy M. O'Brien, Shook, Hardy & Bacon L.L.P., Overland Park, KS, Stanley B. Block, Vedder, Price, Kaufman & Kammholz, Chicago, IL, for Continental Ins. Co.

David W. Hauber, Boddington & Brown, Chtd., Kansas City, KS, David J Healey, Arnold, White & Durkee, Houston, TX, for Continental Western Ins. Co., Hartford Underwriters Ins. Co. James R Safley, Robins, Kaplan, Miller & Ciresi, Minneapolis, MN, Roger D. Stanton, Berkowitz, Feldmiller, Stanton, Brandt, Williams & Stueve, LLP, Prairie Village, KS, for Employers Ins. of Wausau.

Timothy M. O'Brien, William R. Sampson, Shook, Hardy & Bacon L .L.P., Overland Park, KS, James P Kleinberg, James G Snell, McCutchen, Doyle, Brown & Enersen, L.L.P., San Jose, CA, for Fireman's Fund Ins. Co, Nat. Sur. Corp..

Robert B. Sullivan, Douglas S Laird, Miriam Glueck, Polsinelli, White, Vardeman & Shalton, Kansas City, MO, for Granite State Ins. Co.

Reid F. Holbrook, Thomas M. Sutherland, Brent G. Wright, Holbrook, Heaven & Fay, P.A., Kansas City, KS, Floyd R. Finch, Jr, Blackwell, Sanders, Matheny, Weary & Lombardi L.L.P., Kansas City, MO, Michael Lowenberg, David R McAtee, Akin, Gump, Strauss, Hauer & Feld, L.L.P., Dallas, TX, for Houston Gen. Ins. Co.

William V. North, Shughart, Thomson & Kilroy, Overland Park, KS, R Lawrence Ward, Shughart, Thomson & Kilroy, P.C., Kansas City, MO, Richard G Parker, O'Melveny & Myers L.L.P., Washington, DC, for Ins. Co. of North America.

Lori R. Schultz, Morrison & Hecker L.L.P., Kansas City, MO, for Liberty Mut. Ins. Co.

Reid F. Holbrook, Thomas M. Sutherland, Brent G. Wright, Holbrook, Heaven & Fay, P.A., Kansas City, KS, Mark F Horning, Steptoe & Johnson, Washington, DC, Jerome T. Wolf, Curtis E Woods, Sonnenschein, Nath & Rosenthal, Kansas City, MO, for Travelers Ins. Co.

Reid F. Holbrook, Thomas M. Sutherland, Brent G. Wright, Holbrook, Heaven & Fay, P.A., Kansas City, KS, David H Bamberger, Piper & Marbury, Washington, DC, for United States Fidelity and Guar. Co.

MEMORANDUM AND ORDER

VRATIL, District Judge.

This matter is before the Court on Plaintiff's Motion For Remand (Doc. # 17) filed November 26, 1996. On October 3, 1996, Amundson & Associates Art Studio, Ltd. ("Amundson") brought suit against the National Council on Compensation Insurance, Inc. ("NCCI") and fourteen private insurance companies, in the District Court of Wyandotte County, Kansas. Plaintiff sued individually and on behalf of a class of similarly situated persons, seeking compensatory damages, treble damages, punitive damages, declaratory and injunctive relief, and attorneys' fees and costs for violation of Kansas restraint of trade laws, K.S.A. § 50-101 et seq., fraud, and civil conspiracy. On November 6, 1996, defendants filed their notice of removal under 28 U.S.C. § 1332.

Plaintiff claims that the Court lacks diversity jurisdiction and seeks remand. Specifically, plaintiff alleges that it has suffered less than $50,000 in damages, that "the majority" of class members has also suffered actual damages below $50,000, and that the requisite amount in controversy has not been established. Plaintiff also demands costs and attorneys' fees for improper removal. Defendants argue that the Court has original jurisdiction over "as many as one-half" of the plaintiff class members and may exercise supplemental jurisdiction over the identical claims of remaining class members under 28 U.S.C. § 1367. They also argue that the amount in controversy on plaintiff's claims for equitable relief and for punitive damages may be viewed in the aggregate, and attributed to each member of the purported class, to meet the amount in controversy requirement.¹

For reasons set forth below, the Court finds that plaintiff's motion for remand should be granted.

Factual Background

Amundson's class action petition alleges as follows:

The State of Kansas recognizes that certain high risk employers cannot obtain workers' compensation insurance in the voluntary market. As a result, Kansas requires that all insurance companies which write workers' compensation insurance in Kansas participate in a plan for the equitable apportionment of such risk (¶ 19). Seven hundred insurance companies created and own the National Council on Compensation Insurance, Inc. ("NCCI"), which has implemented a residual market pool for high risk employers in Kansas (¶ 20). NCCI requires that all insurance carriers who write workers' compensation insurance in Kansas participate in the plan, and it selects certain insurers to be "servicing carriers" for the residual market (¶ 21-22). Servicing carriers manage the risk assigned to the residual market but pursuant to a "Quota Share Reinsurance Agreement," all insurers are liable for residual market losses in accordance with their respective market shares (¶ 22). Those insurers pass on to insureds in the voluntary market — including plaintiff and putative class members — their portion of the residual market loss (¶ 22).

Defendants are NCCI and the servicing carriers. They retain all net operating gain for the residual market but collect any net operating loss from carriers in the voluntary market, who in turn collect any loss from plaintiff and members of the proposed class, through increased premiums (¶ 22, ¶ 26). Defendants have conspired to raise effective premium rates in the residual and voluntary markets (¶ 24), overstate losses from insurers in the voluntary market (¶ 26), charge unlawful premiums (¶ 27), and reduce their cost of administering the residual market by unreasonably settling claims and passing along the resulting losses to plaintiff and members of the class (¶ 28). But for defendants' fraudulent and anti-competitive activity, workers' compensation premiums for plaintiff and putative class members would have been lower. Plaintiff therefore seeks recovery on theories of fraud, civil conspiracy, and restraint of trade.

Plaintiff brings suit for itself and more than 20,000 employers who have been damaged by defendants' illegal practices during the relevant period (¶ 31).² Plaintiff alleges that it has sustained actual damages of less than $50,000 and that "the majority of the members of the Class have [sic] suffered actual damages of less than $50,000" (¶ 1).³

Standards for Remand

A civil action is removable only if plaintiff could have originally brought the action in federal court. 28 U.S.C. § 1441(a). The Court is required to remand "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction." 28 U.S.C. § 1447(c). Because federal courts are courts of limited jurisdiction, there is a presumption against federal jurisdiction. Frederick & Warinner v. Lundgren, 962 F.Supp. 1580, 1582 (D.Kan.1997) (citing Basso v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir.1974)). The rule is inflexible and without exception, and requires a court to deny its jurisdiction in all cases where such jurisdiction does not affirmatively appear in the record. Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites, 456 U.S. 694, 702, 102 S.Ct. 2099, 2104, 72 L.Ed.2d 492 (1982). Accordingly, the Court must strictly construe the federal removal statute. Fajen v. Foundation Reserve Ins. Co., Inc., 683 F.2d 331, 333 (10th Cir.1982). "The burden is on the party requesting removal to set forth, in the notice of removal itself, the `underlying facts supporting [the] assertion that the amount in controversy exceeds $50,000.'" Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir.1995) (quoting Gaus v. Miles, Inc., 980 F.2d 564, 567 (9th Cir.1992)).

Defendants maintain that the amount in controversy exceeds $50,000, even though plaintiff suffered damages in an amount less than $50,000 and "the majority" of class members is in the same situation. As to compensatory damages, defendants' Notice of Removal (Doc. # 1) first reasons that "some (which could be nearly half) of the putative class members have suffered actual damages in excess of $50,000" (¶ 6a),⁴ and that the Court therefore has diversity jurisdiction and may exercise supplemental jurisdiction over the remaining claims under 28 U.S.C. § 1367. The notice next argues that considering plaintiff's claims for treble damages under the Kansas antitrust statutes, "it is readily...