Francis v. Allstate Ins. Co.

869 F.Supp.2d 663

Thomas Michael FRANCIS, et al., Plaintiffs,

v.ALLSTATE INSURANCE CO., Defendant.

Civil No. WDQ–11–1030.

United States District Court,

D. Maryland,

Northern Division.

April 18, 2012.

Edward Joseph Brown, Law Office of Edward J. Brown LLC, Ellicott City, MD, for Plaintiffs.

Ronald W. Cox, Jr., Thomas Patrick Ryan, Rockville, MD, for Defendant.

MEMORANDUM OPINION

WILLIAM D. QUARLES JR., District Judge.

Thomas Michael Francis and his mother, Danielle Francis (the “Plaintiffs”), seek a declaration that Allstate Insurance Co. (“Allstate”) had a duty to defend the Plaintiffs in a tort action in the Circuit Court for Frederick County. For the following reasons, the Court will deny the Plaintiffs' motion to remand, and grant Allstate's motion for summary judgment.

I. Background ¹

Thomas Francis, a Maryland citizen, is the son of Danielle Francis, a California citizen. Compl. ¶¶ 2–3, 6.

In March 2007, Danielle Francis was covered by an Allstate renter's insurance policy (the “Policy”), which provided liability coverage for damages she was obligated to pay “because of bodily injury or property damage arising from an occurrence.” Mem. in Supp. of Mot. for Summ. J. 2–3; Policy, ECF No. 17–5, at 31. The Policy defined “bodily injury” as “physical harm to the body, including sickness or disease, and resulting death.” Policy at 19. “Property damage” meant “physical injury to or destruction of tangible property, including loss of its use.” Id. at 20. The Policy defined an “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Id. at 20. The Policy did not define “accident.”

The Policy also provided that,

[s]ubject to the following paragraph, the laws of California shall govern any and all claims or disputes in any way related to this policy.

If a[n] ... occurrence for which coverage applies under this policy happens outside California, claims or disputes regarding that ... covered occurrence may be governed by the laws of the jurisdiction in which that ... covered occurrence happened, only if the laws of that jurisdiction would apply in the absence of a contractual choice of law provision such as this.

Policy at 43. Allstate mailed the Policy to Danielle Francis's California home. Glen Davis Decl., ECF No. 17–4 at ¶ 3.

In March 2008, Troy Towers sued the Plaintiffs in the Circuit Court for Frederick County, Maryland (“the Circuit Court”) for defamation, false light invasion of privacy, malicious prosecution, civil conspiracy, and intentional infliction of emotional distress. ECF No. 19–3. Towers alleged that the Plaintiffs had “knowingly” or “negligently” made “false and defamatory statements about [him],” including that he had sexually abused Thomas Francis and other students at the Maryland School for the Deaf. Id. at 4–5. Towers asserted that he had suffered “severe mental anguish, loss of reputation, medical and other related expenses, and loss of income” and sought $1 million in compensatory damages and $5 million in punitive damages. Id. at 9–10.

The Plaintiffs admitted that they had made statements about Towers to school officials and police, but “for the sole reason of trying to protect [Thomas Francis].” See ECF Nos. 19–5, 19–6 (Statements of Danielle and Thomas Francis). They denied any intent to slander or libel Towers, invade his privacy, or maliciously prosecute him. Id.

On March 11, 2011, after Allstate “refused ... to provide a defense for the Plaintiffs in [Towers's] tort suit,” the Plaintiffs sued Allstate in the Circuit Court seeking a declaration that Allstate was “obligated to provide a defense” in Towers's tort suit, and is required to pay “any judgment which the Plaintiffs may [have] be[en] liable to pay” to Towers, “all of the costs and expenses related to the underlying tort action, including reasonable attorneys' fees,” and “the costs and expenses which they have, and will, incur in prosecuting this declaratory judgment action, including reasonable attorneys' fees.” ECF No. 2 at 3–4.

On March 16, 2011, the Circuit Court granted summary judgment for Thomas and Danielle Francis in Towers's tort suit. ECF No. 19 at 2; ECF No. 23 at 4. On April 6, 2011, the Circuit Court entered a final judgment in favor of all the defendants in Towers's tort suit. ECF No. 19 at 2; ECF No. 23 at 4. Thomas and Danielle Francis spent $66,347 in attorneys' fees defending Towers's lawsuit.²

On April 20, 2011, Allstate removed the declaratory action to this Court on the basis of diversity jurisdiction.³ On May 19, 2011, the Plaintiffs argued that removal had been untimely and moved to remand the case to the Circuit Court. ECF No. 12. On July 18, 2011, 2011 WL 2938236, the Court denied that motion. See ECF Nos. 14, 15.

On October 28, 2011, Allstate moved for summary judgment. ECF No. 17. On November 18, 2011, the Plaintiffs opposed that motion and moved to remand, arguing that the Court lacks subject matter jurisdiction. ECF No. 19. On December 5, 2011, Allstate filed a reply. ECF No. 23.

II. Analysis

In response to Allstate's motion for summary judgment, the Plaintiffs argue, inter alia, that this Court lacks subject matter jurisdiction. ECF No. 19 at 3–6. “If at any time before final judgment it appears that the district court lacks subject matter jurisdiction [over a removed action], the case shall be remanded.” 28 U.S.C. § 1447(c). Thus, the Court will not consider the motion for summary judgment unless it determines it has jurisdiction.

A. Subject Matter Jurisdiction

Federal jurisdiction is “fixed at the time the ... notice of removal is filed.” Dennison v. Carolina Payday Loans, Inc., 549 F.3d 941, 943 (4th Cir.2008). If, at that time, the parties are citizens of different states and the amount in controversy exceeds $75,000, the Court has jurisdiction on the basis of diversity—“regardless of later changes in ... the amount in controversy.” ⁴

The Plaintiffs argue that the amount in controversy was below that threshold when Allstate filed its notice of removal. ECF No. 19 at 3–6. Because the Circuit Court had granted them summary judgment in Towers's tort suit, the Plaintiffs contend that they could have recovered no more than the $66,347 they had spent to defend that action. Id. They argue that the amount in controversy did not include any potential indemnity obligation of Allstate, nor the Plaintiffs' attorneys' fees in this action.⁵

Allstate counters that the amount in controversy included (1) the amount the Plaintiffs spent to defend Towers's tort action, (2) Allstate's potential indemnification obligation in that action, and (3) the Plaintiffs' attorneys' fees in this suit. ECF No. 23 at 3–8. According to Allstate, these figures exceeded $75,000 at the time of removal. Id. at 8.

1. The Amount in Controversy in a Declaratory Action

When a plaintiff seeks declaratory relief, the amount in controversy is the “value of the object of the litigation.” ⁶ The Court must consider “the potential pecuniary effect that a judgment would have on either party to the litigation.” ⁷ The amount in controversy requirement is met if “either the direct pecuniary value of the right the plaintiff seeks to enforce, or the cost to the defendant of complying with any prospective equitable relief, exceeds $75,000.” ⁸ The Court “should consider all the evidence in the record” and “specify exactly what relief the plaintiff seeks.” Lee, 739 F.Supp.2d at 946 (internal citations and quotation marks omitted).

In their complaint for declaratory judgment, the Plaintiffs seek a declaration that Allstate was “obligated to provide a defense” in Towers's tort suit, and is required to pay “any judgment which the Plaintiffs may [have] be[en] liable to pay” to Towers, “all of the costs and expenses related to the underlying tort action, including reasonable attorneys' fees,” and “the costs and expenses which they have, and will, incur in prosecuting this declaratory judgment action, including reasonable attorneys' fees.” ECF No. 2 at 3–4.

a. Allstate's Potential Indemnity Obligation

The Plaintiffs argue that, at the time of removal, the amount in controversy did not include any potential indemnity in Towers's tort suit, because the Circuit Court had granted Plaintiffs summary judgment. ECF No. 19 at 3. Allstate argues that it still faced a potential indemnity of at least $100,000 ⁹ because the time for Towers to appeal the Circuit Court's decision did not expire until after Allstate had removed this action. ECF No. 23 at 4.

At the time of removal, Allstate no longer faced potential indemnity liability. The Plaintiffs had been granted summary judgment, and the Circuit Court entered a final order granting judgment to all the defendants on April 6, 2011—14 days before Allstate removed the declaratory action.¹⁰ Allstate has not explained why the amount in controversy in this case included potential indemnity in the tort action merely because Towers had an opportunity to appeal the Circuit Court's decision.¹¹ Thus, the Court will exclude any potential indemnity obligation in its calculation of the amount in controversy.

b. The Plaintiffs' Attorneys' Fees In This Action

Although they seek to recover their attorneys' fees for litigating this declaratory action, the Plaintiffs contend that the amount in controversy at the time of removal did not include these fees. ECF No. 19 at 2 n. 3. Allstate counters that the jurisdictional amount must account for the attorneys' fees in this lawsuit, and the fees establish that more than $75,000 was in controversy at the time of removal. ECF No. 23 at 5–8.

The Court agrees that the amount in controversy includes the attorneys' fees in this action. The Plaintiffs sued under the Maryland Uniform Declaratory Judgments Act,¹² which allows an “award of costs as may seem equitable and just.” Md.Code Ann., Cts. & Jud. Proc. § 3–410. Maryland courts have held that an insurer

is liable for the damages, including attorneys' fees, incurred...