The opinion of the court was delivered by: Baker, District Judge.
This class action challenges certain "collateral protection
insurance" practices of the defendant under several different
state law theories. The case was originally filed in an Illinois
court, but was removed to this court on May 13, 1996. The
defendant moved to dismiss. The plaintiffs failed to respond to
the motion, and the United States Magistrate Judge recommended
dismissing the entire complaint with leave to re-file certain
counts. The court now remands the case to state court.
If a district court lacks jurisdiction over a case removed from
state court, the district court must remand the case to state
court. "If at any time before final judgment it appears that the
district court lacks subject matter jurisdiction, the case shall
be remanded." 28 U.S.C. § 1447(c). "An order remanding a case to
the State court from which it was removed is not reviewable on
appeal or otherwise." 28 U.S.C. § 1447(d). See also, Volvo of
America Corp. v. Schwarzer, 429 U.S. 1331, 97 S.Ct. 284, 50
L.Ed.2d 273 (1976) (denying application for stay) (focusing on
district court's duty to remand if it lacks jurisdiction).
Federal courts are courts of limited jurisdiction. Jurisdiction
is either by diversity of the citizenship of the parties or by a
federal law question. The instant case triggers neither of these
jurisdictional provisions. First, there is no federal issue
raised in the complaint. "The district courts shall have original
jurisdiction of all civil actions arising under the Constitution,
laws, or treaties of the United States." 28 U.S.C. § 1331. In the
instant case the complaint includes eight counts. The eight
counts plead eight state law claims: (1) breach of fiduciary
duties, (2) breach of implied covenants of good faith and fair
dealing, (3) fraudulent misrepresentation or omission, (4)
negligent misrepresentation or omission, (5) negligence, (6)
unjust enrichment, (7) violation of the Illinois Insurance Code,
and (8) violation of the Illinois Consumer Fraud and Deceptive
Trade Practices Act. Since none of these claims involve federal
law, there is no federal jurisdiction under 28 U.S.C. § 1331.
In it's notice of removal, the defendant argues that this court
has jurisdiction because of the diversity of the citizenship of
the parties. Diversity jurisdiction requires both that the
parties' citizenship be diverse and that the parties satisfy the
amount in controversy requirement of $50,000. 28 U.S.C. § 1332.
In the instant case the parties are diverse, but the matter in
controversy does not "exceed the sum or value of $50,000,
exclusive of interest and costs." 28 U.S.C. § 1332(a). The
defendant argues that the amount in controversy does exceed
$50,000 if the calculations include punitive damages, and if the
calculations aggregate all of the multiple claims of the members
of the plaintiff class. However, amount in controversy
calculations do not properly include aggregated claims, nor do
unsupported allegations of punitive damages suffice to boost the
amount above $50,000.
"Multiple persons' claims cannot be combined to reach the
minimum amount in controversy." Stromberg Metal Works v. Press
Mechanical, Inc., 77 F.3d 928, 931 (7th Cir. 1996). In a class
action each individual class member must satisfy the amount in
controversy requirement. Zahn v. International Paper Co.,
414 U.S. 291, 300, 94 S.Ct. 505, 512, 38 L.Ed.2d 511 (1973); Snyder
v. Harris, 394 U.S. 332, 89 S.Ct. 1053, 22 L.Ed.2d 319 (1969).
The Fifth Circuit has exercised supplemental jurisdiction under
28 U.S.C. § 1367 over class members who do not meet the amount in
controversy level. In re: Abbott Laboratories, 51 F.3d 524,
527-29 (5th Cir. 1995). The Seventh Circuit, in dicta, has shown
a support for this procedure. Stromberg Metal Works, 77 F.3d at
931. However, both Abbott Laboratories and
Stromberg specify that such supplemental jurisdiction only
applies when at least one of the multiple plaintiffs satisfies
the amount in controversy requirement. 77 F.3d at 931; 51 F.3d at
527-529. Because none of the plaintiffs in the instant case
exceeds the jurisdictional amount requirement we need not reach
the Abbott Laboratories/Stromberg Metal Works issue of whether
or not a district court may properly exercise supplemental
jurisdiction under 28 U.S.C. § 1367 over members of a class who
do not meet the amount in controversy requirement. See, Anthony
v. Security Pacific Financial Services, Inc., 75 F.3d 311, 316
n. 2 (7th Cir. 1996).
The class members in the instant case are Larry Sharrow, Cathy
Robinson, and all others similarly situated. These plaintiffs are
all persons who contracted to purchase a vehicle or mobile home.
Their contracts included provisions for the defendant to purchase
insurance on their behalf if they defaulted on their insurance
coverage. Such insurance is called "collateral protection
insurance" or "force placed insurance." All of the plaintiffs
defaulted on their insurance coverage and thereby triggered the
contractual provisions for collateral protection insurance. The
defendant purchased collateral protection insurance, and the
plaintiffs now challenge that purchase under state law. The
plaintiffs claim the collateral protection insurance purchased by
the defendant was unconscionably expensive.
The complaint specifically states the "actual damages sought by
Plaintiffs and each class member is less than $50,000 for each
individual plaintiff and each individual class member." The
complaint repeatedly asks for actual damages in excess of
$15,000, but less than $50,000. Clearly, the actual damages
sought by individual plaintiffs in this case do not satisfy the
minimum amount in controversy requirement for federal diversity
jurisdiction. Each of the plaintiffs in this case stands to
recover much less than the requisite $50,000.
The plaintiffs also seek punitive damages. Punitive damages may
be included in a court's calculation of the amount in
controversy. Bell v. Preferred Life Society, 320 U.S. 238, 239,
64 S.Ct. 5, 6, 88 L.Ed. 15 (1943); Sharp Electronics Corp. v.
Copy Plus, Inc., 939 F.2d 513, 515 (7th Cir. 1991). "Where
punitive damages are required to satisfy the jurisdictional
requirement in a diversity case, a two-part inquiry is necessary.
The first question is whether punitive damages are recoverable as
a matter of state law. If the answer is yes, the court has
subject matter jurisdiction unless it is clear beyond a legal
certainty that the plaintiff would under no circumstances be
entitled to recover the jurisdictional amount." Anthony v.
Security Pacific Financial Services, Inc., 75 F.3d 311, 315 (7th
Cir. 1996) (citing Cadek v. Great Lakes Dragaway, Inc.,
58 F.3d 1209, 1211 (7th Cir. 1995)).
Illinois law requires a very high level of culpability to
support an award of punitive damages. The Illinois Supreme Court
has limited punitive damage availability to "conduct involving
some element of outrage similar to that usually found in crime.
The conduct must be outrageous, either because the defendant's
acts are done with an evil motive or because they are done with a
reckless indifference to the rights of others." Loitz v.
Remington Arms, 138 Ill.2d 404, 150 Ill.Dec. 510, 563 N.E.2d 397
(1990) (citing Restatement (Second) of Torts § 908) "In this
context, willful and wanton misconduct approaches the degree of
moral blame attached to intentional harm, since the defendant
deliberately inflicts a highly unreasonable risk of harm upon
others in conscious disregard of it." Loitz, 150 Ill.Dec. at
510, 563 N.E.2d at 397. Illinois has further statutorily limited
punitive damages in the context of insurance cases. The Illinois
Insurance Code provides a $25,000 cap on punitive damage awards.
215 ILCS 5/155.
In the case at bar, the class plaintiffs' vague claims do not
support a finding of possible punitive damages sufficient to
satisfy the amount in controversy requirement of diversity
jurisdiction. All of the plaintiffs' various state law theories
are based on a claim that the contractually based "collateral
protection insurance" (or "forced place insurance") purchased by
the defendant was in some way against the law, e.g. a breach of
contract, or a tort such as negligence, or a violation of an
Illinois statute. There is no Illinois case law supporting a
cause of action based on collateral protection insurance
practices such as those alleged by the plaintiffs. Other states
have addressed related, but not identical issues, with mixed
results. See e.g., Logsdon v. Fifth Third Bank of Toledo,
100 Ohio App.3d 333, 654 N.E.2d 115 (1994) appeal denied 72 Ohio St.3d 1552,
650 N.E.2d 1371 (1995) (finding neither fiduciary
relationship nor duty of good faith in class action collateral
protection insurance case); Surrett v. TIG Premier Ins. Co.,
869 F. Supp. 919 (M.D.Ala. 1994) (finding no duty to disclose in
collateral protection insurance case); Kenty v. Transamerica
Premium Ins. Co., 72 Ohio St.3d 415, 650 N.E.2d 863 (1995)
(recognizing collateral protection insurance claims under
tortious interference with contract and civil conspiracy).*fn1
The court, in its review of the relevant case law does not see
support for large punitive damage awards to individual
plaintiffs. The court is not deciding whether the instant
plaintiffs can recover punitive damages under their multiple
state law theories. Instead the court is making the limited
inquiry of whether it is likely that any single plaintiff could
recover combined compensatory and punitive damages sufficient to
meet the amount in controversy requirement of federal diversity
jurisdiction. The court now finds that no single plaintiff has
alleged a claim for combined compensatory and punitive damages in
the amount of more than $50,000., therefore this court lacks
jurisdiction and must remand the case to the Illinois courts.
IT IS THEREFORE ORDERED THAT the case is remanded to state
court on the basis of ...