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Garvey v. The Prudential Ins. Co. of America: US District Court : CIVIL PROCEEDURE - value of possible future disputes irrelevent to value of present dispute for removal purposes

Case No. 08-CV-0147 (PJS/RLE)
James T. Hansing, HANSING LAW OFFICE; and D. Randall Blohm, ATTORNEY, for
Patrick H. O’Neill, Jr., O’NEILL & MURPHY, L.L.P., for defendant.
Plaintiff Paz Garvey brought this action in Minnesota state court seeking to recover
disability benefits under an insurance policy issued by defendant The Prudential Insurance
Company of America (“Prudential”). Prudential removed this action to federal court. This
matter is before the Court on Garvey’s motion to remand pursuant to 28 U.S.C. § 1447(c). For
the reasons set forth below, Garvey’s motion is granted.
A. Background
According to the allegations in Garvey’s complaint, Prudential paid Garvey ,000 per
month in disability income benefits from July 2000 to April 30, 2007 under a disability insurance
policy. Compl. ¶ 8. In late April 2007, however, Prudential notified Garvey that it no longer
considered her to be “totally disabled” within the meaning of the policy. Hansing Decl. Ex. 2.
On the basis of that determination, Prudential refused to pay Garvey further disability benefits.
Compl. ¶ 9. Garvey initiated this breach-of-contract action in November 2007 seeking all unpaid
benefits, accrued interest on the unpaid benefits, a declaration that she is totally disabled and
entitled to benefits, and costs and disbursements. Compl. at 3.
Several weeks after Garvey served the summons and complaint, Prudential contacted
Garvey’s counsel to ask for a settlement proposal. Hansing Decl. ¶ 7. Prudential emphasized
that it was not interested in a settlement proposal relating only to the past-due benefits sought in
this lawsuit. Instead, Prudential said, it wanted a “policy buyout” proposal that assumed
continuing disability and normal life expectancy. Hansing Decl. ¶ 7 & Ex. 4. Garvey responded
with a policy-buyout proposal of 7,865. Hansing Decl. Ex. 4. Garvey calculated this figure
by assuming a life expectancy of twenty-seven years and then discounting the resulting figure to
present value. Hansing Decl. Ex. 4. The parties did not engage in any other type of settlement
negotiations. Hansing Decl. ¶¶ 7-8.
B. Discussion
Prudential removed this action pursuant to 28 U.S.C. § 1441(a), which permits the
removal of “any civil action brought in a State court of which the district courts of the United
States have original jurisdiction . . . .” Prudential alleges that this Court has original jurisdiction
over this action on the basis of diversity. See 28 U.S.C. § 1332(a).
Garvey argues that remand to state court is proper for three reasons: (1) Prudential’s
notice of removal was untimely; (2) Prudential’s reliance on the “other paper” doctrine of 28
U.S.C. § 1446(b) is without merit; and (3) the amount in controversy does not exceed ,000,
as is required for the Court to exercise diversity jurisdiction. The Court agrees with Garvey that
1Prudential spends most of its time arguing that Garvey’s settlement proposal qualifies as
an “other paper” under 28 U.S.C. § 1446(b). For purposes of this order, the Court assumes, but
does not decide, that Garvey’s proposal qualifies as an “other paper” that would trigger
Prudential’s right to remove. The Court also assumes, but does not decide, that Prudential’s
notice of removal was timely.
2For obvious reasons, Prudential does not argue that the other monetary relief Garvey
seeks — namely, accrued interest, costs, and disbursements — would put Garvey’s potential
recovery anywhere near the jurisdictional threshold. The Court therefore ignores those potential
recoveries for purposes of its analysis.
the amount-in-controversy requirement is not met in this case, and thus the Court need not reach
Garvey’s other arguments.1
When a complaint does not mention the amount in controversy, or alleges an amount that
is less than the jurisdictional minimum, the removing party bears the burden of proving, by a
preponderance of the evidence, that the amount in controversy in fact satisfies the jurisdictional
minimum. In re Minn. Mut. Life Ins. Co. Sales Practices Litig., 346 F.3d 830, 834 (8th Cir.
2003). The amount in controversy is measured as of the date of removal. James Neff Kramper
Family Farm P’ship v. IBP, Inc., 393 F.3d 828, 833-34 (8th Cir. 2005).
As noted, Garvey seeks past-due disability benefits of ,000 per month. As of the date
of removal, the amount of past-due benefits was ,000, an amount far less than the
jurisdictional minimum.2 Pointing to Garvey’s 7,865 settlement proposal, Prudential argues
that the jurisdictional minimum is nevertheless met in this case. The problem with Prudential’s
argument is that Garvey’s proposal does not accurately reflect — or even provide much evidence
of — the amount in controversy in this action.
This is a case for disability benefits. To be entitled to such benefits, Garvey must
demonstrate that she is totally disabled within the meaning of the policy. If Garvey prevails, she
will be entitled to benefits for the time period during which she was totally disabled. As of the
date of removal, that amount would have been, at most, ,000.
Prudential apparently believes that the Court should consider Prudential’s possible
liability for future benefits for the purpose of calculating the amount in controversy. But it is
legally impossible for the Court to award future disability benefits to Garvey in this breach-ofcontract
action. Even if a judgment favorable to Garvey were entered in this case, Prudential
could decide the very next day that Garvey had recovered from her disability (depression,
anxiety, and irritable bowel syndrome) sufficiently to lose her entitlement to benefits. The
Court’s previous determination that Garvey was disabled — even a declaratory judgment to that
effect — would not preclude Prudential from finding, at some future time, that she is no longer
disabled and is therefore no longer entitled to benefits. For this reason, most courts confronting
this issue — including the Eighth Circuit, in a long-ago case — have held that courts should not
consider possible future disability benefits when determining the amount in controversy. See,
e.g., Colorado Life Co. v. Steele, 95 F.2d 535, 537 (8th Cir. 1938); Keck v. Fidelity & Cas. Co.
of N.Y., 359 F.2d 840, 841 (7th Cir. 1966); Russ v. Unum Life Ins. Co., 442 F. Supp. 2d 193, 197
(D.N.J. 2006); see also 14B Charles Alan Wright et al., Federal Practice & Procedure § 3710 at
260-62 (3d ed. 1998).
It is true that, when the validity of a disability policy is in dispute, courts will consider
possible future benefits in determining the amount in controversy. See, e.g., Mass. Cas. Ins. Co.
v. Harmon, 88 F.3d 415, 416 (6th Cir. 1996), cited with approval in Minn. Mut. Life Ins. Co.,
346 F.3d at 834-35. Prudential tries to shoehorn this case into that exception by suggesting that
Garvey’s settlement proposal indicates that she might be seeking damages based on a
repudiation of the policy. That contention is meritless. There is no hint in the complaint, or in
anything else submitted to the Court, that Garvey is challenging the validity of the policy.
Moreover, the record before the Court clearly establishes that Garvey formulated her settlement
proposal not to reflect what is at stake in this particular lawsuit, but instead to comply with
Prudential’s request for a complete policy buyout. In other words, pursuant to Prudential’s
instructions, Garvey submitted a proposal that would have settled not only the parties’ current
dispute, but also any and all possible future disputes. Those possible future disputes, however,
have no bearing on the amount that is in controversy in this case.
Similarly, Garvey’s settlement proposal is entirely unlike the settlement demands in the
cases cited by Prudential. See, e.g., Addo v. Globe Life & Accident Ins. Co., 230 F.3d 759 (5th
Cir. 2000); LaPree v. Prudential Fin., 385 F. Supp. 2d 839 (S.D. Iowa 2005). In Addo and
LaPree, the plaintiffs were suing for an indeterminate amount of damages, and the settlement
demands were the first indication that the damages in those cases could exceed the jurisdictional
minimum. But Garvey’s proposal did not, and could not, put more than ,000 in controversy;
as already explained, it was impossible for Garvey to recover more than ,000 from Prudential
at the time of removal. The Court thus lacks jurisdiction, and Garvey’s motion to remand is
Based on the foregoing, and on all of the files, records, and proceedings herein, IT IS
1. Plaintiff’s motion to remand [Docket No. 3] is GRANTED.
2. This matter is hereby REMANDED to the Minnesota District Court, Second
Judicial District.
Dated: April 18, 2008 s/Patrick J. Schiltz
Patrick J. Schiltz
United States District Judge


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