"> November 2016 Bad Faith Cases | Common Pleas Arbitration

November 2016 Bad Faith Cases: Court Would Not Remand, Even Where Action was Started as Common Pleas Arbitration, Where Complaint Made Clear Claim Could be Over $136,000 and Punitive Damages were Legitimately Considered (Philadelphia Federal)

This bad faith and breach of contract case was removed to federal court by the insurer, and the insured sought remand. The case was originally filed as an arbitration matter in the Court of Common Pleas of Philadelphia, i.e., it was filed with the representation that the matter was worth less than $50,000. Moreover, the parties even stipulated in the Court of Common Pleas that the matter was worth less than $50,000. However, subsequent to that stipulation the insured filed an amended complaint, indicating damages of over $136,000, though the matter appeared to still be no the arbitration track.

The court first observed that the arbitration statute in Pennsylvania does not create a mandatory damages cap of $50,000; but only a requirement that if a matter is alleged to involve less than $50,000 it is subject to de novo arbitration in the first instance. The court parsed authority going both ways on this issue in the Eastern District, and came down on the side of those courts finding this should not be treated as a damage cap. It then considered other evidence.

The proponent of federal jurisdiction must show “to a legal certainty” that the amount in controversy exceeds $75,000. “Because Pennsylvania state law permitted [the insured] to limit her monetary claims, see 42 Pa. Cons. Stat. § 7361; Pa. R. Civ. Pro. 1021(c), the Court [looked] to whether [her] ‘actual monetary demands in the aggregate exceed the threshold, irrespective of whether [the insured] states that the demands do not.’”

In this case, the insured’s had multiple ad damnum clauses seeking damages “not in excess of $50,000”; however, the amended complaint also stated a description of various losses, with invoices attached as exhibits, totaling $136,905.20. Such facts stood in “clear contrast to recent cases in this District holding that a defendant did not meet the burden to show the amount in controversy exceeded the $75,000 limit.” Thus, the insurer “met its heightened burden to prove to a legal certainty that the amount in controversy exceeds $75,000 because [the insured], in her own Amended Complaint, submitted proof that her damages exceeded $75,000.” In addition, the court observed that the insured sought punitive damages under the bad faith statute. “A district court must consider punitive damages when calculating the amount in controversy unless the claim for punitive damages is frivolous.” The present punitive damages claim was not frivolous because it was provided for in the bad faith statute’s language. “While a claim for punitive damages alone is too speculative to push the amount in controversy over the jurisdictional threshold … the Court finds that, in conjunction with estimated damages of $136,905.20, [the insured’s] claim for punitive damages weighs in favor of a determination that the amount in controversy requirement is met in this case.

Date of Decision: September 20, 2016

Pecko v. Allstate Ins. Co., CIVIL ACTION NO. 16-1988, 2016 U.S. Dist. LEXIS 1129569 (E.D. Pa. September 20, 2016) (Pratter, J.)



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