Once Upon a Time in Cortland Manor, Inc. v. Markel Insurance Company

Background

Once Upon a Time in Cortland Manor, Inc. and Lisa Montalto sued Markel Insurance Company and Markel Service, Incorporated in the Supreme Court of the State of New York, County of Putnam. The plaintiffs alleged that the insured held two policies issued by the defendants, requested coverage for itself and Montalto in connection with another proceeding, and was denied coverage for Montalto’s defense. The plaintiffs asserted one breach-of-contract claim seeking $20,983.40 in legal fees spent defending Montalto in that other proceeding.

On May 27, 2022, the defendants filed a notice of removal seeking to bring the case from state court to the U.S. District Court for the Southern District of New York. They argued that federal diversity jurisdiction existed because the parties were citizens of different states and the face value of each insurance policy was $2 million.

Analysis

Federal diversity jurisdiction requires, among other things, that the amount in controversy exceed $75,000. The party seeking federal jurisdiction bears the burden of showing that this requirement is met. Because the plaintiffs brought a breach-of-contract claim rather than a claim for declaratory or injunctive relief, the relevant amount was the amount recoverable under contract law—here, the compensation needed to make the plaintiffs whole.

The court found that the complaint identified $20,983.40 in legal fees as the claimed damages. That amount was below the jurisdictional minimum. The court rejected the defendants’ reliance on the $2 million face value of the insurance policies because the defendants’ cited approach applied to declaratory or injunctive relief, which the plaintiffs did not seek.

The court also rejected the argument that the allegations in the other proceeding could eventually lead to more than $75,000 in covered costs. The amount in controversy is determined when the complaint is filed, and damages that are remote, contingent, speculative, or based on conjecture cannot establish the jurisdictional amount.

Disposition

Judge Philip M. Halpern concluded that the defendants failed to establish that the amount in controversy exceeded $75,000 and that removal was therefore improper. The court remanded the action to the Supreme Court of the State of New York, County of Putnam. It directed the Clerk to send a copy of the order to that court and close the federal action, and it terminated all pending matters.