Continental Casualty Co. v. Kidney Real Estate Associates of Arvada, LLC

          RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

          Kristen L. Mix United States Magistrate Judge.

         This matter is before the Court on Respondent's Motion to Dismiss [#11]^[1] (the “Motion”). Petitioner filed a Response [#13] in opposition to the Motion and Respondent filed a Reply [#14]. Pursuant to 28 U.S.C. § 636(b)(1) and D.C.COLO.LCivR 72.1(c), the Motion [#11] has been referred to the undersigned for a recommendation regarding disposition. See [#12]. The Court has reviewed the Motion, the Response, the Reply, the entire case file, and the applicable law, and is sufficiently advised in the premises. For the reasons set forth below, the Court respectfully RECOMMENDS that the Motion [#11] be DENIED.

         I. Background

         Petitioner, an insurance company, issued Property Insurance Policy No. B 5094150675 (the “Policy”) to Respondent, the owner of property in Arvada, Colorado (the “Property”). Petition [#1] ¶ 4. The Policy covered “direct physical loss of or damage to covered property caused by or resulting from a covered cause of loss, including damage caused by wind or hail during the policy period.” Id. On May 8, 2017, the Property sustained damage caused by a hailstorm and Respondent subsequently submitted an insurance claim to Petitioner in the amount of $162, 489.57. Id. ¶¶ 3, 5. Petitioner conducted its own investigation of the Property damage and issued payment for the assessed damages in the amount of $19, 002.21. Id. ¶¶ 6, 7. This amount was the net payment after applying $1, 000 for the Policy's windstorm/hail deductible and $9, 599.81 in depreciation. Id. ¶ 7. Respondent disagreed with the coverage determination and invoked the appraisal provision of the Policy, which states:

If we and you disagree on the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:

a. Pay its chosen appraiser; and

b. Bear the other expenses of the appraisal and umpire equally. If there is an appraisal, we will still retain our right to deny the claim.

Id. ¶¶ 8, 10. Pursuant to this provision, Respondent and Petitioner retained their respective appraisers. Id. ¶ 8. The appraisers could not agree on selecting an umpire. Id. For that reason, Petitioner filed the Petition to Appoint Umpire [#1] (the “Petition”) in this Court on March 8, 2018. In the Petition, Petitioner only seeks declaratory relief in the form of the appointment of an appraisal umpire and states that jurisdiction in this Court is proper pursuant to 28 U.S.C. § 1332, Fed.R.Civ.P. 57, and 28 U.S.C. § 2201. Id. ¶¶ 1-3. On April 6, 2018, Respondent filed the present Motion [#11] pursuant to Fed.R.Civ.P. 12(b)(1), arguing that the Court does not have subject matter jurisdiction to appoint an appraisal umpire and that, because of this, the “action should have been filed in state court.” [#11] at 1.

         II. Standard of Review

         The purpose of a motion to dismiss pursuant to Rule 12(b)(1) is to test whether the Court has jurisdiction to properly hear the case before it. Because “federal courts are courts of limited jurisdiction, ” the Court must have a statutory basis to exercise its jurisdiction. Montoya v. Chao, 296 F.3d 952, 955 (10th Cir. 2002); Fed.R.Civ.P. 12(b)(1). Statutes conferring subject matter jurisdiction on federal courts are to be strictly construed. F & S Const. Co. v. Jensen, 337 F.2d 160, 161 (10th Cir. 1964). It is well established that “[t]he party invoking federal jurisdiction bears the burden of establishing such jurisdiction as a threshold matter.” Radil v. Sanborn W. Camps, Inc., 384 F.3d 1220, 1224 (10th Cir. 2004). “The lack of federal jurisdiction cannot be overcome by mere agreement of the parties.” Mitchell v. Maurer, 293 U.S. 237, 244 (1934).

         A motion to dismiss pursuant to Rule 12(b)(1) may take two forms: facial attack or factual attack. Holt v. United States, 46 F.3d 1000, 1002 (10th Cir. 1995). When reviewing a facial attack, the Court accepts the allegations of the complaint as true. Id. By contrast, when reviewing a factual attack, the Court “may not presume the truthfulness of the complaint's factual allegations.” Id. at 1003. With a factual attack, the moving party challenges the facts upon which subject matter jurisdiction depends. Id. The Court therefore must make its own findings of fact. Id. In order to make its findings regarding disputed jurisdictional facts, the Court “has wide discretion to allow affidavits, other documents, and a limited evidentiary hearing.” Id. (citing Ohio Nat'l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir. 1990); Wheeler v. Hurdman, 825 F.2d 257, 259 n.5 (10th Cir.), cert. denied, 484 U.S. 986 (1987)). The Court's reliance on “evidence outside the pleadings” to make findings concerning purely jurisdictional facts does not convert a motion to dismiss pursuant to Rule12(b)(1) into a motion for summary judgment pursuant to Rule 56. Id.

         III. Analysis

         Although the Motion [#11] is not a model of clarity, Respondent appears to argue that this Court lacks subject matter jurisdiction to adjudicate the Petition for three reasons. First, that there is no case or controversy between Petitioner and Respondent (collectively, the “Parties”) to raise a justiciable issue. See Motion [#11] at 2-3; Reply [#14] at 5-6. Second, that the amount in controversy requirement is not satisfied to grant the Court diversity jurisdiction pursuant to 28 U.S.C. § 1332(a). See Motion [#11] at 2; Reply [#14] at 3-5. Third, that these two deficiencies cannot be cured by Petitioner filing its Petition under the Declaratory Judgment Act. See Motion [#11] at 3-4; Reply [#14] at 6-8. The Court will address each argument in turn.

         A. Case or Controversy

         As stated above, Respondent first argues that the Court lacks subject matter jurisdiction because the Petition fails to demonstrate a case or controversy between the Parties which raises a justiciable issue. See Motion [#11] at 2-3; Reply [#14] at 5-6.

         Article III of the United States Constitution limits the jurisdiction of the federal courts to actual cases or controversies. U.S. Const. art. III, § 2, cl. 1. To meet this jurisdictional requirement, an actual case or controversy must be present at all stages of the litigation. See Copar Pumice Co. v. Tidwell, 603 F.3d 780, 792 (10th Cir. 2010). To establish that a case or controversy exists, Petitioner must demonstrate that the controversy is: (1) definite, concrete, and touches on the legal relations of the Parties, and (2) sufficiently immediate and real. Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-41 (1937); Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941). Another “element of the case-or-controversy requirement is that [Petitioner] must establish that [it] [has] standing to sue.” Clapper v. Amnesty Int'l USA, 568 U.S. 398, 408 (2013) (internal quotation marks and citations omitted). The elements of standing are the existence of a particularized injury that is fairly traceable to Respondent and capable of being redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). In other words, Petitioner must allege an injury in fact, assert a causal connection between the injury in fact and the challenged action, and demonstrate that there is a likelihood that the injury can be redressed by a favorable decision. See Jordan v. Sosa, 654 F.3d 1012, 1019 (10th Cir. 2011). As with all requisites to conferring subject matter jurisdiction, parties cannot create standing by agreement. Wilson v. Glenwood Intermountain Properties, Inc., 98 F.3d 590, 593 (10th Cir. 1996).

         Respondent first argues that “[t]he appointment of an umpire does not directly translate into a justiciable issue because of the possibility that [ ] the two appraisers will disagree as to the amount of loss and thereafter submit their differences to the Court-appointed umpire -- i.e., the umpire may not even be utilized to resolve the underlying amount of loss dispute.” Motion [#11] at 2-3. Respondent cites no authority to support this argument.

         The Court agrees with Petitioner that, whether or not the appraisers disagree at a future date, Respondent's argument ignores the adversarial dispute, or “disagreement, ” that presently exists between the Parties. The Petition clearly demonstrates at least two on-going controversies that include disputes over the value of loss to the Property and the appointment of a neutral umpire. See Petition [#1] ¶¶ 8, 9. “Indeed, [Respondent's] invocation of appraisal is premised on the existence of a contractual dispute between the [Parties].” Response [#13] at 7; see Cypress Chase Condo. Ass'n A v. QBE Ins. Corp., No. 10-61987-CIV, 2011 WL 1544860, at *5 (S.D. Fla. Apr. 15, 2011) (construing a similar appraisal provision as making “disagreement a prerequisite to appraisal”). Moreover, according to the Policy's appraisal provision, the appointment of an umpire is a condition precedent to an appraisal occurring. See Petition [#1] ¶ 10.^[2] Therefore, the Parties' disagreement over selecting an umpire precludes Petitioner (or Respondent) from obtaining the appraisal that Respondent invoked, and further delays resolution of the claim under the Policy. Response [#13] at 7; see Maryland Casualty Co., 312 U.S. at 273 (An actual controversy exists for purposes of the Declaratory Judgment Act where “there is a substantial controversy, between parties having adverse legal interests, ...