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American Premier Underwriters, Inc. v. Estate of Chizum

United States District Court, N.D. Indiana, South Bend Division

June 11, 2015

AMERICAN PREMIER UNDERWRITERS, INC. and CONSOLIDATED RAIL CORPORATION, Plaintiffs,
v.
THE ESTATE OF ARTHUR M. CHIZUM, THE ARTHUR M. CHIZUM REVOCABLE LIVING TRUST of July 27, 1998, and RUTH E. CHIZUM, in her Capacity as Personal Representative, Defendants.

OPINION AND ORDER

JON E. DEGUILIO, District Judge.

I. Introduction and Procedural History

This case arises from a Consent Decree (Decree) between the Environmental Protection Agency (EPA) and the present Plaintiffs, Consolidated Rail Corporation (Conrail) and American Premier Underwriters, Inc. (APU), the successor-in-interest to ownership of Conrail. DE 4, 26-7. The Decree followed lawsuits by the EPA and the State of Indiana alleging Conrail's liability under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"). 42 U.S.C. ยง 9607; DE 26-7 at 5-6. Under that Decree, Conrail agreed to perform significant environmental remediation. DE 26-7 at 20-29. If Conrail deviates from this cleanup plan, it faces stipulated penalties, which accrue over time until compliance is restored. Id. at 30-36.

Following a study mandated by the Decree, the Plaintiffs came to believe that a drag strip owned by Arthur M. Chizum (the Property) had contributed to the contamination at issue. So, the Plaintiffs sued Chizum to recover part of their remediation costs. DE 4 at 5. While Chizum passed away after the litigation began, the Plaintiffs amended their complaint to name Chizum's Estate and Ruth E. Chizum (the Estate's representative) as defendants. DE 4-1 at 2. The parties then settled that lawsuit through a November 19, 2001 settlement agreement (the Settlement Agreement), which, among other things, permits "Conrail and APU reasonable access to the Chizum Property to perform any response action the EPA requires Conrail and APU to perform." Id. at 4.

The Plaintiffs now allege that Chizum's Estate and Ruth E. Chizum (the Estate's representative) have breached the Settlement Agreement by refusing to allow Plaintiffs reasonable access to the Property. According to the Plaintiffs, this has prohibited them from complying with the EPA Decree, exposing them to its stipulated penalty provision. DE 4 at 6-7. Their Complaint alleges that this amounts to a material breach of contract and seeks specific performance allowing the Plaintiffs access to the Property and a declaratory judgment articulating the Plaintiffs' right to access the Property. Id. at 7-10.

The Defendants responded, in part, by filing a motion to dismiss this litigation for lack of subject matter jurisdiction on November 4, 2014. They argue that this action does not belong in federal court because Plaintiffs do not meet the $75, 000 amount in controversy requirement for diversity jurisdiction under 28 U.S.C. 1332(a). DE 22. Defendants do not challenge the diversity of the parties.

II. Standard of Review

In analyzing a motion to dismiss for lack of subject matter jurisdiction, the Court must accept as true all well-pled factual allegations and must draw all reasonable inferences in favor of the Plaintiffs. Long v. Shorebank Dev. Corp., 182 F.3d 548, 554 (7th Cir. 1999). However, the Plaintiffs bear the burden of establishing that subject matter jurisdiction is proper. Lee v. City of Chi., 330 F.3d 456, 468 (7th Cir. 2003); Muscarello v. Ogle Cnty. Bd. of Comm'rs, 610 F.3d 416, 425 (7th Cir. 2010). The Court may look beyond the pleadings and consider any evidence submitted to determine whether subject matter jurisdiction exists. Long, 182 F.3d at 554. If a federal court concludes that it lacks subject matter jurisdiction over an action, it must dismiss that action in its entirety. See, e.g., Arbaugh v. Y&H Corp., 546 U.S. 500, 506 (2006).

III. Analysis

The Defendants argue that this action should not be in federal court, because the Plaintiffs cannot meet the $75, 000 amount in controversy requirement for diversity jurisdiction.[1] They articulate three reasons for this: (1) the Plaintiffs would not gain any funds if they prevailed, (2) any EPA fines suffered by the Plaintiffs were they to lose this litigation would be collateral, and thus exempt from consideration in calculating the jurisdictional threshold under Smith Prod. Co. v. Baldwin, No. 96-1746, 1997 WL 34742 (7th Cir. Jan. 24, 1997) and (3) the "mere suggestion" that the Plaintiffs would incur costs if they were denied relief is not an adequate justification for conferring federal jurisdiction-i.e. the damages offered by the Plaintiffs are too speculative. In each respect the Court disagrees.

A. The Proper Measure of Damages

First, the Defendants argue that the Plaintiffs cannot meet the $75, 000 requirement because they would not get any money if they prevailed, only the right to access the Property. But money does not have to change hands to meet the amount in controversy requirement.

Under the Seventh Circuit's "either viewpoint" rule, the Court looks to the "pecuniary result to either party which the judgment would directly produce" to determine if the jurisdictional limit is satisfied. McCarty v. Amoco Pipeline Co., 595 F.2d 389, 393 (7th Cir. 1979). In suits for equitable relief, this can be either the cost to a defendant (or the benefit that a defendant would have to forgo) to comply with the court's directive or the value of the relief to the plaintiff. In re Brand Name Prescription Drugs Antitrust Litig., 123 F.3d 599, 609 (7th Cir. 1997) (surveying acceptable means of meeting the amount in controversy requirement in equitable actions). When measuring the value of equitable relief to a plaintiff, the Court may consider harm averted as well as value gained. Hunt v. Washington State Apple Adver. Comm'n, 432 U.S. 333, 347 (U.S. 1977) ("In actions seeking declaratory or injunctive relief, it is well established that the amount in controversy is measured by the value of the object of the litigation.... [Here, the] value of that right is measured by the losses that will follow from the statute's enforcement."); In re Brand Name Prescription Drugs Antitrust Litig., 123 F.3d at 609 (noting that plaintiffs could establish the value of an injunction in a price-fixing case by pointing to the present value of future cost savings).

So, while the court values equitable relief based on the pecuniary result to either party that it would directly produce, such a "pecuniary result" is not limited to the literal exchange of money. Rather, averted future losses may be used to calculate the value of equitable relief to a plaintiff. In this case, the Plaintiffs argue that they will face losses in the form of stipulated penalties under the Decree and increased remediation costs if they do not receive the ...


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