United States District Court, S.D. Texas, Corpus Christi Division
Tagle Senior United States District Judge
before the Court are Plaintiff's Motion to Remand, Dkt.
No. 7; Defendant Union Standard Insurance Group, LLC's
Motion to Dismiss Under FRCP 12(b)(6), Dkt. No. 10; Defendant
Union Insurance Company's Motion to Strike
Plaintiff's First Amended Petition, Dkt. No. 12;
Defendant David Girard's Motion to Dismiss under FRCP
12(b)(6), Dkt. No. 16; Plaintiff's Motion for Leave to
File a Second Amended Petition, Dkt. No. 30; Defendant David
Girard's Opposed Motion to Quash and for Protective
Order, Dkt. No. 37; and Defendant David Girard's Motion
to Expedite Hearing, Dkt. No. 40.
a breach of contract of insurance case seeking a judgment for
insurance coverage pursuant to legal expenses incurred by
Plaintiff in an unrelated state court lawsuit. See
Dkt. No. 1 at 1. On October 18, 2016, Plaintiff Lewis
Mechanical Sales, Inc. (“Lewis Mechanical”) filed
an original petition alleging a breach of contract claim and
seeking damages against Defendants Union Standard Insurance
Group, LLC (“Union Standard”) and Union Insurance
Company (“Union”) in the 319th Judicial District
Court in Nueces County, Texas. See Dkt. No. 1, Ex.
B, Pl.'s Orig. Pet. [hereinafter Pl.'s Orig. Pet.].
In this petition, Lewis Mechanical states that it is the
owner of a “Commercial General Liability Policy”
issued by Union Standard and Union, and that it seeks
“monetary relief in excess of $100, 000 but not more
than $200, 000, including damages of any kind, penalties,
costs, expenses, pre-judgment interest, and reasonable and
necessary attorney's fees” from these
Defendants. Id. at ¶¶ 2, 7. On
October 31, 2016, Lewis Mechnical served Union with notice of
its petition. Dkt. No. 7 at 1. On November 18, 2016, Union
timely filed a notice of removal in this Court pursuant to 28
U.S.C. §§ 1441 and 1446, citing 28 U.S.C. §
1332 as the basis for removal providing this Court with
subject matter jurisdiction. See Dkt. No. 1. On
December 15, 2016, Lewis Mechanical served Union Standard
with notice of its original petition. Dkt. No. 7 at 1. On
December 16, 2016, without seeking leave of the Court, Lewis
Mechanical filed a First Amended Petition that adds new
claims alleging violations of the Texas Insurance Code and
breach of good faith and fair dealing, and adds a new
Defendant, David Girard (“Girard”), a Texas
resident and Union Standard employee. See Dkt. No. 6. On
the same day, Lewis Mechanical filed an opposed motion to
remand, arguing the Court lacks jurisdiction over this action
for want of complete diversity between the parties.
See Dkt. No. 7. Union responded to Lewis
Mechanical's motion to remand on January 6, 2017, arguing
that removal was proper as any non-diverse Defendants in this
action were improperly joined. Lewis Mechanical replied to
this response two months later, on March 7,
2017. Dkt. No. 33.
Union Standard filed a motion to dismiss Lewis
Mechanical's original petition pursuant to Federal Rule
of Civil Procedure 12(b)(6) on January 5, 2017, Dkt. No. 10,
and filed an answer to this petition on January 5, 2017, Dkt.
No. 11. On January 6, 2017, Union filed a motion to strike
Lewis Mechanical's first amended petition. Dkt. No. 12.
Girard filed a Rule 12(b)(6) motion to dismiss the claims
against him as alleged in Lewis Mechanical's first
amended petition on January 25, 2017, Dkt. No. 16, and filed
an answer to this first amended petition on January 25, 2017,
Dkt. No. 17. Lewis Mechanical responded to Union
Standard's motion to dismiss on January 26, 2017, Dkt.
No. 18, and to its motion to strike on January 27, 2017, Dkt.
No. 19. Union Standard replied to these responses on February
7, 2017, Dkt. No. 20, and February 9, 2017, respectively. On
February 15, 2017, Lewis Mechanical responded Girard's
motion to dismiss, Dkt. No. 24, to which Girard replied on
March 1, 2017.
March 6, 2017, Lewis Mechanical moved for leave to file a
second amended petition, seeking to provide additional detail
in support of its claims. Dkt. No. 30. Defendants responded
collectively to this motion on March 27, 2017, alleging that
it was untimely filed, and in any event is unsupported by
good cause. Dkt. No. 36. Finally, on March 29, 2017, Girard
filed an opposed motion to quash in regard to a notice of
deposition and subpoena duces tecum served by Lewis
Mechanical, Dkt. No. 37, and supported this motion in a
declaration timely filed on April 3, 2017, Dkt. No. 39. On
April 6, 2017, Girard filed a motion to expedite hearing
pursuant to his opposed motion to quash, Dkt. No. 40.
Motion to Remand
district courts have original jurisdiction in civil actions
where the matter in controversy exceeds $75, 000 and complete
diversity exists between the parties. 28 U.S.C. §
1332(a). District courts also have removal jurisdiction over
any civil action within their original jurisdiction.
Id. § 1441(a). Accordingly, a civil action
filed in state court may be removed to the district court if
the matter in controversy exceeds $75, 000 and complete
diversity exists between the parties, provided that no
defendant is a resident of the forum state. See Id.
§ 1332(a); see also Id. § 1441(a)-(b). For
the purpose of determining federal diversity jurisdiction, a
corporation is “deemed to be a citizen of any State by
which it has been incorporated and of the State where it has
its principal place of business.” 28 U.S.C. §
1332(c)(1). Here, the parties agree that more than $75, 000
in damages are in dispute, but disagree as to the citizenship
of Union, and as to whether Union Standard and Girard are
proper defendants in this action whose citizenship the Court
must account for in its jurisdictional analysis.
doctrine of “fraudulent” or
“improper” joinder prevents a district court
“from exercising jurisdiction over a suit in which any
party, by assignment or otherwise, has been improperly or
collusively joined to manufacture federal diversity
jurisdiction.” Smallwood v. Ill. Cent. R.R. Co.,
385 F.3d 568, 572 (5th Cir. 2004) (en banc), cert. denied,
544 U.S. 992 (2005). The Fifth Circuit has “recognized
two ways to establish improper joinder: (1) actual fraud in
the pleading of jurisdictional facts, or (2) inability of the
plaintiff to establish a cause of action against the
non-diverse party in state court.” Id. at 573.
In either case, “the burden is on the removing party to
prove that the joinder of the in-state parties was
improper[.]” Id. at 575. As to the second
means of showing improper joinder, the germane question is
“whether the Defendant has demonstrated that there is
no possibility of recovery by the Plaintiff against an
in-state defendant.” Id. To assess this issue,
the court “may conduct a Rule 12(b)(6)-like analysis,
looking initially at the allegations of the complaint to
determine whether the complaint states a claim under state
law against the in-state defendant.” Id. at
573. Additionally, where a plaintiff “has stated a
claim, but has misstated or omitted discrete facts that would
determine the propriety of joinder . . . the district court
may, in its discretion, pierce the pleadings and conduct a
summary inquiry.” Id.
notice of removal of this action, Union, an Iowa corporation,
alleges that it is the only proper Defendant in this action,
and that, as a non-local Defendant, it is entitled to remove
this action under § 1441(b)(2). Specifically, Union
alleges that Union Standard, a Texas corporation, has
“no relation . . . to the insurance policy at the
center of [Lewis Mechanical's] breach of contract claim,
” and was improperly joined by Lewis Mechanical to
defeat diversity. Dkt. No. 1 at 3, 5. In Lewis
Mechanical's motion for remand, filed after the addition
of Girard, a Texas resident, to its first amended petition,
Lewis Mechanical argues that Union's removal of this
action was inappropriate because: (i) Union has not shown
that Union Standard was improperly joined in this action,
(ii) Union Standard did not consent to removal, in violation
of 28 U.S.C. § 1446(b)(2)(A), (iii) Union is actually a
non-diverse Texas citizen, and (iv) Girard, too, is a
non-diverse defendant whose presence in this action strips
the Court of jurisdiction over Lewis Mechanical's claims.
See Dkt. No. 7. Union's response to Lewis
Mechanical's motion specifically denies each of these
arguments and alleges that: (i) Union Standard was indeed
improperly joined, as Lewis Mechanical has no possible claim
against it, (ii) Union Standard's consent to removal was
not required because it had not been properly served by the
time Union filed its removal petition, (iii) Union is indeed
diverse from Lewis Mechanical, as both its headquarters and
principal place of business are in Iowa, and (iv) Girard was
improperly joined in Lewis Mechanical's first amended
petition, which in any case should be struck as it was filed
without leave of court. See Dkt. No. 13.
whether Union Standard was properly joined, the parties do
not dispute that this company is a Texas corporation which
maintains its principal place of business in Texas.
See Dkt. No. 7 at 4. The Court's analysis here
therefore hinges on whether Lewis Mechanical can possibly
establish a cause of action against Union Standard. Union
alleges that it cannot, as Union alone issued the insurance
policy underlying Lewis Mechnical's breach of contract
claim, while Union Standard “was not involved” in
issuing this policy or in adjusting Lewis Mechanical's
claim under this policy. Dkt. No. 13 at 5. In its original
petition, Lewis Mechanical states that its insurance policy
was issued by both Union and Union Standard. See
Dkt. No. 1-2 at 2. Additionally, in its motion to remand,
Lewis Mechanical asserts that it has a viable claim against
Union Standard because it has received letters on Union
Standard letterhead, including letters sent by Girard, a
Union Standard employee who has admitted to his involvement
in adjusting Lewis Mechanical's policy claim.
See Dkt. 7 at 4, Dkt; No. 16 at 2. Yet Union makes
no secret of its relationship to Union Standard, and neither
do these letters. For instance, in an initial letter to Lewis
Mechanical memorializing its purchase of an insurance policy
with Union, the letterhead reads “Union Standard
Insurance Group, a W.R. Berkley Company, ” yet
clarifies that the letter is sent “on behalf of”
various insurance companies, including Union. Dkt. No. 7-1 at
3. Additionally, the letterhead and Girard's email
signature both include identical language admonishing their
readers to "[r]efer to the policy for the applicable
insurer, each of which has sole financial responsibility for
its own products and services.” Dkt. No. 7-1 at 5-6.
Meanwhile, Girard states that he assisted in adjusting Lewis
Mechanical's claim not on Union Standard's behalf,
but instead “in his capacity as an agent for Union,
” and supports this assertion with a sworn affidavit.
Dkt. No. 16 at 2; Dkt. No. 1-3, Aff. of Girard. Finally,
Union submits with its response to Lewis Mechanical's
motion to remand the entirety of its policy with Lewis
Mechanical, which lists “Union Insurance Company”
as the issuing insurer, and makes no reference to Union
Standard. See Dkt. No. 13, Ex. B.
on the foregoing, it is clear that while Union is a member of
the “Union Standard Insurance Group, ” it is a
separate corporate entity that contracted independently with
Lewis Mechanical to provide it with the insurance policy at
issue in this litigation. Despite what its original petition
asserts, therefore, Lewis Mechanical has no possible breach
of contract claim against Union Standard. For this reason,
the Court finds that Union Standard was improperly joined in
this action. Accordingly, Lewis Mechanical's second
argument for remand, which asserts that remand is required
because Union Standard did not consent to its removal, fails
too. A removal petition is only per se defective where all
properly joined and served defendants have not consented to
removal. Getty Oil Corp., Div. of Texaco, Inc. v.
Insurance Co. of N. Am., 841 F.2d 1254, 1262 (5th Cir.
1988). Here, not only is it undisputed by the parties that
Union Standard was not served by Lewis Mechanical until after
Union removed this action, but the Court additionally finds
that Union Standard is not a properly joined defendant in
this action. Union Standard's consent was therefore not
required before Union removed this action.
Mechanical also asserts that Union itself is not actually an
Iowa corporation, but instead a local defendant, on the basis
that it has a San Antonio address. Dkt. No. 7 at 2-3. Yet
corporate citizenship for diversity purposes looks to where
an entity is incorporated and where it has its
“principal place of business, ” not merely to any
jurisdiction in which it operates. See §
1332(c)(1). The parties do not dispute that Union is
incorporated in Iowa, leaving only the location of its
principal place of business in issue. Union states that,
while it has many offices in the United States, its principal
place of business is also in Iowa. Dkt. No. 13 at 2-4. It
submits evidence to support this assertion, including the
affidavit of Ty Simmons (“Simmons”), Union's
Vice President, General Counsel, and Secretary, in which
Simmons states that “[t]he overall operations for Union
are directed, coordinated, and controlled at Union's
corporate headquarters in Urbandale Iowa, including all
financial compliance, the preparation of all financial
statements, and the issuance of all claim payments and other
checks.” Dkt. No. 13-1, Aff. of Simmons. This
description is sufficient to evidence Union's claim that
its principal place of business is in Iowa, not Texas.
See Hertz Corp. v. Friend, 559 U.S. 77, 92-93 (2010)
(describing the “nerve center” of a corporation
as its principal place of business.) The Court therefore
finds Union's presence as a defendant in this action does
not destroy removal jurisdiction.
Mechanical's final claim with respect to its motion for
remand is that removal is improper here as Girard, a Texas
resident, has been joined in this action pursuant to its
first amended petition and destroys the complete diversity
necessary for this Court to retain jurisdiction. Yet this
claim too is unavailing, as the Court strikes this first
amended petition herein.
of the foregoing reasons, Lewis Mechanical's Motion to
Remand, Dkt. No. 7, is DENIED.
Union Standard's ...