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Lewis Mechanical Sales, Inc. v. Union Standard Insurance Group, LLC

United States District Court, S.D. Texas, Corpus Christi Division

April 7, 2017



          Hilda Tagle Senior United States District Judge

         Now 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.

         I. Procedural Background[1]

         This is 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.[2] 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.[3] 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.[4] Dkt. No. 33.

         Meanwhile, 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.

         On 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.

         II. Pending Motions

         a. Motion to Remand

         Federal 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.

         The 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.”[5] 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.

         In its 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.

         As to 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.

         Based 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.[6] 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.

         Lewis 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.

         Lewis 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.

         For all of the foregoing reasons, Lewis Mechanical's Motion to Remand, Dkt. No. 7, is DENIED.

         b. Union Standard's ...

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