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Gonzalez v. State Auto Property & Casualty Insurance Co.

United States District Court, S.D. Texas, Laredo Division

June 16, 2017

LUIS GONZALEZ, Plaintiff
v.
STATE AUTO PROPERTY & CASUALTY INSURANCE COMPANY, et al., Defendants.

          ORDER

          Marina Garcia Marmolejo United States District Judge

         Plaintiff Luis Gonzalez moves to remand this insurance-coverage dispute because the Parties are not completely diverse. Plaintiff and Defendants Haag Engineering, Sampson Quang Nguyen, and David L. Teasdale (collectively "Haag Defendants") are Texas citizens. Defendant State Auto and the Haag Defendants oppose remand, arguing that the Court should disregard the Haag Defendants' citizenship because they have been improperly joined in an effort to defeat diversity jurisdiction.

         Because the Court concludes that the Haag Defendants-as engineers-are not in the business of insurance, Plaintiff has not pleaded any facts that would lead to a possible recovery against the Haag Defendants under the Texas Insurance Code. Thus, they are improperly joined. Plaintiffs Motion to Remand (Dkt. No. 7) is DENIED, and the Haag Defendants are DISMISSED WITHOUT PREJUDICE from this lawsuit.

         I. Background

         In March of 2016, a hailstorm bombarded Plaintiffs home in Laredo, Texas, damaging his roof. (Dkt. No. 1-3 at 3). Afterwards, Plaintiff submitted a claim to State Auto, its home-insurance provider, to recover all cost of repair to his home. (Id. at 4). State Auto then hired Haag Engineering, an independent engineering firm incorporated in Texas, to help inspect the roofs damage. (Id.). Haag sent two of its engineers, Nguyen and Teasdale, to the property to prepare an engineering report. (Id. at 4). The report concluded that the hailstorm did not cause the roofs damage. (Id.). State Auto relied upon this engineering report when it adjusted and allegedly undervalued Plaintiffs claim. (Id. at 5).

         Unhappy with State Auto's decision, Plaintiff filed this lawsuit in the 111th judicial district of Webb County. Plaintiffs original petition alleges that State Auto violated the Texas Insurance Code, breached its duty of good faith and fair dealings, and broke its contract with Plaintiff. (Id. at 10-13). It also alleges that the Haag Defendants violated the Texas Insurance Code by conducting unfair settlement practices. (Id. at 8-9).

         On March 24, 2017, State Auto removed this case based on diversity jurisdiction, contending that complete diversity exists and that the amount in controversy exceeds $75, 000.[1]All Defendants urge the Court to disregard the Haag Defendants' citizenship because they are improperly joined. They argue that since the Haag Defendants are not in the business of insurance, there is no possibility of recovering against them under the Texas Insurance Code. On April 20, 2017, Plaintiff moved to remand this case. He asserts that the Haag Defendants are in the business of insurance (even though they are officially engineers) because they acted as the de-facto adjusters of his claim by inspecting his home. Thus, Plaintiff says, he has pleaded a potential claim under the Texas Insurance Code, thereby defeating this Court's diversity jurisdiction.

         II. Removal Jurisdiction

         Under 28 U.S.C. § 1441, an action filed in state court may be removed to federal court when (1) subject matter jurisdiction exists and (2) the removal procedure is properly followed. Motions to remand to state court are governed by 28 U.S.C. § 1447(c), which states that "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." The removing party bears the burden of establishing that federal jurisdiction exists over the controversy. Winters v. Diamond Shamrock Chem. Co., 149 F.3d 387, 397 (5th Cir. 1998). This burden requires all disputed factual issues and any uncertainties under controlling state law to be resolved in favor of remand. Guillory v. PPG Indus., Inc., 434 F.3d 303, 308 (5th Cir. 2005).

         With limited exceptions, "[a] federal district court has removal jurisdiction over an action if the district court could have exercised original jurisdiction over it." Elam v. Kansas City S. Ry Co., 635 F.3d 796, 803 (5th Cir. 2011) (citing 28 U.S.C. § 1441(a)). Federal courts have original jurisdiction in cases where the amount in controversy exceeds $75, 000 and which are between, inter alia, "citizens of different States." 28 U.S.C. § 1332(a)(1). The doctrine of improper joinder, however, "constitutes a narrow exception to the rule of complete diversity." McDonal v. Abbott Laboratories, 408 F.3d 177, 183 (5th Cir. 2005).

         A. Improper Joinder

         When a "plaintiff improperly joins a non-diverse defendant, then the court may disregard the citizenship of that defendant, dismiss the non-diverse defendant from the case, and exercise subject matter jurisdiction over the remaining diverse defendant." Flagg v. Stryker Corp., 819 F.3d 132, 136 (5th Cir. 2016) (en banc). The removing party has the heavy burden of proving improper joinder. McDonal, 408 F.3d at 183.

         Improper joinder can be established in two ways: "(1) actual fraud in the pleading of jurisdictional facts, or (2) the inability of the plaintiff to establish a cause of action against the non-diverse party in state court." Smallwood v. III. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc). To make the second showing, a defendant must demonstrate that "there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against an in-state defendant." Id.

         Under this analysis, there are two ways to determine whether the plaintiff could possibly recover against the non-diverse defendant: (1) conduct a Rule l2(b)(6)-type analysis, looking to the face of the complaint to assess whether it states a claim against the non-diverse defendant; or (2) to "pierce the pleadings" and conduct a summary-judgment analysis to identify discrete facts that would preclude recovery against the non-diverse defendant. Id. at 573-74. The latter method is applicable only when the plaintiff has "misstated or omitted discrete facts that would determine the propriety of joinder." Id. If a court does pierce the pleadings and the defendant has come forth with some evidence supporting improper joinder, "the plaintiff must produce at least some controverting evidence." Michels v. Safeco Ins., 544 F.App'x 535, 539 (5th Cir. 2013) (per ...


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