United States District Court, N.D. Texas, Dallas Division
MEMORANDUM OPINION AND ORDER
Lindsay, United States District Judge.
October 5, 2017, United States Magistrate Judge David L.
Horan entered the Findings, Conclusions and Recommendation of
the United States Magistrate Judge (“Report”),
recommending that the court: (1) grant Plaintiff's Motion
to Remand (Doc. 13) because there is a reasonable basis to
predict that Plaintiff Margaret Mary
(“Plaintiff”) might be able to recover against
nondiverse Defendant John Spuriell (“Spuriell”)
on one or more of her claims under Chapter 541 of the Texas
Insurance Code and, thus, Spuriell was not improperly joined;
and (2) deny Plaintiff's request for attorney's fees.
Defendants filed objections to the Report on October 19,
2017. For the reasons herein explained, the court determines
that the magistrate judge's findings and conclusions are
correct, and accepts them as those of the
court. Accordingly, the court grants
Plaintiff's Motion to Remand (Doc. 13),
denies Plaintiff's request for
attorney's fees, and overrules
object to the magistrate judge's improper joinder
analysis and recommendation. Defendants' objections
consist primarily of arguments that were presented to and
rejected by the magistrate judge. Defendants assert that
there is “no reasonable possibility of recovery against
Spruriell” under sections 541.060(a)(1) or (a)(2) of
the Texas Insurance Code. Defendants provide no explanation
for this conclusory objection with respect to §
541.060(a)(1). Defs.' Obj. 1-5. Defendants contend that,
as a matter of law, § 541.060(a)(2) applies only to
insurers, not adjusters like Spuriell because adjusters have
no settlement authority, and Plaintiff does not allege that
Spuriell has settlement authority. Defendants acknowledge the
split of authority discussed in the parties' respective
briefs and the Report regarding adjuster liability under
§ 541.060(a)(2) but maintain, without explanation, that
the authority favorable to the position taken by them is the
“better approach.” Defs.' Obj. 2. In
addition, Defendants contend that Plaintiff's allegations
consist of boilerplate legal conclusions disguised as factual
allegations. Defendants argue that counsel for Plaintiff has
included allegations in pleadings in numerous other state
court cases that are identical to those in this case.
seeking to remove an action to federal court on the basis of
fraudulent or improper joinder bears a heavy burden.
Smallwood v. Illinois Cent. R.R. Co., 385 F.3d 568,
574 (5th Cir. 2004) (en banc). As correctly noted by the
magistrate judge, the test for improper joinder is
“whether the defendant has demonstrated that there is
no possibility of recovery by the plaintiff against an
in-state defendant, which stated differently means 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.” See Id. at 573 (5th Cir. 2004)
(citing Travis v. Irby, 326 F.3d 644, 648 (5th Cir.
the standard in Smallwood for improper joinder, this
court and others have concluded that an insurance adjuster
may be held personally liable for engaging in unfair
settlement practices under § 541.060(a)(2) of the Texas
Insurance Code because the adjuster can effect or bring about
the settlement of an insured's claim. See Avila v.
Metropolitan Lloyds Ins. Co. of Tex., No.
3:16-CV-3007-L-BN, 2017 WL 1232529 (N.D. Tex., Feb. 21,
2017), report and recommendation adopted by 2017 WL
1211339 (N.D. Tex., Apr. 3, 2017); Lopez-Welch v. State
Farm Lloyds, 3:14-CV-2416-L, 2014 WL 5502277, at *8-9
(N.D. Tex. Oct. 31, 2014); see also Arrow Bolt &
Elec., Inc. v. Landmark Am. Ins. Co., 3:17-CV-1894-M,
2017 WL 4548319, at *2 (N.D. Tex. Oct. 12, 2017); Manziel
v. Seneca Ins. Co., Inc., No. 3:15-CV-03786-M, 2016 WL
3745686, at *3 (N.D. Tex. July 13, 2016); Shade Tree
Apartments, LLC v. Great Lakes Reinsurance (UK) PLC, No.
A-15-CA-843-SS, 2015 WL 8516595, at *6 (W.D. Tex. Dec. 11,
2015); Denley Grp., LLC v. Safeco Ins. Co. of Ind.,
3:15-CV-1183-B, 2015 WL 5836226, at *3-4 (N.D. Tex. Sept. 30,
2015); Linron Prop., Ltd. v. Wausau Underwriters Ins.
Co., 2015 WL 3755071, at *5 (N.D. Tex. June 16, 2015).
court is aware that, despite the abundant case authority
supporting adjuster liability under § 541.060, a handful
of courts have questioned the appropriateness of holding an
adjuster individually liable for unfair settlement practices
under § 541.060. See Id. (discussing split of
authority). These cases reason that an adjuster cannot be
liable under § 541.060 for failing to settle or pay
claims because an adjuster only assesses the damage and does
not have authority to settle an insured's claim on behalf
of the insurance company. Id. (citations omitted).
While seemingly logical, this reasoning does not account for
the plain language of § 541.060. As noted by the
magistrate judge, Chapter 541 defines “person” to
include adjusters, and the statute does not distinguish
between the roles of insurers and adjusters. Report 16
(citing Tex. Ins. Code 541.002).
liability under § 541.060(a)(2) is not limited to final
settlement of claims but instead covers a broader swath of
conduct related to claim settlement. Specifically, §
541.060(a)(2) prohibits those engaged in the business of
insurance from “failing to attempt in good faith to
effectuate a prompt, fair, and equitable
settlement.” § 541.060(a)(2)(A) (emphasis added).
To “effectuate” means “to cause to come
into being” or “to bring about.” Linron
Prop., Ltd., 2015 WL 3755071, at *5 (quoting
Merriam-Webster's Collegiate Dictionary 397 (11th ed.
2003). As noted by the court in Linron Properties,
the use of the word “effectuate” in §
541.060(a)(2)(A) “rather than a word that conveys
finality (e.g., finalize), suggests that its prohibition
extends to all persons who play a role in bringing about a
prompt, fair, and equitable settlement of a claim, ”
not just insurers who finalize the settlement of a claim.
Id. at *5. “As the persons primarily
responsible for investigating and evaluating insurance
claims, insurance adjusters unquestionably have the ability
to affect or bring about the ‘prompt, fair, and
equitable settlement' of claims, because it is upon their
investigation that the insurance company's settlement of
a claim is generally based.” Id. (citing
Arana v. Allstate Texas Lloyds, No. 3:13-CV-0750-D,
2013 WL 2149589, at *5 (N.D. Tex. May 17, 2013). As a result,
delay caused by an adjuster's investigation can delay the
payment of a claim, and an insufficient investigation may
lead to an unfair settlement of a claim. Thus, based on the
reasoning in Linron Properties and the Report, the
court believes that the “better approach” is to
construe § 541.060(a)(2)(A) as not precluding, as a
matter of law, claims against adjusters but instead as
requiring the analysis of an adjuster's liability to be
viewed on a case by case basis.
in deciding Plaintiff's Motion to Remand, any split of
authority regarding the scope of an adjuster's liability
under the Texas Insurance Code weighs in favor of remand
because ambiguities in state law are construed against
removal and in favor of remand. See African Methodist
Episcopal Church v. Lucien, 756 F.3d 788, 793 (5th Cir.
2014) (“[A]ny ambiguities of state law must be
resolved” in favor of remand.); Hood ex rel. Miss.
v. JP Morgan Chase & Co., 737 F.3d 78, 84 (5th Cir.
2013) (“Any ambiguities are construed against removal
and in favor of remand to state court.”); Arrow
Bolt & Elec., Inc., 2017 WL 4548319, at *3 n.2
(concluding that split of authority regarding adjuster
liability under Chapter 541 weighed in favor of remand);
Roach v. Vehicle, 2016 WL 795967, at *6 (N.D. Tex.
Feb. 29, 2016) (“[I]n the context of a motion to
remand, the split in authority regarding the scope of an
insurance adjuster's liability under the Texas Insurance
Code must be resolved in favor of remand.”).
the sufficiency of Plaintiff's pleadings, the court,
having reviewed Plaintiff's Original Petition, agrees
with the magistrate judge that Plaintiff has pled sufficient
facts to support a claim against Spuriell for violations of
§ 541.060(a)(2), notwithstanding Defendants'
contention to the contrary. In ruling on Plaintiff's
Motion to Remand, the court only asks whether there is a
reasonable basis to predict that Plaintiff might be able to
recover against Spuriell. See Smallwood, 385 F.3d at
573. Because there is a reasonable basis to predict that
Plaintiff might be able to recover against Spuriell under
§ 541.060(a)(2), and because Plaintiff's Original
Petition sets forth sufficient facts under the federal
pleading standard to state a claim against Spuriell under
§ 541.060(a)(2) of the Texas Insurance Code, the court
determines that Spuriell was not improperly joined. Further,
as Plaintiff and Spuriell are citizens of Texas, diversity
jurisdiction is lacking, and the court must remand this case
to state court. 28 U.S.C. § 1447(c).
Plaintiff has pleaded other claims, some of which form the
basis for Defendants' objections to the Report, the court
need not determine whether Plaintiff has set forth sufficient
facts for it to predict that a reasonable basis exists for
recovery as to each claim or cause of action asserted. This
is so because 28 U.S.C. § 1441's “holistic
approach to removal mandates that the existence of even a
single valid cause against [an] in-state defendant (despite
the pleading of several unavailing claims) requires remand of
the entire case to state court.” Gray v.
Beverly Enters.-Miss., Inc., 390 F.3d 400, 412
(5th Cir. 2004) (footnote omitted). As the court has
determined that Plaintiff has adequately pleaded at least one
claim under Chapter 541 of the Texas Insurance Code, it need
not focus on the sufficiency of Plaintiff's pleadings as
to the other claims or Defendants' objections regarding
Plaintiff's other claims.
also contend that Spuriell was improperly joined because
Plaintiff cannot make out a claim against him under the bona
fide dispute rule and the economic loss and independent
injury rule. This matter was adequately addressed by the
magistrate judge such that no further discussion is warranted
to resolve Defendants' objections.
for all of the foregoing reasons, the court concludes, in
accordance with the magistrate judge's findings and
recommendation, that this action must be remanded because
Defendants have not met their heavy burden under
Smallwood of establishing that Spuriell was