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Kel Lee Properties, Inc. v. Evanston Insurance Co.

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

January 4, 2018

KEL LEE PROPERTIES, INC., Plaintiff,
v.
EVANSTON INSURANCE COMPANY, et al, Defendants.

          ORDER REMANDING CASE

          NELVA GONZALES RAMOS, UNITED STATES DISTRICT JUDGE.

         Plaintiff Kel Lee Properties, Inc. (KLP) filed this action against Defendants Essex Insurance Company (Essex) and its adjuster, Michael Cox (Cox) in the 36th Judicial District Court of Bee County, Texas. D.E. 1-5. At issue is an insurance claim for hail damage to a commercial real estate property, which Essex denied. KLP alleges state law claims of breach of contract, violations of the Texas Insurance Code, breach of the duty of good faith and fair dealing, unfair insurance practices, and violations of the Texas Deceptive Trade Practices Act.

         On September 12, 2017, Evanston Insurance Company (Evanston), as successor by merger to Essex, removed the case to this Court pursuant to 28 U.S.C. § 1332 diversity jurisdiction. D.E. 1. In so doing, Evanston asserts that Cox, the only non-diverse Defendant, is improperly joined. Before the Court is KLP's Motion to Remand (D.E. 5), timely filed October 3, 2017, and Evanston's response (D.E. 7). It is undisputed that the amount in controversy requirement of § 1332 is satisfied. See D.E. 5-1, para. II.

         The motion is instead based upon KLP's assertion that it has viable claims against Cox 1 / 12 and that he was properly joined, thus defeating diversity jurisdiction. For the reasons set out below, the Court GRANTS the motion.

         DISCUSSION

         A. Standard of Review

         On a motion to remand, “[t]he removing party bears the burden of showing that federal jurisdiction exists and that removal was proper.” Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002). “Any ambiguities are construed against removal because the removal statute should be strictly construed in favor of remand.” Id. The strict construction rule arises because of “significant federalism concerns.” See generally, Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941).

         “The party seeking removal bears a heavy burden of proving that the joinder of the in-state party was improper.” Smallwood v. Illinois Cent. R.R. Co., 385 F.3d 568, 574 (5th Cir. 2004) (en banc). The removing party proves improper joinder by demonstrating: (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 defendant in state court. See Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d 529, 532 (5th Cir. 2006) (citing Travis v. Irby, 326 F.3d 644, 646-47 (5th Cir. 2003)); see also Boone v. Citigroup, Inc., 416 F.3d 382, 388 (5th Cir. 2005). Only the second method is at issue here.

         Thus the motion to remand must be granted unless “there is absolutely no possibility that the plaintiff will be able to establish a cause of action against the non-diverse defendant in state court.” Griggs v. State Farm Lloyds, 181 F.3d 694, 699 (5th Cir. 1999). In other words, “the existence of even a single valid cause of action against 2 / 12 the in-state defendants (despite the pleading of several unavailing claims) requires remand of the entire case to state court.” Grey v. Beverly Enterprises-Mississippi, Inc., 390 F.3d 400, 412 & n. 11 (5th Cir. 2004) (and cases cited therein). To determine whether a plaintiff has a “reasonable basis for recovery under state law, the court may “conduct a Rule 12(b)(6)-type analysis.” Smallwood, 385 F.3d at 573; Anderson v. Georgia Gulf Lake Charles, 342 Fed.Appx. 911, 915 (5th Cir. 2009).

         The test of pleadings under Rule 12(b)(6) is devised to balance a party's right to redress against the interests of all parties and the court in minimizing expenditure of time, money, and resources devoted to meritless claims. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 558 (2007). Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the claim showing that the pleader is entitled to relief.” Furthermore, “Pleadings must be construed so as to do justice.” Rule 8(e). The requirement that the pleader show that he is entitled to relief requires “more than labels and conclusions[;] a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)).

         Factual allegations are required, sufficient to raise the entitlement to relief above the level of mere speculation. Twombly, 550 U.S. at 555. Those factual allegations must then be taken as true, even if doubtful. Id. In other words, the pleader must make allegations that take the claim from conclusory to factual and beyond possible to plausible. Id., 550 U.S. at 557. The Twombly court stated, “[W]e do not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face.” 550 U.S. at 570.

         The Supreme Court, elaborating on Twombly, stated, “The plausibility standard is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. In dismissing the claim in Iqbal, the Court stated, “It is the conclusory nature of respondent's allegations, rather than their extravagantly fanciful nature, that disentitles them to the presumption of truth.” 556 U.S. at 681.

         B. Claim Against Cox

         1. KLP Has Asserted a ...


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