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Avalanche Food Group, LLC v. Starr Surplus Lines Insurance Co.

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

January 9, 2018

AVALANCHE FOOD GROUP, LLC, et al, Plaintiffs,
v.
STARR SURPLUS LINES INSURANCE COMPANY, et al, Defendants.

          ORDER ON MOTION TO REMAND

          NELVA GONZALES RAMOS UNITED STATES DISTRICT JUDGE.

         Plaintiffs Avalanche Food Group, LLC and AFG SPID, Inc. filed this action against their insurance carriers, [1] along with their independent adjuster, Jay Adame, Sr. (Adame), alleging violations of the Texas Insurance Code.[2] At issue is a claim for business interruption losses caused by a city-wide water contamination event on or about December 15, 2016. Plaintiffs originally filed the action in the 94th Judicial District Court of Nueces County, Texas on August 31, 2017.

         The Carriers removed the action to this Court on October 27, 2017, within thirty days of being served with the summons and complaint. D.E. 1, ¶ 4. The basis for removal is diversity jurisdiction pursuant to 28 U.S.C. § 1332. It is undisputed that the amount in controversy requirement is met. However, Defendant Adame is a Texas citizen, destroying the diversity of citizenship requirement. In support of federal jurisdiction, the Carriers argue that Defendant Adame is improperly joined such that the Court may disregard his citizenship.

         Before the Court is Plaintiffs' motion to remand (D.E. 10), in which Plaintiffs defend against the improper joinder argument. The Carriers have filed their response (D.E. 17). For the reasons set out below, the Court GRANTS the motion to remand (D.E. 10).

         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.

         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). The existence of a viable claim is determined according to federal pleading standards. Int'l Energy Ventures Mgmt, L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 208 (5th Cir. 2016). Under federal standards, the pleadings must allege sufficient facts to demonstrate that the claim alleged is plausible rather than speculative. Ashcroft v. Iqbal, 556 U.S. 662 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).

         B. Sufficiency of the Allegations Against Adame

         1. The Facts and their Fit Plaintiffs have alleged the following facts against Adame:

• In adjusting the claim, Adame retained an accounting expert that was biased in favor of the Carriers;
• Adame was aware of policy provisions prohibiting the reduction of a claim for certain stock, supplies, merchandise, and services, had no evidence of such items, yet adjusted the loss so as to reduce it for such items;
• Adame persisted in this error despite having it pointed out to him; and
• Adame prepared a sworn statement and proof of loss containing these errors and tried to get ...

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