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R&M Enterprises v. American Southern Insurance Co.

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

January 25, 2018

R&M ENTERPRISES, Plaintiff,
v.
AMERICAN SOUTHERN INSURANCE COMPANY, and ASSURANCE RESOURCES, INC. Defendants.

          ORDER AND OPINION

          MELINDA HARMON UNITED STATES DISTRICT JUDGE

         Before the Court is Defendant American Southern Insurance Company's (“American Southern”) Motion to Dismiss under Fed.R.Civ.P. 12(b)(6), Doc. 6, Plaintiff, R&M Enterprises' (“R&M”) Response, Doc. 9, American Southern's Motion to Strike R&M's First Amended Complaint, Doc. 15, R&M's Response and Motion for Leave to File R&M's First Amended Complaint, Doc. 19, and R&M's Supplement to its Motion for Leave, Doc. 25, American Southern's Motion to Dismiss R&M's First Amended Complaint under Fed.R.Civ.P. 12(b)(6), Doc. 16, R&M's Response, Doc. 20, and Defendant Assurance Resources, Inc.'s (“Assurance”) Motion to Dismiss under Fed.R.Civ.P. 12(b)(1), Doc. 23. After considering these documents and the applicable law, the Court grants American Southern's initial Motion to Dismiss, Doc. 6, but grants R&M's Motion for Leave to File its First Amended Complaint (“FAC”), Doc. 19, rendering American Southern's Motion to Strike as moot, Doc. 15. Considering the remaining motions, the Court grants Assurance's Motion to Dismiss, Doc. 23, which moots American Southern's subsequent Motion to Dismiss, Doc. 16, and remands this case to state court.

         I. Background

         On November 18, 2016, R&M filed its Original Petition in state court alleging that American Southern refused “to pay the costs to defend R&M, as required under the insurance policy” in accordance with “Section 1B- Contingent Liability Policy.” Doc. 1 at 12, (Cause No. 2016-80160 in the 334th Judicial District Court of Harris County, Texas). R&M asserted the claims of breach of contract, promissory estoppel, suit on sworn account, violations of the Texas Deceptive Trade Practices Act, violation of the Texas Insurance Code Chapter 541, violation of Texas Insurance Code Chapter 542, and bad faith. Id. at 14-20. Attached to the petition were an affidavit from the firm who defended R&M, Martin, Disiere, Jefferson, & Wisdom L.L.P., (the “Firm”), stating that the firm defended R&M on behalf of American Southern, Ex. 1, the Firm's account statement to “Assurance Resources, Inc., ” Ex. 2, the firm's invoices to “Assurance Resources, Inc., ” Ex. 3A-3I, and an invoice for expert witness services, Ex. 4. Id. at 24-121. Subsequently, American Southern removed the case to this Court under diversity jurisdiction. See 28 U.S.C. § 1332; Doc. 1 at 2.

         American Southern then filed its motion to dismiss and requests that the Court dismiss R&M's complaint for lack of standing and capacity to sue. Doc. 6. American Southern asserts that “the attachments to [R&M]'s Original Petition establish the attorney fees [R&M] bases its claims on were payable to the law firm of Martin, Disiere, Jefferson, & Wisdom L.L.P. and are owed by Assurance. . . .” Id. at 2. Because “[a]ll of [R&M's] claims arise from a third party's alleged failure to pay the attorney of another third party, ” American Southern asserts that R&M lacks standing to bring this suit and capacity to sue for these claims. Id. at 1-2. Therefore, American Southern asserts that R&M's “claims should be dismissed.” Id. at 2. R&M responded. Doc. 9.

         This Court issued a scheduling order setting the date to file motions for leave to amend pleadings and join new parties as June 30, 2017. Doc. 11. Next, the parties filed a joint case management plan wherein American Southern indicated that it intended to add Assurance “as a third-party defendant” following the resolution of American Southern's motion to dismiss. Doc. 10 at 2.[1]

         More than twenty-one days after the American Southern's motion to dismiss, R&M filed its FAC, wherein it added a “negligent and fraudulent misrepresentation” claim against American Southern and joined Assurance, asserting claims “for breach of contract, unjust enrichment, money had and received, tortious interference with existing contract, violations of the Texas Deceptive Trade Practices Act, and misrepresentation” against Assurance. Doc. 13 at 12-13.

         Among the attachments to the FAC is an unsigned renewal endorsement of R&M's limited liability policy. The liability policy lists the policy holder as R&M and the issuer as American Southern. Doc. 13-3 at 3, 5. The policy designates Assurance as the claims administrator, “Authorized Surplus Lines Agent, ” and the receiver of notices and suits concerning this policy. Id. at 4-5. And policy section I B contains the language, “We will pay Your legal defense in connection with a Claim of an Eligible Person.” Id. at 10.

         American Southern then filed its Motion to Strike the FAC as untimely, without written consent of American Southern, and without leave of court as required under Fed.R.Civ.P. 15. Doc. 15. R&M responded by requesting leave to file its FAC. Doc. 19. R&M attached in support an e-mail from American Southern's counsel, suggesting that “[R&M] will need to seek these damages from [Assurance]” because Assurance “controlled all aspects of retention of all counsel on this claim and had a contractual obligation with our client to set aside premium dollars to pay these fees and costs.” Doc. 19-1 at 2. The e-mail added, American Southern “had to shut down this related claims program because it lost substantial money, and they are out significant dollars.” Id. R&M later supplemented its motion for leave. Doc. 25.

         Subject to its Motion to Strike, American Southern filed a second motion to dismiss against the FAC asserting the same arguments presented in its earlier motion to dismiss. Doc. 16. R&M responded. Doc. 20.

         Subsequently, Assurance filed a motion to dismiss under Fed.R.Civ.P. 12(b)(1) asserting that the Court “lacks subject-matter jurisdiction” because “there is not complete diversity between the parties.” Doc. 23 at 1. In support, Assurance attaches an affidavit from its president and its articles of incorporation, indicating that Assurance “is incorporated in the State [of] Texas and duly registered with the Texas Secretary of state.” Doc. 23-1 at 2-6.

         All motions are now ripe for adjudication.

         II. Motion to Dismiss under 12(b)(6)

         American Southern requests that the Court dismiss R&M's complaint under 12(b)(6) for lack of standing and capacity to sue because the debt is owed to the Firm from ...


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