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Shrimad Holdings, L.P. v. Seneca Insurance Co.

United States District Court, W.D. Texas, Austin Division

April 4, 2018

SHRIMAD HOLDINGS, L.P., d/b/a Quality Inn & Suites, Plaintiff,



         Before the Court is Plaintiff Shrimad Holdings, L.P., d/b/a Quality Inn & Suites' (“Quality Inn”) Motion to Remand, (Dkt. 5), along with the parties' responsive briefing. After considering the parties' arguments and the relevant law, the Court agrees with Quality Inn that remand is proper.

         I. BACKGROUND

         Quality Inn filed this action in the 98th Judicial District Court of Travis County, Texas, on August 23, 2017. (Orig. Pet., Dkt. 4-1). In its petition, Quality Inn asserts causes of action arising under Texas law against Defendants Seneca Insurance Company (“Seneca”) and David Carberry (“Carberry”) (together, “Defendants”). (Id. at 12-17). Quality Inn alleges that one of its hotels was damaged in a storm and that Seneca (the insurer) and Carberry (the adjuster) failed to properly handle its insurance claim. (Id. at 3-11). Seneca removed the case to this Court on October 11, 2017, on the basis of this Court's diversity jurisdiction. (Dkt. 1). In its notice of removal, Seneca asserts that it is diverse from Quality Inn and that Carberry-who is not-was improperly joined. (Id. at 2).


         A defendant may remove any civil action from state court to a district court of the United States that has original jurisdiction. 28 U.S.C. § 1441(a). District courts have original jurisdiction over all civil actions that are between citizens of different states and involve an amount in controversy in excess of $75, 000, exclusive of interest and costs. 28 U.S.C. § 1332(a). Diversity jurisdiction “requires complete diversity- if any plaintiff is a citizen of the same State as any defendant, then diversity jurisdiction does not exist.” Flagg v. Stryker Corp., 819 F.3d 132, 136 (5th Cir. 2016) (citing Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806)). When a properly joined defendant is a resident of the same state as the plaintiff, removal is improper. 28 U.S.C. § 1441(b)(2).

         However, “the improper joinder doctrine constitutes a narrow exception to the rule of complete diversity.” Cuevas v. BAC Home Loans Servicing, LP, 648 F.3d 242, 249 (5th Cir. 2011). To establish improper joinder, the removing party has the “heavy” burden, id., to demonstrate either: “(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court.” Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004). Only the doctrine's second prong is before the Court here. (Not. Removal, Dkt. 1, at 4; Resp. Mot. Remand, Dkt. 14, at 2).

         Under the second prong of the improper joinder doctrine, a defendant must establish “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.” Smallwood, 385 F.3d at 573. A court evaluates the reasonable basis of recovery under state law by “conduct[ing] a Rule 12(b)(6)-type analysis” or “pierc[ing] the pleadings and conduct[ing] a summary inquiry.” Id.; see also Int'l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 207 (5th Cir. 2016) (stating that a court may use either analysis, but it must use one and only one). The Court agrees with the parties that the Rule12(b)(6)-type analysis is appropriate here. (See Resp. Mot. Remand, Dkt. 14, at 4).

         In conducting a 12(b)(6)-type analysis, federal pleading standards apply. Int'l Energy Ventures, 818 F.3d at 207. Accordingly, a plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Although “detailed factual allegations” are not necessary, a plaintiff must provide “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. The statements in the complaint must be sufficiently detailed to “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Id.

         The party seeking removal “bears the burden of establishing that federal jurisdiction exists and that removal was proper.” Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002). The removal statute must “be strictly construed, and any doubt about the propriety of removal must be resolved in favor of remand.” Gasch v. Hartford Accident & Indem. Co., 491 F.3d 278, 281-82 (5th Cir. 2007); see also Hood ex rel. Mississippi 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.”). A district court is required to remand the case to state court if, at any time before final judgment, it determines that it lacks subject matter jurisdiction. 28 U.S.C. § 1447(c).


         The parties agree that Quality Inn and Carberry are both Texas residents. (Not. Removal, Dkt. 1, at 3; Mot. Remand, Dkt. 5, at 1). This Court therefore lacks subject matter jurisdiction unless Seneca can meet its heavy burden to establish that Carberry was improperly joined. Seneca argues that Quality Inn fails to state a claim against Carberry either because it fails to allege sufficient facts to state a plausible claim for relief against him or because it asserts claims against him that are not actionable against insurance adjusters. (Not. Removal, Dkt. 1, at 4-5). Quality Inn responds that, among other things, insurance adjusters can be held liable under the Texas Insurance Code and that it has alleged enough facts to state a plausible claim for relief under that statute. (Mot. Remand, Dkt. 5, at 4). The Court agrees with Quality Inn. Its pleading against Carberry for violating Texas Insurance Code Section 541.060(a)(2) is, by itself, sufficient to state a plausible claim for relief against Carberry. (Orig. Pet., Dkt. 4-1, at 16).

         The Texas Insurance Code defines a “person” subject to liability under the code as any “individual . . . engaged in the business of insurance”-explicitly including adjusters. Tex. Ins. Code § 541.151(1); id. § 541.002(2); see also Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482, 486 (Tex. 1998) (holding that an insurer's employee who “engage[s] in the business of insurance” is a “person” for purposes of the Texas Insurance Code and thus may be held liable individually under the code). “The business of insurance includes the investigation and adjustment of claims and losses.” Vail v. Tex. Farm Bureau Mut. Ins. Co., 754 S.W.2d 129, 132 (Tex. 1988). Accordingly, the Fifth Circuit has recognized that insurance adjusters may be held individually liable for violations of the Texas Insurance Code. Gasch, 491 F.3d at 282.

         Quality Inn asserts that Carberry is individually liable under Texas Insurance Code Section 541.060(a)(2) for “[n]ot attempting in good faith to effectuate a prompt, fair, and equitable settlement of an insurance claim submitted in which liability has become reasonably clear.” (Orig. Pet., Dkt. 4-1, at 16). In support of that cause of action, Quality Inn alleges a number of relevant facts. According to Quality Inn, Carberry retained and oversaw an engineering firm that “spent little time inspecting” the property and limited the investigation “primarily to the roofs of the main building.” (Id. at 6). Carberry and the firm only conducted a limited visual check of a small, unrepresentative sample of the roof. (Id.). They did not conduct testing that would have identified the full extent of the hail and wind damage to the roof, nor did they inspect the building's interior for water damage. (Id.). Accordingly, Carberry's report omitted substantial damage to the roof, exterior vents, exterior air conditioning units, gutters, spouts, screens, signs, and interior guestrooms. (Id. at 6-7). Carberry also underestimated the cost to repair or replace the limited damage he did include in his estimate. (Id. at 7). As a result, Quality Inn claims, Carberry “prepared an estimate to misrepresent that no payment was due on the insurance claim” in order “to ostensibly effectuate settlement of [Quality Inn's] insurance claim.” (Id.). In fact, ...

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