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Xome Settlement Services, LLC v. Certain Underwriters at Lloyds

United States District Court, E.D. Texas, Sherman Division

April 17, 2019

XOME SETTLEMENT SERVICES, LLC and QUANTARIUM, LLC
v.
CERTAIN UNDERWRITERS AT LLOYD'S, LONDON SUBSCRIBING TO POLICY NO. B0621PXOME000116

          MEMORANDUM OPINION AND ORDER

          AMOS L. MAZZANT UNITED STATES DISTRICT JUDGE

         Pending before the Court is Plaintiffs Xome Settlement Services, LLC (“Xome”) and Quantarium, LLC's (“Quantarium”) Motion to Remand (Dkt. #5). Having considered the motion and the relevant pleadings, the Court finds that the motion should be denied.

         BACKGROUND

         Plaintiffs filed this insurance coverage action in the 367th Judicial District Court of Denton County, Texas seeking a declaration of their rights under an insurance policy issued by Defendants Certain Underwriters at Lloyd's, London subscribing to Policy No. B0621PXOME000116 (“the Policy”) (Dkt. #1; Dkt. #5 at p. 1). The Certain Underwriters subscribing to the Policy are Canopius Syndicate, Barbican Syndicate, and Antares Syndicate (collectively, “Defendants”) (Dkt. #1 ¶ 8).

         On November 29, 2018, Defendants removed the case to this Court (Dkt. #1). On December 20, 2018, Plaintiffs filed their Motion to Remand (Dkt. #5). Defendants filed a response to the motion on January 18, 2019 (Dkt. #9). Plaintiffs filed a reply in support of the motion on January 22, 2019 (Dkt. #10). The parties dispute whether Defendants waived their removal rights in the Policy.

         LEGAL STANDARD

         “Federal courts are courts of limited jurisdiction, possessing only that power authorized by Constitution and statute.” Gunn v. Minton, 568 U.S. 251, 256 (2013) (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994)). “Only state court actions that originally could have been filed in federal court may be removed to federal court by the defendant.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987) (citing 28 U.S.C. § 1441(a)). “In an action that has been removed to federal 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.” Humphrey v. Tex. Gas Serv., No. 1:14-CV-485, 2014 WL 12687831, at *2 (E.D. Tex. Dec. 11, 2014) (citations omitted). The Court “must presume that a suit lies outside [its] limited jurisdiction, ” Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001), and “[a]ny ambiguities are construed against removal and in favor of remand to state court.” Mumfrey v. CVS Pharmacy, Inc., 719 F.3d 392, 397 (5th Cir. 2013) (citing Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002)). “When considering a motion to remand, the removing party bears the burden of showing that federal jurisdiction exists and that removal was proper.” Humphrey, 2014 WL 12687831, at *2 (quoting Manguno, 276 F.3d at 723).

         ANALYSIS

         I. Subject Matter Jurisdiction

         Before addressing whether Defendants waived their right to remove the case from state court, the Court must determine whether it may exercise subject matter jurisdiction in this case. See Sangha v. Navig8 ShipManagement Private Ltd., 882 F.3d 96, 100 (5th Cir. 2018) (citations omitted) (It is the “general expectation that federal courts address subject-matter jurisdiction at the outset in the ‘mine run of cases' . . . .”). Defendants allege the Court may exercise subject matter jurisdiction pursuant to 28 U.S.C. § 1332.

         Section 1332(a) provides that federal district courts may exercise subject matter jurisdiction over “all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between . . . citizens of a State and citizens or subjects of a foreign state . . . .” Subject matter jurisdiction established by § 1332 is referred to as “diversity jurisdiction” or “diversity of citizenship jurisdiction.” “‘The diversity statute requires ‘complete diversity' of citizenship.'” Stiftung v. Plains Mktg., L.P., 603 F.3d 295, 297 (5th Cir. 2010) (quoting Whalen v. Carter, 954 F.2d 1087, 1094 (5th Cir. 1992)). “Complete diversity ‘requires that all persons on one side of the controversy be citizens of different states than all persons on the other side.'” Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1079 (5th Cir. 2008) (quoting McLaughlin v. Miss. Power Co., 376 F.3d 344, 353 (5th Cir. 2004)). In other words, “A federal court cannot exercise diversity jurisdiction if one of the plaintiffs shares the same citizenship as any one of the defendants.” Stiftung, 603 F.3d at 297 (citations omitted). A corporation is “deemed to be a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business.” 28 U.S.C. § 1332(c)(1). The citizenship of unincorporated entities is determined by the citizenship of all its members. Americold Realty Tr. v. Conagra Foods, Inc., 136 S.Ct. 1012, 1016 (2016) (citing Carden v. Arkoma Assocs., 494 U.S. 185, 195 (1990)); Harvey, 542 F.3d at 1080 (citations omitted) (“[T]he citizenship of a [Limited Liability Company (“LLC”)] is determined by the citizenship of all of its members.”). “The party seeking to assert federal jurisdiction bears the burden of proving that subject matter jurisdiction exists.” Stiftung, 603 F.3d at 297 (citing Howery, 243 F.3d at 919).

         It its Notice of Removal, Defendants claim Plaintiff Xome is a Pennsylvania corporation with a principal place of business in Texas and Plaintiff Quantarium is a Washington corporation with a principal place of business in Washington (Dkt. #1 ¶¶ 6-7). Therefore, Defendants conclude Plaintiffs are citizens of Pennsylvania, Texas, and Washington (Dkt. #1 ¶¶ 6-7).

         In Plaintiffs' Original Petition, Plaintiffs claim they are LLCs (Dkt. #1-3 ¶¶ 2-3). Both Plaintiff Xome and Plaintiff Quantarium's sole member is Xome Holdings LLC (Dkt. #1-3 ¶¶ 2- 3). Xome Holdings LLC is a “wholly owned subsidiary” of Nationstar Mortgage LLC (Dkt. #1-3 ¶ 2).[1] Nationstar Mortgage LLC is “wholly owned” by Nationstar Sub1 LLC and Nationstar Sub2 LLC (Dkt. #1-3 ¶ 2). Nationstar Sub1 LLC and Nationstar Sub2 LLC are both “wholly owned” by Nationstar Mortgage Holdings, Inc. (Dkt. #1-3 ¶ 2). Nationstar Mortgage Holdings, Inc. is a Delaware corporation with a principal place of business in Texas (Dkt. #1-3 ¶ 2). Accordingly, under Plaintiffs' allegations, Plaintiffs are citizens of Delaware and Texas.

         Under either Defendants or Plaintiffs' jurisdictional allegations, no “plaintiff[ ] shares the same citizenship as any one of the defendants.”[2] Stiftung, 603 F.3d at 297. Defendants allege they are unincorporated foreign entities whose members are foreign citizens (Dkt. #1 ¶¶ 8-11). Plaintiffs do not allege that Defendants' are citizens of any state within the United States (Dkt. #1-3 ¶¶ 4-6). Consequently, Defendants are foreign citizens. Comparing Plaintiffs' potential citizenship-Pennsylvania, Texas, Washington, and Delaware-and Defendants' citizenship- foreign-no plaintiff shares the same citizenship as any one defendant. Therefore, the Court may exercise subject matter jurisdiction over this case pursuant to § 1332 if Defendants did not waive their removal rights in the Policy.

         II. Waiver of Removal Rights

         There are three ways in which a party may waive its removal rights: “‘[1] by explicitly stating that it is doing so, [2] by allowing the other party the right to choose venue, or [3] by establishing an exclusive venue within the contract.'” Ensco Intern., Inc. v. Certain Underwriters at Lloyd's, 579 F.3d 442, 443-44 (5th Cir. 2009) (alterations in original) (quoting City of New Orleans v. Mun. Admin. Servs., Inc., 376 F.3d 501, 504 (5th Cir. 2004)). A waiver of a parties' removal rights need not contain explicit words. Southland Oil Co. v. Miss. Ins. Guar. Ass'n, 182 Fed.Appx. 358, 361 (5th Cir. 2006) (quoting Waters v. Browning-Ferris Indus., Inc., 252 F.3d 796, 797 (5th Cir. 2001)). However, “For a contractual clause to prevent a party from exercising its right to removal, the clause must give a ‘clear and unequivocal' waiver of that right.” New Orleans, 376 F.3d at 504 (citing McDermott Intern., Inc. v. Lloyds Underwriters of London, 944 F.2d 1199 (5th Cir. 1991); Waters, 252 F.3d at 796). “Ambiguous language cannot constitute a ‘clear and unequivocal' waiver.” Grand View PV Solar Two, LLC v. Helix Elec, Inc./Helix Elec. of Nev., L.L.C, J.V., 847 F.3d 255, 258 (5th Cir. 2017) (citing New Orleans, 376 F.3d 505-06).

         A. “Of Texas”

         Plaintiffs contend Defendants clearly and unequivocally waived their removal rights under the language of the “Choice of Law and Jurisdiction” provision of the Policy. The Choice of Law and Jurisdiction provision contains two sentences. The second sentence provides:

Any disputes between the Insured and Underwriters arising under or in connection with this Insurance policy shall be subject to the exclusive jurisdiction of Texas.

(Dkt. #5-1 at p. 24) (emphasis added). Plaintiffs argue the “of Texas” language of this sentence is like the language analyzed in Grand View, Ensco, Dixon, Waters, and Paolino (Dkt. #5 at pp. 3- 4) (citing Grand View, 847 F.3d at 255; Ensco, 579 F.3d at 442; Dixon v. TSE Intern. Inc., 330 F.3d 396 (5th Cir. 2003); Waters, 252 F.3d at 796; Argyll Equities LLC v. Paolino, 211 Fed.Appx. 317 (5th Cir. 2006)).

         The language at issue is distinguishable from the language in Grand View, Ensco, and Paolino because the language in these cases specified that specific states courts in Texas possessed exclusive jurisdiction. Grand View, 847 F.3d at 258 (Defendant waived its removal rights “by agreeing in the MCA to ‘the sole and exclusive jurisdiction of the courts of Harris County in the State of Texas for any action, suit or proceeding arising out of or relating to this Agreement or the Proposed Transaction.'”); Ensco, 579 F.3d at 448 (“The Policies' forum selection clause fixes ‘exclusive' venue for litigation in ‘the Courts of Dallas County, Texas.' This, prima facie, satisfies New Orleans.”); Paolino, 211 Fed.Appx. at 319 (“[T]he district court properly concluded that it is not a court ‘sitting in Kendall County.'”). If the language of the Policy here read, “shall be subject to the exclusive jurisdiction of [the courts of Denton County], Texas, ” the Court would remand the case finding Defendants clearly and unequivocally waived their removal rights in accordance with Grand View, E ...


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