United States District Court, W.D. Texas, Austin Division
REPORT AND RECOMMENDATION OF THE UNITED STATES
W. AUSTIN UNITED STATES MAGISTRATE JUDGE
HONORABLE LEE YEAKEL UNITED STATES DISTRICT JUDGE
the Court are Plaintiff's Opposed Motion to Remand (Dkt.
No. 4); and Defendants' Response (Dkt. No. 5). The
District Judge referred the motions to the undersigned for
report and recommendation pursuant to 28 U.S.C.
§636(b)(1)(B), Fed.R.Civ.P. 72, and Rule 1(d) of
Appendix C of the Local Court Rules.
Stuart Davis filed this suit in the 261st District
Court of Travis County, Texas. He alleges that he owned a
Texas Residential Insurance Policy issued by Travelers,
insuring his residence in Austin, Texas. When the property
sustained water damage Davis filed a claim under the policy.
Rick Limer was assigned by Travelers as the adjuster on the
claim. Davis alleges that Limer conducted a substandard
investigation and inspection, under-reported the damage to
the property, and undervalued the damage he observed. Davis
alleges that because of Limer's actions, his claim was
wrongly denied by Travelers. Davis brings claims against
Travelers for breach of contract, violations of the Texas
Prompt Payment of Claims Act (TPPCA), claims under both
Chapters 541 and 542 of the Texas Insurance Code, and breach
of the duty of good faith and fair dealing. He also brings
various causes of action against Limer, including a claim
under Chapter 541 of the Texas Insurance Code.
and Limer removed the case to this court based upon
diversity, asserting that Limer, though a Texas citizen, is
improperly joined. Davis now moves to remand, arguing that he
has properly pled a claim against Limer, and Limer's
citizenship should therefore be taken into account. Because
the Court agrees that Limer was not improperly joined,
complete diversity of citizenship is lacking and this case
should therefore be remanded to state court.
removal statutes are the starting point for analyzing any
claim of improper joinder. Smallwood v. Ill. Cent. R.R.
Co., 385 F.3d 568, 572 (5th Cir. 2004), cert.
denied, 544 U.S. 992 (2005). To remove a case based on
diversity, the defendant must demonstrate that all of the
prerequisites of diversity jurisdiction contained in §
1332 are satisfied, including the requirement of
“complete” diversity of citizenship. Id.
at 572. Complete diversity “requires that all persons
on one side of the controversy be citizens of different
states than all persons on the other side.”
McLaughlin v. Miss. Power Co., 376 F.3d 344, 353
(5th Cir. 2004). A non-diverse defendant does not destroy
diversity, however, when that defendant was “improperly
or collusively joined to manufacture federal diversity
jurisdiction.” Smallwood, 385 F.3d at 572. The
“heavy burden” to demonstrate that a party has
been improperly joined is on the removing party. Id.
at 574. The Fifth Circuit recognizes two avenues to establish
improper joinder: “(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.” Travis v. Irby, 326 F.3d 644,
646-47 (5th Cir. 2003); Int'l Energy Ventures Mgmt.,
L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 199
(5th Cir. 2016).
argues that in determining whether he has adequately pled a
cause of action against Limer, the Court should employ the
Texas “fair notice” standard and not the more
stringent federal standard. However, in conducting the
improper-joinder analysis, federal courts apply federal
pleading standards. Int'l Energy Ventures, 818
F.3d at 208. Thus, federal courts conduct a Rule
12(b)(6)-type analysis, looking initially at the allegations
of the complaint to determine whether the complaint states a
claim under state law against the in-state defendant.
Id. “Ordinarily, if a plaintiff can survive a
Rule 12(b)(6) challenge, there is no improper joinder.”
Id. This means that the Court will examine whether
Davis has asserted facts-which the Court accepts as true-that
“state a claim to relief that is plausible on its
face.” Bell Atl. Corp. v. Twombly, 550 U.S.
554, 570 (2007). In this context, courts “do not
determine whether the plaintiff will actually or even
probably prevail on the merits of the claim, but look only
for a possibility that the plaintiff may do so.”
Rodriguez v. Sabatino, 120 F.3d 589, 591 (5th Cir.
1997). Moreover, “§ 1441's holistic approach
to removal mandates that the existence of even a single valid
cause of action against [defendant] . . . (despite the
pleading of several unavailing claims) requires remand of the
entire case to state court.” Gray v. Beverly
Enters.-Miss., Inc., 390 F.3d 400, 412 (5th Cir. 2004).
asserts several claims against Limer. He contends that Limer
misrepresented the damages covered by the policy at issue,
and misrepresented the costs required to repair the covered
damage. Dkt. No. 1-1 at ¶ 41. He also contends that
Limer engaged in conduct that constitutes unfair acts or
practices in the business of insurance. Id. at
¶ 42. The Texas Insurance Code creates a private right
of action to anyone who sustains actual damages caused by
“a person” engaging in an act or practice defined
in Chapter 541 to be an unfair act or practice of insurance.
Tex. Ins. Code In § 541.151. Chapter 541 identifies a
number of actions as unfair acts or practices, including
making misrepresentations of the scope of a policy, as well
as a litany of “unfair settlement practices.”
Tex. Ins. Code §§ 541.051, 541.060. The definition
of “person” includes “an
individual . . . engaged in the business of
insurance, including an agent, broker,
adjuster, or life and health insurance
counselor.” Id. at § 541.002(2) (emphasis
added). Thus, Chapter 541 of the Texas Insurance Code
explicitly allows suit to be filed against an insurance
adjuster based on a failure to properly settle a claim or
engaging in a prohibited act or practice. On its face,
Davis' petition appears to allege such a claim.
and Limer nevertheless argue that Davis' claim against
Limer is predicated on the allegation that Limer improperly
denied Davis' claim. They point out that because only
Travelers was Davis' insurer, and thus only Travelers
could have paid Davis' claim, it is impossible for Limer
to have improperly denied the claim. Dkt. No. 5 at 3. To
support this argument, the Defendants rely on a number of
cases. See Messersmith v. Nationwide Mut. Fire Ins.
Co., 10 F.Supp.3d 721, 723 (N.D. Tex. 2014) (holding
that insurance adjuster was improperly joined because Tex.
Ins. Code § 541.060(a) applies only to insurers);
One Way Investments, Inc. v. Century Surety Company,
2014 WL 6991277, at *4 (N.D. Tex. Dec. 11, 2014) (same);
Plascencia v. State Farm Lloyds, 2014 WL 11474841,
at *6-7 (N.D. Tex. Sept. 25, 2014) (same).
cases Travelers relies on are only part of the story,
however. As Judge Chestney noted recently,
there is hardly consensus among the district courts in this
Circuit as to the availability of a remedy against an
adjuster with respect to all sections of Section 541.060. In
fact, a survey of the case law reveals “many seemingly
inconsistent cases both remanding and denying remand ...