United States District Court, W.D. Texas, San Antonio Division
ORDER FOR SUPPLEMENTAL BRIEFING
ELIZABETH S. ("BETS Y") CHESTNEY UNITED STATES
the Court is Plaintiff Velma Trejo's Motion to Remand
[#8] and Defendant Allstate Fire and Casualty Insurance
Company's Motion to Dismiss [#3]. On March 5, 2019, the
Honorable Fred Biery referred all pre-trial proceedings in
this case to the undersigned for disposition pursuant to Rule
72 of the Federal Rules of Civil Procedure and Rules CV-72
and 1(c) of Appendix C of the Local Rules of the United
States District Court for the Western District of Texas [#6].
On April 30, 2019, the undersigned held an initial pre-trial
conference in this case, at which the parties presented
argument on the pending motions. After considering the
arguments of the parties at the hearing, as well as their
motions, responses, and replies, the relevant law, and the
case file as a whole, the Court requests additional briefing
regarding the Court's subject-matter jurisdiction.
an underinsured-motorist (UIM) case. On January 11, 2017,
Trejo was involved in a three-vehicle accident on Jackson
Keller Road in Castle Hills, Texas. (Orig. Pet. [#1-3] at ¶
6.) Trejo filed a claim for UIM benefits with Allstate, her
insurer. (Id. at ¶ 11.) Allstate denied the
claim, and Trejo filed a complaint against Allstate and
Defendant Tonja Hess, a claims adjuster for Allstate, in
County Court at Law No. 3 of Bexar County, Texas. Trejo's
Original Petition and Request for Disclosure, which is the
live pleading in this case, asserts a breach-of-contract
claim and extra-contractual claims under the common law, the
Texas Insurance Code, and the Texas Deceptive Trade Practices
Act. (Id. at ¶¶ 11-19.)
timely filed its Notice of Removal [#1] in this Court on
February 25, 2019, invoking the Court's diversity
jurisdiction. On March 27, 2019, Trejo filed a motion to
remand [#8], arguing that complete diversity does not exist
because Hess, like Trejo, is a citizen of Texas Allstate does
not dispute that Hess, like Trejo, is a citizen of Texas.
(Notice of Removal [#1] at ¶ 10.) However, Allstate
contends that Hess' in-state and non-diverse citizenship
must be disregarded for diversity purposes because Trejo
improperly joined Hess to defeat diversity
jurisdiction. Allstate can demonstrate improper joinder
by showing “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
v. Illinois Cent. R. Co., 385 F.3d 568, 573 (5th Cir.
2004) (en banc).
contends Hess was improperly joined because Trejo has not
obtained a judgment establishing the liability and
underinsured status of the other motorist, and because Trejo
has not alleged that she suffered any damages unrelated to
and independent of the policy claim, she has not stated a
viable claim against Hess. In so arguing, Allstate relies
primarily on Brainard v. Trinity Universal Ins. Co.,
216 S.W.3d 809 (Tex. 2006). In that case, the Supreme Court
of Texas held that “the UIM insurer is under no
contractual duty to pay benefits until the insured obtains a
judgment establishing the liability and underinsured status
of the other motorist.” Id. at 818. In its
Motion to Dismiss, Allstate argues that Trejo's claims
against Allstate should be dismissed for the same
reasons-Trejo's failure to first obtain the necessary
judgment or to allege an independent injury.
arguendo, that Trejo's claims against Allstate
fail for these reasons, and that Trejo's claims against
Hess fail for the same reasons, the
“common-defense” exception to the
improper-joinder rule may be implicated. The
“common-defense” rule provides that “when a
nonresident defendant's showing that there is no
reasonable basis for predicting that state law would allow
recovery against an in-state defendant equally disposes of
all defendants, there is no improper joinder of the in-state
defendant.” Smallwood, 385 F.3d at 571. So, if
Hess has not been improperly joined because the
common-defense rule applies, this Court lacks subject-matter
jurisdiction over the dispute and the case must be remanded.
See Id. at 576 (“[The district court] lacks
the jurisdiction to dismiss the case on its merits. It must
remand to the state court.”).
courts have a “continuing obligation” to examine
the basis for their subject-matter jurisdiction, and
“[t]he issue may be raised by parties, or by the court
sua sponte, at any time.” MCG, Inc. v.
Great W. Energy Corp., 896 F.2d 170, 173 (5th Cir.
1990). Because this issue has not been briefed by the
parties, however, the Court will offer the parties an
opportunity to address the impact of Smallwood on
their case before ruling on the pending motions.
Specifically, the parties should address whether the
common-defense exception described in Smallwood
applies and deprives the Court of subject-matter
IS THEREFORE ORDERED that, within seven (7) days
from the date of this Order, the parties
FILE a supplemental brief, not to exceed ten
(10) pages, addressing the impact of Smallwood on
the Court's subject-matter jurisdiction.
IS SO ORDERED.
 A copy of Trejo's Original
Petition and Request for Disclosure is attached as part of
Exhibit A to Allstate's Notice of Removal [#1].
 The parties use the term
“fraudulent joinder” in their filings with the
Court. The Fifth Circuit, however, has adopted the term
“improper joinder” as being more consistent with
the statutory language than the term “fraudulent
joinder, ” so that is the term used in this Order.