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Greatland Investment, Inc. v. Mt. Hawley Insurance Co.

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

May 15, 2019

Greatland Investment, Inc., d/b/a Southwest Plaza, Plaintiff,
v.
Mt. Hawley Insurance Company and Kevin Wilson Mayfield, Defendants.

          MEMORANDUM OPINION AND ORDER

          Gray H Miller Senior United States District Judge

         Pending before the court is plaintiff Greatland Investment, Inc.'s motion to remand. Dkt. 6. Defendant Mt. Hawley Insurance Company responded. Dkt. 11. Having considered the motion, response, and applicable law, the court is of the opinion that Greatland's motion to remand (Dkt. 6) should be DENIED.

         I. Background

         This is an insurance coverage case. Greatland alleges that a storm damaged Greatland's real property in August 2017. Dkt. 1-2 at 7. Greatland subsequently submitted a claim to Mt. Hawley under an existing business insurance policy. Id. Mt. Hawley then allegedly assigned Kevin Mayfield, an insurance adjuster employed by Engle Martin & Associates (“Engle Martin”), to “inspect and adjust the claim.” Id.; Dkt. 1 at 4. According to Greatland, Mayfield found that the claim did not fall within Greatland's insurance policy and Mt. Hawley refused to pay the claim. Id.

         On December 3, 2018, Greatland sent a demand letter stating its intent to sue Mt. Hawley and Mayfield, among others. Dkt. 11-4 at 2. On January 15, 2019, Mt. Hawley responded and notified Greatland that Mt. Hawley had elected to accept liability for its employees, Engle Martin, and Engle Martin employees under Texas Insurance Code § 542A.006. Dkt. 11-5 at 2. On March 1, 2019, Greatland filed suit against Mt. Hawley and Mayfield in Texas state court for breach of contract, noncompliance with the Texas Insurance Code, and DTPA violations. Id. at 12-18.

         Mt. Hawley removed the case to this court on diversity jurisdiction grounds. Dkt. 1; 28 U.S.C. § 1332. Greatland now moves to remand. Dkt. 6. The parties do not dispute that the amount in controversy exceeds the $75, 000 jurisdictional threshold. See Dkt. 1-2 at 21 (state court petition claiming at least $1, 000, 000 in damages). However, Greatland argues that both itself and Mayfield are Texas citizens and that therefore the parties are not completely diverse. Dkt. 6. Mt. Hawley counters that it elected to accept liability for Mayfield under Texas Insurance Code § 542A.006. Dkt. 11 at 8. Thus, Mt. Hawley argues that Mayfield is improperly joined and that Mayfield's citizenship must be ignored for diversity purposes. Dkt. 11 at 14. Because Mt. Hawley is a citizen of Illinois, it contends that complete diversity exists between the parties. Dkt. 1 at 3.

         II. Standard of Review

         A. Rule 12(b)(1)

         Under Federal Rule of Civil Procedure 12(b)(1), a party can seek dismissal of an action for lack of subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). Subject matter jurisdiction based on diversity jurisdiction requires that (1) complete diversity exists among the parties, and (2) the amount in controversy exceeds $75, 000. 28 U.S.C. § 1332. Generally, “[i]n determining whether the court has subject matter jurisdiction, [the court] must accept as true the allegations set forth in the complaint.” Crane v. Johnson, 783 F.3d 244, 251 (5th Cir. 2015) (citation omitted).

         B. Improper Joinder

         Under 28 U.S.C. § 1441, a defendant may remove an action from state court to federal court if the district would have had original jurisdiction over that action. However, a case may be removed despite a non-diverse defendant if the non-diverse defendant was improperly joined for the purpose of destroying diversity. Hornbuckle v. State Farm Lloyds, 385 F.3d 538, 542 (5th Cir. 2004). The burden to establish improper joinder falls on the party that asserts it. Travis v. Irby, 326 F.3d 644, 649 (5th Cir. 2003).

         To prove improper joinder, the removing party must demonstrate that “there is no reasonable basis for the district court to predict that the plaintiff might be able to recover” against the non-diverse defendant. Int'l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 200 (5th Cir. 2016) (quoting Smallwood v. Ill. Cent. Ry. Co., 385 F.3d 568, 573 (5th Cir. 2004)). When determining whether a defendant is improperly joined, the court must usually limit its inquiry to the pleadings. Id.; see also Electro Grafix, Corp. v. Acadia Ins. Co., No. SA-18-CA-589-XR, 2018 WL 3865416, at *3 (W.D. Tex. Aug. 14, 2018). However, “the district court may, in its discretion, pierce the pleadings and conduct a summary inquiry” if the plaintiff has “misstated or omitted discrete facts that would determine the propriety of joinder.” Smallwood, 385 F.3d at 573.

         III. Analysis

         Section 542A.006(a) of the Texas Insurance Code provides that an insurer may “elect to accept whatever liability an agent might have to the claimant for the agent's acts or omissions related to the claim by providing written notice to the claimant.” Tex. Ins. Code Ann. § 542A.006(a) (West Supp. 2018). If an insurer makes such an election prior to the plaintiff filing suit, “no cause of action exists against the agent related to the claimant's claim, and, if the claimant files an action against the agent, the court shall dismiss that action with prejudice.” § 542A.006(b). In that case, there is no reasonable basis to predict that the plaintiff might be able to recover from the agent-defendant, and the agent-defendant is improperly joined. Electro Grafix, Corp., 2018 WL 3865416, at *4; see also Stephens v. Safeco Ins. Co. of Indiana, No. 4:18-cv-00595, 2019 WL 109395, at *7 (E.D. Tex. Jan. 4, 2019) (“[I]f the [§ 542A] election is made pre-suit, an adjuster subsequently joined is joined when state law mandates that there can be no viable claims against him.”). Thus, federal courts are to disregard the agent-defendant's ...


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