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Vyas v. Atain Specialty Insurance Co.

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

May 15, 2019

SUCHETA VYAS, and DAVIS VYAS, Plaintiffs,
v.
ATAIN SPECIALTY INSURANCE COMPANY, and TEAM ONE CLAIMS, Defendants.

          ORDER

          Lee H. Rosenthal Chief United States District Judge

         Sucheta Vyas and Davis Vyas-together, “Vyas”-sued Atain Specialty Insurance Company and Team One Claims in Texas state court, alleging that these defendants unreasonably investigated and underpaid an insurance claim for storm damage to their hotels. (Docket Entry No. 1-2 at 9). Atain Insurance removed based on diversity jurisdiction, asserting that Team One was improperly joined. (Docket Entry No. 1). Vyas moved to remand, arguing that the court lacks diversity jurisdiction because Team One is a proper defendant. Atain Insurance responded and submitted documents. (Docket Entry Nos. 6, 9-10).

         After a careful review of the state-court pleadings, the notice of removal, the motion to remand, response, and the properly considered documents, the court concludes that there was improper joinder and denies the motion to remand. The reasons are explained in detail below.

         I. Background

         The allegations are straightforward and all too familiar. Vyas alleges that a February 2018 storm damaged some hotels they owned. Although they timely filed an insurance claim, Atain Insurance “overlooked or ignored” the property damage and paid too little. (Docket Entry No. 1- 2 at 9). Team One investigated the claim on Atain Insurance's behalf. (Id.). Vyas alleges that Team One “was unable or unwilling to perform or complete a reasonable inspection” and missed storm damage to two hotels. (Id.). Vyas alleges that the Casa Loma Motel had “exterior damage to the property, including damage to the built-up 3 ply roof, roll roof, soft metal and gutters, as well as stucco damage to the exterior elevations, ” and that the Holiday Plaza Motel had “exterior damage to the property, ” including damage to the roofs of buildings 1-4, a storage shed, and a laundry room; exterior elevation damage; and damage to rooms 204, 205, 219, 245, and 248, all of which Team One omitted or undervalued. (Id. at 9-10). Vyas alleges that Team One's “unreasonable investigation led to the wrongful underpayment and/or denial of [the] claim, ” and that Atain Insurance ratified Team One's findings and actions. (Id. at 10, 16).

         In January 2019, Vyas sued in the 85th Judicial District Court of Brazos County, Texas, asserting a contract-breach claim and violations of the Texas Insurance Code and the Texas Deceptive Trade Practices Act against Atain Insurance and Team One. (Id. at 13, 16-17). Atain Insurance timely removed on the basis that it is not a Texas citizen and that Vyas improperly named Team One as a defendant because Atain Insurance had accepted “whatever liability” Team One had to Vyas for its “acts or omissions related to the claim.” (Docket Entry No. 1 at 3 (quoting Tex. Ins. Code 542A.006(a))). Atain Insurance submitted a November 2018 letter it sent to Vyas, stating that:

Pursuant to section 542A.006(b) of the Texas Insurance Code, Atain [Insurance] accepts any liability that Robert Gutierrez, Team One Adjusting Services, Scott Abraham, [or] EnVista Forensics may have for their purported acts or omissions related to this claim.

(Docket Entry No. 1-2 at 38).

Vyas has moved to remand, arguing that § 542A.006 permits “insurers to assume responsibility for their agent-adjusters without allowing insurers to claim complete diversity when they assume responsibility for a non-diverse adjuster.” (Docket Entry No. 6 at 4). Atain Insurance responds that Vyas relies on cases involving insurers that elected to accept liability only after the lawsuit had been filed in state court, while Atain Insurance elected to accept liability for Team One months before suit was filed. (Docket Entry No. 9 at 3-5). As a result, Atain Insurance argues, Vyas's claims against Team One had no possibility of success when Vyas sued Team One. (Id. at 3).

         The parties' arguments are considered below.

         II. The Legal Standard

         “To remove a case based on diversity, the diverse defendant must demonstrate that all of the prerequisites of diversity jurisdiction contained in 28 U.S.C. § 1332 are satisfied.” Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 572 (5th Cir. 2004) (en banc). “A case may be removed pursuant to 28 U.S.C. § 1332 if there is complete diversity of citizenship and the amount in controversy is greater than $75, 000 exclusive of interests and costs.” Allen v. Walmart Stores, L.L.C., 907 F.3d 170, 183 (5th Cir. 2018).

         “[A] district court is prohibited by statute from exercising jurisdiction over a suit in which any party, by assignment or otherwise, has been improperly or collusively joined.” Smallwood, 385 F.3d at 572 (emphasis omitted) (citing 28 U.S.C. § 1359). Improper joinder can be established by showing the “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, 647 (5th Cir. 2003). The issue is “whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an instate 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.

         “The burden of persuasion on those who claim improper joinder is a heavy one.” Davidson v. Georgia-Pacific, L.L.C., 819 F.3d 758, 765 (5th Cir. 2016) ...


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