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Robbins Place West Campus, LLC v. Mid-Century Ins. Co.

United States District Court, W.D. Texas, Austin Division

May 21, 2019

ROBBINS PLACE WEST CAMPUS, LLC
v.
MID-CENTURY INS. CO. and JILLIAN MEGHAN SHERMAN

          REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

          ANDREW W. AUSTIN UNITED STATES MAGISTRATE JUDGE

         TO: THE HONORABLE LEE YEAKEL UNITED STATES DISTRICT JUDGE

         Before the Court are Plaintiff's Opposed Motion to Remand (Dkt. No. 7); Defendants' Response (Dkt. No. 8); and Plaintiff's Reply (Dkt. No. 10). The District Judge referred the above-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.

         I. GENERAL BACKGROUND

         Plaintiff Robbins Place West Campus, LLC, owns commercial property in Austin, Texas. Mid-Century issued a Commercial Property Policy insuring the Property. The Property sustained wind and hail damage during a June 11, 2017 storm, and Robbins gave Mid-Century notice of loss, seeking coverage for the damages. Mid-Century opened a claim and assigned it to Jillian Meghan Sherman, as the claims adjuster. Robbins Place contends that Mid-Century and Sherman “completely mishandled Plaintiff's claims and caused Plaintiff further and additional damages.” Robbins thus filed suit in the District Court of Travis County, Texas against both Mid-Century and Sherman. Robbins sues Mid-Century for breach of contract, violation of the prompt payment of claims provisions of the Texas Insurance Code, and breach of the duty of good faith and fair dealing, and sues Sherman for violations of Chapters 541 and 542 of the Texas Insurance Code.

         Roughly three weeks after both defendants were served with the suit, Mid-Century notified Robbins that Mid-Century was making an election of legal responsibility for Sherman pursuant to § 542A.006 of the Texas Insurance Code. The next day, before any action could be taken by the state court in response to the election, Mid-Century removed the case to this Court. Though Sherman is a Texas resident, Mid-Century contends that Sherman is improperly joined as a party, and thus her citizenship should not be considered in the diversity analysis.

         At issue on the motion to remand is whether Mid-Century's election of responsibility (made the day before removal) was sufficient to eliminate Sherman as a party, or to make her joinder as a party no longer proper, thereby rendering the case removable to federal court under an improper joinder theory. The Court concludes that the election was made too late to effect Sherman's party status, and that because Sherman was otherwise a proper defendant, Robbins' Motion to Remand should be granted.

         II. 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)).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). In a removal action, it is the removing party that “bear[s] the burden of establishing jurisdiction.” Boone v. Citigroup, Inc., 416 F.3d 382, 388 (5th Cir. 2005). Additionally, “[a]ny ambiguities are construed against removal because the removal statute should be strictly construed in favor of remand.” Manguno v. Prudential Prop. and Cas. Ins., 276 F.3d 720, 723 (5th Cir. 2002).

         III. ANALYSIS

         This case turns on the impact of a recent Texas statute. That statute-an amendment to the Texas Insurance Code passed in 2017-allows an insurance company to elect to assume all liability for the acts of an adjuster on a claim. If an insurance company makes such an election before a suit is filed, any claim against the adjuster ceases to exist; if the election is made post-suit, the statute compels the dismissal of any claim brought against the adjuster. Mid-Century's primary argument is that once it elected to accept liability for Sherman under the new Texas statute, any suit against her had zero chance of success as a matter of law, rendering her joinder in the suit improper. Alternatively, Mid-Century argues that even if the new statute is not applied here, or if its election to accept liability was too late, Sherman was still improperly joined under prior law.

         The relevant statute, adopted in 2017, and now codified in Section 542A.006 of the Texas Insurance Code, affords an insurer the option to assume legal responsibility for the acts and omissions of an adjuster. The statute provides, in pertinent part:

(a) . . . in an action to which this chapter applies, an insurer that is a party to the action 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.
(b) If an insurer makes an election . . . before a claimant files an action . . . no cause of action exists against the agent related to the claimant's claim, and, if the claimant files an action against the agent, ...

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