United States District Court, S.D. Texas, Laredo Division
Garcia Marmolejo United States District Judge
United Fire & Casualty Company removed this case-an
insurance dispute regarding storm damage sustained by
Plaintiffs' commercial buildings-from state court on the
basis of diversity jurisdiction. (Dkt. Nos. 1 at 1; 1-3 at
4). In its notice of removal, United Fire recognized that the
parties are not completely diverse: Plaintiffs Yarco Trading
Company and T&T Forwarding Services and Defendant Patrick
Peden are all Texas citizens. (Id. at 2). Although
that would normally defeat diversity jurisdiction, Defendants
ask the Court to ignore Peden's citizenship and dismiss
him under the improper-joinder doctrine, arguing that (1)
Plaintiffs have failed to state a claim against Peden under
the federal pleading standard, and (2) even if Plaintiffs had
adequately pleaded claims against Peden, those claims are
precluded by United Fire's post-suit election to accept
liability under Texas Insurance Code § 542A.006.
(Id. at 2-3).
before the Court is Plaintiffs' Motion to Remand (Dkt.
No. 3). Plaintiffs argue that Peden's citizenship cannot
be ignored for diversity purposes because they have pleaded
valid state-law claims against him and United Fire's
§ 542A.006 election cannot retroactively render him
improperly joined. Because the Court agrees, Plaintiffs'
Motion to Remand is GRANTED, and this case
is REMANDED to the 49th Judicial
District of Webb County.
2017, a severe storm damaged Plaintiffs' commercial
buildings, which were insured by United Fire. (Dkt. No. 1-3
at 4). To repair their property Plaintiffs filed an insurance
claim. (Id.). United Fire eventually assigned
Patrick Peden, an adjuster, to inspect Plaintiffs'
property for any storm damage. (Id.). Plaintiffs
claim that he conducted a substandard, dilatory investigation
of the buildings' roofs, failed to respond to and
repeatedly misled Plaintiffs about his investigation, and
employed an engineering firm and metallurgist who were biased
toward findings favorable to insurance companies; as a
result, United Fire refused to pay damages owed under
Plaintiffs' insurance policy. (Id. at 4-6).
filed this lawsuit in the 49th Judicial District of Webb
County, asserting that United Fire and Peden violated
§§ 541.051, 541.060, and 541.061 of the Texas
Insurance Code and § 17.50(a) of the Texas Deceptive
Trade Practices Act. (Id. at 1, 6-9). After
receiving service of Plaintiffs' petition, United Fire
elected to accept liability for Peden under Texas Insurance
Code § 542A.006, (Dkt. No. 1-4 at 9), and then removed
the case to this Court, arguing that Peden was improperly
joined and his citizenship should not be considered when
assessing federal diversity jurisdiction, (Dkt. No. 1).
28 U.S.C. § 1441, an action filed in state court may be
removed to federal court when (1) the federal court has
subject matter jurisdiction, and (2) the removal procedure is
properly followed. However, "[i]f at any time before
final judgment it appears that the district court lacks
subject matter jurisdiction, the case shall be
remanded." 28 U.S.C. § 1447(c).
removing party bears the burden of establishing that federal
jurisdiction exists over the controversy. Winters v.
Diamond Shamrock Chem. Co., 149 F.3d 387, 397 (5th Cir.
1998). That burden requires all disputed factual issues and
any uncertainties under controlling state law to be resolved
in favor of remand. Guillory v. PPG Indus., Inc.,
434 F.3d 303, 308 (5th Cir. 2005) (citations omitted).
limited exceptions, "[a] federal district court has
removal jurisdiction over an action if the district court
could have exercised original jurisdiction over it."
Elam v. Kan. City S. Ry. Co., 635 F.3d 796, 803 (5th
Cir. 2011) (citing 28 U.S.C. § 1441(a)). Federal courts
have original jurisdiction in cases that are between
"citizens of different States" where the amount in
controversy exceeds $75, 000. 28 U.S.C. § 1332(a)(1).
1332 "requires 'complete diversity' of
citizenship." Stiftung v. Plains Mktg., L.P.,
603 F.3d 295, 297 (5th Cir. 2010) (quoting Whalen v.
Carter, 954 F.2d 1087, 1094 (5th Cir. 1992)). That is,
federal courts "cannot exercise diversity jurisdiction
if one of the plaintiffs shares the same citizenship as any
one of the defendants." Id.
improper-joinder doctrine provides a narrow exception to the
rule that parties must be completely diverse for federal
courts to exercise subject matter jurisdiction under 28
U.S.C. § 1332. McDonal v. Abbott Labs., 408
F.3d 177, 183 (5th Cir. 2005). Under this doctrine, the court
may disregard the citizenship of an improperly joined,
non-diverse defendant, dismiss that defendant from the case,
and exercise subject matter jurisdiction over the remaining
diverse defendants. Flagg, 819 F.3d at 136.
removing party bears the heavy burden of proving improper
joinder, Cuevas v. BAC Home Loans Servicing, LP, 648
F.3d 242, 249 (5th Cir. 2011), and can establish it in two
ways: "(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." Smallwood v. III. Cent. R.R. Co.,
385 F.3d 568, 573 (5th Cir. 2004) (en banc) (quoting
Travis v. Irby, 326 F.3d 644, 646-47 (5th Cir.
2003)). To make the second showing, a defendant must
demonstrate 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." Id.
are two methods of determining whether the plaintiff could
possibly recover against the non-diverse defendant: (1)
conduct a Rule 12(b)(6)-type analysis, looking to the face of
the complaint to assess whether it states a claim against the
non-diverse defendant; or (2) pierce the pleadings and
conduct a summary judgment-type analysis to identify discrete
facts that would preclude recovery against the non-diverse
defendant. Id. at 573-74. The latter method is
applicable only when the plaintiff has stated a claim against
the non-diverse defendant, but summary-judgment evidence
reveals misstated or omitted facts relevant to the propriety
of joinder. Id.
federal pleading standard is applied during an
improper-joinder analysis. Int'l Energy Ventures
Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193,
208 (5th Cir. 2016). Under the federal standard, the
pleadings must contain "enough facts to state a claim to
relief that is plausible on its face." Bell Ail.
Corp. v. Twombly, 550 U.S. 544, 570 (2007). Labels and
conclusions, formulaic recitations of the elements of a cause
of action, or naked assertions devoid of further factual
enhancement will not suffice. Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009). And for fraud claims, a heightened
pleading standard requires parties to "state with
particularity the circumstances constituting fraud."
FED. R. Civ. P. 9(b).