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Williams v. Allstate Vehicle and Property Insurance Co.

United States District Court, N.D. Texas, Dallas Division

July 23, 2019




         This Order addresses Plaintiff, David Williams's motion to remand [7]. For the reasons stated below, the Court grants the motion and remands this case to the 116th District Court in Dallas County, Texas.

         I. Removal to Federal Court

         This case involves a dispute over insurance benefits allegedly due under a homeowner's insurance policy. Williams originally filed suit in state court to recover damages and benefits from its insurer, Defendant Allstate Vehicle and Property Insurance Company (“Allstate”), and the insurance adjuster assigned to investigate and adjust Williams's claim, Defendant Murray McKay (“McKay”). Williams asserted claims against Allstate for breach of contract, breach of good faith and fair dealing, and for violations of the Texas Insurance Code. As to McKay, Williams asserted claims for violations of the Texas Insurance Code. Allstate then timely removed the case to this Court based on diversity of citizenship, alleging that McKay's Texas citizenship should be disregarded because he was improperly joined as a party in this case. Williams subsequently filed a motion to remand arguing that because McKay, a nondiverse defendant, is properly joined, the Court lacks subject matter jurisdiction over this action.

         II. Standard for Improper Joinder

         A defendant may remove a state court action to federal court if he establishes the federal court's original jurisdiction over the action. 28 U.S.C. § 1441(a); see also Winters v. Diamond Shamrock Chem. Co., 149 F.3d 387, 397 (5th Cir. 1998) (“[I]t is the defendant's burden to establish the existence of federal jurisdiction over the controversy.”). Thus, to remove a case, a defendant must show that the action either arises under federal law or satisfies the requirements of diversity. 28 U.S.C. § 1441(b). “Because removal raises significant federalism concerns, the removal statute is strictly construed ‘and any doubt as to the propriety of removal should be resolved in favor of remand.'” Gutierrez v. Flores, 543 F.3d 248, 251 (5th Cir. 2008) (quoting In re Hot-Hed, Inc., 477 F.3d 320, 323 (5th Cir. 2007)). A district court must remand a case if, at any time before final judgment, it appears that the court lacks subject matter jurisdiction. 28 U.S.C. § 1447(c).

         As a general matter, a federal court must remand a removed case where, as here, one of the defendants “is a citizen of the State in which [the] action is brought, ” thereby destroying diversity. Id. at § 1441(b). Such a case may remain in federal court, however, if the defendant shows the plaintiff improperly joined the nondiverse party to defeat diversity jurisdiction. Smallwood v. Illinois Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc). The Fifth Circuit recognizes two ways to establish improper joinder: “(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.” Id. at 573 (quoting Travis v. Irby, 326 F.3d 644, 646-47 (5th Cir. 2003)). Where the defendant alleges the latter, he 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.

         In determining whether a plaintiff has a reasonable basis of recovery, the Court conducts a rule 12(b)(6)-type analysis to determine whether the plaintiff has failed to state a claim against the nondiverse defendant under state law. Int'l Energy Ventures Mgmt., L.L.C. v. United Energy Group, Ltd., 818 F.3d 193, 200 (5th Cir. 2016) (citing Smallwood, 385 F.3d at 573)). The Fifth Circuit has held that the federal pleading standard, rather than the state pleading standard, applies when conducting a rule 12(b)(6)-type analysis in the improper joinder context. Id. at 208. But the focus of the inquiry remains on the joinder, not the merits of the plaintiff's case. Id. at 200.

         III. Plaintiff Properly Joined McKay

         Allstate admits that an insured may have a valid cause of action against an insurance adjuster like McKay. Moreover, the Fifth Circuit has held that the Texas Insurance Code authorizes actions against insurance adjusters in their individual capacities, even where the employer is also liable for the adjuster's actions. Gasch v. Hartford Acc. & Indem. Co., 491 F.3d 278, 282 (5th Cir. 2007). McKay therefore may be individually liable for violating the Texas Insurance Code. Allstate argues, however, that Williams fails to plead sufficient facts showing a plausible right to relief against McKay for violations of the Texas Insurance Code. The Court disagrees.

         A. Rule 12(b)(6) Standard

         Rule 12(b)(6) permits a court to dismiss a plaintiff's complaint for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). When addressing a rule 12(b)(6) motion to dismiss, the Court must determine whether the plaintiff has asserted a legally sufficient claim for relief. Blackburn v. City of Marshall, 42 F.3d 925, 931 (5th Cir. 1995). To survive dismissal, a complaint must include “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). To satisfy this standard, a plaintiff must plead factual content “that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A plaintiff must provide “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. A complaint, however, need not contain “detailed factual allegations.” Ashcroft, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). The plaintiff's factual allegations “must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Twombly, 550 U.S. at 555.

         B. Williams States a Plausible Claim Against McKay

         The parties do not dispute that the jurisdictional amount in controversy is met or that Williams and McKay are Texas citizens. Instead, Allstate alleges that McKay is improperly joined because Williams's claims against McKay are deficient under the federal pleading standard, and there is thus ...

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