United States District Court, S.D. Texas, Laredo Division
Garcia Marmolejo United States District Judge.
case concerns Defendant United Fire & Casualty
Company's alleged liability for storm damage to a
commercial building owned by Plaintiff. United Fire removed
the case to federal court on the basis of diversity
jurisdiction. The parties, however, are not completely
diverse: United Fire is a citizen of Iowa; but Plaintiff and
Defendant Walton, an adjuster employed by United Fire, are
citizens of Texas.
the lack of complete diversity ordinarily would defeat
federal jurisdiction, United Fire asks the Court to ignore
Walton's citizenship under the doctrine of improper
joinder, because there was no possibility that Plaintiff
could recover against Walton in state court. (Dkt. No. 1 at
2). In that regard, before this case was filed, United Fire
executed an "election of legal responsibility"
under Texas Insurance Code § 542.006, by which it
assumed Walton's liability and precluded any cause of
action against him. (Id.). For its part, Plaintiff
appears to acknowledge that United Fire's election
rendered Walton an improperly joined party, (see
Dkt. No. 4 at 1-2). It now seeks the Court's leave to
voluntarily dismiss the claims against him. (Id. at
considering the parties' submissions, the Court agrees
that Walton was improperly joined as a party to this case.
The Court therefore grants the parties' motion (Dkt. No.
1 at 2-3; Dkt. No. 4 at 2) to DISMISS the
claims against Walton without prejudice.
2017, a storm damaged a commercial building that Plaintiff
owned. (Dkt. No. 1-3 at 3). Plaintiff filed an insurance
claim with United Fire, which then assigned adjuster David
Walton to inspect the property damage. (Id.).
According to Plaintiff, Walton underestimated the extent of
the damage, and United Fire knowingly relied upon
Walton's undervaluation in denying some of Plaintiffs
claim. (Id. at 3-6).
April 2019, United Fire notified Plaintiff that, pursuant to
§ 542A.006 of the Texas Insurance Code, United Fire was
"elect[ing] to accept whatever liability its agent,
David Scott Walton [ ], might have to [Plaintiff] for
[Walton's] alleged acts or omissions related to the
claim." (Dkt. No. 1-8 at 2). About a month later,
Plaintiff filed suit in state court, alleging claims against
United Fire and Walton for breach of the common law duty of
good faith and fair dealing and violations of chapters 541
and 542 of the Texas Insurance Code. Plaintiff also alleged a
separate cause of action against United Fire for breach of
contract. (Dkt. No. 1-3 at 8-12).
Fire was served on June 3, 2019. (Dkt. No. 1-2). It filed a
Notice of Removal on June 24, 2019. In its Notice of Removal,
United Fire asserts that Walton was improperly joined and
urges the Court to disregard his citizenship in evaluating
the parties' diversity. (Dkt. No. 1 at 2). United Fire
reasons that because of its pre-lawsuit election of liability
for Walton's actions, there is "no reasonable
basis" for the Court to "predict that the Plaintiff
might be able to recover against Walton."
responded to Defendant's Notice of Removal in an Advisory
filed on August 9, 2019.Initially, Plaintiff does "not
concede" that Walton was improperly joined, recalling
that Walton was "the claims adjuster assigned to the
claim that made the basis of this lawsuit." (Dkt. No. 4
at 1-2). However, Plaintiff acknowledges that a motion to
remand would "likely be denied" because of United
Fire's pre-lawsuit election of liability. Plaintiff
therefore seeks leave to voluntarily dismiss the claims
against Walton. (Id. at 2).
limited exceptions, a federal district court may exercise
"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)).
As relevant here, 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.
doctrine of improper joinder is a "narrow exception to
the rule of complete diversity." McDonal v. Abbott
Labs., 408 F.3d 177, 183 (5th Cir. 2005). When a
plaintiff improperly joins a non-diverse defendant, the Court
may disregard the citizenship of the improperly joined
defendant, dismiss that defendant from the case, and exercise
subject-matter jurisdiction over the remaining, diverse
defendants. Flagg v. Stryker Corp., 819 F.3d 132,
136 (5th Cir. 2016) (en banc). The "heavy" burden
of proving improper joinder falls to the removing party.
Cuevas v. BAC Home Loans Servicing, LP, 648 F.3d
242, 249 (5th Cir. 2011).
joinder can be established 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) (citation omitted). 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.; see also Cumpian v. Alcoa World
Alumina, L.L.C., 910 F.3d 216, 219-20 (5th Cir. 2018)
(analyzing improper joinder under Federal Rule of Civil
Procedure 12(b)(6) standard).