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Trejo v. Allstate Fire and Casualty Insurance Co.

United States District Court, W.D. Texas, San Antonio Division

September 19, 2019

VELMA TREJO, Plaintiff,



         To the Honorable United States District Judge Fred Biery:

         This Report and Recommendation concerns Plaintiff Velma Trejo’s (“Trejo”) Motion to Remand [#8] and Defendant Allstate Fire and Casualty Insurance Company’s (“Allstate”) Motion to Dismiss [#3]. Also before the Court is Trejo’s Response to Allstate’s Motion to Dismiss [#11], Allstate’s Reply to Its Motion to Dismiss [#12], Allstate’s Response to Trejo’s Motion to Remand [#13], Trejo’s Supplemental Brief [#20], Allstate’s Supplemental Brief [#21], and Allstate’s Advisory to the Court [#22]. The Honorable Fred Biery referred all pretrial proceedings in this case to the undersigned for disposition pursuant to Rule 72 of the Federal Rules of Civil Procedure and Rules CV-72 and 1(c) of Appendix C of the Local Rules of the United States District Court for the Western District of Texas [#6]. The undersigned has authority to enter this Report and Recommendation pursuant to 28 U.S.C. § 636(b)(1)(B). For the reasons set forth below, it is recommended that Trejo’s Motion to Remand be GRANTED and this case REMANDED to County Court at Law No. 3 of Bexar County, Texas. It is also recommended that Allstate’s Motion to Dismiss be DISMISSED AS MOOT.

         I. Factual and Procedural Background

         This is an underinsured-motorist (“UIM”) case. On January 11, 2017, Trejo was involved in a three-vehicle accident on Jackson Keller Road in Castle Hills, Texas. (Pl.’s Original Pet. and Req. for Disclosure[1] [#1-3] at ¶ 6.) Trejo filed a claim for UIM benefits with Allstate, her insurer, which was denied. (Id. at ¶ 10.) On January 17, 2019, Trejo filed a complaint against Allstate and Defendant Tonja Hess (“Hess”), a claims adjuster for Allstate, in County Court at Law No. 3 of Bexar County, Texas.

         Trejo alleges various contractual and extra-contractual causes of action based on Allstate’s denial of his claim for UIM benefits. Specifically, Trejo’s Original Petition, which is the live pleading in this case, alleges claims for breach of contract, unjust enrichment, breach of the common-law duty of good faith and fair dealing, and statutory violations of Chapter 541 of the Texas Insurance Code and the Texas Deceptive Trade Practices-Consumer Protection Act (“the TDTPA”), Tex. Bus. & Com. Code Ann. §§ 17.41–17.63 (West 2019). (Original Pet. at ¶¶ 11–19.) Trejo also seeks a declaratory judgment under the Texas Uniform Declaratory Judgment Act (“the TUDJA”), Tex. Civ. Prac. & Rem. Code Ann. §§ 37.001–37.011 (West 2019). (Original Pet. at ¶¶ 22–23.)

         Trejo served Allstate through its registered agent on October 15, 2018, and Allstate timely filed its Notice of Removal [#1] in this Court on February 25, 2019. On March 4, 2019, Allstate filed a motion to dismiss for failure to state a claim upon which relief can be granted [#3]. Trejo filed a response [#11], and Allstate filed a reply [#12]. On March 27, 2019, Trejo filed a motion to remand for lack of subject-matter jurisdiction [#8]. Allstate filed a response [#13]. The Court held an initial pretrial conference on April 30, 2019, at which the Court heard argument on Trejo’s Motion to Remand. On June 19, 2019, Allstate filed an advisory to the Court [#22], in which it supplemented the authority upon which it relies to include this Court’s recent decision in Martinez v. Allstate Fire and Cas. Ins. Co., No. 5:19-CV-00035-DAE (W.D. Tex. June 18, 2019).[2]

         For the reasons set forth below, it is recommended that this case be remanded to the Bexar County Court at Law.

         II. Legal Standard

         Allstate removed this action to this Court on the basis of diversity jurisdiction, alleging that Hess had been improperly joined to defeat diversity jurisdiction.[3] The federal removal statute, 28 U.S.C. § 1441, allows for the removal of “any civil action brought in a State court of which the district courts of the United States have original jurisdiction.” § 1441(a). Because removal raises federalism concerns, “any doubt as to the propriety of removal should be resolved in favor of remand.” In re Hot-Hed Inc., 477 F.3d 320, 323 (5th Cir. 2007). Accordingly, “[t]he removing party bears the burden of showing that federal jurisdiction exists and that removal was proper.” Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002).

         Trejo alleges diversity jurisdiction pursuant to 28 U.S.C. § 1332. Diversity jurisdiction exists in “all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, ” and there is diversity of citizenship between the parties. § 1332(a). Section 1332(a) requires “complete diversity” of citizenship, which “requires that all persons on one side of the controversy be citizens of different states than all persons on the other side.” Vaillancourt v. PNC Bank, Nat. Ass’n, 771 F.3d 843, 847 (5th Cir. 2014) (quoting Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1079 (5th Cir. 2008)). “Additionally, a case cannot be removed based on diversity jurisdiction if any properly joined defendant is a citizen of the state in which the action is brought.” Alviar v. Lillard, 854 F.3d 286, 289 (5th Cir. 2017) (citing § 1441(b)(2)).

         If a plaintiff has improperly joined a non-diverse or in-state defendant, however, the citizenship of that defendant is disregarded for purposes of determining diversity. See McKee v. Kan. City S. Ry. Co., 358 F.3d 329, 333 (5th Cir. 2004). “The burden of persuasion on those who claim fraudulent joinder is a heavy one.” Travis v. Irby, 326 F.3d 644, 649 (5th Cir. 2003).

         In determining whether a defendant was improperly joined, “the focus of the inquiry must be on the joinder, not the merits of the plaintiff’s case.” Smallwood v. Ill. Cent. R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc). The Fifth Circuit has recognized 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.” Mumfrey v. CVS Pharmacy, Inc., 719 F.3d 392, 401 (5th Cir. 2013) (quoting McKee, 358 F.3d at 333). Allstate does not dispute that Hess, like Trejo, is a citizen of Texas. Because Allstate has not alleged actual fraud in the pleadings, the applicable test for improper joinder “is whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in- state 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; see also Guillory v. PPG Indus., Inc., 434 F.3d 303, 309 (5th Cir. 2005) (stating that the court does not determine “whether the plaintiff will actually or even probably prevail on the merits of the claim, but look[s] only for a possibility that the plaintiff might do so”).

         To answer this question, a court “may conduct a Rule 12(b)(6)-type analysis, looking initially at the allegations of the complaint to determine whether the complaint states a claim under state law against the in-state defendant.” Smallwood, 385 F.3d 568 at 573. Ordinarily, this analysis will be determinative. See Id . However, if the plaintiff has stated a claim against the in-state defendant, but has omitted discrete facts that would determine the propriety of joinder, the court may, in its discretion, “pierce the pleadings” and conduct a summary judgment-type inquiry. Id. “Although a court may pierce the pleadings and consider summary-judgment type evidence, the standard for finding improper joinder is not the summary judgment standard in which an absence in the plaintiff’s proof alone can be fatal.” Davidson v. Georgia-Pac., L.L.C., 819 F.3d 758, 766 (5th Cir. 2016). Rather, the court must “take into account all unchallenged factual allegations, including those alleged in the complaint, in the light most favorable to the plaintiff.” McKee, 358 F.3d at 334. In addition, “[a]ny contested issues of fact and any ambiguities of state law must be resolved in the plaintiff’s favor.” Id.

         The Fifth Circuit has instructed federal courts to apply the federal, not a state, pleading standard when testing for improper joinder. See Int’l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 208 (5th Cir. 2016). Under Rule 8 of the Federal Rules of Civil Procedure, a pleading must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). To survive a Rule 12(b)(6) motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). Although a complaint need not contain “detailed factual allegations” to survive a motion to dismiss, the “allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. The allegations must show “more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555).

         In analyzing the complaint, the “court accepts ‘all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.’” Martin K. Eby Const. Co. v. Dall. Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004) (quoting Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999)). However, the court does “not credit conclusory allegations or allegations that merely restate the legal elements of a claim.” Chhim v. Univ. of Tex. at Austin, 836 F.3d 467, 469 (5th Cir. 2016). In short, the court should dismiss a claim only if it determines that it is beyond doubt that the claimant cannot prove a plausible set of facts that support the claim and would justify relief. See Twombly, 550 U.S. at 570.

         III. ...

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