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Lopez v. Progressive County Mutual Insurance Co.

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

October 2, 2019




         To the Honorable United States District Judge Fred Biery:

         This Report and Recommendation concerns Plaintiffs' Motion to Remand [#18]. All dispositive pretrial matters in this case have been referred to the undersigned for disposition pursuant to Western District of Texas Local Rule CV-72 and Appendix C [#6]. The undersigned has authority to enter this recommendation pursuant to 28 U.S.C. § 636(b)(1)(B). For the reasons set forth below, it is recommended that Plaintiffs' motion be denied.

         I. Background

         Plaintiffs Richard Lopez and Gloria Lopez (collectively, “Plaintiffs”) bring this putative class action against their insurer, Defendant Progressive County Mutual Insurance Company (“Progressive”), and its employee, Defendant April Hager (collectively “Defendants”). This case was originally filed in state court and subsequently removed to this Court by Progressive under the “mass action” provisions of the Class Action Fairness Act of 2005 (“CAFA”). See 28 U.S.C. § 1332(d).

         Plaintiffs did not originally file this suit as a class action. Their Original Petition against Defendants alleged individual claims for violations of the Texas Deceptive Trade Practices Act and fraud. (Orig. Pet. [#1-3] at 2-20.) Plaintiffs amended their Petition twice prior to removal. (First Am. Pet. [#1-17] at 2-15; Second Am. Pet. [#1-19] at 2-18.) The First Amended Petition supplemented Plaintiffs' allegations and added additional claims but did not assert class claims. (First Am. Pet. [#1-17].) It was in Plaintiffs' Second Amended Petition that Plaintiffs first raised class action allegations seeking recovery on behalf of other individuals. (Second Am. Pet. [#1-19] at 12-15.) Progressive promptly removed Plaintiffs' Second Amended Petition under CAFA, and Plaintiffs filed an Amended Complaint [#8], which is the live pleading in this case.

         By their class action, Plaintiffs, who are insureds of Progressive, seek to recover damages for the allegedly unlawful assertion by Defendants of a right to reimbursement based on a purported subrogation lien under the auto insurance contracts between Progressive and Plaintiffs. (Am. Compl. [#8] at 1.) Plaintiffs claim that they paid premiums to Progressive to have Medical Payments Coverage included in their policy so that in the event of a motor vehicle collision, the Medical Payments Coverage would pay for medical services received by the insureds. (Id. at 2- 3.) Plaintiffs allege that they were involved in a motor-vehicle collision caused by Corina Hernandez, who was insured by GEICO Choice Insurance Company (“GEICO”), and suffered serious personal injuries. (Id. at 3.) Plaintiffs received medical care in conjunction with their injuries; accrued medical bills for the services rendered; and those bills were paid by Progressive directly to the health-care providers. (Id.) Plaintiffs claim that Progressive subsequently sent standardized letters to Plaintiffs' counsel and GEICO asserting a right to reimbursement for these payments in the event of any third-party personal-injury recovery or settlement. (Id.)

         Plaintiffs settled their personal-injury claim with GEICO and Hernandez, and Plaintiffs asked Progressive, through Hager, for a statutory reduction of the claimed subrogation lien such that Progressive would share the costs of attorney's fees and litigation expenses as required by Texas law. (Id. at 4.) Hager allegedly declined and reaffirmed Progressive's claim for full reimbursement of Plaintiffs' medical expenses. (Id.) Defendants ultimately initiated arbitration proceedings against GEICO to force GEICO to pay the entire amount directly to Progressive. (Id.) GEICO was ordered by the arbitrator to pay, and did pay, the entire $13, 406.68 in medical payments to Progressive. (Id. at 6.) Plaintiffs filed this lawsuit because Defendants allegedly refused to reduce the claimed amount to share litigation fees and costs. (Id.) It was only after the parties engaged in discovery that Plaintiffs discovered facts that led them to take the position that they argue in this suit-that Defendants never had any rights to reimbursement in the first instance. (Id.) Plaintiffs also learned through discovery that Defendants have asserted subrogation liens on over $3, 560, 510.00 of money paid under Medical Payments Coverage policies in Texas from 2015 through November 2018 and have recovered over $1, 085, 222.00 from Progressive's insureds through subrogation liens on personal-injury recoveries. (Id.) Plaintiffs amended their pleadings to add these allegations.

         By their Amended Complaint, Plaintiffs maintain that Defendants do not have a contractual right of reimbursement to payments made directly to health-care providers, as opposed to payments made directly to Plaintiffs as the insureds. (Id. at 5.) Accordingly, Plaintiffs maintain that Defendants have wrongfully claimed the right to recover money paid to third-party health-care providers and have asserted a subrogation lien to take money that belongs to Plaintiffs. (Id. at 2.) Plaintiffs bring causes of action against Defendants for violations of the Texas Insurance Code, Tex. Ins. Code § 541.051, et seq., the Texas Deceptive Trade Practices Act, Tex. Ins. Code § 541.141(2), and the Texas Civil Practice & Remedies Code § 12.002, and for conversion and theft. (Id. at 7-11.) Plaintiffs bring this lawsuit as a class action and propose the following definition of the Class:

All individuals who had Medical Payments Coverage with their Auto Insurance policy issued by Progressive County Mutual Insurance Company in and subject to the laws of Texas, and against whom Defendants asserted the existence of rights to reimbursement, a subrogation lien, or demands for repayment through a Sub41 letter from their personal injury recoveries of money that was paid to anyone other than the insured individuals from April 3, 2015 to the present.

(Id. at 11.)[1]

         Plaintiffs now move to remand this action to state court, arguing that their case must be remanded under the local-controversy and home-state exceptions to CAFA [#18, #19]. Defendants responded to the motion [#24], and Plaintiffs filed a reply [#26]. Defendants have moved to strike a portion of Plaintiffs' reply or for leave to file a sur-reply, arguing that Plaintiffs raised an entirely new basis for remand in their reply brief-the discretionary-jurisdiction exception to CAFA [#27].[2] Plaintiffs did not respond to Defendants' motion to strike, and the undersigned will also recommend that the Court grant the motion as unopposed and strike Section IV of Plaintiffs' reply in which Plaintiffs argue for the first time CAFA's discretionary-jurisdiction provision.

         II. Motion to Strike

         The Court should grant Defendants' motion to strike. According to this Court's Local Rules, Plaintiffs' response to the motion was due within seven days of the motion's filing, on or before July 22, 2019. See Loc. R. CV-7(e) (responses to nondispositive motions due within seven days of motion's filing). To date, Plaintiffs have not filed a response to the motion. Pursuant to Local Rule CV-7(e), if there is no response filed within the time period prescribed by the rules, the court may grant the motion as unopposed. Moreover, Plaintiffs have waived the ability to seek remand under CAFA's discretionary-jurisdiction provision by raising only the local-controversy and home-state exceptions in their motion to remand. United States v. Jackson, 426 F.3d 301, 304 n.2 (5th Cir. 2005) (“Arguments raised for the first time in a reply brief, even by pro se litigants such as Jackson, are waived.”). Accordingly, the undersigned has not considered Plaintiffs' argument with respect to the discretionary-jurisdiction exception or the proposed sur-reply attached to Defendants' motion to strike.

         III. Motion to Remand

         The Court should deny Plaintiff's motion to remand. CAFA authorizes removal of a class action based on a modified jurisdictional test for removal, “which requires the removing defendant to prove minimal diversity and an aggregated amount in controversy of $5, 000, 000 or more.” Preston v. Tenet Healthsystem Memorial Med. Ctr., Inc. (Preston I), 485 F.3d 793, 797 (5th Cir. 2007) (citing 28 U.S.C. § 1332(d)). “Minimal diversity, ” for purposes of CAFA, means that “any member of a class of plaintiffs” is a citizen of a state or foreign state different from “any defendant.” § 1332(d)(2). The parties do not dispute that the aggregated amount in controversy in this case satisfies the $5, 000, 000 threshold and that the citizenship of the parties satisfies the liberal test for minimal diversity.

         Plaintiffs argue, rather, that the local-controversy and home-state exceptions set forth in CAFA, which are mandatory, apply and this Court therefore must decline jurisdiction and remand Plaintiffs' case to state court. These mandatory-abstention provisions are “designed to draw a delicate balance between making a federal forum available to genuinely national litigation and allowing the state courts to retain cases when the controversy is strongly linked to that state.” Hollinger v. Home State Mut. Ins. Co., 654 F.3d 564, 570 (5th Cir. 2011) (quoting Hart v. FedEx Ground Package Sys., Inc., 457 F.3d 675, 682 (7th Cir. 2006)).

         Pursuant to the local controversy exception, the district court “shall decline to exercise jurisdiction” when the action meets the following criteria:

(A)(I) greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which ...

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