United States District Court, E.D. Texas
ORDER ADOPTING MAGISTRATE JUDGE'S REPORT AND
A. CRONE UNITED STATES DISTRICT JUDGE
court referred this case to the Honorable Zack Hawthorn,
United States Magistrate Judge, for pretrial management. The
court has received and considered the report (Doc. No. 11) of
the magistrate judge, who recommends that the court grant
Plaintiff Michael Hebert's “Motion to Remand”
(Doc. No. 6) because the state court's dismissal of
claims against Douglas Aaron Pharr (“Pharr”) and
Aaron Omar Castro (“Castro”) was an involuntary
act as to the plaintiff. On October 23, 2019, Defendant
United Property & Casualty Insurance Company
(“UPC”) filed its “Objection to Report and
Recommendation.” Doc. No. 12.
who files timely, written objections to a magistrate
judge's report and recommendation is entitled to a de
novo determination of those findings or recommendations
to which the party specifically objects. 28 U.S.C. §
636(b)(1)(C); Fed.R.Civ.P. 72(b)(2)-(3). “Parties
filing objections must specifically identify those findings
[to which they object]. Frivolous, conclusive or general
objections need not be considered by the district
court.” Nettles v. Wainwright, 677 F.2d 404,
410 n.8 (5th Cir. 1982) (en banc), overruled on other
grounds by Douglass v. United Servs. Auto. Ass'n, 79
F.3d 1415 (5th Cir. 1996) (en banc).
UPC objects to the magistrate judge's conclusion that
because UPC elected liability for Pharr and Castro after suit
was filed, the case is not removable “on its face nor
after UPC's election of liability.” Doc. No. 12, p.
3. Removal of an action to federal court based on diversity
of citizenship requires complete diversity and an amount in
controversy in excess of $75, 000. 28 U.S.C. §§
1441, 1446. The case was not removable on its face because
Pharr, Castro, and Hebert are Texas citizens and, therefore,
there was not complete diversity. Under the
voluntary-involuntary rule, a case generally can become
removable only by an affirmative act by the plaintiff.
See 28 U.S.C. § 1446(b)(3). UPC's election
of post-suit liability was an involuntary act with regard to
the plaintiff. See Stephens v. Safeco Ins. Co. of
Ind., No. 4:18-CV-00595, 2019 WL 109395, at *1, 5 (E.D.
Tex. Jan. 4, 2019). Therefore, the case was not removable on
its face or after UPC's election of liability.
then objects to the magistrate judge's determination that
the improper joinder exception to the voluntary-involuntary
rule does not apply. Doc. No. 12, p. 3. Specifically, UPC
argues that this court should adopt the court's holding
in Y an Qing Jiang v. Travelers Home &
Marine Ins. Co., which held that insurance agents were
improperly joined parties and therefore must be dismissed.
No. 18-CV-758, 2018 WL 6201954, at *2 (W.D. Tex. Nov. 28,
2018). Although Texas Insurance Code 542A.006
requires dismissal of an insured's claims against the
agent if the insurance company assumes liability, it does not
follow that the initial claim against the agent was an
improper joinder. Yarco Trading Co., Inc. v.
United Fire & Cas. Co., No. 5:18-CV-155, 2019 WL
3024792, at *6 (S.D. Tex. July 11, 2019). To establish an
improper joinder, the removing party must demonstrate either:
“(1) actual fraud in the pleading of jurisdictional
facts, or (2) inability to establish a cause of action
against the non-diverse party in state court.”
Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573
(5th Cir. 2004). Only the second prong was considered by the
court in Jiang, which found that following post-suit
election o f liability, there was no possibility of
plaintiff's recovery from the agent. Id. An
insurer's post-suit election of liability, however, does
not retroactively render adjusters improperly joined parties.
Yarco Trading Co., Inc., 2019 WL 3024792, at *6.
Hebert need only have stated valid claims against Pharr and
Castro when suit was initially filed for the parties to be
properly joined. The magistrate judge accurately states that
the Texas Insurance Code creates a private right of action
for damages caused by a “person” engaging in an
unfair insurance act or practice. Tex. Ins. Code §
541.151. Although the court does not determine the merits of
Hebert's argument, Hebert's allegation that Pharr and
Castro conducted an inadequate inspection is a valid state
claim. Id. Therefore, Pharr and Castro were not
improperly joined parties, and the improper joinder exception
to the voluntary-involuntary rule does not apply. See
Stephens, 2019 WL 109395, at *1, 5.
UPC argues that the court erred in not following the
“settled precedents” of Jiang and
Flores. Jiang, 2018 WL 6201954, at *2;
Flores, 2018 WL 5695553, at *5. The magistrate judge
addresses the conflicting opinions in the Southern, Western,
and Eastern Districts of Texas regarding removability
following post-suit election of liability. Doc. No. 11, p.
7-8 n.6. Even UPC concedes that Stephens v. Safeco
Insurance Company of Indiana, a case relied upon in the
magistrate judge's recommendation, “does not
provide the only framework [regarding] the issue.” Doc.
No. 12, p. 3. This contradicts UPC's later claim that the
issue is “settled precedent” as set forth in
Jiang and Flores. Doc. No. 12, p. 3.
Because there are conflicting opinions in the Southern,
Western, and Eastern Districts of Texas regarding
removability following post-suit election of liability, Jiang
and Flores are not settled law.
therefore, ORDERED that Defendant's
objections (Doc. No. 12) are OVERRULED,
Judge Hawthorn's report and recommendation (Doc. No. 11)
is ADOPTED, and Plaintiff's
“Motion to Remand” (Doc. No. 6) is
 The court in Flores v. Allstate
Vehicle & Prop. Ins. Co. reached a similar
conclusion. No. 18-CV-742, 2018 WL 5695553, at *5 (W.D. ...