Escuadra v. Geovera Specialty Ins. Co.

• Citation: 739 F.Supp.2d 967
• Decision Date: 09 September 2010
• Docket Number: No. 1:09-CV-974,1:09-CV-974
• Parties: Maria ESCUADRA, Plaintiff v. GEOVERA SPECIALTY INSURANCE COMPANY, et al., Defendants.
• Court: United States District Courts. 5th Circuit. United States District Court of Eastern District Texas

739 F.Supp.2d 967

Maria ESCUADRA, Plaintiff

v.GEOVERA SPECIALTY INSURANCE COMPANY, et al., Defendants.

No. 1:09-CV-974.

United States District Court,

E.D. Texas,

Beaumont Division.

Sept. 9, 2010.

Michael R. Ramsey, Sean Michael Russell, The Mostyn Law Firm, Beaumont, TX, for Plaintiff.

Jay Scott Simon, Barry Andrew Moscowitz, Thompson Coe Cousins & Irons, Dallas, TX, for Defendants.

Opinion Re Motion To Remand

EARL S. HINES, United States Magistrate Judge.

This "Hurricane Ike case" is assigned to United States district judge Ron Clark and is referred to the undersigned for pretrial proceedings under an administrative, unwritten referral order entered on November 19, 2009.

Unlike most such cases filed in or removed to this court after Hurricanes "Rita" and "Ike," the parties find themselves unable to resolve their dispute amicably, and they jointly request expedited rulings on two pending motions: (1) plaintiff's motion to remand this case back to the 172nd Judicial District Court of Jefferson County, Texas, and (2) defendant's motion to compel appraisal under the provisions of the homeowners' insurance policy at issue in this case. After briefing, both motions were argued orally at a hearing convened on July 20, 2010.

Plaintiff's motion to remand argues that this court lacks subject-matter jurisdiction, an issue that logically must be determined before addressing a non-jurisdictional appraisal question. Accordingly, this opinion is limited in scope to the question of whether this action must be remanded.

I. Magistrate Judge Authority

United States magistrate judges lack authority to adjudicate federal civil cases absent consent of all parties. The parties to this case have not consented to entry of judgment by a magistrate judge. A threshold question, therefore, is whether a motion to remand—which does not adjudicate the merits of a claim or defense, but which can result in terminating proceedings in federal court—is within a magistrate judge's authority to determine.

No definitive Supreme Court or Fifth Circuit decision teaches whether orders of remand adjudicate claims or defenses. Lower courts and other circuits are split.¹ But, in a recent case whereonly pretrial matters were referred to a magistrate judge, the Fifth Circuit affirmed a magistrate judge's order remanding certain actions without objecting to the magistrate judge's action.² In that case, however, the magistrate judge's authority to act on the remand motions was not challenged, and the appellate court's recitation of historical facts reveals that the presiding district judge reviewed and ratified the magistrate judge's order. Thus, magistrate judges apparently may rule on motions to remand at least when district-judge review is not foreclosed.

Here, both parties can secure district-judge review of any order entered by the undersigned magistrate judge.³ Consequently, the undersigned will enter a direct, efficient and less cumbersome ruling instead of a report.

II. Parties; Nature of Suit; Factual Background

A. Parties

Plaintiff, Maria Escuadra ("Escuadra"), resides and is domiciled in Jefferson County, Texas.

Defendants are GeoVera Specialty Insurance Company ("GeoVera"), ICA Adjusters, Inc. ("ICA"), and Jade Saucier ("Saucier"). GeoVera, a corporation with its principal place of business in California, is a citizen of California. ⁴ ICA and Saucier are both citizens of Texas.

B. Factual Background and Proceedings

Escuadra's residence, located in Beaumont, Texas, allegedly sustained damages as a result of Hurricane Ike, which struck southeast Texas in September 2008. When this loss occurred, Escuadra owned a Texas homeowners' insurance policy that insured her home against direct physical loss of or damage to the property caused by windstorm (the "Policy"). GeoVera issued the Policy, and it was in effect at the time of the alleged loss.

Escuadra filed a policy claim for roof damage, water damage, wind damage, contents damage, foundation damage, and structural damage. GeoVera retained ICA and Saucier to adjust Escuadra's claim. Based upon Saucier's investigation and evaluation of Escuadra's claim, GeoVera remitted to Escuadra payment in the amount of $6,574.99.⁵

C. Nature of Suit and Proceedings

On October 5, 2009, Escuadra brought suit in the 172nd Judicial District Court of Jefferson County, Texas. Escuadra alleged that the homeowners' insurance payments she received were insufficient,and GeoVera failed to adequately settle or to make full payment on her claim. Against GeoVera, Escuadra asserted causes of action for breach of contract, breach of the duty of good faith and fair dealing, fraud, conspiracy to commit fraud, and numerous violations of the Texas Insurance Code. Against ICA and Saucier, Escuadra asserted causes of action for fraud, conspiracy to commit fraud, and numerous violations of the Texas Insurance Code as follows:

1. Misrepresented to plaintiff material facts relating to the coverage at issue. Tex. Ins.Code Ann. § 541.060(a)(1) (Vernon Supp. 2007).

2. Failed to make an attempt in good faith to effectuate a prompt, fair, and equitable settlement of the claim, even though liability under the policy was reasonably clear. Tex. Ins.Code Ann. § 541.060(a)(2)(A).

3. Failed to promptly provide plaintiff with a reasonable explanation of the basis in the policy, in relation to the facts or applicable law, for the offer of a compromise settlement of plaintiff's claim. Tex. Ins.Code Ann. § 541.060(a)(3).

4. Failed within a reasonable time to affirm or deny coverage of the claim to plaintiff or to submit a reservation of right to plaintiff. Tex. Ins.Code Ann. § 541.060(a)(4).

5. Refused to pay plaintiff's claim without conducting a reasonable investigation. Tex. Ins.Code Ann. § 541.060(a)(7).

See Pl.'s Original Pet., ¶¶ 34-38 (Saucier), & 40-44(ICA).⁶

GeoVera filed a notice of removal on November 18, 2009. The notice of removal invoked this court's diversity jurisdiction. Escuadra then moved to remand the action on December 16, 2009.

III. Motion to Remand

Escuadra's motion asserts that diversity of citizenship between her and all defendants does not exist. Namely, defendants ICA and Saucier are citizens of Texas, as is Escuadra. Accordingly, this court does not have original subject-matter jurisdiction, and removal on the basis of diversity jurisdiction was improper. Escuadra also argues procedural defects in GeoVera's removal of this action: (1) defendants failed to allege facts supporting that the amount in controversy is over $75,000.00, and (2) GeoVera failed to obtain timely consent from ICA and Saucier to join all defendants in the notice of removal.

GeoVera defends the propriety of removal by arguing that the amount in controversy exceeds the $75,000.00 jurisdictional requirement and that the citizenship of ICA and Saucier is irrelevant because they were joined improperly to defeat federal jurisdiction. Thus, their consent to removal was unnecessary.

IV. Principles of Analysis

A. Removal and Remand

Under the federal removal statute, 28 U.S.C. § 1441, a defendant may remove a civil action filed in state court to the federal district court for the district and division where the state court is located if that district court could have exercised original jurisdiction over the case.⁷ A notice of removal must be filed within thirty days after a defendant is served with notice of suit, and all served and properlyjoined defendants must timely consent to removal. See 28 U.S.C. § 1446(b); Brown v. Demco, Inc., 792 F.2d 478, 482 (5th Cir.1986); see also Gillis v. La., 294 F.3d 755, 759 (5th Cir.2002); Getty Oil Corp. v. Ins. Co. of N. Am., 841 F.2d 1254, 1262-63 (5th Cir.1988).

To safeguard against wrongful removal, Congress authorizes motions to remand to state courts where actions originally were filed, based on various defects in removals. See 28 U.S.C. § 1447(c). When a motion to remand is filed, the removing party has the burden is to show that removal was proper. See B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir.1981).

B. Improper Joinder

Generally, complete diversity of citizenship must exist between all plaintiffs and all defendants to create federal subject-matter jurisdiction in a case governed by substantive state law. See Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806); Whalen v. Carter, 954 F.2d 1087, 1094 (5th Cir.1992). When non-diverse defendants are "improperly joined," ⁸ however, their citizenship may be disregarded when determining whether the federal court enjoys original jurisdiction. See Jernigan v. Ashland Oil Inc., 989 F.2d 812, 817 (5th Cir.1993). Similarly, improperly joined defendants need not consent to removal. Id. at 815.⁹

A defendant who asserts federal removal jurisdiction notwithstanding the presence of a non-diverse defendant bears a heavy burden of proving that the joinder of the in-state party in the state action was improper. Sid Richardson Carbon & Gasoline Co. v. Interenergy Res., Ltd., 99 F.3d 746, 751 (5th Cir.1996) (the party invoking the removal jurisdiction on the grounds of improper joinder bears a heavy burden); Green v. Amerada Hess Corp., 707 F.2d 201, 205 (5th Cir.1983) ("The burden of proving fraudulent joinder is a heavy one."). And, " '[since] the effect of removal is to deprive the state court of an action properly before it, removal raises significant federalism concerns.' The removal statute is therefore to be strictly construed, and any doubt about the propriety of removal must be resolved in favor of remand." Gasch v. Hartford Acc. & Indem. Co., 491 F.3d 278, 281-82 (5th Cir.2007) (quoting Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 365-66 (5th Cir.1995)). Lastly, because jurisdiction of a federal court is limited, it must presume that a suit falls outside its jurisdiction. See Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir.2001).

C. Framework for Improper Joinder Analysis

1. Basic Tenets

Consistent with the "heavy burden" mentioned above,...