Macey Prop. Mgmt. v. Starr Surplus Lines Ins. Co.

• Decision Date: 23 February 2022
• Docket Number: Civil Action H-21-3943
• Parties: MACEY PROPERTY MANAGEMENT, LLC, Plaintiff, v. STARR SURPLUS LINES INSURANCE COMPANY, TIM FITZGERALD AND ALAN RUSCHER, Defendants.
• Court: U.S. District Court — Southern District of Texas

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MACEY PROPERTY MANAGEMENT, LLC, Plaintiff, v. STARR SURPLUS LINES INSURANCE COMPANY, TIM FITZGERALD AND ALAN RUSCHER, Defendants.

Civil Action No. H-21-3943

United States District Court, S.D. Texas, Houston Division

February 23, 2022

MMORANU OPINION AND ORDER OF REMAND FOR LACK OF SUBJCT MATTER JURISDICTION

SIM LAKE, SENIOR UNITED STATES DISTRICT JUDGE.

On December 12, 2021, Defendant Certain Underwriters at Lloyd's London Subscribing to Policy No. PG1701771's ("Underwriters") filed a Notice of Removal ("Notice of Removal") (Docket Entry No. 1). Pending before the court is Plaintiff's Motion to Remand (Docket Entry No. 3). For the reasons explained below Plaintiff's Motion to Remand will be granted.

I. Background

Plaintiff Macey Property Management, LLC, initiated this action on December 15, 2020, by filing Plaintiff's Original Petition ("Plaintiff's Original Petition") in the 127th Judicial District Court of Harris County, Texas, Cause No. 2020-80109, against one of its insurers, Starr Surplus Lines Insurance Company ("Starr"), and against Tim Fitzgerald ("Fitzgerald"), and Alan Ruscher ("Ruscher"), the adjusters assigned to one of Plaintiff's property damage claims, asserting causes of action arising from the failure to pay insurance claims for damage caused by a tornado that struck commercial properties owned by Plaintiff in Dallas, Texas, on October 20, 2019.^[1] Plaintiff asserted claims against Starr for breach of contract, violation of the prompt payment provisions of Texas Insurance Code § 542.051, et seq., breach of the duty of good faith and fair dealing, and claims against Starr, Fitzgerald and Ruscher for unfair settlement practices in violation of § 541.151 of the Texas Insurance Code.^[2] Plaintiff's Original Petition alleged that "Starr is a foreign surplus lines insurance company engaged in the business of insurance in Texas, operating for the purpose of accumulating monetary profit, "^[3] and that Fitzgerald and Ruscher are Texas residents and adjusters licensed by the Texas Department of Insurance.^[4]

On January 10, 2021, Starr's counsel sent Plaintiff's counsel a letter accepting liability for Fitzgerald and Ruscher pursuant to Texas Insurance Code § 542A.006(a) .^[5] On June 4, 2021, counsel for Plaintiff and Starr entered a negotiated Rule 11 agreement, which in pertinent part states that

Plaintiff will effectuate the involuntary dismissal of both Tim Fitzgerald and Alan Ruscher from this lawsuit on or before July 1, 2021. In exchange, Defendant agrees that it will not seek to remove this case from state to federal court or consent to the removal of this matter.^[6]

On July 1, 2021, Plaintiff filed a Partial Notice of Non-Suit with Prejudice as to defendants Fitzgerald and Ruscher.^[7] On July 12, 2021, the state court judge signed an Order of Partial Non-Suit with Prejudice as to Certain Defendants, which stated that

[h]aving considered Plaintiff Macey Property Management, LLC's Partial Notice of Non-Suit with Prejudice, the Court is of the opinion that it should be GRANTED. It is therefore ORDERED that all claims and causes of action by Plaintiff against Defendants Tim Fitzgerald and Alan Ruscher in this action are hereby dismissed with prejudice, pursuant to Rule 162 of the Texas Rules of Civil Procedure and the June 4, 2021[, ] Rule 11 between the parties.^[8]

On July 7, 2021, Plaintiff filed Plaintiff's First Amended Petition against Starr, which added new defendants Chubb Custom Insurance Company ("Chubb"), General Security Indemnity Company of Arizona ("GISCA"), and Underwriters.^[9] Plaintiff's First Amended Petition reasserts causes of action against Starr for breach of contract, unfair settlement practices in violation of §§ 541.060(a) and 541.151 of the Texas Insurance Code, violation of the prompt payment provisions of Texas Insurance Code § 542.051, et seq., and breach of the duty of good faith and fair dealing for failure to pay insurance claims arising from damage to commercial properties owned by Plaintiff when a tornado struck Dallas, Texas, on October 20, 2019.^[10] Plaintiff asserts causes of action against Starr and the newly named defendants for breach of contract and violation of the prompt payment provisions of Texas Insurance Code § 542.051, et seq. for failure to pay insurance claims for damage caused to commercial properties owned by Plaintiff in Houston, Texas, by Hurricane Harvey on August 27, 2017.^[11]

On November 12, 2021, Plaintiff filed a Notice of Agreed Non-Suit with Prejudice as to Starr, which the state court signed on November 14, 2021. The Notice of Non-Suit stated that

[p]ursuant to Texas Rule of Civil Procedure 162, plaintiff . . . and defendant Starr . . . file this Notice of Agreed Non-Suit With Prejudice of Plaintiff's claims against Starr. This notice disposes of all Plaintiff's causes of action against Starr only. Plaintiff s claims against defendants Certain Underwriters at Lloyd's, London Subscribing to Policy No. PG1701771 are unaffected by this agreed notice.^[12]

On December 2, 2021, Underwriters removed Plaintiff's state court action to this court stating that

5. Underwriters are the only remaining defendant in this action.

6. Underwriters timely filed this notice of removal within the 30-day period prescribed by 28 U.S.C. § 1446(b).

7. Removal is proper based on diversity of citizenship under 28 U.S.C. § 1332(a).

8. Plaintiff is a Texas citizen.

9. Effective November 12, 2021, Underwriters are the sole defendants in this action.

10. Underwriters are foreign insurers. Lloyd's Syndicate 0318 MSP and Lloyd's Syndicate 1967 WRB are not, and were not at the time Plaintiff commenced this action against them, citizens of Texas.

11. Because Plaintiff is a Texas citizen and Underwriters are not citizens of Texas, there exists complete diversity of citizenship between Plaintiff and Underwriters. Removal is therefore appropriate on this basis.

12. Plaintiff's live pleading, the Amended Petition, alleges damages in excess of $1, 000, 000.00, excluding interest and costs.

13. Al though Underwriters dispute liability and damages, it is evident from Plaintiff s Amended Petition that Plaintiff assets claims for monetary relief which, if granted, would exceed $75, 000.00. Therefore, based on Plaintiff's claims for damages, the amount in controversy requirement is satisfied. All requirements are therefore met for removal under 28 U.S.C. §§ 1332 and 1441(b) .^[13]

On December 20, 2021, Plaintiff filed the pending Motion to Remand arguing that the court lacks subject matter jurisdiction because "Underwriters has not met its burden to prove that Fitzgerald and Ruscher were improperly joined in Macey's Original Petition, "^[14] and because "diversity jurisdiction of the various entities of individuals within both syndicates has not been distinctly and affirmatively demonstrated by Underwriters."^[15]

On January 10, 2022, Underwriters filed an Amended Notice of Removal identifying the policy period at issue, ^[16] and a response to Plaintiff s Motion to Remand asserting that "[d]iversity was not created by an involuntary dismissal after a § 542A.006 election; this action became removable due to Plaintiff's settlement and express release of its claims against all non-diverse defendants named in the lawsuit." ^[17]

On January 13, 2022, Underwriters filed a Supplemental Amended Notice of Removal stating in pertinent part that searches of underwriting member information for Lloyd's Syndicates 0318 and 1967 "revealed no individual member of the syndicate had a home address in the state of Texas and no corporate member was incorporated in, or had its principle place of business located in, the state of Texas. "^[18]

On January, 18, 2022, Plaintiff filed a reply arguing that "the Agreed Notice of Nonsuit filed on November 12, 2021[, ] did not make this case removeable under 28 U.S.C. § 1446(b) (3), as Underwriters argue. "^[19]

II. Standard of Review

Motions for remand are governed by 28 U.S.C. § 1447(c), which states in pertinent part that "[ i] f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." On a motion to remand challenging subject matter jurisdiction, the defendant attempting to establish removal bears the burden of establishing jurisdiction. See Wilson v. Republic Iron & Steel Co., 42 S.Ct. 35, 37 (1921). See also Manguno v. Prudential Property and Casualty Insurance Co., 276 F.3d 720, 723 (5th Cir. 2002) ("The removing party bears the burden of showing that federal jurisdiction exists and that removal was proper.") . Because removal jurisdiction raises significant federalism concerns, "[t] he removal statute is strictly construed, and any doubt about the propriety of removal must be resolved in favor of remand." Gasch v. Hartford Accident & Indemnity Co., 491 F.3d 278, 281-82 (5th Cir. 2007).

III. Analysis

Asserting that "the longstanding 'voluntary-involuntary rule prevents a non-removable case on the initial pleadings from becoming removable, unless it becomes removable pursuant to a voluntary act of the plaintiff[ ]"^[20] Plaintiff argues that "Underwriters cannot rely on the diversity created by the involuntary dismissal of in-state adjusters, [Fitzgerald and Ruscher, ] especially where the very same counsel that previously represented Starr acknowledged [Plaintiff]'s dismissal of the adjusters would not affect the removability of this matter. "^[21] Plaintiff argues that

the Court lacks subject matter jurisdiction because Underwriters has not met its burden to prove that Fitzgerald and Ruscher were improperly joined in [Plaintiff]'s Original Petition. Indeed, Underwriters does not even appear to dispute that [Plaintiff]'s Original Petition alleged

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