Rincon Del Sol LLC v. Lloyd's Of London

• Citation: 709 F.Supp.2d 517
• Decision Date: 27 April 2010
• Docket Number: Civil Action No. H-10-346.
• Parties: RINCON DEL SOL, LLC, Plaintiff,v.LLOYD'S OF LONDON, Steadfast Insurance Company, Essex Insurance Company, Axis Surplus Insurance Company, Crouch Insurance Consulting, Gregory Crouch, York Claims Service, Inc. d/b/a York Sla, Mike Carpenter d/b/a Carpenter Asset Management Associates LLC, Michelle Whiteside, Individually, Trimont Real Estate Advisors, Bank of America Corporation, Fannie Mae Foundation, Tritex Real Estate Advisors, Inc., and Fannie Mae, Defendants.
• Court: U.S. District Court — Southern District of Texas

709 F.Supp.2d 517

RINCON DEL SOL, LLC, Plaintiff,v.LLOYD'S OF LONDON, Steadfast Insurance Company, Essex Insurance Company, Axis Surplus Insurance Company, Crouch Insurance Consulting, Gregory Crouch, York Claims Service, Inc. d/b/a York Sla, Mike Carpenter d/b/a Carpenter Asset Management Associates LLC, Michelle Whiteside, Individually, Trimont Real Estate Advisors, Bank of America Corporation, Fannie Mae Foundation, Tritex Real Estate Advisors, Inc., and Fannie Mae, Defendants.

Civil Action No. H-10-346.

United States District Court,

S.D. Texas,

Houston Division.

April 27, 2010.

COPYRIGHT MATERIAL OMITTED

Frederick L. McGuire, Attorney at Law, Liberty, TX, Colleen Michele McClure, Law Offices of Frederick L. McGuire, Spring, TX, for Plaintiff.

Eric W. Pinker, Edward Jason Dennis, Lakeisha M. Forte, Lynn Tillotson Pinker & Cox, LLP, Michael Anthony Parsons, II, Brad E. Brewer, Zelle Hofmann Voelbel Mason LLP, Dallas, TX, Anthony Lee Icenogle, Icenogle & Sullivan, L.L.P., Austin, TX, Yasmin Islam Atasi, Justin Bryan Whitley, Winstead PC, Houston, TX, for Defendants.

ORDER

DAVID HITTNER, District Judge.

Pending before the Court are Defendants Crouch Insurance Consulting, Ltd., LLC and Gregory Crouch's Rule 12(b)(6) Motion to Dismiss and Brief in Support, Defendant Michele Whiteside's Motion to Dismiss for Lack of Personal Jurisdiction Pursuant to Fed.R.Civ.P. 12(b)(2), and, Subject Thereto, Defendants Michele Whiteside, Fannie Mae, Fannie Mae Foundation, Bank of America Corporation, Trimont Real Estate Advisors, Inc., and Tritex Real Estate Advisors, Inc.'s Motion to Dismiss Plaintiff's Claims Pursuant to Fed.R.Civ.P. 9(b) and 12(b)(6), and Plaintiff Rincon Del Sol, LLC's Motion to Remand. Having considered the motions, submissions, and applicable law, the Court determines the motion to remand should be granted and the motions to dismiss should be denied as moot.

BACKGROUND

This case arises from a dispute over insurance coverage for an apartment complex located in Houston, Texas. Plaintiff Rincon Del Sol, LLC (“Plaintiff”), a California corporation, alleges that an apartment complex (the “Property”) it owns incurred $634,057.87 worth of damage as a result of Hurricane Ike. According to Plaintiff, the insurance carriers fraudulently assessed damage at $48,901.99, an amount below the deductible, and refused to pay Plaintiff's claims. Plaintiff further alleges that some of the defendants breached a forbearance agreement made while awaiting proceeds of its insurance claims, resulting in foreclosure of the Property.

On January 6, 2010, Plaintiff filed its original petition in the 281st Judicial District Court of Harris County, Texas, alleging various causes of actions against multiple defendants. Plaintiff amended its complaint on January 28, 2010, adding the Federal National Mortgage Association (“Fannie Mae”) as a defendant. On February 8, 2010, Defendants Steadfast Insurance Company, Essex Insurance Company, and Axis Surplus Insurance Company (“Removing Defendants” or “Defendants”) filed a notice of removal to federal court asserting diversity jurisdiction. These defendants admit that Defendants Mike Carpenter, Gregory Crouch, and Crouch Insurance Company (“Texas Defendants”) are citizens of Texas for diversity purposes but argue that they were improperly joined. The Removing Defendants contend there is “no reasonable possibility of recovery” against the Texas Defendants, making removal proper. Plaintiff argues that the Texas Defendants were not improperly joined because Plaintiff has asserted legitimate claims against them and, therefore, the case must be remanded to state court.

On February 12, 2010, the Removing Defendants filed a supplemental notice of removal, asserting an additional basis for jurisdiction due to Fannie Mae's addition as a party. They argue Fannie Mae's presence as a defendant confers original jurisdiction upon federal courts under provisions 12 U.S.C. § 1723a(a), the Fannie Mae charter. On March 7, 2010, Plaintiff moved to remand for lack of subject matter jurisdiction. Thus, the Court must determine whether subject matter jurisdiction exists.

STANDARD OF REVIEW

The party seeking to remove the case to federal court bears the burden of establishing federal jurisdiction. Jernigan v. Ashland Oil, Inc., 989 F.2d 812, 815 (5th Cir.1993). Due to federalism concerns, the removal statute should be construed strictly in favor of remand. See Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868, 85 L.Ed. 1214 (1941); Healy v. Ratta, 292 U.S. 263, 270, 54 S.Ct. 700, 78 L.Ed. 1248 (1934) (“The policy of the statute calls for its strict construction.”); Frank v. Bear Stearns & Co., 128 F.3d 919, 921-22 (5th Cir.1997). Any ambiguities are construed against removal. Butler v. Polk, 592 F.2d 1293, 1296 (5th Cir.1979). An action removed to federal court must be remanded if the district court determines that it lacks subject matter jurisdiction. 28 U.S.C. § 1447(c) (“If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.”); McDonal v. Abbott Labs., 408 F.3d 177, 182-83 (5th Cir.2005).

LAW & ANALYSIS

The Removing Defendants contend removal is proper for two reasons: (1) diversity jurisdiction exists because the Texas Defendants were improperly joined; and (2) the existence of Fannie Mae as a defendant compels the removal to federal forum under 12 U.S.C. § 1723a(a). The Court addresses each argument in turn.

I. Diversity Jurisdiction A. Complete Diversity

A defendant may remove a state-court action to federal court based on diversity jurisdiction. See 28 U.S.C. §§ 1332, 1441. Diversity jurisdiction requires complete diversity of citizenship between all plaintiffs and all defendants. See Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373-74, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978); Lowe v. Ingalls Shipbuilding, A Div. of Litton Sys., Inc., 723 F.2d 1173, 1177 (5th Cir.1984) (“[W]here one or more plaintiffs sue one or more defendants each plaintiff must be of a different citizenship than each defendant.”). Diversity jurisdiction exists only when there is “an actual, substantial controversy between citizens of different states.” Zurn Indus., Inc. v. Acton Const. Co., Inc., 847 F.2d 234, 236 (5th Cir.1988).

The parties agree that Plaintiff is a citizen of California for diversity purposes. Thus, for diversity jurisdiction to exist, all defendants must be citizens of states other than California. It is apparent that is the case here. Because each defendant is diverse from Plaintiff, the Court determines that complete diversity exists in this case.

B. Local Defendant

But even when complete diversity exists, 28 U.S.C. § 1441(b) imposes a limitation on removal. See 28 U.S.C. § 1441(b). An action in which there exists complete diversity of citizenship is not removable if a defendant is a citizen of the state in which the action was brought. Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d 529, 531-32 (5th Cir.2006). The plaintiff can object to the improper removal by moving for remand within thirty days of removal. See Denman v. Snapper Div., 131 F.3d 546, 548 (1998) (“[T]he presence of an in-state defendant is a procedural defect that is waived unless raised within thirty days of removal.”).

The Removing Defendants argue that the Texas Defendants were improperly joined and thus should be dismissed and disregarded for purposes of the jurisdictional analysis. It is true that a defendant may remove an otherwise non-removable case to federal court if the defendant can establish that the local defendant was improperly joined for the purpose of defeating federal jurisdiction. See, e.g., Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir.2004). The Removing Defendants may establish improper joinder by: (1) showing “actual fraud in the pleading of jurisdictional facts”; or (2) showing an “inability of the plaintiff to establish a cause of action against the [local defendants].” Id. “[T]he test for fraudulent 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.

The Court must evaluate the factual allegations made in the state-court pleadings in the light most favorable to Plaintiff. See B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir.1981). The Court need not determine whether the plaintiff will prevail on the merits. Guillory v. PPG Indus., Inc., 434 F.3d 303, 308-09 (5th Cir.2005). Rather, the Court need look only for a possibility that the plaintiff may prevail. Id. “If that possibility exists, then a good faith assertion of such an expectancy in a state court is not a sham ... and is not fraudulent in fact or in law.” Dodson v. Spiliada Maritime Corp., 951 F.2d 40, 43 (5th Cir.1992) (internal quotations omitted).

There are two proper methods for predicting whether a plaintiff has a reasonable basis of recovery under state law: (1) “[t]he 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”; or (2) “pierce the pleadings and conduct a summary inquiry” in cases in which the plaintiff has “misstated or omitted discrete facts that would determine the propriety of joinder.” Smallwood, 385 F.3d at 573. “Ordinarily, if a plaintiff can survive a Rule 12(b)(6) challenge, there is no improper joinder.” Id.

Carpenter, Crouch, and Crouch Insurance Consulting are local defendants. The Removing Defendants do not contend there is “actual fraud in the pleading of jurisdictional facts.” Indeed, they agree that the Texas Defendants are Texas citizens. Rather, they argue that Plainti...