Simmons v. Northfield Ins. Co.
| Decision Date | 02 September 2015 |
| Docket Number | CASE NO. 4:15-CV-374 |
| Court | U.S. District Court — Eastern District of Texas |
| Parties | GERALD SIMMONS AND GLENDA SIMMONS v. NORTHFIELD INSURANCE COMPANY AND JOHN KYLE KARST |
MEMORANDUM OPINION AND ORDER
Pending before the Court is Plaintiffs' Opposed Motion to Remand (Dkt. #8). Having considered the relevant pleadings, the Court is of the opinion that the motion to remand should be granted.
Plaintiffs originally filed this action in the 393rd Judicial District Court of Denton County, Texas, against Defendants Northfield Insurance Company ("Northfield"), and John Kyle Karst ("Karst"). The petition stems from the alleged wrongful and unfair adjustment of Plaintiffs' insurance claim for property damages caused by wind/hail on or about April 3, 2014. The petition asserts that Northfield and Karst conducted an unfair investigation of Plaintiff's' claim and violated their duties and obligations under the Texas Insurance Code Chapter 542, and the Texas Deceptive Trade Practices Act, among other theories of unfair claims settlement practices.
Northfield removed this matter based upon diversity jurisdiction, asserting that Karst was improperly joined because Plaintiffs' petition fails to plead specific factual allegations regarding Karst that form the basis of any cause of action against him individually. On July 10, 2015, Plaintiffs filed a motion to remand (Dkt. #8). On July 24, 2015, Northfield filed a response (Dkt. #9). On July 31, 2015 Plaintiffs filed a reply (Dkt. #10).
Plaintiffs are individual resident citizens of the State of Texas. Northfield is a corporation organized under laws of the State of Iowa with its principal place of business in the State of Connecticut. Accordingly, Northfield is a citizen of Iowa and Connecticut. Karst is an individual citizen of Texas, and Northfield asserts that Karst was improperly joined.
A defendant may remove any civil action from state court to a district court of the United States which has original jurisdiction. 28 U.S.C. § 1441. District courts have original jurisdiction over all civil actions that are between citizens of different states and involve an amount in controversy in excess of $75,000, exclusive of interest and costs. 28 U.S.C. § 1332. The party seeking removal "bears the burden of establishing that federal jurisdiction exists and that removal was proper." Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002); Weaver v. Zurich Am. Ins. Co., No. H-10-1813, 2010 WL 3910053, at *1 (S.D. Tex. Oct.1, 2010). The removal statute must "be strictly construed, and any doubt about the propriety of removal must be resolved in favor of remand." Gasch v. Hartford Accident & Indem. Co., 491 F.3d 278, 281-82 (5th Cir.2007). A district court is required to remand the case to state court if, at any time before final judgment, it determines that it lacks subject matter jurisdiction. See 28 U.S.C. § 1447(c); Groupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 571 (2004).
"When assessing whether diversity jurisdiction exists, a court must disregard non-diverse citizenship of an improperly joined defendant." Doucet v. State Farm Fire and Cas. Co., No. 1:09-CV-142, 2009 WL 3157478, at *4 (E.D. Tex. Sept. 25, 2009) (citing Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 572-73 (5th Cir. 2004)). A defendant who contends that a non-diverse partyis improperly joined has a "heavy" burden of proof. Green v. Amerada Hess Corp., 707 F.2d 201, 205 (5th Cir. 1983); Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 312 (5th Cir. 2002) (citation omitted). "In making its determination, the court must ordinarily evaluate all of the factual allegations in the plaintiff's state court pleadings in the light most favorable to the plaintiff, resolving all contested issues of substantive fact in favor of the plaintiff." Green, 707 F.2d at 205.
"The removing party must prove that there is absolutely no possibility that the plaintiff will be able to establish a cause of action against the in-state defendant in state court, or that there has been outright fraud in the plaintiff's pleading of jurisdictional facts." Great Plains Trust, 313 F.3d at 312 (quoting Green, 707 F.2d at 205). After the Court resolves all disputed questions of fact and all ambiguities in controlling state law in favor of the plaintiff, the Court determines whether the plaintiff has any possibility of recovery against the party whose joinder is questioned. Id. (citation omitted). If there is a reasonable basis for predicting that the state law might impose liability on the facts of the case, then there is no fraudulent joinder. Id. (citation omitted). This possibility must be reasonable and not just theoretical. Id.
A determination of improper joinder must be based on an analysis of the causes of action alleged in the complaint at the time of removal. See Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 264 (5th Cir. 1995). "A district court should ordinarily resolve [claims of] improper joinder by conducting a Rule 12(b)(6)-type analysis." McDonal v. Abbott Labs., 408 F.3d 177, 183 n.6 (5th Cir. 2005); see also Boone v. Citigroup, Inc., 416 F.3d 382, 388 (5th Cir. 2005). "[I]f a plaintiff can survive a Rule 12(b)(6)-type challenge, there is generally no improper joinder." Guillory v. PPG Indus., Inc., 434 F.3d 303, 309 (5th Cir. 2005) (citation omitted); Smallwood, 385F.3d at 573. The Court, however, must carefully distinguish an attack on the overall merits of the case from a showing that defendants were improperly joined in order to defeat diversity. See Smallwood, 385 F.3d at 573; see also Gasch 491 F.3d at 284. However, plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). There are cases in which a further summary inquiry is appropriate to "identify the presence of discrete and undisputed facts that would preclude plaintiff's recovery against the in-state defendant." Smallwood, 385 F.3d at 573-74; Guillory, 434 F.3d at 311.
The question for the Court is whether the Defendants have shown that Plaintiffs have no possibility of establishing a valid cause of action against the non-diverse defendant, Karst. Defendants assert that Plaintiffs' state court petition does not sufficiently allege any possibility of recovery against Karst.
The first question the Court must decide is which standard to apply to examining Plaintiffs' state court petition. Plaintiffs ask the Court to apply the less stringent Texas notice standard where Defendants ask the Court to apply the federal standard. This issue has not been decided by the Fifth Circuit. Plaintiffs point to several cases to support applying the Texas pleading standard, but none of the cases cited are Eastern District cases. (Dkt. #8 at pp. 4-5). Eastern District courts have consistently held that the federal pleading-sufficiency standard applies to analyzing improper joinder. See Doucet, 2009 WL 3157478, at *5; First Baptist Church of Mauriceville, Tex. v. Guideone Mut. Ins. Co., No. 1:07-CV-988, 2008 WL 4533729, at *4 (E.D. Tex. Sept.29, 2008); King v. Provident Life and Accident Ins. Co., No. 1:09-CV-983, 2010 WL 2730890, at *4 (E.D. Tex. June 4, 2010). The Court will follow the Eastern District pattern and follow the federal pleadingstandard; but see Holmes v. Acceptance Cas. Ins. Co., 942 F. Supp. 2d 637, 646 (E.D. Tex. 2013).
The Court must determine whether Plaintiffs have set forth "specific actionable conduct" to support their claim against the non-diverse Karst. King v. Provident Life & Acc. Ins. Co., No. 1:09-CV-983, 2010 WL 2730890, at *1 (E.D. Tex. June 4, 2010) report and recommendation adopted, No. 1:09-CV-983, 2010 WL 2730888 (E.D. Tex. July 9, 2010) (citing Griggs v. State Farm Lloyds, 181 F.3d 694, 699 (5th Cir.1999)). "Whether the plaintiff has stated a valid state law cause of action depends upon and is tied to the factual fit between the plaintiff's allegations and the pleaded theory of recovery." Id. (quoting Griggs, 181 F.3d at 701).
This means that the state-court petition must allege facts sufficient to establish the essential elements of each asserted cause of action. Tuchman v. DSC Communications Corp., 14 F.3d 1061, 1067 (5th Cir.1994); Chemtreat, Inc. v. Chemtech Chem. Servs., LLC, No. 1:07-CV-146, 2007 WL 4353420, at *5 (E.D. Tex. Dec. 7, 2007); Omda Oil and Gas, Inc. v. Young Oil, Corp., No. 3:06-CV-439M, 2006 WL 1343640, at *2 (N.D. Tex. May 17, 2006). Merely lumping diverse and non-diverse defendants together in undifferentiated liability averments of a petition does not satisfy the requirement to state specific actionable conduct against the non-diverse defendant. See Griggs, 181 F.3d at 699.1 Merely asserting a laundry list of statutory violations without factual support as to how a non-diverse defendant violated the statute will not suffice. Doucet, 2009 WL 3157478, at *5. However, the joinder of an in-state, non-diverse defendant is proper as long as the plaintiff's petition contains factual allegations sufficient to render one of the statutory claims plausible. Escuadra v. Geovera Specialty Ins. Co., 739 F. Supp. 2d 967, 985 (E.D. Tex. 2010).
There is at least one plausible legal claim against Karst for which he could be held liable under the Texas Insurance Code. Texas law provides a person may not engage in unfair or deceptive acts or practices in the business of insurance. TEX. INS. CODE §541.003. A "person" means an "individual [...] engaged in the business of insurance including an [...] adjuster." TEX. INS. CODE §541.002 (2). The "business of insurance" includes "directly or indirectly acting as an agent for or otherwise representing or assisting an insurer or person in: (E) inspecting a risk." TEX. INS. CODE §101.051 (b)(6)(E). The Texas Supreme Court and the Fifth Circuit have found that adjusters can be held...
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