Vizza Wash, LP v. Nationwide Mut. Ins. Co.

• Decision Date: 26 October 2020
• Docket Number: Civil Action No. 5:20-cv-00680-OLG
• Citation: 496 F.Supp.3d 1029
• Parties: VIZZA WASH, LP d/b/a The Wash Tub, Plaintiff, v. NATIONWIDE MUTUAL INSURANCE COMPANY and Bradley Worth, Defendants.
• Court: U.S. District Court — Western District of Texas

496 F.Supp.3d 1029

VIZZA WASH, LP d/b/a The Wash Tub, Plaintiff,

v.NATIONWIDE MUTUAL INSURANCE COMPANY and Bradley Worth, Defendants.

Civil Action No. 5:20-cv-00680-OLG

United States District Court, W.D. Texas, San Antonio Division.

Signed October 26, 2020

Shannon E. Loyd, Loyd Law Firm, PLLC, San Antonio, TX, for Plaintiff.

Ethan D. Carlyle, Robert Glen Wall, Patrick M. Kemp, Segal McCambridge Singer & Mahoney, Ltd., Austin, TX, Meka Moore, Selman Breitman, LLP, Los Angeles, CA, for Defendants.

ORDER

ORLANDO L. GARCIA, Chief United States District Judge

On this day, the Court considered Plaintiff's Opposed Motion to Remand (docket no. 4) (the "Motion to Remand") and Defendant's Motion to Dismiss Plaintiff's Second Amended Petition for Failure to State a Claim (docket no. 14) (the "Motion to Dismiss"). Having considered the motions and the parties' briefing, the Court concludes that Plaintiff's Motion to Remand should be DENIED and Defendant Nationwide's Motion to Dismiss should be GRANTED .

BACKGROUND

Plaintiff Vizza Wash, LP d/b/a The Wash Tub ("Plaintiff") operates various car wash locations in Bexar County and throughout Central Texas (collectively, Plaintiff's "Property"). See docket no. 9 pp. 2-3. Plaintiff insures its business Property with a Policy issued by Defendant Nationwide Mutual Insurance Company ("Nationwide"). See docket no. 9-1; docket no. 14-2 (the "Policy"). Among other types of protections, the Policy provides "business income" and "civil authority" coverage, subject to certain limitations and/or exclusions. See generally id.

On February 11, 2020, the World Health Organization identified the 2019 Coronavirus ("Covid-19") as a disease. Since then, the Covid-19 virus has spread across the world, and health organizations, including the Center for Disease Control, characterize Covid-19 as a global pandemic. The outbreak in the United States continues to evolve. To stop "community spread" of Covid-19, state and local governments have issued executive orders that limit the opening of certain businesses and require social distancing. Bexar County Judge Nelson Wolff and Texas Governor Greg Abbott have issued executive orders throughout this crisis, including Orders on March 23, 2020 and March 31, 2020, respectively, that closed certain "non-essential" businesses, including Plaintiff's business locations. See docket no. 9-2 & 9-3 (the "Orders"). As a result of the Orders—as well as the public's fear of the Covid-19 virus—Plaintiff alleges that it suffered business income losses. See docket no. 9 ¶¶ 7, 10-12. Plaintiff's allegations indicate that Plaintiff continues to incur business losses as the result of the ongoing Covid-19 pandemic. See id.

Following the issuance of the shutdown Orders, Plaintiff submitted an insurance claim to Nationwide seeking coverage for its business income losses. See id. at ¶ 12. Nationwide denied the claim on the basis that Plaintiff's losses were not covered and/or were excluded under the Policy. See id. at ¶¶ 16-17. Following the denial of its claim, Plaintiff initiated this lawsuit by filing its Original Petition in Cause No. 2020-CI-08311, in the 407th Judicial District of Bexar County, Texas on May 6, 2020. See docket no. 1-1. Plaintiff's lawsuit asserts claims against both Nationwide and against Defendant Bradley Worth ("Worth"), Plaintiff's insurance agent. See id. Against Nationwide, Plaintiff asserts claims for breach of contract, violations of the Texas Insurance Code's unfair settlement practices and prompt payment of claims statutes, and breach of the duty of good faith and fair dealing. See generally docket no. 9. Against Worth, Plaintiff asserts claims for negligence, negligent misrepresentation, violations of the Texas Insurance Code, and violations of the Deceptive Trade Practices Act ("DTPA"). See generally id.

On June 5, 2020, Nationwide removed the action to this Court on the basis of this Court's diversity jurisdiction. See docket no. 1. Although there appears to be no dispute that Plaintiff and Worth are both citizens of Texas, Nationwide's removal contended that complete diversity exists between the appropriate parties because Worth was improperly joined in the lawsuit.¹ See docket no. 1. On June 12, 2020, Nationwide filed a motion seeking dismissal of Plaintiff's First Amended Complaint (the operative complaint at the time of removal). See docket no. 3. On the same day, Plaintiff filed a Motion to Remand asserting that Worth was a proper defendant, and thus, that this Court lacks diversity jurisdiction. See docket no. 4. On June 19, 2020, Nationwide filed a response to Plaintiff's Motion to Remand. See docket no. 8.

On June 26, 2020, Plaintiff filed a Second Amended Complaint against Nationwide and Worth.² See docket no. 9. On July 10, 2020, Defendant Nationwide filed its pending Motion to Dismiss, seeking dismissal of Plaintiff's operative Second Amended Complaint. See docket no. 14. Plaintiff filed a response to Nationwide's Motion to Dismiss on July 24, 2020, and Nationwide filed a reply in support of its motion on July 31, 2020. See docket nos. 18 & 24. In the period since the parties completed their briefing, both Plaintiff and Nationwide have filed supplemental authorities in support of their positions. See docket nos. 25, 26 & 27.

ANALYSIS

Presently pending before the Court is Defendant Nationwide's Motion to Dismiss. However, before determining whether Nationwide's motion has merit, the Court must first determine whether it even has jurisdiction to conduct such an analysis. Importantly, if Worth is a proper defendant in this action, this case lacks complete diversity and thus this Court lacks jurisdiction. For that reason, the Court will first analyze whether Worth was improperly joined and whether Plaintiff's Motion to Remand should be granted.

I. Nationwide's Assertion of Improper Joinder and Plaintiff's Motion to Remand

"[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or defendants, to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). Motions to remand require the Court to consider whether removal was proper, which in turn requires that a federal district court have original jurisdiction over the case. See id.

Federal district courts have original jurisdiction over civil actions if the parties have diverse citizenship and the amount in controversy exceeds $75,000. 28 U.S.C. § 1332(a). Diversity jurisdiction requires complete diversity—in other words, no Plaintiff is a citizen of the same state as any Defendant. See Exxon Mobil Corp. v. Allapattah Services, Inc. , 545 U.S. 546, 553-54, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005) ("Incomplete diversity destroys original jurisdiction with respect to all claims."). Thus, without complete diversity, removal is improper. See 28 U.S.C. § 1441(a). Moreover, the removing party bears the burden of establishing federal jurisdiction. BEPCO, L.P. v. Santa Fe Minerals, Inc. , 675 F.3d 466, 470 (5th Cir. 2012).

As noted above, the parties do not dispute that Plaintiff and Worth are citizens of Texas. At issue, rather, is whether Worth's citizenship destroys this Court's diversity jurisdiction or whether he is improperly joined. Improper joinder is a "narrow exception to the rule of complete diversity." McDonal v. Abbott Labs. , 408 F.3d 177, 183 (5th Cir. 2005). If a court finds that a non-diverse defendant is improperly joined, the "court may disregard the citizenship of that defendant, dismiss the non-diverse defendant from the case, and exercise subject matter jurisdiction over the remaining diverse defendant." Kotzur v. Metro. Lloyds Ins. Co. of Tex. , No. SA-19-CV-01165-XR, 2019 WL 6168207, at *2 (W.D. Tex. Nov. 19, 2019) (citing Flagg v. Stryker Corp. , 819 F.3d 132, 136 (5th Cir. 2016) ).

Other than showing actual fraud, the removing party may establish improper joinder by showing the "inability of the plaintiff to establish a cause of action against the non-diverse party in state court." Smallwood v. Ill. Cent. R. Co. , 385 F.3d 568, 573 (5th Cir. 2004) (quoting Travis v. Irby , 326 F.3d 644, 646-47 (5th Cir. 2003) ). The Smallwood court further stated that this Rule 12(b)(6)-type analysis should determine "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." Id.

In determining whether Worth was improperly joined at the time of removal, the Court considers the allegations in Plaintiff's First Amended Complaint (the operative complaint at the time of removal). See docket no. 1-1. And having reviewed those allegations, the Court finds that Nationwide's removal was appropriate because Worth was improperly joined in the lawsuit.³ Importantly, the record demonstrates that Defendant Nationwide has shown that there is no possibility of recovery by Plaintiff against Worth, at least insofar as any such relief would be premised on the allegations and theories of relief that Plaintiff has presently alleged.

Plaintiff's claims against Worth are generally premised on misrepresentations (either affirmative statements or omissions) that Worth allegedly made either before or after providing Plaintiff with the Policy in question. However, Plaintiff's First Amended Complaint is devoid of any specific misrepresentations made by Worth that induced Plaintiff to purchase the Policy. Notably, there are no allegations indicating that Plaintiff specifically requested a certain type of coverage from Worth that Worth failed to obtain when he sold the Policy to Plaintiff. Moreover, with respect to Worth's purported misrepresentations by omission, there are no other allegations that support an...