Chen v. Metropolitan Lloyds Insurance Company of Texas et al
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE re 9 MOTION to Remand and Abstain filed by Jian Chen. Signed by Magistrate Judge Don D. Bush on 2/15/2016. (baf, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
METROPOLITAN LLOYDS INSURANCE
COMPANY OF TEXAS and
CHRISTOPHER JAMES BUCHANAN,
CIVIL NO. 4:15-cv-00501-RC-DBB
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Now before the Court is Plaintiff‟s Motion to Abstain and Remand (Dkt. 9). Defendant
Metropolitan Lloyds Insurance Company of Texas (“Metropolitan”) filed a notice of removal on
July 24, 2015 on the basis of diversity jurisdiction (Dkt. 1) asserting that Defendant Christopher
James Buchanan (“Buchanan”) was improperly joined. Plaintiff filed a motion to remand (Dkt.
9) on September 3, 2015, and Metropolitan has filed a response in opposition (Dkt. 10). Having
reviewed the motion, the response, and the applicable authorities, the Court finds that Plaintiff‟s
motion (Dkt. 9) should be GRANTED.
This case relates to an insurance claim for storm-related damages to Plaintiff‟s property
located in Plano, Texas (the “Property”). Plaintiff alleges that Metropolitan has not provided
coverage sufficient to complete necessary repairs on the Property.
Dkt. 1-3 at ¶¶ 13-16.
Buchanan was the adjustor assigned to Plaintiff‟s claim. Id.
Metropolitan removed this case on the basis of diversity jurisdiction. Suits are removed
on the basis of diversity jurisdiction when: (1) the suit involves a controversy between citizens of
different states and (2) the amount in controversy exceeds $75,000.
28 U.S.C. § 1332.
Metropolitan contends that Buchanan, a Texas citizen, was improperly joined in the litigation.
Suits are removed on the basis of diversity jurisdiction “only if none of the parties in interest is
properly joined and served as defendants is a citizen of the State in which such action is
brought.” 28 U.S.C. § 1441(b) (emphasis added).
“To establish that a non-diverse defendant has been improperly joined, the removing
party must prove (1) actual fraud in the pleading of jurisdictional facts, or (2) the plaintiffs‟
inability to establish a cause of action against the non-diverse party in state court.” Rico v.
Flores, 481 F.3d 234, 238-39 (5th Cir. 2007); Holder v. Abbott Labs., Inc., 444 F.3d 383, 387
(5th Cir. 2006). The second prong only is at issue here, and its test 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.‟” Rico, 481 F.3d
This Court must decide whether “there is any reasonable basis for predicting that
[Plaintiffs] might be able to establish [Defendants‟] liability on the pleaded claims in state
court.” Griggs v. State Farm Lloyds, 181 F.3d 694, 699 (5th Cir. 1999). Since the purpose of
the improper joinder inquiry is to determine whether or not the in-state defendant was properly
joined, the focus of the inquiry must be on the joinder, not the merits of the plaintiff‟s case.
Smallwood v. Illinois Cent. R. Co., 385 F.3d 568, 573 (5th Cir. 2004).
In making that
determination, the 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. Id. The court is also required to resolve any issues of material
fact or ambiguity in the state law in the plaintiffs‟ favor. Rico, 481 F.3d at 239.
As explained by the Fifth Circuit:
To determine such possibility of state-court recovery, a court may analyze the
sufficiency of a plaintiff‟s pleadings alone; or, in its discretion, pierce the
pleadings and conduct a summary inquiry. The focus is on plaintiff‟s
pleadings at the time of removal; post-removal filings may be considered only
to the extent they amplify or clarify facts alleged in the state-court complaint,
with new claims or theories of recovery disregarded.
Akerblom v. Ezra Holdings Ltd., 509 Fed. App‟x 340, 344-45 (5th Cir. 2013) (internal
citations and quotations omitted). The petition as filed in state court controls a court‟s inquiry.
See Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 264 (5th Cir.1995); see also Griggs
v. State Farm Lloyds, 181 F.3d 694, 699 (5th Cir.1999) (stating that the court must determine if
there could possibly be liability “on the pleaded claims in state court.”). The party claiming
fraudulent joinder bears a “heavy burden” of persuasion. See Smallwood, 385 F.3d 568 at 574.
Metropolitan‟s notice of removal claims that Buchanan was improperly joined, and,
therefore, his citizenship should be disregarded for purposes of diversity. Dkt. 1 at ¶ 2.1. The
Court thus reviews the state court petition (Dkt. 1-3) for the claims made against Buchanan to
determine if there is a reasonable basis upon which it could predict that Chen will recover against
Buchanan under Texas law.
The first issue before the Court is which pleading standard to apply to its examination of
Plaintiff‟s state court petition. Citing Edwea, Inc. v. Allstate Ins. Co., 2010 WL 5099607 (S.D.
Tex. 2010), Plaintiff asserts that because his petition states factual allegations against Buchanan,
as well as “allegations  that track the statutory language,” this is sufficient to state a potentially
valid cause of action against Buchanan. See Dkt. 9 at 4-5. The Court notes that Edwea was
decided under the Texas “fair notice” pleading standard, rather than the more stringent federal
pleading standard. Id. at *6.
Metropolitan argues that the more stringent federal standard
should be applied and directs the Court‟s attention to Texas Rule of Civil Procedure 91a, which
Metropolitan asserts is analogous to Federal Rule 12(b)(6). Dkt. 10 at 4-5; See GoDaddy.com,
LLC v. Toups, 429 S.W.3d 752, 754 (Tex. App. 2014), review denied (Nov. 21, 2014); See also
Linron Properties, Ltd. v. Wausau Underwriters Ins. Co., 2015 WL 3755071, at *2-3 (N.D. Tex.
2015) (“While not identical to the Rule 12(b)(6) standard, the Texas Courts of Appeals have
interpreted as essentially calling for a Rule 12(b)(6)-type analysis and have relied on the 12(b)(6)
case law in applying Rule 91a.”).
The extent to which Texas Rule 91a and Federal Rule 12(b)(6) are analogous has not
been decided by the Fifth Circuit. Nor has the Fifth Circuit decided the issue of whether the
federal or state pleading standard applies in cases such as this. See, e.g., New Life Assembly of
God of City of Pampa, Tex. v. Church Mut. Ins. Co., 2015 WL 2234890, at *4-5 (N.D. Tex.
2015); Bart Turner & Assocs. v. Krenke, 2014 WL 1315896, at *3 (N.D.Tex. 2014). Eastern
District courts have consistently held that the federal pleading standard applies to analyzing
improper joinder. Simmons v. Northfield Ins. Co., 2015 WL 5162369, at *2 (E.D. Tex. 2015);
See also Doucet v. State Farm Fire and Cas. Co., 2009 WL 3157478, at *5 (E.D.Tex. 2009);
First Baptist Church of Mauriceville, Tex. v. Guideone Mut. Ins. Co., 2008 WL 4533729, at *4
(E.D.Tex. 2008); King v. Provident Life and Accident Ins. Co., 2010 WL 2730890, at *4 (E.D.
Tex. 2010). Therefore, this Court will follow the Eastern District pattern and apply the federal
Plaintiff‟s claims against Buchanan are for violations of the Texas Insurance Code and
the Texas Deceptive Trade Practice Act (the “DTPA”). See Dkt. 1-3 at ¶¶ 48-55. The Texas
Insurance Code permits any person “who sustains actual damages” to bring an action “against
another person for those damages caused by the other person engaging in ... an unfair or
deceptive act or practice in the business of insurance.” Esteban v. State Farm Lloyds, 23 F. Supp.
3d 723, 728-29 (N.D.Tex. 2014); TEX. INS. CODE ANN. § 541.151. “An unfair or deceptive act or
practice in the business of insurance” includes engaging in “unfair settlement practices with
respect to a claim by an insured,” which, in turn, includes (1) misrepresenting to a claimant a
material fact or policy provision relating to coverage at issue; (2) failing to attempt in good faith
to effectuate a prompt, fair, and equitable settlement of: (A) a claim with respect to which the
insurer's liability has become reasonably clear; or ...(3) failing to promptly provide to a
policyholder a reasonable explanation of the basis in the policy, in relation to the facts or
applicable law, for the insurer's denial of a claim or offer of a compromise settlement of a
claim.” Esteban, 23 F. Supp. 3d at 728-29 (internal quotations omitted); TEX. INS. CODE ANN. §
541.060(a). There is no dispute in this case that an insurance adjuster, like Buchanan, may be
held liable for deceptive or misleading acts in violation of the Texas Insurance Code and the
DTPA. See Gasch v. Hartford Acc. & Indem. Co., 491 F.3d 278, 282 (5th Cir. 2007); Centro
Cristiano Cosecha Final, Inc. v. Ohio Cas. Ins. Co., 2011 WL 240335, at *4 (S.D.Tex. 2011).
Rather, the issue presented is whether Plaintiff has alleged sufficient facts to support a
reasonable basis to predict recovery against Buchanan.
The Court must determine whether Chen‟s pleadings allege actionable facts specific to
Buchanan. See Griggs, 181 F.3d at 699.
It is a party‟s individual acts that expose him to
liability under the Texas Insurance Code. Esteban, 23 F. Supp. 3d at 729 (citing Garrison, 966
S.W.2d at 486). The Court must, therefore, determine whether Plaintiff has set forth “specific
actionable conduct” to support his claim against Buchanan. King v. Provident Life & Acc. Ins.
Co., 2010 WL 2730890, at *1 (E.D. Tex. 2010) report and recommendation adopted, (citing
Griggs, 181 F.3d at 699). “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, 2007 WL 4353420, at *5 (E.D.Tex. 2007); Omda Oil and
Gas, Inc. v. Young Oil, Corp., 2006 WL 1343640, at *2 (N.D.Tex. 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. Furthermore, 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).
Plaintiff makes the following factual allegations specific to Buchanan:
A) He was hired or assigned by Metropolitan to inspect and adjust the claim;
B) His inspection generated an estimate of damages that included “replacing turbine
vents, gas vent caps, and a power vent cover,” totaling $1,127.09 in estimated
damages, an amount less than the policy deductible;
C) He stated that there was no hail storm damage to roof shingles, that shingle damage
was “wear and tear,” and that “inspection of the interior revealed no water damage to
any rooms;” and
D) He conducted a substandard and improper inspection of the Property, which grossly
undervalued the cost of repairs in its estimate and yielded an unrealistic amount to
See Dkt. 1-3 at ¶¶ 14-15.
Plaintiff further alleges that Buchanan violated various provisions of § 541.060, including
§§ 541.060(a)(2)(A) and 541.060(a)(3), and § 542.003, by knowingly underestimating the
amount of damage to the Property, failing to provide Plaintiff a prompt and reasonable
explanation of the basis in the Policy for underpayment of the claim and failing to attempt in
good faith to make a prompt, fair, and equitable settlement of the claims. Id. at 50-53. Plaintiff
alleges that damage to the Property is currently estimated at $53,608.30, an amount substantially
above the amount established by Buchanan‟s inspection. Id. at ¶ 16.
Having reviewed Plaintiff‟s allegations, the Court finds them sufficient to support a claim
against Buchanan in his individual capacity for violation of the Texas Insurance Code. Further
buttressing Plaintiff‟s claims that Buchanan‟s inspection was “substandard and improper,” the
Court observes that in Defendant‟s Motion to Sever and Abate currently before this Court (Dkt.
21), Metropolitan acknowledges a number of “re-inspections” of the Property by different
inspectors with different findings than those determined by Buchanan. Because Metropolitan
has not met its “heavy burden,” the Court cannot find that there is no reasonable possibility of
recovery against Buchanan. Smallwood, 385 F.3d 568 at 574.
While Chen also asserts a DTPA claim against Buchanan, the Court does not need to rule
on the sufficiency of that claim because it has already concluded that Chen has stated a valid
claim against Buchanan under the Texas Insurance Code. See Escuadra, 739 F.Supp.2d at 985;
Gray v. Beverly Enterprises–Mississippi, Inc., 390 F.3d 400, 412 (5th Cir.2004) (finding that the
existence of even a single valid cause of action against in-state defendants requires remand of the
entire case to state court)).
For the foregoing reasons, the Court recommends that Plaintiff‟s Motion to Remand (Dkt.
9) be GRANTED.
Within fourteen (14) days after service of the magistrate judge‟s report, any party may
serve and file written objections to the findings and recommendations of the magistrate judge.
28 U.S.C.A. § 636(b)(1)(C).
A party is entitled to a de novo review by the district court of the findings and
conclusions contained in this report only if specific objections are made, and failure to timely file
written objections to any proposed findings, conclusions, and recommendations contained in this
report shall bar an aggrieved party from appellate review of those factual findings and legal
conclusions accepted by the district court, except on grounds of plain error, provided that the
party has been served with notice that such consequences will result from a failure to object. Id.;
Thomas v. Arn, 474 U.S. 140, 148 (1985); Douglass v. United Servs. Auto Ass’n, 79 F.3d 1415,
1417 (5th Cir. 1996) (en banc), superseded by statute on other grounds, 28 U.S.C. § 636(b)(1)
(extending the time to file objections from ten to fourteen days).
SIGNED this 15th day of February, 2016.
DON D. BUSH
UNITED STATES MAGISTRATE JUDGE
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