Yeldell v. Geovera Specialty Insurance Company et al
Filing
15
MEMORANDUM OPINION AND ORDER: The Court concludes that Defendants have failed to carry their "heavy" burden of establishing improper joinder of Allcorn. This Court does not have subject matter jurisdiction over this case. Accordingly, Plaintiff's 5 Motion to Remand is GRANTED, and this case is REMANDED to the 116th Judicial District Court of Dallas County, Texas for further proceedings. (Ordered by Judge Barbara M.G. Lynn on 11/8/2012) (twd)
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
HATTIE YELDELL,
§
§
§
§
§
§
§
§
§
§
§
§
§
Plaintiff,
v.
GEOVERA SPECIALTY INSURANCE
COMPANY and STEPHANIE
ALLCORN,
Defendants.
Civil Action No. 3:12-cv-1908-M
MEMORANDUM OPINION AND ORDER
Before the Court is the Motion to Remand, filed by Plaintiff Hattie Yeldell (“Plaintiff”)
[Docket Entry #5].
For the reasons set forth below, Plaintiff’s Motion to Remand is
GRANTED.
I.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
This action concerns a dispute over the Defendants’ handling of an insurance claim filed
by Plaintiff for property damage. On May 17, 2012, Plaintiff, a citizen of Texas, filed a civil
action in Texas state court against GeoVera Specialty Insurance Company (“GeoVera”), a citizen
of California, and Stephanie Allcorn (“Allcorn”), a citizen of Texas. Pl.’s Original Pet., Ex. B to
Notice of Removal, at 1–2. [Docket Entry #1].
In her Petition, Plaintiff alleges that GeoVera
failed to compensate her for the full value of damage Plaintiff’s property sustained during a wind
and hailstorm that took place on April 11, 2011. Id. at 2–7. Plaintiff also filed suit against
Allcorn, the insurance agent for GeoVera in charge of handling Plaintiff’s insurance claim. Id. at
Page 1 of 9
3. Plaintiff asserts the following causes of action against both GeoVera and Allcorn: breach of
the duty of good faith and fair dealing, violation of Sections 541 and 542 of the Texas Insurance
Code, violation of the Texas Deceptive Trade Practices Act, fraud, conspiracy, and aiding and
abetting the commission of a tort. Id. at 3–15. Plaintiff also asserts the following causes of
action against only Allcorn: negligence, gross negligence, and negligent misrepresentation. Id. at
16–17.
On June 19, 2012, GeoVera removed the case to this Court, claiming federal diversity
jurisdiction. Def.’s Notice of Removal ¶ 6. GeoVera alleges that there is complete diversity of
parties, despite the fact that Allcorn is a citizen of Texas, because Allcorn was improperly joined,
and therefore her citizenship should be disregarded for diversity purposes. Id. ¶ 9. On June 28,
2012, Plaintiff moved to remand, arguing that Plaintiff properly joined Allcorn as a Defendant,
and thus, there is not complete diversity among the Defendants, rendering remand proper. Pl.’s
Mot. to Remand ¶ 8. The issue before the Court is whether Allcorn, a Texas citizen, was
properly joined in the lawsuit, thereby defeating diversity jurisdiction.
II.
APPLICABLE LAW
A defendant has the right to remove a case to federal court when federal jurisdiction
exists, and the removal procedure is properly followed. 28 U.S.C.A § 1441 (Supp. 2012). The
removing party bears the burden of establishing that a state court suit is properly removable to
federal court. Delgado v. Shell Oil Co., 231 F.3d 165, 178 n.25 (5th Cir. 2000). Doubts about
the propriety of removal are to be resolved in favor of remand. Manguno v. Prudential Prop. &
Cas. Ins., 276 F.3d 720, 723 (5th Cir. 2002).
If federal jurisdiction is based on diversity of citizenship under 28 U.S.C.A. § 1332, an
action “may not be removed if any of the parties in interest properly joined and served as
Page 2 of 9
defendants is a citizen of the State in which such action is brought.” 28 U.S.C.A. § 1441(b)
(Supp. 2012). A case may be removed despite the presence of a resident defendant if the
removing defendant shows that the resident defendant was fraudulently or improperly joined. 1
Salazar v. Allstate Texas Lloyd’s, Inc., 455 F.3d 571, 574 (5th Cir. 2006). “The burden of
persuasion on those who claim fraudulent joinder is a heavy one.” Travis v. Irby, 326 F.3d 644,
649 (5th Cir. 2003). To establish that a non-diverse defendant has been improperly joined for the
purpose of defeating diversity jurisdiction, the removing party must prove either that: (1) there
has been actual fraud in the pleading of jurisdictional facts; or (2) that there is no reasonable
possibility that the plaintiff will be able to establish a cause of action against the non-diverse
defendant in state court. Smallwood v. Illinois Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004)
(en banc).
Only the latter ground is at issue here. When determining whether a plaintiff is able to
establish a state claim against a non-diverse party, the court inquires whether there is any
reasonable basis for the court to predict that the plaintiff might be able to recover against the
non-diverse defendant. Id. at 573. To make that determination, the court generally conducts a
Fed. R. Civ. P. 12(b)(6)-type analysis, looking initially at the allegations of the petition to
determine whether the petition states a claim under state law against the in-state defendant. Id.
All factual allegations in the state court petition are considered in the light most favorable to the
plaintiff, and contested fact issues are resolved in the plaintiff’s favor. Guillory v. PPG
Industries, Inc., 434 F.3d 303, 308 (5th Cir. 2005).
1
There is no substantive difference between the terms “improper joinder” and “fraudulent joinder,” but the use of
the term “improper joinder” is preferred by the Fifth Circuit. Jonhson v. Zurich Am. Ins. Co., No. 3:11-cv-0344-P,
2011 WL 3111919, at *1 n.2 (N.D. Tex. June 29, 2011) (Solis, J.) (citing Smallwood v. Illinois Cent. R.R. Co., 385
F.3d 568, 574 n.1 (5th Cir. 2004) (en banc) (“We adopt the term ‘improper joinder’ as being more consistent with
the statutory language than the term ‘fraudulent joinder,’ which has been used in the past. Although there is no
substantive difference between the two terms, ‘improper joinder’ is preferred.”)).
Page 3 of 9
a. Applicability of the Federal or Texas Pleading Standard
As a threshold issue in this case, this Court must decide if it should look to the federal or
state pleading standard to determine whether a plaintiff can state a claim for relief against an instate defendant. The Fifth Circuit has not directly addressed the issue in a published opinion, and
this District is divided, with some of its judges applying the federal pleading standard in this
analysis. Helm v. Moog Inc., No. 4:11-cv-109-Y, 2011 WL 3176439, at *2 (N.D. Tex. July 27,
2011) (Means, J.) (using the federal pleading standard in the improper joinder analysis);
Mugweni v. Wachovia Corp., No. 3:08-cv-1889-G-BF, 2011 WL 2441255, at *2 (N.D. Tex.
April 19, 2011) (Stickney, Mag. J.) (same), accepted by 2011 WL 2441838 (N.D. Tex. June 17,
2011) (Fish, J.); Sahinkaya v. Travelers Indem. Co., No. 3:10-cv-0717-B, 2010 WL 3119423, at
*3 nn.3–4 (N.D. Tex. Aug. 5, 2010) (Boyle, J.) (same).
On the other hand, the Fifth Circuit, in an unpublished decision, along with some judges
in this District, have applied the Texas “fair notice” pleading standard in the improper joinder
analysis. De La Hoya v. Coldwell Banker Mex., Inc., 125 F.App’x. 533, 537–38 (5th Cir. 2005)
(Reavley, J.) (unpublished opinion) (applying Texas’s notice pleading standard to factual
allegations of removed complaint in improper joinder analysis); Durable Specialties, Inc. v.
Liberty Ins. Corp., No. 3:11-cv-739-L, 2011 WL 6937377, at *5 (N.D. Tex. Dec. 30, 2011)
(Lindsay, J.) (applying Texas’s “fair notice” standard after finding the Fifth Circuit’s application
of the state pleading standard in De La Hoya to be logical); Smith v. Shred-It USA, No. 3:10-cv831-O-BK, 2010 WL 3733902, at *2–3 (N.D. Tex. Sept. 23, 2010) (O’Connor, J.) (noting that
the focus in improper joinder cases is on the plaintiff’s possibility of success in state court and
distinguishing cases that applied the federal pleading standard in the improper joinder analysis);
Shioleno Indus., Inc. v. Liberty Mut. Fire Ins. Co., No. 3:11-cv-971-O-BK, 2012 WL 176572, at
Page 4 of 9
*3–4 (N.D. Tex. Jan. 6, 2012) (Toliver, Mag. J.) (noting disagreement among judges in this
District as to whether the federal or state pleading standard applied, but ultimately applying the
state pleading standard in improper joinder analysis), accepted by 2012 WL 195016 (N.D. Tex.
Jan. 23, 2012) (O’Connor, J.).
For purposes of the improper joinder inquiry, this Court finds that the assessment of the
sufficiency of the factual allegations should be reviewed under Texas’s “fair notice” pleading
standard, not the heightened federal pleading standard. Although the Fifth Circuit’s decision in
De La Hoya is unpublished, its application of the state pleading standard is entirely logical in the
context of a removal action. See De La Hoya, 125 F.App’x at 537–38. As Judge Lindsay noted
in Durable Specialties, Inc., “[w]hen a party files suit in a Texas [state] court, such party expects
to be governed by the rules of the game that apply to the civil pleading requirements of that state
court system.” 2011 WL 6937377, at *5. This Court agrees that “[f]undamental fairness compels
that the standard applicable at the time the initial lawsuit was filed in state court should govern.”
See id. Thus, this Court holds that the Texas “fair notice” pleading standard applies to factual
allegations of the removed petition in an improper joinder analysis. See De La Hoya, 125
F.App’x at 537–38.
b. Texas “Fair Notice” Pleading Standard
Under the Texas Rules of Civil Procedure, a pleading can contain legal conclusions as
long as fair notice to the opponent is given by the allegations as a whole. Tex. R. Civ. P. 45(b).
The state court liberally construes a plaintiff’s petition in the plaintiff’s favor. Starcrest Trust v.
Berry, 926 S.W.2d 343, 349 (Tex. App.—Austin, 1996, no writ). Moreover, the court will look
to the plaintiff’s intent and uphold a petition, even if the plaintiff has not specifically alleged
some element of a cause of action, by supplying every fact that can reasonably be inferred from
Page 5 of 9
what the plaintiff specifically stated. Torch Operating Co. v. Bartell, 865 S.W.2d 552, 554 (Tex.
App.—Corpus Christi, 1993, writ denied).
III.
ANALYSIS
Plaintiff has moved for remand, arguing that this Court lacks diversity jurisdiction
because Allcorn is a resident of Texas. 2 The parties do not dispute that the amount-incontroversy requirement has been met and do not dispute the domicile of the parties. 28
U.S.C.A. § 1332(a) (Supp. 2012). The issue before the Court is whether Defendants have carried
their burden of showing that there is no reasonable basis on which the Court can predict that
Plaintiff might recover against Allcorn. 3 See Smallwood, 385 F.3d at 573. If Defendants fail to
meet the “heavy” burden of establishing that Allcorn was joined improperly, the Court must
remand the action to state court. See Travis, 326 F.3d at 649.
Plaintiff’s Petition brings some claims only against GeoVera, some claims only against
Allcorn, and some claims against both Defendants. The factual allegations in Plaintiff’s Petition
against Allcorn are as follows: (1) GeoVera assigned Allcorn to adjust the claim; (2) Allcorn
misrepresented to Plaintiff that the damage to the Property was not covered under the Policy,
even though the damage was caused by a covered occurrence; (3) Allcorn failed to attempt to
settle Plaintiff’s claim in a fair manner; (4) Allcorn failed to explain to Plaintiff the reasons for
GeoVera’s offer of an inadequate settlement, specifically, she failed to offer Plaintiff adequate
compensation, without any explanation why full payment was not being made; (5) Allcorn failed
2
GeoVera did not have to provide written consent to removal from Allcorn. A removing defendant need not obtain
the consent of a defendant it alleges was improperly joined. See Jernigan v. Ashland Oil Inc., 989 F.2d 812, 815 (5th
Cir. 1993) (In cases involving alleged improper or fraudulent joinder of parties, requiring the written consent of
“improperly or fraudulently joined parties would be nonsensical, as removal in those cases is based on the
contention that no other proper defendant exists.”).
3
The parties do not dispute that Texas law recognizes a cause of action against an insurance adjuster for violations
of the Texas Insurance Code and for common law fraud. See, e.g., Liberty Mutual Ins. Co. v. Garrison Contractors,
Inc., 966 S.W.2d 482, 484 (Tex. 1998); Gasch v. Hartford Accident & Indem. Co., 491 F.3d 278, 282 (5th Cir.
2007).
Page 6 of 9
to affirm or deny coverage within a reasonable time, specifically, failed to perform a reasonable
investigation; (6) Allcorn knowingly or recklessly made false representations as to material facts;
and (7) the storm damaged Plaintiff’s property and further damages have been caused as a direct
result of Allcorn’s mishandling of Plaintiff’s claim in violation of the Texas Insurance Code.
Pl.’s Original Pet., Ex. B to Notice of Removal, at 2–17.
Defendants argue that Allcorn was improperly joined because Plaintiff’s Petition only
recites statutory language from the Texas Insurance Code and fails to allege any facts that could
support liability for the causes of action Plaintiff alleges against Allcorn. The Court disagrees.
Texas’s pleading standard is simply one of “fair notice” and thus, is more relaxed than its federal
counterpart. SmithKline Beecham Corp. v. Doe, 903 S.W.2d 347, 354 (Tex. 1995). Under
Texas’s “fair notice” pleading standard, Plaintiff’s Petition alleges sufficient facts against
Allcorn. See id.
Plaintiff’s Petition alleges that the property was damaged, that Allcorn was
tasked with handling the insurance claim, and that Allcorn failed to fulfill this task in the manner
required by the Texas Insurance Code. Pl.’s Original Pet., Ex. B to Notice of Removal, at 2–17.
Moreover, Plaintiff alleges that Allcorn mishandled the claim in several specific ways. Id.
Plaintiff’s allegations, if proven true, would create a reasonable possibility that Plaintiff could
prevail in her claims against Allcorn under Texas law. See Smallwood, 385 F.3d at 573.
Defendants have not provided any evidence showing that recovery against Allcorn would be
unlikely. See Jimenez v. Travelers Indem. Co., No. H-09-cv-1308, 2010 WL 1257802, at *4
(S.D. Tex. March 25, 2010) (denying remand where the in-state adjuster named as the defendant
was not the adjuster who had analyzed and denied the claim); Lakewood Chiropractic Clinic v.
Travelers Lloyds Ins. Co., No. H-09-cv-1728, 2009 WL 3602043, at *4 (S.D. Tex. Oct. 27, 2009)
(same); Frisby v. Lumbermens Mut. Cas. Co., No. H-07-cv-015, 2007 WL 2300331, at *5 (S.D.
Page 7 of 9
Tex. Feb. 20, 2007) (denying remand where the defendant presented deposition testimony by the
plaintiff that the in-state defendant “never made any untrue statements to him, never failed to tell
him an important fact, and never made a statement in a way that led him to a false conclusion”).
Because the court must consider all allegations in the state court petition in the light most
favorable to the plaintiff, see Guillory, 434 F.3d at 308, this Court cannot conclude that there is
no reasonable basis to predict that Plaintiff might recover under at least one cause of action
asserted against Allcorn.4 Remand is therefore appropriate. This result is consistent with recent
opinions from this District with similar facts and claims. 5 See, e.g., Shioleno Indus., Inc., 2012
WL 176572, at *5–6 (granting remand because Plaintiff’s allegations provided sufficient factual
allegations under Texas’s fair notice standard for recovery against defendant adjuster); Jonhson
v. Zurich Am. Ins. Co., No. 3:11-cv-0344-P, 2011 WL 3111919, at *3–4 (N.D. Tex. June 29,
2011) (Solis, J.) (recognizing that independent insurance adjusters may be liable under the Texas
Insurance Code and granting remand because plaintiff’s factual allegations state a plausible
claim for plaintiff to recover against the defendant insurance adjuster).
IV.
CONCLUSION
The Court concludes that Defendants have failed to carry their “heavy” burden of
establishing improper joinder of Allcorn. This Court does not have subject matter jurisdiction
over this case. Accordingly, Plaintiff’s Motion to Remand is GRANTED, and this case is
4
While perhaps not specific enough to survive a Federal Rule of Civil Procedure 12(b)(6) motion, these factual
allegations are sufficient under Texas’s more lenient “fair notice” standard because Plaintiff’s Petition gives
adequate notice to Defendants of her claims against them, considering the allegations as a whole. See Tex. R. Civ. P.
45(b). Moreover, because Texas’s fair notice pleading standard applies, Defendant’s argument that Plaintiff failed
to meet the heightened pleading requirements of Federal Rule of Civil Procedure 9(b) is irrelevant. Moreover, the
Court must find only that Plaintiff can plead at least one cause of action against Allcorn, and need not decide
whether Plaintiff has sufficiently pleaded each cause of action against Allcorn.
5
The Southern District of Texas has also reached a result consistent with this Order when faced with substantially
similar pleadings and allegations. See Harris v. Allstate Tex. Lloyd's, No. H-10-0753. 2010 WL 1790744, at *2–5
(S.D. Tex. April 30, 2010) (Sim Lake, J.) (reaching the same conclusion when faced with nearly identical pleadings
and allegations regarding an insurance dispute arising from Hurricane Ike, while not expressly applying either state
or federal pleading standard).
Page 8 of 9
REMANDED to the 116th Judicial District Court of Dallas County, Texas for further
proceedings.
SO ORDERED.
Dated: November 8, 2012.
Page 9 of 9
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?