Boze Memorial, Inc. v. The Travelers Lloyds Insurance Company et al

Filing 7

MEMORANDUM OPINION AND ORDER: Before the Court is the 1 Notice of Removal, filed by The Travelers Lloyds Insurance Company, and the 6 Joint Status Report. Complete diversity is lacking, and the Court lacks subject-matter jurisdiction; therefore the Court REMANDS the case to the 40th Judicial District Court of Ellis County, Texas. (Ordered by Judge Barbara M.G. Lynn on 2/28/2013) (skt)

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

BOZE MEMORIAL, INC.,
Plaintiff,
v.
THE TRAVELERS LLOYDS INSURANCE
COMPANY and MARY WILKERSON,
Defendants.

§
§
§
§
§
§
§
§
§
§

No. 3:12-cv-4363-M

MEMORANDUM OPINION AND ORDER
Before the Court is the Notice of Removal [Docket Entry #1], filed by The Travelers
Lloyds Insurance Company (“Travelers”), and the Joint Status Report [Docket Entry #6]. For
the reasons set forth below, the case is REMANDED to the 40th Judicial District Court of Ellis
County, Texas.
I. Background
This case arises from a dispute between a funeral home, Boze Memorial, Inc. (“Boze”),
and its insurance company, Travelers. In 2009, the parties entered into an insurance agreement
(the “Policy”) which covers two separate properties: one located in Italy, Texas (the “Italy
property”) and another located in Red Oak, Texas (the “Red Oak property”).
The Policy includes an appraisal section governing the procedure for determining the
damage incurred to covered property in the event the parties cannot agree. That appraisal
procedure calls for each party to select an appraiser, and for the appraisers to select an umpire.
Should the appraisers be unable to agree on an umpire, either party may request that the court
appoint one.

Page 1 of 9

Sometime in 2010,1 wind and hail damaged the Italy property. Boze submitted a claim,
but the parties disagreed as to the amount of covered loss. On July 20, 2011, Boze filed the
underlying state court action, arguing that Travelers had failed to appoint an appraiser, and
invoked its right to seek a court-appointed appraisal umpire. The state court appointed an
appraisal umpire and ordered an appraisal on July 25, 2011. The appraisal concluded on August
18, 2011, and Travelers claims it paid the appraised amount on August 24, 2011.
On September 26, 2011, Boze filed a Second Emergency Motion to Appoint Appraiser
and Appraisal Umpire. This time, Boze moved the court to appoint an appraisal umpire to
preside over a dispute concerning damage to the Red Oak property. Travelers argued that the
motion concerning the Red Oak property was inappropriately asserted in the action which
concerned the Italy property. Boze argued that the claims involved the same parties and policy
and should be included in the same action. The court agreed with Boze, appointed an appraisal
umpire, and, on January 4, 2012, ordered an appraisal. The Red Oak appraisal concluded on
March 30, 2012, and Travelers allegedly paid the appraised amount shortly thereafter.
On February 10, 2012, Boze sued Travelers in federal court, asserting claims for breach
of contract and bad faith relating to underpayment of the Red Oak claim. That suit, No.12-cv669-P, remains pending before Judge Jorge A. Solis.
On October 4, 2012, Boze filed a Supplemental Motion to Appoint an Appraisal Umpire
and for Other Relief in the state court action. In that Motion, Boze asserted “monetary causes of
action” against Travelers relating to the Italy property claim, including breach of common law
duty of good faith and fair dealing, and violations of the Texas Deceptive Trade Practices Act
(“DTPA”). Boze also asserted a DTPA claim against a new defendant, one of Travelers’s

1

In its Supplemental Motion to Appoint an Appraisal Umpire, Boze stated that the damage occurred on August 18,
2010, or on April 23, 2010. Pl.’s Mot. 4. It is not clear which is the correct date.

Page 2 of 9

insurance adjusters, Mary Wilkerson (“Wilkerson”). Travelers is an unincorporated association
and, like all of its underwriters, it is a citizen of Connecticut. Boze and Wilkerson are citizens of
Texas.
Travelers removed the case on October 30, 2012, over fifteen months after Boze
originally filed suit. Under 28 U.S.C. § 1446, a diversity case cannot normally be removed more
than a year after it was initiated. However, Travelers claims that the timing of Boze’s
prosecution of this action evidences a bad-faith intent to avoid removal which triggers an
exception to the one-year rule. Travelers also argues that Wilkerson was fraudulently joined to
destroy diversity. Further, in the parties’ status report, they have suggested that this case be
consolidated with the case before Judge Solis. This suggestion comes with one caveat, however:
Travelers does not want to consolidate the cases if Wilkerson remains a Defendant. No nondiverse defendant was named in Judge Solis’s case (which concerns only the Red Oak property),
and Travelers does not want to risk creating a scenario in which both cases are jointly remanded.
The deadline for Boze to file a motion for remand has passed.
II. Legal Standard
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. § 1441. If federal jurisdiction
is based on diversity of citizenship under 28 U.S.C. § 1332, an action “may not be removed if
any of the parties in interest properly joined and served as defendants is a citizen of the State in
which such action is brought.” 28 U.S.C. § 1441(b). A case may be removed despite the
presence of a non-diverse defendant, however, if the removing defendant shows that the nondiverse defendant was improperly joined. Salazar v. Allstate Texas Lloyd’s, Inc., 455 F.3d 571,
574 (5th Cir. 2006).

Page 3 of 9

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. Co., 385 F.3d 568, 573 (5th Cir. 2004). “The burden
of persuasion on those who claim . . . [improper] joinder is a heavy one.” Travis v. Irby, 326
F.3d 644, 649 (5th Cir. 2003).
To make such a finding, “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 may also conduct a summary
judgment-like inquiry “to identify the presence of discrete and undisputed facts that would
preclude plaintiff's recovery against the in-state defendant.” Id. at 573–74. All factual
allegations 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 203, 308 (5th Cir.
2005); Manguno v. Prudential Prop. & Cas. Ins., 276 F.3d 720, 723 (5th Cir. 2002); Griggs v.
State Farm Lloyds, 181 F.3d 694, 699 (5th Cir. 1999).
Where, as here, the court’s inquiry focuses on plaintiff’s ability to establish a cause of
action against a non-diverse defendant, the court must also determine whether to apply federal or
state pleading standards. The Fifth Circuit has not provided definitive guidance on this issue, nor
have the courts in this district taken a uniform approach. See Yeldell v. GeoVera Specialty Ins.
Co., No. 3:12-CV-1908-M, 2012 WL 5451822, at *4–5 (N.D. Tex. Nov. 8, 2012) (Lynn, J.)
(comparing cases from the Northern District of Texas). However, this Court has recently

Page 4 of 9

determined that the better-reasoned approach is to apply the state court pleading standard. See
id.
Texas applies a “fair notice” pleading standard, which looks to “whether the opposing
party can ascertain from the pleading the nature and basic issues of the controversy and what
testimony will be relevant.” SFTF Holdings, LLC v. Bank of Am., No. 3:10-CV-0509-G, 2011
WL 1103023 (N.D. Tex. Mar. 22, 2011) (Fish, J.) (quoting Horizon/CMS Healthcare
Corporation v. Auld, 34 S.W.3d 887, 896 (Tex. 2000)). 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 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 and Conclusion
This case presents two threshold questions relevant to jurisdiction. First, was the removal
fatally untimely? If not, was Wilkerson improperly joined, thus establishing diversity
jurisdiction?
A. Timeliness of removal
Generally, defendants have only thirty days after being served with the complaint, or
some other paper that forms the basis of removal, to effectuate proper removal. 28 U.S.C.
§ 1446(b)(2)(B), (b)(3). Further, with only a limited exception, the removal statute prohibits
defendants from removing a case on the grounds of diversity jurisdiction more than one year

Page 5 of 9

after the case was initiated, regardless of when the removing defendant receives notice that the
case is removable. Until recently, the limited exception was found not in the statute itself, but in
Fifth Circuit case law.2 See Tedford v. The Warner–Lambert Co., 327 F.3d 423, 428–29 (5th
Cir. 2003). In Tedford, the Fifth Circuit held that “[w]here a plaintiff has attempted to
manipulate the statutory rules for determining federal removal jurisdiction, thereby preventing
the defendant from exercising its rights, equity may require that the one-year limit in § 1446(b)
be extended.” Id.
Here, however, the Court need not determine whether Boze’s actions trigger the
exception to the one-year limit. Section 1447 provides that a “motion to remand the case on the
basis of any defect other than the lack of subject matter jurisdiction must be made within 30 days
after the filing of the notice of removal.” 28 U.S.C. § 1447(c). Untimely removal is a
procedural, not a jurisdictional defect, and failure to object to the defect within thirty days of
removal effectuates a waiver. Federal Deposit Ins. Corp. v. Loyd, 955 F.2d 316 (5th Cir. 1992)
(district courts lack authority to remand based on a procedural defect to removal, such as timing,
if no party raises an objection within the statutorily-circumscribed thirty-day window); Tedford,
327 F.3d at 426 (time limitation for an action to be removed is not jurisdictional and can be

2

Travelers bases its timeliness argument on the most recent amendment to the federal removal statute. However,
that amendment, codified by the Federal Courts Jurisdiction and Venue Clarification Act of 2011, applies only to
actions commenced on or after the effective date, January 6, 2012. Public Law 112-63, § 103, December 7, 2011,
125 Stat 758. It further states that “an action or prosecution commenced in State court and removed to Federal court
shall be deemed to commence on the date the action or prosecution was commenced, within the meaning of State
law, in State court.” Public Law 112-63, § 105. See Jones v. Shaner SPE Associates, LP, No. 12-CV-0381, 2012
WL 1609884 (W.D. La. May 7, 2012) (engaging in a similar analysis). Texas Rule of Civil Procedure 22 provides
that a civil suit commences once the petition is filed in the office of the clerk. Tex. R. Civ. P. 22. Boze filed its
original petition on July 20, 2011, well before January 6, 2012, the effective date for the amended removal statute.
Accordingly, the pre-amendment Tedford doctrine, rather than the newly-codified exception, governs the propriety
of this removal.

Page 6 of 9

waived). In this case, Boze did not move to remand, and therefore waived any objections based
on the timing of the removal.
B. Propriety of Joining Non-Diverse Defendant Wilkerson
Where a federal court’s jurisdiction is based on diversity, complete diversity between the
plaintiff and all the defendants is a requirement which cannot be waived. Thus, the Court has
jurisdiction over this action only if Boze improperly joined Wilkerson. To determine that, the
Court must analyze whether Boze failed to sufficiently plead a cause of action against Wilkerson
under the Texas fair notice pleading standard. In its state court pleading, Boze alleged that
Travelers and Wilkerson engaged in “bad faith insurance practices with respect to the Italy
Property claim” by (1) underpaying the claim, (2) engaging in unfair settlement practices, and (3)
hiring a biased appraiser.
Travelers argues that the underpayment allegations fail because “Wilkerson simply was
not involved in the decision regarding what amount to pay on the Italy Claim appraisal award. . .
[because] [t]he Italy Claim was transferred from the adjuster Mary Wilkerson supervised prior to
the payment of the Italy Claim Appraisal award.” Notice of Removal ¶ 24. In support of this
argument, Travelers attaches an affidavit of a Travelers employee who states that the Italy
Property claim was assigned to an adjuster, Adam Tate, whom Wilkerson managed and directly
supervised, but that “Wilkerson had no involvement or input into the decision regarding what
amounts to pay on the appraisal award signed August 2011.” Notice of Removal Ex. B at 1–2
(emphasis added). Travelers has not provided any authority for the proposition that a manager
cannot be held liable under the Texas Insurance Code or DTPA for the actions of an employee
she directly manages. But even if that were the case, and the Court were to resolve the

Page 7 of 9

underpayment allegations in Travelers’s favor, Travelers did not address Boze’s unfair
settlement allegations.
Travelers also argues that the biased appraisal allegations fail as a matter of Texas law
because “the showing of a pre-existing relationship” between the appraiser and the insurance
company, “without more, does not support a finding of bias.” Franco v. Slavonic Mut. Fire Ins.
Ass'n, 154 S.W.3d 777, 786 (Tex. App.—Houston [14th Dist.] 2004, no pet.). In Franco, the
only case cited by Travelers for this proposition, a Texas appellate court recognized that an
appraisal award can be set aside if made by someone without authority or as the result of fraud.
Id. The court ultimately rejected the appellants’ claim of bias, but it did so in the context of a
summary judgment motion. This Court’s job is not to determine the sufficiency of the evidence,
but simply to determine whether the allegations put Defendants on fair notice of claims that have
potential validity under Texas law. Boze alleges that the appraiser was “non-impartial,” and
“prone to simply automatically approve the conclusions of the engineer.” These allegations
appear to be based largely on the “pre-existing relationship” theory, which, under Franco, do
not, “without more,” sustain a claim. See id. However, the Franco court acknowledged that
evidence that the insurance company exerted control over the appraiser, that the appraiser had a
financial interest in the claim, or that the appraiser’s previous inspection somehow factored into
his damages evaluation could support a claim. Id. at 787. Travelers has not shown there is no
reasonable basis to believe that Boze could prevail on this claim, and the allegations meet
Texas’s liberal pleading standard.
Boze did not rebut Travelers’s affidavit that Wilkerson was not involved in deciding what
amount was to be paid by Travelers in the August 2011 appraisal award, so the underpayment
claims cannot constitute a basis for joinder of Wilkerson. However, the evidence before the

Page 8 of 9

Court does not foreclose Wilkerson’s role in the unfair settlement claim or the biased appraiser
claim. Thus, Travelers has failed to carry its heavy burden in establishing improper joinder.
Accordingly, complete diversity is lacking, and the Court lacks subject-matter jurisdiction;
therefore the Court REMANDS the case to the 40th Judicial District Court of Ellis County,
Texas.
SO ORDERED.
February 28, 2013.

_________________________________
BARBARA M. G. LYNN
UNITED STATES DISTRICT JUDGE
NORTHERN DISTRICT OF TEXAS

Page 9 of 9