Manziel et al v. Seneca Insurance Company, Inc., et al
Filing
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MEMORANDUM OPINION AND ORDER: Plaintiffs' 5 Motion is GRANTED, and this case is REMANDED to the 160th Judicial District Court of Dallas County, Texas. (Ordered by Chief Judge Barbara M.G. Lynn on 7/13/2016) (sss)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
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BOBBY JOE MANZIEL AND OIL
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PALACE, INC.,
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Plaintiffs,
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v.
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SENECA INSURANCE COMPANY, INC., §
VERICLAIM, INC. AND SHAUN
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KEEFER,
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Defendants.
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CIVIL ACTION NO. 3:15-CV-03786-M
MEMORANDUM OPINION & ORDER
Before the Court is the Motion to Remand, filed by Plaintiffs Bobby Joe Manziel and Oil
Palace, Inc. [Docket Entry #5]. For the reasons set forth below, Plaintiffs’ Motion to Remand is
GRANTED.
I. BACKGROUND
On September 23, 2015, Plaintiff Oil Palace, Inc., a business incorporated under Texas
law with its principal place of business in Tyler, Texas, and Plaintiff Bobby Joe Manziel, a
natural person who is a citizen of Texas, filed an Original Petition in the 160th Judicial District
Court of Dallas County, Texas against (1) Defendant Seneca Insurance Company, Inc., which
Plaintiffs claimed to be an insurance company incorporated under New York law with its
principal place of business in New York; (2) Defendant Vericlaim, Inc., an insurance adjusting
company formed under Delaware law, with its principal place of business in Illinois; and (3)
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Defendant Shaun Keefer, an individual adjuster who is a natural person and a citizen of Texas.
[Docket Entry #1-2 at 4-7].
Plaintiffs assert claims for damages to Oil Palace’s property, allegedly insured by Seneca.
[Docket Entry #1-2 at ¶ 4.2]. Plaintiffs plead that Seneca sold Oil Palace a commercial insurance
policy for Oil Palace’s property in Tyler, Texas. [Docket Entry #1-2 at ¶ 4.1]. On April 18, 2015,
the Tyler property sustained damage in a wind and hail storm, and Oil Palace submitted a claim
to Seneca. Id. at ¶ 4.2. Seneca assigned Vericlaim to be its third-party adjuster, and it assigned
Keefer to the project. Id. at ¶ 4.3. Plaintiffs allege that Seneca wrongfully denied Oil Palace’s
claim. Id. at ¶ 4.4.
Plaintiffs filed suit in state court for violations of the Texas Insurance Code, failure to
make prompt payment of the claim, breach of contract, breach of the duty of good faith and fair
dealing, violations of the Texas Deceptive Trade Practices Act, and fraud, seeking actual
damages, interest, and punitive damages. [Docket Entry #1-2]. All causes of action were directed
to all defendants, except for the alleged breaches of contract and fiduciary duty, which were
directed only to Seneca. Id. at ¶¶ 8.1-9.2. Plaintiffs allege that Keefer failed to prepare estimates,
falsely represented that there was no hail damage, and failed to maintain effective
communication, thereby prolonging and delaying resolution of Plaintiff’s claim. Id. at ¶ 4.4.
Seneca removed the case, arguing in its Notice of Removal that Keefer was improperly
joined because Plaintiffs failed to state a claim against him, and that his Texas citizenship should
thus be disregarded for purposes of diversity jurisdiction. Id. at ¶ 9, 12.
Plaintiffs moved to remand, arguing that this Court must evaluate its Petition under Texas
pleading standards. [Docket Entry #5 at ¶ 4]. Alternatively, Plaintiffs contend that they stated a
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viable claim against Keefer if their suit is evaluated according to federal pleading standards and
that, therefore, there is not complete diversity. Id. at ¶ 14-17.
The only issue before this Court is whether or not Keefer has been properly joined.
II. LEGAL STANDARD
A. Removal Jurisdiction
Title 28 U.S.C. § 1441(a) permits the removal of any civil action brought in a state court
of which the district courts of the United States have original jurisdiction. This case was removed
on the basis of diversity jurisdiction under 28 U.S.C. § 1332. [Docket Entry #1 at ¶ 5]. For a case
to be removed based on diversity jurisdiction, “all persons on one side of the controversy [must]
be citizens of different states than all persons on the other side.” Harvey v. Grey Wolf Drilling
Co., 542 F.3d 1077, 1079 (5th Cir. 2008). Under 28 U.S.C. § 1441(b), a case cannot be removed
based on diversity jurisdiction if any properly joined defendant is a citizen of the state in which
the action is brought.
B. Improper Joinder
The purpose of an improper joinder inquiry is to determine whether or not the federal
district court has jurisdiction over the removed case. 28 U.S.C. § 1441(b); Int'l Energy Ventures
Mgmt., L.L.C. v. United Energy Grp., Ltd., 2016 WL 1274030, at *10 (5th Cir. Mar. 31, 2016).
There are two ways to establish improper joinder: “(1) actual fraud in the pleading of
jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the
nondiverse party in state court. Smallwood v. Illinois Cent. R. Co., 385 F.3d 568, 573 (5th Cir.
2004) (quoting Travis v. Irby, 326 F.3d 644, 646-47 (5th Cir. 2003)). If a nondiverse defendant
has been properly joined, then the federal court has no jurisdiction and must remand the removed
case. 28 U.S.C. § 1447. If, however, it is found that the nondiverse defendant has been
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improperly joined, then the remand must be denied and the claims against the nondiverse
defendant dismissed without prejudice. Int'l Energy, 2016 WL 1274030, at *10. The defendant
seeking removal must demonstrate that the district court has no reasonable basis to predict that
the plaintiff might be able to recover against the nondiverse defendant. Smallwood, 385 F.3d at
573.
C. The Applicable Pleading Standard
In Int'l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 2016 WL 1274030,
at *1 (5th Cir. Mar. 31, 2016), the Fifth Circuit, addressing whether state or federal pleadings
standards apply to the issue of improper joinder, held that a federal court must apply the federal
pleading standard. Id. at *8. This requires the plaintiff’s pleading to contain sufficient facts to
state a claim to relief that is plausible on its face, providing more than a mere possibility to
recovery. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). Moreover, the pleading must
provide more than “labels and conclusions” and do more than merely restate the elements of a
cause of action. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
III. ANALYSIS
Here, Plaintiffs’ Petition alleges various causes of action against the nondiverse
defendant, Keefer, including claims under the Texas Insurance Code. [Docket Entry #1-2 at 1416]. To be liable under the Insurance code, one must be “in the business of insurance.” Gasch v.
Hartford Acc. & Indem. Co., 491 F.3d 278, 282 (5th Cir.); Liberty Mut. Ins. Co. v. Garrison
Contractors, Inc., 966 S.W.2d 482, 488 (Tex. 1998); Tex. Ins. Code Ann. § 541.002 (West). The
Texas Supreme Court has held that the business of insurance “includes the investigation and
adjustment of claims and losses.” Vail v. Texas Farm Bureau Mut. Ins. Co., 754 S.W.2d 129, 132
(Tex. 1998). Because Texas law recognizes that an adjuster can potentially be liable for Texas
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Insurance Code violations, the sole issue before this Court is whether or not Plaintiffs have stated
a viable claim against Keefer. If so, then Keefer was properly joined, and this Court must grant
Plaintiffs’ Motion to Remand for lack of diversity jurisdiction. Int’l Energy, 2016 WL 1274030,
at *9.
If the Court finds a reasonable basis to predict that Plaintiffs can potentially recover on a
claim asserted against Keefer, then the Court must remand the entire case. Smith-Manning v.
State Farm Lloyds, 2013 WL 5637539, at *2 (N.D. Tex. Oct. 14, 2013) (Lynn, J.) (quoting Gray
ex rel. Rudd v. Beverly Enterprises-Mississippi, Inc., 390 F.3d 400, 412 (5th Cir. 2004)).
A. Plaintiffs sufficiently pled that Keefer violated Tex. Ins. Code § 541.060(a)(2)
In the Petition, Plaintiffs asserted a number of causes of action against Keefer under §541
of the Texas Insurance Code. [Docket Entry #1-2 at 14-16]. Plaintiffs claim that Keefer “failed to
attempt to effectuate a prompt, fair, and equitable settlement of a claim with respect to which
liability has become reasonably clear…failed to provide promptly a reasonable explanation, in
relation to the facts or applicable law, for the denial of a claim…refused to pay a claim without
conducting a reasonable investigation with respect to the claim…[and] misrepresented the
insurance policy.” [Docket Entry #1-2 at 15-16]; Tex. Ins. Code Ann. §§ 541.060(a)(2)(A),
(a)(3), (a)(7) (West); Tex. Ins. Code Ann. § 541.061(1)-(3) (West). All of these § 541 claims
were asserted jointly against Keefer and his co-defendants, Seneca and Vericlaim. However, the
Plaintiffs allege facts against Keefer that are independent of those asserted against his codefendants. The Petition alleges the following:
Keefer failed to prepare any estimates or scopes of damage to the
Property. Instead, Keefer falsely represented that there was no hail
damage to the Property. Additionally, Keefer retained an engineer
to assess damage to the Property; that engineer was inadequate to
evaluate the damage. Keefer refused to provide the report of
findings to Oil Palace. Throughout the claims process Keefer failed
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to respond to emails or provide updates to Oil Palace, prolonging
and delaying any claims resolution. As a result… [Oil Palace] was
forced to hire its own consultants and representatives [, who]
point[ed] out obvious damages that [Keefer] continued to ignore.
[Docket Entry #1-2 at ¶¶ 4.4].
Several courts, including this one, have concluded that an insurance adjuster may be held
personally liable for engaging in unfair settlement practices under Tex. Ins. Code §
541.060(a)(2), because the adjuster has the ability to affect or bring about the settlement of a
claim. See Denley Group, LLC v. Safeco Ins. Co. of Ind., 2015 WL 5836226, at *3-4 (N.D. Tex.
Sept. 30, 2015) (Boyle, J.); Progressive Island, LLC v. Scottsdale Ins. Co., 2013 WL 6065414, at
*2-3 (N.D. Tex. Nov. 18, 2013) (Lynn, J.); Lopez-Welch v. State Farm Lloyds, 2014 WL
5502277, at *8 (N.D. Tex. Oct. 31, 2014) (Lindsay, J.); Shade Tree Apartments, LLC v. Great
Lakes Reinsurance (UK) PLC, 2015 WL 8516595, at *6 (W.D. Tex. Dec. 11, 2015). In ruling on
the subject motion, this Court asks only whether there is a reasonable basis to predict that
Plaintiffs might be able to recover against Keefer. Smallwood, 385 F.3d at 573. Since there is a
reasonable basis, the Court finds that Plaintiffs’ Petition is sufficient under the federal pleading
standard to state a claim against Keefer under Tex. Ins. Code § 541.060(a)(2)(A). Iqbal, 556 U.S.
at 678.
Because Keefer was not improperly joined, his citizenship destroys diversity jurisdiction
and therefore requires the Court remand the action. See U.S.C. § 1447(c).
For these reasons, Plaintiffs’ Motion is GRANTED, and this case is REMANDED to the
160th Judicial District Court of Dallas County, Texas.
SO ORDERED.
Dated: July 13, 2016.
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