Hutchins Warehouse Limited Partners v. American Automobile Insurance Company et al
MEMORANDUM OPINION AND ORDER: The 8 Motion to Remand is DENIED and plaintiff Hutchins Warehouse Limited Partners's claims against Rodger McMillan are DISMISSED without prejudice. Hutchins may cure -- if it can -- the deficient allegations aga inst McMillan by filing and serving an amended complaint no later than 2/24/2017. Moreover, because the removing defendants, as the parties invoking the jurisdiction of this court, have not adequately alleged the citizenship of Hutchins, see note 1 above, the defendants must properly plead the citizenship of Hutchins, by filing and serving an amended notice of removal, no later than 2/24/2017. (Ordered by Senior Judge A. Joe Fish on 2/14/2017) (twd)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
HUTCHINS WAREHOUSE LIMITED
INSURANCE COMPANY, ET AL.,
CIVIL ACTION NO.
MEMORANDUM OPINION AND ORDER
Before the court is the plaintiff’s motion to remand the case to the state court
from which it was previously removed (docket entry 8). For the reasons stated
below, the plaintiff’s motion is denied.
On October 7, 2016, the plaintiff, Hutchins Warehouse Limited Partners
(“Hutchins”), commenced this action in the 116th Judicial District Court of Dallas
County, Texas against the defendants, American Automobile Insurance Company
(“American”), Fireman’s Fund Insurance Company, Allianz Global Corporate &
Specialty (“Allianz”), and Rodger McMillan (“McMillan”) (collectively, “the
defendants”). Defendants’ Notice of Removal (“Notice”) ¶ 1.1 (docket entry 1);
Plaintiff’s Original Petition (“Original Petition”) (docket entry 1-2). Hutchins’s
claims arise from storm damage to its property that occurred on April 19, 2016.
Original Petition ¶ 17. Hutchins made a claim to its insurer, American, to pay for
the damage. See id. ¶ 18. American’s adjusting company, Allianz, assigned its
adjuster, McMillan, to inspect Hutchins’s property and to estimate the extent of the
storm damage. Id. ¶¶ 11, 20. Hutchins contends that McMillan made numerous
errors in his estimate, which resulted in American underpaying and partially denying
Hutchins’s claims. Id. ¶ 20.
On November 30, 2016, the defendants removed the case to this court,
alleging that the court has subject matter jurisdiction because Hutchins improperly
joined McMillan in the lawsuit to defeat diversity jurisdiction. Notice ¶ 2.8. On
December 28, 2016, Hutchins filed the instant motion to remand. Plaintiff’s Motion
to Remand (“Motion”) (docket entry 8). On January 18, 2017, the defendants filed
a timely response. Defendants’ Response to Plaintiff’s Motion to Remand (docket
entry 9); Defendants’ Brief in Support of Their Response to Plaintiff’s Motion to
Remand (“Defendants’ Brief”) (docket entry 10). The motion is now ripe for
A. Legal Standards
1. Removal Jurisdiction
28 U.S.C. § 1441(a) permits the removal of “any civil action brought in a
[s]tate court of which the district courts of the United States have original
jurisdiction.” 28 U.S.C. § 1441(a). The statute allows a defendant to “remove a
state court action to federal court only if the action could have originally been filed in
federal court.” Anderson v. American Airlines, Inc., 2 F.3d 590, 593 (5th Cir. 1993).
However, the removal statute must be strictly construed because “removal
jurisdiction raises significant federalism concerns.” Willy v. Coastal Corporation, 855
F.2d 1160, 1164 (5th Cir. 1988); see also Gutierrez v. Flores, 543 F.3d 248, 251 (5th
Cir. 2008). Therefore, “any doubts concerning removal must be resolved against
removal and in favor of remanding the case back to state court.” Cross v. Bankers
Multiple Line Insurance Company, 810 F. Supp. 748, 750 (N.D. Tex. 1992) (Means, J.);
see also Shamrock Oil & Gas Corporation v. Sheets, 313 U.S. 100, 108-09 (1941). The
party seeking removal bears the burden of establishing federal jurisdiction. Willy,
855 F.2d at 1164.
There are two principal bases upon which a district court may exercise removal
jurisdiction: the existence of a federal question, see 28 U.S.C. § 1331, and complete
diversity of citizenship among the parties. See 28 U.S.C. § 1332. Here, the removing
defendants have alleged only diversity of citizenship as a basis for this court’s
jurisdiction. See Notice ¶ 2.2. The court can properly exercise jurisdiction on the
basis of diversity of citizenship after removal only if three requirements are met:
(1) the parties are of completely diverse citizenship, see 28 U.S.C. § 1332(a); (2) none
of the properly joined defendants is a citizen of the state in which the case is brought,
see 28 U.S.C. § 1441(b); and (3) the case involves an amount in controversy of more
than $75,000, see 28 U.S.C. § 1332(a). In this case, the plaintiff, Hutchins, is
apparently a citizen of Wisconsin.1 See Notice ¶ 2.3. The defendant, McMillan, is a
citizen of Texas. Id. ¶ 2.7. However, the defendants contend that removal is proper
because Hutchins improperly joined McMillan in this suit. Id. ¶ 2.8.
2. Improper Joinder
Even if a defendant is a citizen of the state from which the action was
removed, a federal court can still exercise removal jurisdiction over an action if the
court finds that the plaintiff improperly joined the in-state defendant. The Fifth
Circuit has recognized two grounds on which a court can find that a defendant was
improperly joined: “(1) there is actual fraud in pleading jurisdictional facts or (2) the
The citizenship is of Hutchins is not entirely clear. The defendants
allege that Hutchins is a limited partnership and a “citizen of the state of Wisconsin
for diversity purposes.” Notice ¶ 2.3. However, the citizenship of a limited
partnership is determined by the citizenship of each of its partners. Harvey v. Grey
Wolf Drilling Company, 542 F.3d 1077, 1079 (5th Cir. 2008) (“The citizenship of a
limited partnership is based upon the citizenship of each of its partners.”). Neither
party has alleged the citizenship of each partner of Hutchins.
plaintiff is unable to establish a cause of action against the nondiverse defendant.”
Campbell v. Stone Insurance, Inc., 509 F.3d 665, 669 (5th Cir. 2007).
Only the latter ground is at issue here. To satisfy the second ground for
improper joinder, the defendant must demonstrate 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.” Smallwood v. Illinois Central
Railroad Company, 385 F.3d 568, 573 (5th Cir. 2004) (en banc) (emphasis added),
cert. denied, 544 U.S. 992 (2005).
When applying this test, the court does not “determine whether the plaintiff
will actually or even probably prevail on the merits of the claim [against the in-state
defendant], but look[s] only for a possibility that the plaintiff might do so.” Guillory
v. PPG Industries, Inc., 434 F.3d 303, 308-09 (5th Cir. 2005) (citing Dodson v. Spiliada
Maritime Corporation, 951 F.2d 40, 42-43 (5th Cir. 1992); B., Inc. v. Miller Brewing
Company, 663 F.2d 545, 549 (5th Cir. 1981)). Furthermore, the party seeking
removal bears the heavy burden of proving that joinder was improper. Smallwood,
385 F.3d at 574. This burden requires the trial court to resolve all “contested issues
of material fact, and any ambiguity or uncertainty in the controlling state law” in the
plaintiff’s favor. Griggs v. State Farm Lloyds, 181 F.3d 694, 699 (5th Cir. 1999). The
court can only deny the plaintiff’s motion for remand if, as a matter of law, there is
absolutely no possibility that the plaintiff can state a valid claim against the nondiverse defendant in state court. See B., Inc., 663 F.2d at 554. If the defendant
cannot prove improper joinder, remand is mandated. Smallwood, 385 F.3d at 575.
To determine whether Hutchins is unable to establish a cause of action against
the in-state defendant, the court should “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. at 573.
If the complaint survives the analysis, there is generally no improper joinder. Id.
Although there has been some uncertainty as to the pleading standard to be
applied, the Fifth Circuit has most recently held that federal courts should use the
federal court pleading standard when conducting the Rule 12(b)(6)-type analysis of
an improper joinder claim in a motion to remand to determine if the plaintiff has
stated a claim against a nondiverse defendant. International Energy Ventures
Management, L.L.C. v. United Energy Group, Limited, 818 F.3d 193, 200 (5th Cir.
2016); see also Buettner v. USA Gymnastics, No. 4:16-CV-0157-A, 2016 WL 2918107,
at *2 (N.D. Tex. May 18, 2016) (McBryde, J.).
3. Pleading Standard under Federal Law
“To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead
‘enough facts to state a claim to relief that is plausible on its face.’” In re Katrina
Canal Breaches Litigation, 495 F.3d 191, 205 (5th Cir. 2007) (quoting Bell Atlantic
Corporation v. Twombly, 550 U.S. 544, 570 (2007)), cert. denied, 552 U.S. 1182
(2008). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not
need detailed factual allegations, a plaintiff’s obligation to provide the grounds of his
entitlement to relief requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555
(citations, quotation marks, and brackets omitted). “Factual allegations must be
enough to raise a right to relief above the speculative level, on the assumption that all
the allegations in the complaint are true (even if doubtful in fact).” In re Katrina
Canal, 495 F.3d at 205 (quoting Twombly, 550 U.S. at 555) (internal quotation
marks omitted). “The court accepts all well-pleaded facts as true, viewing them in
the light most favorable to the plaintiff.” Id. (quoting Martin K. Eby Construction
Company, Inc. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004))
(internal quotation marks omitted).
The Supreme Court has prescribed a “two-pronged approach” to determine
whether a complaint fails to state a claim under Rule 12(b)(6). See Ashcroft v. Iqbal,
556 U.S. 662, 678-79 (2009). The court must “begin by identifying the pleadings
that, because they are no more than conclusions, are not entitled to the assumption
of truth.” Id. at 679. The court should then assume the veracity of any well-pleaded
allegations and “determine whether they plausibly give rise to an entitlement to
relief.” Id. The plausibility principle does not convert the Rule 8(a)(2) notice
pleading to a “probability requirement,” but “a sheer possibility that a defendant has
acted unlawfully” will not defeat a motion to dismiss. Id. at 678. The plaintiffs must
“plead[ ] factual content that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.” Id. “[W]here the well-pleaded
facts do not permit the court to infer more than the mere possibility of misconduct,
the complaint has alleged -- but it has not ‘show[n]’ -- ‘that the pleader is entitled to
relief.’” Id. at 679 (alteration in original) (quoting FED. R. CIV. P. 8(a)(2)). The
court, drawing on its judicial experience and common sense, must undertake the
“context-specific task” of determining whether the plaintiffs’ allegations “nudge” their
claims against the defendant “across the line from conceivable to plausible.” See id.
at 679, 683.
The defendants contend that Hutchins fails to state a claim against McMillan
because Hutchins’s complaint contains merely a recitation of the elements alleging
that the McMillan violated Chapter 541 of the TEX. INS. CODE. Notice ¶¶ 2.11-2.12.
Hutchins responds that it has alleged a valid cause of action against McMillan.
Motion at 7. First, Hutchins extensively briefs the issue regarding whether adjusters
can be held liable under Chapter 541. Id. at 7-11. However, this court has
previously held that adjusters can be found liable under this Chapter. Petree v.
Metropolitan Lloyds Insurance Company of Texas (Petree I), No. 3:16-CV-0735-G, 2016
WL 3090592, at *4 (N.D. Tex. June 2, 2016) (Fish, J.) (“This court concludes that
insurance adjusters can be liable under the provisions of the TEX. INS. CODE at issue
here.”), reconsideration denied, No. 3:16-CV-0735-G, 2016 WL 4179372 (N.D. Tex.
Aug. 8, 2016). The primary issue here is whether Hutchins has stated a claim against
McMillan. As to this issue, Hutchins contends that it pled sufficient facts against
McMillan. Motion at 12-14.
In the case Cavazos v. Sussex Insurance Company, No. 7:16-CV-00576, 2016 WL
6471139, at *2 (S.D. Tex. Nov. 2, 2016), the plaintiffs pled the following:
[Ring] failed to perform a thorough
[Ring] failed to include all of the damages;
[Ring] underestimated and undervalued the
cost of repairs . . .;
[Ring] improperly adjusted [Plaintiffs’ claim];
[Ring] misrepresented to Plaintiffs that the
damage to the property was not covered
under the policy. . . .
Cavazos, 2016 WL 6471139, at *2 (internal citations and quotations marks omitted).
The court held that the plaintiffs’ allegations were merely “naked assertions devoid of
further factual enhancement.” Id. (quoting Ashcroft, 556 U.S. at 678). The court
reasoned that the plaintiffs failed to show how the defendant failed to perform a
thorough investigation, what damages the defendant omitted from the estimate, and
why the defendant should have included such damages. Id.
The allegations in Cavazos are very similar to those pled here. In this case,
Hutchins’s complaint does not allege sufficient facts describing the actionable
conduct of the adjuster, including the following:
“[McMillan] . . . made numerous errors in
estimating the value of Plaintiff’s claim”;
“McMillan did not conduct a thorough
investigation of Plaintiff’s claim . . .. [His]
substandard inspection failed to include all of
Plaintiffs storm damages noted upon
“The damages included in the estimate were
“Defendant McMillan failed to thoroughly
review and properly supervise the inspection
of The Property”;
“Further, Defendant McMillan knowingly
and intentionally overlooked damages at The
Property and used their own inadequate and
biased investigation as the basis for
erroneously denying a portion of Plaintiff’s
Original Petition ¶ 20. These purported factual allegations are “nothing more than
legal conclusions couched as factual allegations, which the court need not consider in
determining a motion to dismiss.” See Weldon Contractors, Ltd. v. Fireman’s Fund
Insurance Company, No. 4:09-CV-0165-A, 2009 WL 1437837, at *3-4 (N.D. Tex.
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May 22, 2009) (McBryde, J.) (holding that similar allegations were merely
conclusory allegations). They do not provide the court with a reasonable basis to
predict that Hutchins can recover against McMillan.
Like the allegations in Cavazos, Hutchins’s allegations fall short of describing
the cause of the loss, such as how McMillan specifically committed any of the above
acts. Cf. Petree v. Metropolitan Lloyds Insurance Company of Texas (Petree II), No. 3:16CV-0735-G, 2016 WL 4211764, at *2 (N.D. Tex. Aug. 9, 2016) (Fish, J.)
(“Specifically, [the plaintiffs] claim that Tailored ‘ignored the moisture that was
entering the property via the wind driven rain (a covered cause of loss) and focused
exclusively on water that was allegedly entering the property via groundwater (an
excluded loss).’”). The closest Hutchins comes to making factual allegations is its
statement that “[McMillan’s] June 7, 2016 report . . . failed to include all of
Plaintiffs storm damages noted upon inspection.” Original Petition ¶ 20. However,
this allegation, like the unsuccessful allegation in Cavazos that the “[defendant] failed
to include all of the damages,”2 lacks factual support.
This court permitted similar allegations in the case Glidewell v. Safeco
Insurance Company of Indiana, No. 3:15-CV-1099-G, 2015 WL 4868483, at *4 (N.D.
Tex. Aug. 13, 2015) (Fish, J.). However, in Glidewell this court applied Texas’s “fair
notice” pleading standard because the Glidewell opinion was rendered prior to the
Fifth Circuit decision in International Energy Ventures Management, 818 F.3d at 208,
which requires the plaintiff to meet the federal pleading standard. Glidewell, 2015
WL 4868483, at *3.
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Moreover, Hutchins’s allegations against McMillan merely track the statutory
language under which Hutchins purports to bring its claims against McMillan.3 For
example, Hutchins alleges that McMillan engaged in an unfair settlement practice by
“misrepresenting to Plaintiff material facts relating to the coverage at issue.” Original
Petition ¶ 83. However, Hutchins fails to identify a single statement or any specific
misrepresentation made by McMillan that would support a cause of action under
section 541.060. Hutchins has only pled a theoretical possibility that McMillan
could be held liable under these sections. See Smallwood, 385 F.3d at 573 n.9
(holding that pleadings must show more than a “mere theoretical possibility of
recovery”) (internal quotations omitted).
In its motion, Hutchins contends that “there clearly exists the possibility
Plaintiff will be able to establish [a cause of action] against Defendant McMillan.”
Motion at 15. However, Hutchins has not alleged sufficient factual assertions that
would “nudge their claims across the line from conceivable to plausible.” Twombly,
550 U.S. at 570. Therefore, Hutchins has not pled “enough facts to state a claim
that is plausible on its face.” Id.
Because Hutchins has not stated a claim against McMillan, this court
concludes that the joinder of McMillan was improper. The claims asserted against
Specifically, Hutchins claims that McMillan violated the TEX. INS.
CODE §§ 541.051, 541.060, 541.061, and 541.151. Original Petition ¶ 81.
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American, Fireman’s Fund Insurance Company, and Allianz are unaffected by this
ruling. Hutchins’s claims against McMillan are dismissed without prejudice.
For the reasons stated above, the motion to remand is DENIED and
Hutchins’s claims against McMillan are DISMISSED without prejudice. Hutchins
may cure -- if it can -- the deficient allegations against McMillan by filing and serving
an amended complaint no later than February 24, 2017. Moreover, because the
removing defendants, as the parties invoking the jurisdiction of this court, have not
adequately alleged the citizenship of Hutchins, see note 1 above, the defendants must
properly plead the citizenship of Hutchins, by filing and serving an amended notice
of removal, no later than February 24, 2017.
February 14, 2017.
A. JOE FISH
Senior United States District Judge
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