Hutchins Warehouse Limited Partners v. American Automobile Insurance Company et al

Filing 33

MEMORANDUM OPINION AND ORDER: This action is REMANDED to the 116th Judicial District Court of Dallas County, Texas. The clerk shall mail a certified copy of this memorandum opinion and order to the district clerk of Dallas County, Texas. (Ordered by Senior Judge A. Joe Fish on 6/22/2017) (ran)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

HUTCHINS WAREHOUSE LIMITED
PARTNERS,
Plaintiff,
VS.
AMERICAN AUTOMOBILE
INSURANCE COMPANY, ET AL.,
Defendants.

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CIVIL ACTION NO.
3:16-CV-3336-G

MEMORANDUM OPINION AND ORDER

The court, on its own motion, herein examines subject matter jurisdiction in
this case. For the reasons stated below, this case is remanded to the state court from
which it was previously removed. The court set forth the background of this case in a
recent memorandum opinion and order. See Memorandum Opinion and Order of
February 14, 2017 (“Order”) (docket entry 11).
I. ANALYSIS
A. Legal Standards
The court may sua sponte raise the issue of its jurisdiction at any time during
the course of litigation. In re Bass, 171 F.3d 1016, 1021 (5th Cir. 1999) (“Federal

courts must be assured of their subject matter jurisdiction at all times and may
question it sua sponte at any stage of judicial proceedings.”) (emphasis added).
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
defendant, American Automobile Insurance Company, has alleged only diversity of

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citizenship as a basis for this court’s jurisdiction. See Second Amended Notice of
Removal ¶ 2.2 (docket entry 32). 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).
Even if a defendant has the same citizenship as the plaintiff, a federal court
can still exercise removal jurisdiction over an action if the court finds that the
plaintiff improperly joined the non-diverse defendant. A defendant can satisfy the
requirements for improper joinder by demonstrating 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), cert. denied, 544 U.S.
992 (2005). To determine whether Hutchins Warehouse Limited Partners
(“Hutchins”) is unable to establish a cause of action against the non-diverse
defendant, Rodger McMillan (“McMillan”), the court should conduct a Rule
12(b)(6)-type analysis. Id. “[T]he Rule 12(b)(6) analysis necessarily incorporates
the federal pleading standard articulated in Bell Atlantic Corp. v. Twombly, 550 U.S.

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544, 555 (2007).” International Energy Ventures Management, L.L.C. v. United Energy
Group, Ltd., 818 F.3d 193, 200 (5th Cir. 2016) (emphasis in original).
B. Application
In this case, both Hutchins and McMillan are citizens of Texas.* See Second
Amended Notice of Removal ¶¶ 2.3, 2.7. The court previously denied Hutchins’s
motion to remand because it failed to state a claim against McMillan in its original
petition. See generally Order. The court concluded that the defendants had met their
heavy burden of demonstrating that Hutchins improperly joined McMillan. Id. at
12. Because McMillan was improperly joined and not a party to the suit, this court
had diversity jurisdiction under 28 U.S.C. § 1332 and denied Hutchins’s motion for
remand. See generally id. The court will now determine whether Hutchins has
successfully stated a claim against McMillan in its first amended complaint
(“Amended Complaint”) (docket entry 18).
The court need not decide whether Hutchins has sufficiently pleaded each
cause of action; rather, if the court finds a reasonable basis to predict that it can
potentially recover on any of these causes of action, the court must remand the entire
case. Smith-Manning v. State Farm Lloyds, No. 3:13-CV-3056-M, 2013 WL 5637539,

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Hutchins is a limited partnership and one of its partners is a citizen of
Texas. See Second Amended Notice of Removal ¶ 2.3. Therefore, Hutchins is also a
citizen of Texas. 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.”).
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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) (“[The] holistic
approach to removal mandates that the existence of even a single valid cause of
action against in-state defendants, despite the pleading of several unavailing claims,
requires remand of the entire case to state court.”)).
Here, Hutchins asserts claims against McMillan under various sections of
Chapter 541 of the Texas Insurance Code. See Amended Complaint ¶¶ 90-98.
Hutchins alleges that McMillan violated, inter alia, § 541.060(a)(1) by
“misrepresenting to [Hutchins] material facts relating to the coverage at issue,” see id.
¶ 93, and § 541.060(a)(7) by “refusing to pay [Hutchins’s] claim without conducting
a reasonable investigation.” Id. ¶ 97.
Specifically, Hutchins alleges that McMillan performed an outcome oriented
investigation, focusing on pre-existing damages that were not caused by the tornado.
Amended Complaint ¶¶ 23, 47; see also Negrete v. Lloyds, No. DR-15-CV-114-AM,
2016 WL 8488287, at *8 (W.D. Tex. Sept. 27, 2016) (holding that the plaintiff
stated a claim under § 541.060(a)(l) and § 541.060(a)(7) by alleging facts showing
that the adjuster undervalued the plaintiff’s losses and conducted an outcomeoriented investigation). Moreover, Hutchins alleges that despite McMillan’s
knowledge of structural damages to the interior building system and the need for
permanent repairs and/or a complete rebuild, McMillian has refused to provide an

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estimate for those damages. Amended Complaint ¶¶ 22-23, 27; see also Petree v.
Metropolitan Lloyds Insurance Company of Texas, No. 3:16-CV-0735-G, 2016 WL
4211764, at *2 (N.D. Tex. Aug. 9, 2016) (Fish, J.) (analyzing whether the plaintiff
alleged specific deficiencies in the adjuster’s investigation). Hutchins avers that its
insurer accepted McMillan’s incomplete estimate as the final determined value of the
damaged property. See Amended Complaint ¶ 22; see also Kris Hospitality LLC v. TriState Insurance Company of Minnesota, No. SA-16-CV-01229-XR, 2017 WL 437424, at
*3 (W.D. Tex. Jan. 31, 2017) (looking to whether the plaintiff alleges facts
connecting the adjuster’s actions to the plaintiff’s alleged harm). Applying the federal
pleading standard in this case, the court concludes that, taking the well-pleaded facts
as true, Hutchins pled factual content that allows the court to draw the reasonable
inference that McMillan violated § 541.060(a)(1) and § 541.060(a)(7) under the
Texas Insurance Code. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Avila v.
Metropolitan Lloyds Insurance Company of Texas, No. 3:16-CV-3007-L, 2017 WL
1232529, at *12-13 (N.D. Tex. Feb. 21, 2017) (Horan, M.J.) (looking to the
“specific factual allegations concerning the inadequacy of the investigation” to
determine whether the plaintiff pled a claim under § 541.060(a)(7)), report and
recommendation adopted sub nom. Avila v. Metropolitan Lloyds Insurance, No. 3:16-CV3007-L, 2017 WL 1211339 (N.D. Tex. Apr. 3, 2017) (Lindsay, J.).

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Because Hutchins has stated a potentially viable claim against McMillan,
complete diversity -- as required under 28 U.S.C. § 1332 -- is lacking, and this case
must be remanded back to the court from which it came. See 28 U.S.C. § 1447(c).
II. CONCLUSION
For the reasons stated above, on the court’s own motion, this action is
REMANDED to the 116th Judicial District Court of Dallas County, Texas. The
clerk shall mail a certified copy of this memorandum opinion and order to the district
clerk of Dallas County, Texas. 28 U.S.C. § 1447(c).
SO ORDERED.

June 22, 2017.

___________________________________
A. JOE FISH
Senior United States District Judge

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