Mary v. Allstate Texas Lloyd's et al

Filing 36

MEMORANDUM OPINION AND ORDER accepting 27 Findings and Recommendations; granting 13 Motion to Remand; denies Plaintiff's request for attorney's fees and overrules Defendants' objections. This action is remanded to the 443rd District Court, Ellis County, TX. (Ordered by Judge Sam A Lindsay on 12/19/2017) (epm)

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
MARGARET MARY,
Plaintiff,
v.
ALLSTATE TEXAS LLOYD’S and
JOHN SPURIELL,
Defendants.

§
§
§
§
§
§
§
§
§

Civil Action No. 3:16-CV-3383-L-BN

MEMORANDUM OPINION AND ORDER
On October 5, 2017, United States Magistrate Judge David L. Horan entered the Findings,
Conclusions and Recommendation of the United States Magistrate Judge (“Report”), recommending
that the court: (1) grant Plaintiff’s Motion to Remand (Doc. 13) because there is a reasonable basis
to predict that Plaintiff Margaret Mary (“Plaintiff”) might be able to recover against nondiverse
Defendant John Spuriell (“Spuriell”) on one or more of her claims under Chapter 541 of the Texas
Insurance Code and, thus, Spuriell was not improperly joined; and (2) deny Plaintiff’s request for
attorney’s fees. Defendants filed objections to the Report on October 19, 2017. For the reasons
herein explained, the court determines that the magistrate judge’s findings and conclusions are
correct, and accepts them as those of the court. Accordingly, the court grants Plaintiff’s Motion to
Remand (Doc. 13), denies Plaintiff’s request for attorney’s fees, and overrules Defendants’
objections.
I.

Improper Joinder
Defendants object to the magistrate judge’s improper joinder analysis and recommendation.

Defendants’ objections consist primarily of arguments that were presented to and rejected by the
Memorandum Opinion and Order – Page 1

magistrate judge. Defendants assert that there is “no reasonable possibility of recovery against
Spruriell” under sections 541.060(a)(1) or (a)(2) of the Texas Insurance Code. Defendants provide
no explanation for this conclusory objection with respect to § 541.060(a)(1). Defs.’ Obj. 1-5.
Defendants contend that, as a matter of law, § 541.060(a)(2) applies only to insurers, not adjusters
like Spuriell because adjusters have no settlement authority, and Plaintiff does not allege that
Spuriell has settlement authority. Defendants acknowledge the split of authority discussed in the
parties’ respective briefs and the Report regarding adjuster liability under § 541.060(a)(2) but
maintain, without explanation, that the authority favorable to the position taken by them is the “better
approach.” Defs.’ Obj. 2. In addition, Defendants contend that Plaintiff’s allegations consist of
boilerplate legal conclusions disguised as factual allegations. Defendants argue that counsel for
Plaintiff has included allegations in pleadings in numerous other state court cases that are identical
to those in this case.
A party seeking to remove an action to federal court on the basis of fraudulent or improper
joinder bears a heavy burden. Smallwood v. Illinois Cent. R.R. Co., 385 F.3d 568, 574 (5th Cir.
2004) (en banc). As correctly noted by the magistrate judge, the test for improper joinder is
“whether the defendant has demonstrated 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.” See
id. at 573 (5th Cir. 2004) (citing Travis v. Irby, 326 F.3d 644, 648 (5th Cir. 2003)).
Applying the standard in Smallwood for improper joinder, this court and others have
concluded that an insurance adjuster may be held personally liable for engaging in unfair settlement
practices under § 541.060(a)(2) of the Texas Insurance Code because the adjuster can effect or bring

Memorandum Opinion and Order – Page 2

about the settlement of an insured’s claim. See Avila v. Metropolitan Lloyds Ins. Co. of Tex., No.
3:16-CV-3007-L-BN, 2017 WL 1232529 (N.D. Tex., Feb. 21, 2017), report and recommendation
adopted by 2017 WL 1211339 (N.D. Tex., Apr. 3, 2017); Lopez-Welch v. State Farm Lloyds,
3:14-CV-2416-L, 2014 WL 5502277, at *8-9 (N.D. Tex. Oct. 31, 2014); see also Arrow Bolt &
Elec., Inc. v. Landmark Am. Ins. Co., 3:17-CV-1894-M, 2017 WL 4548319, at *2 (N.D. Tex. Oct.
12, 2017); Manziel v. Seneca Ins. Co., Inc., No. 3:15-CV-03786-M, 2016 WL 3745686, at *3 (N.D.
Tex. July 13, 2016); Shade Tree Apartments, LLC v. Great Lakes Reinsurance (UK) PLC, No.
A-15-CA-843-SS, 2015 WL 8516595, at *6 (W.D. Tex. Dec. 11, 2015); Denley Grp., LLC v. Safeco
Ins. Co. of Ind., 3:15-CV-1183-B, 2015 WL 5836226, at *3-4 (N.D. Tex. Sept. 30, 2015); Linron
Prop., Ltd. v. Wausau Underwriters Ins. Co., 2015 WL 3755071, at *5 (N.D. Tex. June 16, 2015).
The court is aware that, despite the abundant case authority supporting adjuster liability under
§ 541.060, a handful of courts have questioned the appropriateness of holding an adjuster
individually liable for unfair settlement practices under § 541.060. See id. (discussing split of
authority). These cases reason that an adjuster cannot be liable under § 541.060 for failing to settle
or pay claims because an adjuster only assesses the damage and does not have authority to settle an
insured’s claim on behalf of the insurance company. Id. (citations omitted). While seemingly logical,
this reasoning does not account for the plain language of § 541.060. As noted by the magistrate
judge, Chapter 541 defines “person” to include adjusters, and the statute does not distinguish
between the roles of insurers and adjusters. Report 16 (citing Tex. Ins. Code 541.002).
Additionally, liability under § 541.060(a)(2) is not limited to final settlement of claims but
instead covers a broader swath of conduct related to claim settlement. Specifically, § 541.060(a)(2)
prohibits those engaged in the business of insurance from “failing to attempt in good faith to

Memorandum Opinion and Order – Page 3

effectuate a prompt, fair, and equitable settlement.” § 541.060(a)(2)(A) (emphasis added). To
“effectuate” means “to cause to come into being” or “to bring about.” Linron Prop., Ltd., 2015 WL
3755071, at *5 (quoting Merriam–Webster’s Collegiate Dictionary 397 (11th ed. 2003). As noted
by the court in Linron Properties, the use of the word “effectuate” in § 541.060(a)(2)(A) “rather than
a word that conveys finality (e.g., finalize), suggests that its prohibition extends to all persons who
play a role in bringing about a prompt, fair, and equitable settlement of a claim,” not just insurers
who finalize the settlement of a claim. Id. at *5. “As the persons primarily responsible for
investigating and evaluating insurance claims, insurance adjusters unquestionably have the ability
to affect or bring about the ‘prompt, fair, and equitable settlement’ of claims, because it is upon their
investigation that the insurance company’s settlement of a claim is generally based.” Id. (citing
Arana v. Allstate Texas Lloyds, No. 3:13-CV-0750-D, 2013 WL 2149589, at *5 (N.D. Tex. May 17,
2013). As a result, delay caused by an adjuster’s investigation can delay the payment of a claim, and
an insufficient investigation may lead to an unfair settlement of a claim. Thus, based on the
reasoning in Linron Properties and the Report, the court believes that the “better approach” is to
construe § 541.060(a)(2)(A) as not precluding, as a matter of law, claims against adjusters but
instead as requiring the analysis of an adjuster’s liability to be viewed on a case by case basis.
Moreover, in deciding Plaintiff’s Motion to Remand, any split of authority regarding the
scope of an adjuster’s liability under the Texas Insurance Code weighs in favor of remand because
ambiguities in state law are construed against removal and in favor of remand. See African
Methodist Episcopal Church v. Lucien, 756 F.3d 788, 793 (5th Cir. 2014) (“[A]ny ambiguities of
state law must be resolved” in favor of remand.); Hood ex rel. Miss. v. JP Morgan Chase & Co., 737
F.3d 78, 84 (5th Cir. 2013) (“Any ambiguities are construed against removal and in favor of remand

Memorandum Opinion and Order – Page 4

to state court.”); Arrow Bolt & Elec., Inc., 2017 WL 4548319, at *3 n.2 (concluding that split of
authority regarding adjuster liability under Chapter 541 weighed in favor of remand); Roach v.
Vehicle, 2016 WL 795967, at *6 (N.D. Tex. Feb. 29, 2016) (“[I]n the context of a motion to remand,
the split in authority regarding the scope of an insurance adjuster’s liability under the Texas
Insurance Code must be resolved in favor of remand.”).
Regarding the sufficiency of Plaintiff’s pleadings, the court, having reviewed Plaintiff’s
Original Petition, agrees with the magistrate judge that Plaintiff has pled sufficient facts to support
a claim against Spuriell for violations of § 541.060(a)(2), notwithstanding Defendants’ contention
to the contrary. In ruling on Plaintiff’s Motion to Remand, the court only asks whether there is a
reasonable basis to predict that Plaintiff might be able to recover against Spuriell. See Smallwood,
385 F.3d at 573. Because there is a reasonable basis to predict that Plaintiff might be able to recover
against Spuriell under § 541.060(a)(2), and because Plaintiff’s Original Petition sets forth sufficient
facts under the federal pleading standard to state a claim against Spuriell under § 541.060(a)(2) of
the Texas Insurance Code, the court determines that Spuriell was not improperly joined. Further,
as Plaintiff and Spuriell are citizens of Texas, diversity jurisdiction is lacking, and the court must
remand this case to state court. 28 U.S.C. § 1447(c).
While Plaintiff has pleaded other claims, some of which form the basis for Defendants’
objections to the Report, the court need not determine whether Plaintiff has set forth sufficient facts
for it to predict that a reasonable basis exists for recovery as to each claim or cause of action
asserted. This is so because 28 U.S.C. § 1441’s “holistic approach to removal mandates that the
existence of even a single valid cause against [an] in-state defendant[] (despite the pleading of
several unavailing claims) requires remand of the entire case to state court.” Gray v. Beverly

Memorandum Opinion and Order – Page 5

Enters.-Miss., Inc., 390 F.3d 400, 412 (5th Cir. 2004) (footnote omitted). As the court has
determined that Plaintiff has adequately pleaded at least one claim under Chapter 541 of the Texas
Insurance Code, it need not focus on the sufficiency of Plaintiff’s pleadings as to the other claims
or Defendants’ objections regarding Plaintiff’s other claims.
Defendants also contend that Spuriell was improperly joined because Plaintiff cannot make
out a claim against him under the bona fide dispute rule and the economic loss and independent
injury rule. This matter was adequately addressed by the magistrate judge such that no further
discussion is warranted to resolve Defendants’ objections.
Accordingly, for all of the foregoing reasons, the court concludes, in accordance with the
magistrate judge’s findings and recommendation, that this action must be remanded because
Defendants have not met their heavy burden under Smallwood of establishing that Spuriell was
improperly joined.
II.

Attorney’s Fees
Neither party objected to the magistrate judge’s recommendation that the court should deny

Plaintiff’s request for attorney’s fees. The court agrees with the magistrate judge that none should
be awarded because the law regarding adjuster liability under the Texas Insurance Code is not well
established, and, thus, the removal was objectively reasonable.
III.

Conclusion
For the reasons stated, after considering the Motion to Remand, briefs, pleadings, and Report,

and having conducted a de novo review of that portion of the Report to which objection was made,
the court concludes that the findings and conclusions of the magistrate judge are correct, and accepts
them as those of the court. The court, therefore, overrules Defendants’ objections, grants Plaintiff’s
Memorandum Opinion and Order – Page 6

Motion to Remand (Doc. 13), denies Plaintiff’s request for attorney’s fees, and remands this action
to the 443rd District Court, Ellis County, Texas, from which it was removed. The clerk of the court
is directed to effect the remand in accordance with the usual procedure and term all pending
motions.
It is so ordered this 19th day of December, 2017.

_________________________________
Sam A. Lindsay
United States District Judge

Memorandum Opinion and Order – Page 7