Arrow Bolt & Electric Inc v. Landmark American Insurance Company et al
MEMORANDUM OPINION AND ORDER granting 9 Motion to Remand. The Court REMANDS this civil action to the 116th Judicial District Court of Dallas County, Texas. (Ordered by Chief Judge Barbara M.G. Lynn on 10/12/2017) (epm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
ARROW BOLT & ELECTRIC, INC.,
LANDMARK AMERICAN INSURANCE
COMPANY and JASON KEEN,
Civil Action No. 3:17-cv-1894-M
MEMORANDUM OPINION AND ORDER
Before the Court is a Motion to Remand [ECF #9], filed by Plaintiff Arrow Bolt &
Electric, Inc. For the following reasons, the Court GRANTS the Motion and REMANDS this
civil action to the state court from which it was removed.
Plaintiff filed this lawsuit in Texas state court against Defendants Landmark American
Insurance Company (“Landmark”) and Jason Keen (“Keen”), to recover for damage to Plaintiff’s
commercial property (the “Property”) in Fort Worth, Texas, allegedly caused by a storm that
occurred on May 10, 2016. Landmark insured the Property pursuant to a policy issued to
Plaintiff; Keen, an independent claims adjuster, inspected the Property and adjusted Plaintiff’s
claim on Landmark’s behalf. By this lawsuit, Plaintiff alleges that Landmark and/or Keen
wrongfully denied its claim, breached the insurance policy, and violated various statutory and
common law duties in connection with handling the claim, including Sections 541.051, 541.060,
541.061, and 541.151 of the Texas Insurance Code.
Landmark removed Plaintiff’s case to federal court pursuant to 28 U.S.C. §§1332 and
1441 on the ground that there is complete diversity of citizenship between Plaintiff, a Texas
citizen, and Landmark, a citizen of New Hampshire and Georgia, and an amount in controversy
that exceeds $75,000, exclusive of interest and costs. Recognizing that his presence in the case
would defeat jurisdiction, Landmark contends that Plaintiff improperly joined Keen, a Texas
citizen, because there is no reasonable basis to predict that Plaintiff might be able to recover on
any of its claims against Keen, and that his citizenship therefore must be disregarded. Plaintiff
filed a Motion to Remand, on the ground that Keen was properly joined and that the parties are
not completely diverse. Neither Defendant timely filed a response. The Court therefore considers
the Motion without the benefit of a response.1
Legal Standards and Analysis
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 would have original jurisdiction. This case was
removed on the basis of diversity jurisdiction under 28 U.S.C. § 1332. See Rem. Not. [ECF #1]
at 1, ¶ 3. 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). Moreover, 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.
The improper joinder doctrine is a narrow exception to the rule of complete diversity that
may provide a basis for disregarding a defendant’s citizenship. See Smallwood v. Illinois Cent. R.
Co., 385 F.3d 568 (5th Cir. 2004). 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. Id. at 573 (quoting Travis v. Irby, 326 F.3d
The Court has reviewed Landmark’s Notice of Removal and has considered the arguments and authorities set
forth in that pleading in support of Landmark’s position that Keen was improperly joined and removal was
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. Martinez v. State Farm Lloyds,
2016 WL 4427489, at *2 (N.D. Tex. Aug. 22, 2016) (Lynn, C. J.) (citing 28 U.S.C. § 1447). If,
however, it is found that the nondiverse defendant has been improperly joined, then the remand
must be denied and the claims against the nondiverse defendant dismissed without prejudice. Id.
The party seeking removal bears a heavy burden to prove improper joinder. Smallwood, 385 F.3d
Under the second alternative for establishing improper joinder – which is the alternative
relied on by Landmark in this case – the test is whether the removing defendant has
demonstrated there is no possibility of recovery by the plaintiff against the in-state defendant.
Int’l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 208 (5th Cir.
2016). Stated differently, Landmark must demonstrate that there is no reasonable basis for the
Court to predict that Plaintiff might be able to recover against Keen. Smallwood, 385 F.3d at 573.
Using the federal pleading standard, the Court conducts a Fed. R. Civ. P. 12(b)(6)-type analysis,
looking first at the allegations of the plaintiff’s state court petition to determine whether the
pleading states a claim under state law against the in-state defendant. Id. 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 of recovery. Martinez, 2016 WL 4427489, at *2 (citing
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. Id. (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). Generally, if the plaintiff can
survive a Rule 12(b)(6) challenge, there is no improper joinder. See Smallwood, 385 F.3d at 573.
Here, Plaintiff’s Original Petition alleges various causes of action against Keen, a Texas
citizen, including claims under Section 541 of the Texas Insurance Code. Rem. Not., Ex. C-1 at
13-15 ¶¶ 76-83. To be liable under the Texas Insurance Code, one must be “in the business of
insurance.” Gasch v. Hartford Acc. & Indem. Co., 491 F.3d 278, 282 (5th Cir. 2007); Liberty
Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482, 488 (Tex. 1998); Tex. Ins. Code
Ann. § 541.002 (West 2015). 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 Insurance Code violations, the sole issue before this Court is
whether or not Plaintiff has stated a viable claim against Keen. See Martinez, 2016 WL 4427489,
at *2. If so, then Keen was properly joined, and this Court must grant Plaintiff’s Motion to
Remand for lack of diversity jurisdiction. Id. If the Court finds a reasonable basis to predict that
Plaintiff can potentially recover on one of the causes of action asserted against Keen, 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 EnterprisesMississippi, Inc., 390 F.3d 400, 412 (5th Cir. 2004)).
Having reviewed Plaintiff’s Original Petition, the Court determines that Plaintiff has
sufficiently pled that Keen violated Tex. Ins. Code §541.060(a). Plaintiff alleges that Keen (1)
misrepresented material facts relating to the insurance coverage at issue; (2) failed to attempt in
good faith to effectuate a prompt, fair, and equitable settlement of the claims, even though
liability under the policy is clear; (3) failed to promptly provide a reasonable explanation of the
basis in the policy for the offer of settlement of Plaintiff’s claim; (4) failed to affirm or deny
coverage or submit a reservation of rights within a reasonable time; and (5) refused to pay
Plaintiff’s claim without conducting a reasonable investigation. Rem. Not., Ex. C-1 at 13-14
¶¶78-82. With respect to its allegations that Keen engaged in unfair settlement practices by
conducting an inadequate inspection and unfair adjustment, Plaintiff specifically alleges:
Defendant Landmark assigned Keen as the independent claim
adjuster and estimator to determine the extent of the damages
suffered by Plaintiff. Defendant Keen, who inspected The
Property, made numerous errors in estimating the value of
Plaintiff’s claim, all of which were designed to intentionally
minimize and underpay the loss incurred by Plaintiff. Defendant
Keen failed to fully quantify Plaintiff’s damages, and instead,
grossly undervalued the loss, demonstrating that he did not conduct
a thorough investigation of Plaintiff’s claim. Defendant Keen
conducted a substandard inspection of The Property evidenced by
his report which failed to include all of Plaintiff’s storm damages
noted upon inspection. The damages included in the estimate were
grossly undervalued and did not allow for adequate funds to cover
the cost of repairs to all the damages sustained. Defendant Keen
failed to thoroughly review and properly supervise the inspection
of The Property which ultimately led to approving an improper
adjustment and an inadequately unfair settlement of Plaintiff’s
claim. Further, Defendant Keen knowingly and intentionally
overlooked damages at The Property and used their [sic] own
inadequate and biased investigation as the basis for erroneously
denying a portion of Plaintiff’s claim. As a result of Defendant
Keen’s conduct, Plaintiff’s claim was underpaid and partiallydenied. Without basis and with intent to damage the Plaintiff,
Defendant Keen concluded that the admitted water intrusion
throughout the sub surface of the roof was not the result of the
admitted damage to roof caused by the windstorm. This wrong
determination was intentionally made to undervalue the claim.
Id. at 4, ¶16. Contrary to Landmark’s assertions in the Notice of Removal, these allegations are
not so conclusory and vague as to be fatal to Plaintiff’s ability to state a claim for relief.
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 effect or bring about the settlement of a claim. See Manziel
v. Seneca Ins. Co., Inc., 2016 WL 3745686, at *3 (N.D. Tex. July 13, 2016) (Lynn, J.); Shade
Tree Apartments, LLC v. Great Lakes Reinsurance (UK) PLC, 2015 WL 8516595, at *6 (W.D.
Tex. Dec. 11, 2015); Denley Group, LLC v. Safeco Ins. Co. of Ind., 2015 WL 5836226, at *3-4
(N.D. Tex. Sept. 30, 2015) (Boyle, J.); Lopez-Welch v. State Farm Lloyds, 2014 WL 5502277, at
*8 (N.D. Tex. Oct. 31, 2014) (Lindsay, J.).2 In ruling on Plaintiff’s Motion to Remand, this Court
only asks whether there is a reasonable basis to predict that Plaintiff might be able to recover
against Keen. Smallwood, 385 F.3d at 573. Since there is a reasonable basis to predict that
Plaintiff might be able to recover against Keen, and because Plaintiff’s Original Petition sets
forth sufficient facts under the federal pleading standard to state a claim against Keen under Tex.
Ins. Code § 541.060(a)(2), the Court determines that Keen was not improperly joined. Because
Keen is a citizen of Texas, diversity jurisdiction is lacking, and the Court must remand this case
to state court. 28 U.S.C. §1447(c).
The Court determines that the allegations in Plaintiff’s Original Petition are sufficient to
provide a reasonable basis to conclude that Plaintiff might recover against Defendant Keen, a
Texas citizen. Because Plaintiff also is a Texas citizen, diversity jurisdiction is lacking. The
Court therefore GRANTS Plaintiff’s Motion to Remand [ECF #9] and REMANDS this civil
action to the 116th Judicial District Court of Dallas County, Texas.
The Court is aware of a split in authority among federal district courts in Texas on the question of whether an
adjuster may be held liable under Section 541.060(a)(2). Compare, e.g., Lopez v. United Prop. & Cas. Ins. Co., 2016
WL 3671115, at *3 (S.D. Tex. 2016) with Martinez, 2016 WL 3745686, at *3. See also Linron Prop., Ltd. v.
Wausau Underwriters Ins. Co., 2015 WL 3755071, at *5 (N.D. Tex. June 16, 2015) (surveying conflict among
district courts). In the context of Plaintiff’s Motion to Remand, such a split in authority weighs in favor of remand
because “[a]ny ambiguities are construed against removal and in favor of remand to state court.” Winterrowd v.
Allstate Vehicle and Property Ins. Co., 2017 WL 1370768, at *4 (E.D. Tex. Mar. 27, 2017) (quoting Hood ex rel.
Miss. v. JP Morgan Chase & Co., 737 F.3d 78, 84 (5th Cir. 2013)); see also 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.”).
October 12, 2017.
BARBARA M.G. LYNN
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