University Baptist Church v. Lexington Ins Co

Filing 17

MEMORANDUM OPINION and ORDER denying 9 Motion to Remand filed by University Baptist Church: The court further ORDERS that from this point forward Lexington and York are the only defendants in this action and that the action shall be styled as "University Baptist Church v. Lexington Insurance Company and York Risk Services Inc." (Ordered by Judge John McBryde on 1/25/2018) (bdb)

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IN THE UNITED STATES DISTRICT C URT
NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
UNIVERSITY BAPTIST CHURCH,

§
§

Plaintiff,

§
§
§
§

vs.
LEXINGTON INSURANCE COMPANY,
ET AL.,
Defendants.

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I

I JAN 2 5 2018

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'

CLE:U<., U.S. DlSlKlcl CuuKJ

By
Deputy

NO. 4:17-CV-962-A

§
§
§

§

MEMORANDUM OPINION
and
ORDER
Before the court for consideration and decision is the
motion of plaintiff, University Baptist Church, to remand the
above-captioned action.

The motion also seeks the imposition of

sanctions against defendant Lexington Insurance Company
("Lexington") for improper removal.

Having considered the

motion, the responses of defendants, Kevin Forman ("Forman"),
York Risk Services Inc ("York"), and Lexington, plaintiff's
reply, and the applicable legal authorities, the court finds that
the motion should be denied, and that the claims of plaintiff
against Forman should be dismissed.
I.

Background
Plaintiff initiated this action on August 31, 2017, by the
filing of an original petition in the District Court of Tarrant
County, Texas, 352nd Judicial District.

'

Plaintiff filed an

I
.

amended petition on November 1, 2017.

The state court pleading

alleges that plaintiff filed a claim with Lexington for roof and
structural damage incurred by plaintiff's commercial property on
or about March 17, 2016, as a result of a series of hailstorms.
Lexington forwarded the claim to York, which assigned Forman as
the adjuster on the claim.

Forman discovered from plaintiff's

own roofing contractor that upgrades to plaintiff's roof were
necessary to comply with the building code requirements for the
City of Forth Worth.

Plaintiff's roofing contractor ended up

charging in excess of $800,000.00 for code upgrades, despite an
original code upgrade bid of $285,000.00.

Plaintiff's policy had

a sublimit of $250,000.00 for code and ordinance endorsement.
Presumably, though plaintiff's complaint does not clearly state
so, Lexington refused to pay for such improvements, or otherwise
rejected Plaintiff's claim. 1

Plaintiff also complains that

"Forman agreed to only pay for a lesser quality of tile and not a
tile of 'like kind and quanlity' as required under the policy."
Doc. 5 at 25, , 11.

Based on these facts, plaintiff asserted

'Plaintiffs amended petition contains vague and somewhat inconsistetn statements throughout it
such as, "[t]his failure to pay for the damages sustained during the policy period is a breach of the terms
of the policy," doc. 5 at 25, ~ 11, "[ d]efendants failed and refused to pay Plaintiff an appropriate
amount," id. at 26, ~ 12, and that defendants failed to "[pay] or pattially [pay] a valid claim," id. at 27, ~
17. These statements do not notify the court of the true nature and scope of plaintiffs proposed
damages, particularly whether plaintiff is complaining of a complete denial of its claim, a partial denial
of its claim, or that defendants did not pay an appropriate amount for code upgrades to plaintiffs roof.
The "Doc._" reference is to the number of the item on the docket in this action.
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claims against Lexington for breach of contract, and against all
defendants for breach of the duty of good faith and fair dealing,
violations of the Texas Deceptive Trade Practices Act ("DTPA"),
and unfair settlement practices under the Texas Insurance Code.
On December 4, 2017, Lexington removed the action to this
court asserting subject matter jurisdiction based on diversity of
citizenship and that plaintiff improperly joined Forman to avoid
federal diversity jurisdiction.

On December 14, 2017, plaintiff

filed the instant motion to remand, arguing that Forman was
properly joined as a defendant in this action, that Forman and
plaintiff are citizens of the same state such that Forman's
presence in the action deprives this court of subject matter
jurisdiction, and that remand is therefore required.

Plaintiff

also seeks $3,000.00 in attorney's fees.
II.

Applicable Legal Principles
A.

General Principles for Removal
Under 28 U.S.C.

§

1441(a), a defendant may remove to federal

court any state court action of which the federal district court
would have original jurisdiction. 2

2

"The removing party bears the

The removal statute provides, in pettinent part, "[A]ny civil action brought in a State coutt of
which the district coutts of the United States have original jurisdiction, may be removed by the defendant
or the defendants, to the district cou1t of the United States for the district and division embracing the
place where such action is pending." 28 U.S.C. § 1441(a) (emphasis added).
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burden of showing that federal subject matter jurisdiction exists
and that removal was proper."
Ins. Co., 276 F.3d 720, 723

Manguno v. Prudential Prop. & Cas.

(5th Cir. 2002)

(citations omitted).

"Moreover, because the effect of removal is to deprive the state
court of an action properly before it, removal raises significant
federalism concerns .
the removal statute."

. which mandate strict construction of
Carpenter v. Wichita Falls Indep. Sch.

Dist., 44 F.3d 362, 365-66 (5th Cir. 1995).

Any doubts about

whether removal jurisdiction is proper must therefore be resolved
against the exercise of federal jurisdiction.

Acuna v. Brown &

Root Inc., 200 F.3d 335, 339 (5th Cir. 2000).
B.

Fraudulent or Improper Joinder
To determine whether a party was fraudulently or improperly

joined to prevent removal,

"the court must analyze whether (1)

there is actual fraud in pleading jurisdictional facts or (2) the
plaintiff is unable to establish a cause of action against the
nondiverse defendant."

Campbell v. Stone Ins.,

665, 669 (5th Cir. 2007).

Inc., 509 F.3d

Because defendants have not alleged

actual fraud in the pleadings, the applicable 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.
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Smallwood v. Ill. Cent. R.R., 385 F.3d 568, 573
To answer this question, the court may either:

(5th Cir. 2004).
(1) conduct a Rule

12(b) (6)-type analysis or (2) in rare cases, make a summary
inquiry "to identify the presence of discrete and undisputed
facts that would preclude plaintiff's recovery against the instate defendant."

Id. at 573-74.

A Rule 12(b) (6)-type analysis

of plaintiff's claims appears to be the proper method here to
determine whether there exists a reasonable basis for a
conclusion that plaintiff might be able to recover against
Forman.
C.

The Pleading Standard to be Used in the Rule 12 (bl ( 6) Type Analysis
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.
Int'l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd.,
818 F.3d 193, 208 (5th Cir. 2016) . 3

Rule 8 (a) (2) of the Federal

'The coutt notes that Texas now has a failure-to-state-a-claim rule that is substantially the same
as the federal rule and that Texas comts have interpreted their Rule 9la as requiring a federal Rule
12(b)(6)-type analysis and have relied on federal case law in applying Rule 9la. See. e.g., Wooley v.
Schaffer, 447 S.W.Jd 71, 76 (Tex. App.-Houston [14'h Dist.] 2014, pet. denied); GoDaddy.com. LLC v.
Toups, 429 S.W.3d 752, 754-55 (Tex. App.-Beaumont 2014, pet. denied). Thus, the outcome would be
(continued ... )

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Rules of Civil Procedure provides, in a general way, the
applicable standard of pleading.

It requires that a complaint

contain "a short and plain statement of the claim showing that
the pleader is entitled to relief,"

Fed. R. Civ. P. 8 (a) (2),

"in

order to give the defendant fair notice of what the claim is and
the grounds upon which it rests," Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007)
omitted) .

(internal quotation marks and ellipsis

Although a complaint need not contain detailed factual

allegations, the "showing" contemplated by Rule 8 requires the
plaintiff to do more than simply allege legal conclusions or
recite the elements of a cause of action.
555 & n.3.

Twombly, 550 U.S. at

Thus, while a court must accept all of the factual

allegations in the complaint as true, it need not credit bare
legal conclusions that are unsupported by any factual
underpinnings.

See Ashcroft v. Igbal, 556 U.S. 662, 679

(2009)

("While legal conclusions can provide the framework of a
complaint, they must be supported by factual allegations.").
Moreover, to survive a motion to dismiss for failure to
state a claim under Rule 12(b) (6), the facts pleaded must allow
the court to infer that the plaintiff's right to relief is
plausible.

Igbal, 556 U.S. at 678.

3

To allege a plausible right

( ... continued)
the same if the court were to apply the Texas pleading standard.

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to relief, the facts pleaded must suggest liability; allegations
that are merely consistent with unlawful conduct are
insufficient.

Id.

In other words, where the facts pleaded do no

more than permit the court to infer the possibility of
misconduct, the complaint has not shown that the pleader is
entitled to relief.

Id. at 67 9.

"Determining whether a

complaint states a plausible claim for relief .

.

[is) a

context-specific task that requires the reviewing court to draw
on its judicial experience and common sense."

Id.

Rule 9(b) of the Federal Rules of Civil Procedure sets forth
the heightened pleading standard imposed for fraud claims: "In
alleging fraud or mistake, a party must state with particularity
the circumstances constituting fraud or mistake."

The Fifth

Circuit requires a party asserting fraud to "specify the
statements contended to be fraudulent,

identify the speaker,

state when and where the statements were made, and explain why
the statements were fraudulent."
Lucent Techs.,

Hermann Holdings, Ltd. v.

Inc., 302 F.3d 552, 564-65 (5th Cir. 2002)

(internal quotations and citations omitted).

Succinctly stated,

Rule 9(b) requires a party to identify in its pleading "the who,
what, when, where, and how" of the events constituting the
purported fraud. Dorsey v. Portfolio Equities, Inc., 540 F.3d
333, 339 (5th Cir. 2008).

Claims alleging violations of the

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Texas Insurance Code are subject to the requirements of Rule
9(b).
742

Frith v. Guardian Life Ins. Co. of Am.,

(S.D. Tex. 1998).

9 F. Supp. 2d 734,

As are claims alleging violations of the

DTPA. Id. at 800; Berry v. Indianapolis Life Ins. Co., 608
F.Supp.2d 785, 800 (N.D. Tex. 2009).
III.
Analysis
On the facts outlined in section I of this order, plaintiff
asserts that Forman is liable to it for breaching the duty of
good faith and fair dealing, violations of
Insurance Code, and violations of the DTPA.

§

541 of the Texas
These causes of

action are outlined in sections VI, VII, and VIII of plaintiff's
amended petition, with language indicating that the causes of
action are asserted against all three defendants.

In fact,

throughout these sections, plaintiff only refers to "defendants•
collectively, making no attempt to distinguish how any defendant
individually engaged in acts or omissions giving rise to
liability.
This court has consistently held that "[m]erely lumping
diverse and non-diverse defendants together in undifferentiated
liability averments of a petition does not satisfy the
requirement to state specific actionable conduct against the nondiverse defendant."

Plascencia v. State Farm Lloyds, 2014 WL

8

11474841, at *5 (quoting Studer v. State Farm Lloyds, 2014 WL
234352, at *4 (citation omitted)).

It is not the job of the

court to speculate which averments apply to individual
defendants.

Therefore, without more specificity the court is

unable to infer that plaintiff has a right to relief against
Forman that is plausible, and clearly its claims against Forman
cannot survive the Rule 12(b) (6)-type analysis.
Moreover, even ignoring that plaintiff's general lumping
defendants together and assuming that each assertion by plaintiff
is to apply to Forman specifically, the court still finds that
plaintiff has failed to state a claim against Forman.
First, the law is clear in Texas that absent some special,
contractual relationship, an independent adjuster has no duty of
good faith and fair dealing to an insured.
Inc., 875 S.W.2d 695, 697-8

Natividad v. Alexsis,

(Tex. 1994); Gasch v. Hartford Acc. &

Indem. Co., 491 F.3d 278, 282

(5th Cir. 2007).

The duty of good

faith and fair dealing arises as a result of the unequal
bargaining that exists between the insured and insurer, and is
therefore non-delegable.

Natividad, 875 S.W.2d at 698.

Thus,

Forman's status as a third-party adjuster means that plaintiff's
claim against him for breach of the duty of good faith and fair
dealing is not a cognizable one.

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The law is similarly clear that liability for a violation of
§

541 may only extend to an adjuster who undertakes a proscribed

settlement practice.

Mere nonpayment by the insurer, cannot, by

itself, serve as the basis for a claim against the adjuster.

In

other words, plaintiff must show that Forman, on his own, engaged
in some act that is prohibited by the section.

Though plaintiff

provided specific factual allegations regarding Forman's
involvement in adjusting his claim, it has not specifically
alleged which of Forman's actions give rise to any particular
violation of

§

541, much less spelled out the who, what, when,

where, and how of the purported violations.
Finally, plaintiff's claims against Forman for violations of
the DTPA also fail.

Plaintiff has alleged that "defendants•

violated§ 17.46(b) when they:
(a)

[R]epresented that goods of services have
sponsorship, approval, characteristics,
ingredients, uses, benefits, or quantities which
they do not have;

(b)

[R]epresented that goods or services were of a
particular standard, quality, or grade, or that
goods were of a particular style or model, if they
are of another;

(c)

[R]epresented that an agreement confers or
involves rights, remedies, or obligations which it
does not have or involve, or which are prohibited
by law;
[Flailed to disclose information concerning goods
or services which was known at the time of the
transaction when such failure to disclose such

(d)

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information was intended to induce the customer
into a transaction into which the consumer would
not have entered had the information been
disclosed.
Doc. 5 at 28, ~ 21.
Though the DTPA applies to insurers and adjusters alike,
these allegations are really legal conclusions couched as factual
allegations with no support in the petition.

For example,

plaintiff has not alleged that Forman made any representations or
misrepresentations to it of any kind.

The only representations

plaintiff alleges Forman made at all involve communications
between Forman and plaintiff's contractor about how the
contractor should bill plaintiff for work completed to bring
plaintiff's roof within the City of Fort Worth's building code
requirements.

Plaintiff has not alleged how these statements, or

any other action by Forman, might implicate the DTPA violations
laid out above.

Accordingly, the court concludes that plaintiff

has failed to state a claim against Forman, that Forman was
improperly joined to prevent this court from obtaining
jurisdiction over the matter, that Forman's citizenship should be
disregarded for purposes of determining whether this court has
subject matter jurisdiction over the claims asserted by plaintiff
against Lexington and York, that Forman should be dismissed from

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the action, and that plaintiff's motion to remand should be
denied.

IV
Order
The court ORDERS that plaintiff's motion to remand be, and
is hereby, denied, and that plaintiff's claims and causes of
action against Forman be, and are hereby, dismissed without
prejudice.
The court determines that there is no just reason for delay
in, and hereby directs, entry of final judgment as to the
dismissal of such claims.
The court further ORDERS that from this point forward
Lexington and York are the only defendants in this action and
that the action shall be styled as "University Baptist Church v.
Lexington Insurance Company and York Risk Services Inc."
SIGNED January 25, 2018.

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