W. Ohio St. Condo Association v. Allstate Insurance Company et al

Filing 8

ORDER OF REMAND granting 6 MOTION to Remand. Case terminated on 06/16/2015(Signed by Judge Nelva Gonzales Ramos) Parties notified.(lcayce, 2)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
W. OHIO ST. CONDO ASSOCIATION;
dba DIAMOND G. CONVENIENCE
STORE,

§
§
§
§
Plaintiffs,
§
VS.
§ CIVIL ACTION NO. 2:15-CV-192
§
ALLSTATE INSURANCE COMPANY, et §
al,
§
§
Defendants.
§
ORDER REMANDING CASE
This is an insurance coverage dispute arising from wind and hail storm damage to
Plaintiff W. Ohio St. Condo Association d/b/a Diamond G. Convenience Store’s
(Plaintiff) commercial property. Allstate Insurance Company (Allstate) timely removed
the case from state court on the basis of diversity jurisdiction, with its allegation that the
non-diverse claims adjuster, Defendant Kevin Pakenham (Pakenham), was improperly

joined. Before the Court is Plaintiff's Motion to Remand (D.E. 6). For the reasons set
out below, the Court GRANTS the Motion.
Diversity jurisdiction requires the citizenship of all plaintiffs to be diverse from
the citizenship of all defendants and the amount in controversy to exceed the sum or
value of $75,000, exclusive of interest and costs. 28 U.S.C. § 1332. It is undisputed that
the parties, with the exception of Pakenham, are diverse and that the amount in
controversy exceeds the sum of $75,000. D.E. 1, 6. Therefore, the only issue for the

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Court is whether Defendant Pakenham was improperly joined such that his non-diverse
citizenship may be disregarded.
A. The Standard of Review
On a motion to remand, “[t]he removing party bears the burden of showing that
federal jurisdiction exists and that removal was proper.” Manguno v. Prudential Prop. &
Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002). “Any ambiguities are construed against
removal because the removal statute should be strictly construed in favor of remand.” Id.
The strict construction rule arises because of “significant federalism concerns.” See
generally, Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108–09 (1941).
“The party seeking removal bears a heavy burden of proving that the joinder of the
in-state party was improper.” Smallwood v. Illinois Cent. R.R. Co., 385 F.3d 568, 574
(5th Cir. 2004) (en banc).

The removing party proves improper joinder by

demonstrating: (1) actual fraud in the pleading of jurisdictional facts; or (2) the inability
of the plaintiff to establish a cause of action against the non-diverse defendant in state
court. See Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d 529, 532 (5th Cir. 2006)
(citing Travis v. Irby, 326 F.3d 644, 646–47 (5th Cir. 2003)); see also Boone v. Citigroup,
Inc., 416 F.3d 382, 388 (5th Cir. 2005). Only the second method is at issue here.
The motion to remand must be granted unless “there is absolutely no possibility
that the plaintiff will be able to establish a cause of action against the non-diverse
defendant in state court.” Griggs v. State Farm Lloyds, 181 F.3d 694, 699 (5th Cir.
1999).

Among other things, Plaintiff alleges that Defendant Pakenham knowingly

misrepresented policy provisions related to coverage, refused to conduct a reasonable
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investigation, intentionally excluded portions of covered damage, intentionally conducted
an outcome-oriented investigation for the purpose of allowing Allstate to underpay the
claim, and failed to attempt in good faith to effectuate a prompt, fair, and equitable
settlement of the claim. D.E. 6-1.
Plaintiff's causes of action against Defendant Pakenham are stated as
noncompliance with the Texas Insurance Code's unfair settlement prohibitions. D.E. 6-1.
See e.g., Tex. Ins. Code ch. 541; Liberty Mutual Ins. Co. v. Garrison Contractors, Inc.,
966 S.W.2d 482, 484 (Tex. 1998). Claims similar to those of Plaintiff have been held
sufficient to defeat improper joinder claims in similar cases in all of the federal districts
of Texas. See e.g., Tenner v. Prudential Ins. Co. of Am., 872 F. Supp. 1571, 1574 (E.D.
Tex. 1994); Blanchard v. State Farm Lloyds, 206 F. Supp. 2d 840, 846–48 (S.D. Tex.
2001); Russell v. State Farm Lloyds, 2001 WL 1326501 (N.D. Tex. 2001) (mem.);
Bruner v. State Farm Lloyds, 1999 WL 33290662 (W.D. Tex. 1999).
B. Adjusters Are Subject to Causes of Action for Texas
Insurance Code Violations and Plaintiff’s Liability
Allegations Are Factually Sufficient.
Allstate concedes that Defendant Pakenham, as an insurance adjuster, is subject to
the requirements of the Texas Insurance Code. D.E. 7, p. 3. Instead of challenging that
statutory liability, Allstate argues that there is no possibility of recovery against
Defendant Pakenham because the liability pleadings are factually insufficient. D.E. 7, p.
3.

In that argument, Allstate assumes that federal pleading rules, and specifically

Ashcroft v. Iqbal, 556 U.S. 662 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544
(2007) govern the Court’s evaluation of Plaintiff’s pleading.
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To the contrary, federal courts often apply Texas “fair notice” pleading rules in
removal decisions. Saenz v. IDS Prop. Cas. Ins. Co., No. 2:14-CV-338, 2014 WL
5325053, *1 (S.D. Tex. Oct. 17, 2014) (citing Stevenson v. Allstate Texas Lloyd's, No.
11–cv–3308, 2012 WL 360089, *3 (S.D. Tex. Feb. 1, 2012) and Edwea, Inc. v. Allstate
Ins. Co., No. H–10–2970, 2010 WL 5099607, 2010 U.S. Dist. LEXIS 129582 (S.D. Tex.
Dec. 8, 2010). Furthermore, despite newly adopted Texas Rule of Civil Procedure 91a.1
which provides for dismissal “on the grounds that [the cause of action] has no basis in
law or fact,” the Texas concept of “fair notice” has not morphed into the Federal Rule of
Civil Procedure 12(b)(6) standard re-defined in Twombly and Iqbal.
More specifically, when sitting in diversity jurisdiction, this Court follows Texas
courts’ interpretation of Texas rules under Erie principles.
When evaluating issues of state law, federal courts look to the
final decisions of that state's highest court. In the absence of
such a decision, federal courts must make an Erie guess and
determine, in their best judgment, how the supreme court of
that state would resolve the issue if presented with the same
case. In making an Erie guess, federal courts defer to
intermediate state appellate court decisions, unless convinced
by other persuasive data that the highest court of the state
would decide otherwise.
Temple v. McCall, 720 F.3d 301, 307 (5th Cir. 2013) (internal quotation and editing
marks omitted; citations omitted). According to an intermediate Texas appellate court,
the application of the “fair notice” standard has not changed.
In the context of Texas Rule of Civil Procedure 91a, and after considering Federal
Rule of Civil Procedure 12(b)(6) practice, the Texas Fourteenth Court of Appeals
observed:
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We conclude that both determinations of whether a cause of
action has any basis in law and in fact are legal questions that
we review de novo, based on the allegations of the live
petition and any attachments thereto. In conducting our
review, similar to the analogous [federal] situations discussed
above, we must construe the pleadings liberally in favor of
the plaintiff, look to the pleader's intent, and accept as true the
factual allegations in the pleadings to determine if the cause
of action has a basis in law or fact. In doing so, we apply the
fair notice pleading standard applicable in Texas to
determine whether the allegations of the petition are
sufficient to allege a cause of action.
Wooley v. Schaffer, 447 S.W.3d 71, 76 (Tex. App.—Houston [14th Dist.] 2014, pet.
filed) (emphasis added). Allstate has failed to offer any data to show that the Supreme
Court of Texas would determine this issue differently.
Under the Texas “fair notice” standard for pleading, the question is whether the
opposing party can ascertain from the pleading the nature and basic issues of the
controversy and what evidence will be relevant so as to prepare a defense. Horizon/CMS
Healthcare Corp. v. Auld, 34 S.W.3d 887, 896 (Tex. 2000).

The “fair notice”

requirement of Texas pleading relieves the pleader of the burden of pleading evidentiary
matters with meticulous particularity. E.g, Bowen v. Robinson, 227 S.W.3d 86, 91 (Tex.
App.—Houston [1st Dist.] 2006, pet. denied).
After reviewing the Plaintiff's Original Petition (D.E. 6-1), the Court is of the
opinion that the pleading specifies sufficient factual detail for the claim and adequately
informs Allstate and Defendant Pakenham of the issues such that discovery can be
conducted and evidence can be developed in a proper defense.

The Court rejects

Allstate’s characterization of the pleading as mere “boilerplate.” The pleading thus
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satisfies Texas requirements.1 And while Allstate isolates the “timeliness of the decision
to pay” portion of the pleadings as being factually self-defeating, that argument applies
only to that particular claim.
If the pleading reveals a reasonable basis of recovery on any cause of action, the
court must remand the entire suit to state court. E.g., Gray ex rel. Rudd v. Beverly
Enterprises—Miss., Inc., 390 F.3d 400, 412 (5th Cir. 2004).

The Court finds that

Plaintiff has adequately alleged viable causes of action against Defendant Pakenham and
that Allstate has not met its substantial burden in proving improper joinder based on the
liability allegations.
C. Plaintiff’s Damages Allegations Are Factually Sufficient.
Allstate also argues that Plaintiff has failed to allege appropriate damages
associated with causes of action against Defendant Pakenham, independent of the
contractual claims related to Allstate’s policy.

D.E. 7, p. 7.

See generally, Great

American Ins. Co. v. AFS/IBEX Financial Serv., 612 F. 3d 800, 808 n.1 (5th Cir. 2010)
(citing Parkans Int'l LLC v. Zurich Ins. Co., 299 F.3d 514, 519 (5th Cir. 2002)); Tracy v.
Chubb Lloyds Ins. Co. of Tex., 2012 WL 2477706, *5 (N.D. Tex. June 28, 2012).
Mental anguish is one form of damages that will support extra-contractual claims.
Charla Aldous, P.C. v. Lugo, 2014 WL 5879216, *6 (N.D. Tex. Nov. 12, 2014).
Included in Plaintiff’s allegations is that “the damages caused by the covered losses have

1

The Court finds that Allstate’s reliance on Lozano v. Scottsdale Insurance Company, 2011 WL 3104128 (S.D.
Tex. July 7, 2011) is misplaced. That court’s recitation of the nature of the allegations at issue indicates that the
pleading was less detailed than the one before this Court and involved fewer complaints regarding the adjuster’s
conduct.

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not been properly addressed or repaired in the months since the loss occurred, causing
further damage to the Property, and causing undue hardship and burden to Plaintiff.”
D.E. 1-6, p. 12. In evaluating fraudulent joinder claims, the Court must construe all
matters, including the pleadings, in favor of the non-removing party. E.g., Hart v. Bayer
Corp., 199 F.3d 239, 246-48 (5th Cir. 2000); Madison v. Vintage Petroleum, Inc., 114
F.3d 514, 516 (5th Cir. 1997). Construing the pleading in Plaintiff’s favor, it cannot be
said that Plaintiff has failed to allege the potential recovery of extra-contractual damages.
CONCLUSION
For these reasons, the improper joinder challenge is rejected, the Motion to
Remand (D.E. 6) is GRANTED, and the Court ORDERS this action be remanded to the
79th Judicial District Court of Jim Wells County, Texas, the court from which it was
removed. Plaintiff’s request for attorney’s fees and costs is DENIED.

ORDERED this 16th day of June, 2015.

___________________________________
NELVA GONZALES RAMOS
UNITED STATES DISTRICT JUDGE

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