Boles v. State Farm Lloyds
Filing
23
MEMORANDUM OPINION AND ORDER DENYING 15 Opposed MOTION to Remand.(Signed by Judge Gray H. Miller) Parties notified.(rkonieczny)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
ROBERT BOLES, Individually and on
behalf of all others similarly situated,
Plaintiffs,
v.
STATE FARM LLOYDS,
Defendant.
§
§
§
§
§
§
§
§
§
§
CIVIL ACTION H-13-286
M EMORANDUM O PINION A ND O RDER
Pending before the court is plaintiffs’ motion to remand. Dkt. 15. After considering the
motion, the response, and the applicable law, the court is of the opinion that plaintiffs’ motion to
remand should be DENIED.
I. BACKGROUND
On June 11, 2009, plaintiff’s counsel, the Mostyn Law Firm, and State Farm Lloyds entered
into a Rule 11 agreement concerning Hurricane Ike claims. Dkt. 15, Ex. B. The agreement
stipulated that State Farm would not remove “any Hurricane Ike lawsuits” to federal court in
exchange for the Mostyn Law Firm’s agreement to non-suit with prejudice “all claims against
individually sued Defendants . . . [and] to refrain from suing individual Defendants on future
Hurricane Ike lawsuits.” Id. The agreement pertained “to all Hurricane Ike cases that either have
been filed or will be filed in the future by The Mostyn Law Firm against State Farm Lloyds.” Id.
The parties defined Hurricane Ike as “the storm that occurred on September 13, 2008.” Id.
On September 27, 2010, plaintiff Ronald Boles filed his original petition against defendant
State Farm Lloyds in the District Court of Galveston County, Texas, 122nd Judicial Circuit. Dkt.15,
Ex. C. Boles alleged damages against State Farm for intentionally underpaying his insurance claim
related to the destruction his home by Hurricane Ike. Id. Based on the nature of his claim, Boles’
action was transferred to the multi-district litigation panel created to handle the pretrial management
of Hurricane Ike-related claims. Dkt. 15, Ex. D.
Following the transfer, Boles amended his petition on April 8, 2013, significantly altering
the nature of the claims against State Farm. Dkt. 1, Ex. A, No. 13. The amended petition was filed
by Boles individually, and on behalf of those similarly situated class members, specifically defined
as “[a]ll Texas policyholders who were State Farm’s policyholders prior to January 2009 and: (1)
suffered a covered loss which included roof damage; and (2) were improperly paid a “bundled” or
“turnkey” price as settlement for their roof claims.” Id. at 9.
In the amended petition, Boles asserts, on behalf of himself and the putative class, damages
based on the alleged miscalculation and underpayment of insurance claims for roof damage sustained
by State Farm policyholders prior to January 2009. Id. at 5-10. Specifically, Boles claims State
Farm’s adjusters failed to properly inspect the plaintiffs’ properties. Id. Further, State Farm
allegedly manipulated the national roof pricing formulas (Xactimate price lists) to fraudulently
underpay the plaintiffs’ claims by using undervalued “bundled” or “turnkey” roofing replacement
prices, when the insurance polices provided for itemized coverage. Id. Boles also alleges that State
Farm knowingly listed the prices well below the market price, and therefore, violated its duties and
obligations to Boles and the class members under their policies. Id.
In light of the new allegations made in the amended petition, State Farm filed its notice of
removal on May 3, 2013. Dkt. 1. State Farm removed this action on the basis of diversity
jurisdiction under 28 U.S.C. § 1332(a). Id.
2
II. LEGAL STANDARD
A defendant may remove a state civil case to federal court if the federal court would have had
original jurisdiction. 28 U.S.C. § 1441(a). A defendant seeking removal bears the burden of proving
federal jurisdiction exists. De Aguilar v. Boeing Co., 47 F.3d 1404, 1408 (5th Cir. 1995). Because
the effect of removal is to deprive the state court of an action properly before it, the removal statute
is to be strictly construed, and any doubt about the propriety of removal must be resolved in favor
of remand. Gasch v. Hartford Accident & Indem. Co., 491 F.3d 278, 281-282 (5th Cir. 2007). When
a defendant seeks to remove a case, the court must look at the complaint at the time the petition for
removal is filed in order to determine if jurisdiction exists. Brown v. Sw. Bell Tel. Co., 901 F.2d
1250, 1254 (5th Cir. 1990).
III. ANALYSIS
Boles challenges State Farm’s removal on the basis of the Rule 11 agreement entered into
between the Mostyn Law Firm and State Farm. Boles maintains that State Farm improperly removed
his Hurricane Ike case in abrogation of the Rule 11 agreement. Boles further asserts that the Class
Action Fairness Act of 2005 (“CAFA”), 28 U.S.C. § 1332(d), requires remand.1
A. Breach of Contract
In his request for remand, Boles relies on the Rule 11 agreement entered into between his
counsel and State Farm wherein State Farm agreed not to remove “any Hurricane Ike cases” filed
1
As discussed infra, State Farm has sustained its burden of removal on the basis of diversity jurisdiction
under 28 U.S.C. § 1332(a). Therefore, the court’s analysis of Boles’ argument related to CAFA is
unnecessary. See Frazier v. Pioneer Americas LLC, 455 F.3d 542, 544 (5th Cir. 2006) (affirming district
court’s order which declined to address diversity jurisdiction afforded by § 1332(a) because the court found
jurisdiction under CAFA); Gordon v. Air Liquide-Big Three, Inc., 2013 WL 3490725, *8 (M.D. La. 2013).
3
by the Mostyn Law Firm to federal court. State Farm argues the Rule 11 agreement is inapplicable
to this case because Boles’ class action claims do not involve exclusively Hurricane Ike claims.
In disputes over the meaning of a contract, the court first looks to the plain language of the
contract to determine whether it is ambiguous. Horn v. State Farm Lloyds, 703 F.3d 735, 738 (5th
Cir. 2012) (applying Texas law). Determining if a contract is ambiguous is a question of law. Id.
A contract becomes ambiguous when more than one reasonable interpretation may apply to the
contract’s language. Id. If a contract is ambiguous, then the court can consider extrinsic evidence
for the purpose of ascertaining the true intentions of the parties expressed in the contract. Id.
Conversely, if a contract’s language is unambiguous, the court will apply its plain meaning and
enforce it as written. Id.
The key provisions of the Rule 11 agreement state:
The following agreement will pertain to all Hurricane Ike cases that either
have been filed or will be filed in the future by The Mostyn Law Firm against State
Farm Lloyds. Hurricane Ike is defined as the storm that occurred on September 13,
2008. This confirms our agreement as follows:
In exchange for the The Mostyn Law Firm’s agreement to non-suit with
prejudice all claims against individually sued Defendants and The Mostyn Law
Firm’s agreement to refrain from suing individual Defendants on future Hurricane
Ike lawsuits, State Farm agrees not to remove any Hurricane Ike cases filed by your
firm to Federal Court. ...
Dkt. 15, Ex. B. At its core, the agreement prohibits State Farm from removing any cases involving
Hurricane Ike claims to federal court. The agreement does not limit, however, State Farm from
removing cases that do not stem from Hurricane Ike claims. A review of Boles’ amended petition
and the class allegations reveals that the basis of the lawsuit against State Farm is not exclusively
tied to claims arising from Hurricane Ike damage. Instead, the class includes all Texas State Farm
4
policyholders who were allegedly improperly paid for their covered roof damage claims prior to
January 2009. The class, by definition, includes members who did not have claims related to
Hurricane Ike damage.
Boles relies heavily on a recent Fifth Circuit opinion construing the exact Rule 11 agreement
at issue in this case. Horn, 703 F.3d at 737. In Horn, the Fifth Circuit considered whether the Rule
11 agreement term “any Hurricane Ike cases” included a class action filed by the Mostyn Law Firm.
Id. at 738. The Fifth Circuit held that the agreement “covers all past, present, and future lawsuits
filed by the Firm against State Farm on behalf of homeowners, as individuals or part of a class,
whose properties were damage during Hurricane Ike.” Id. at 739-40.
While the ruling in Horn applies to the extent it holds that class actions are encompassed
within the language used in this particular Rule 11 agreement, the Horn ruling does not dictate that
remand is warranted in this case. This case differs from Horn in one significant, and ultimately
controlling, way. The class members in Horn all suffered damage to their homes due to Hurricane
Ike. Id. In fact, the class definition in Horn explicitly only included those claims involving
homeowners whose properties sustained damage “caused by Hurricane Ike.” Dkt. 20, p. 10.
Conversely, in this case, not all of the putative class members’ claims involve Hurricane Ike
damage. The amended petition defines the class as “[a]ll Texas policyholders who were State
Farm’s policyholders prior to January 2009 and: (1) suffered a covered loss which included roof
damage; and (2) were improperly paid a ‘bundled’ or ‘turnkey’ price as settlement for their roof
claims.” Dkt. 1, Ex. A, No. 13, p. 9. The claims in the amended petition, therefore, are not solely
based on State Farm’s payment policies relating to Hurricane Ike damage claims (as in Horn), but
5
rather on settlement payments made for all roof damage claims, whether or not caused by Hurricane
Ike.
Boles contends the court should only look to his individual claim in order to determine
whether this is a Hurricane Ike case under the terms of the Rule 11 agreement. While his claim may
stem from Hurricane Ike, the expansive class definition encompasses many non-Hurricane Ike
related claims. The court cannot ignore the claims of the class as asserted by Boles. See generally
Steering Comm. v. Exxon Mobil Corp., 461 F.3d 598, 601 (5th Cir. 2006) (a prerequisite to class
certification is a finding tha thte questions common to the class predominate over questions affecting
only individual class members).
As this class includes many potential plaintiffs whose homes were not damaged by Hurricane
Ike, but simply sustained roof damage for which they were allegedly underpaid by State Farm, this
class action does not constitute a “Hurricane Ike case” as contemplated by the language written in
the Rule 11 agreement between the Mostyn Law Firm and State Farm. Therefore, State Farm is not
precluded from removing this case to federal court under the terms of the Rule 11 agreement.
B.
Diversity Jurisdiction Under 28 U.S.C. § 1332(a)
Now that the court has determined that the Rule 11 agreement does not preclude State
Farm’s removal, the court will next consider whether State Farm has met its burden establishing
diversity jurisdiction under 28 U.S.C. § 1332(a). Under Section 1332(a), “[t]he district court shall
have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or
value of $75,000, exclusive of interest and costs, and is between citizens of different States.” 28
U.S.C. § 1332(a)(1).
6
For diversity to exist in a putative class action suit, diversity need only exist between the
named parties, not all the potential putative class members. Manguno v. Prudential Prop. & Cas.
Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002). To determine the citizenship of an unincorporated
association, like State Farm, the court will examine the citizenship of each of the association’s
members. Royal Ins. Co. of Am. v. Quinn-L Capital Corp., 3 F.3d 877, 882 (5th Cir. 1993).
Additionally, the amount in controversy may be satisfied by only one plaintiff’s claim in the putative
class, and the court may exercise supplemental jurisdiction over the remaining class members’
claims, irrespective of whether these claims surpass the minimum amount in controversy threshold.
Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546, 558, 125 S.Ct. 2611 (2005); In re
Abbott Laboratories, 51 F.3d 524, 529 (5th Cir. 1995).
As to the citizenship requirement, State Farm has established proper diversity. Boles, the
named class representative, resides in and is a citizen of the State of Texas. Dkt. 15, Ex. C. State
Farm Lloyds is an unincorporated association of insurance underwriters, so each member’s
citizenship will dictate if complete diversity exists. Twelve individual underwriters comprise State
Farm Lloyds, with eleven members maintaining residences and full time employment in the State
of Illinois, and one member maintaining a residence and full time employment in the State of
Pennsylvania. Dkt. 1, Ex. F. Boles’ citizenship differs from all twelve defendant association
members; therefore, complete diversity exists in this case.
The amount in controversy must also be satisfied for this court to exercise jurisdiction. The
amount in controversy for a class action will be satisfied if a single named plaintiff’s claim exceeds
$75,000. Allapattah Services, 545 U.S. at 558. When the plaintiff’s complaint does not allege a
specific amount of damages, the defendant must prove by a preponderance of the evidence that the
7
amount in controversy exceeds $75,000. De Aguilar v. Boeing Co., 47 F.3d 1404, 1409 (5th Cir.
1995). The defendant can show that the amount in controversy is greater than $75,000 if “(1) it is
apparent from the face of the petition that the claims are likely to exceed $75,000, or, alternatively,
(2) the defendant sets forth ‘summary judgment type evidence’ of facts in controversy that support
a finding of the requisite amount.” Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723
(5th Cir. 2002).
The court finds that not only is it apparent from the face of the petition that amount in
controversy exceeds $75,000, but State Farm has provided additional evidence, namely a demand
letter satisfying this requirement. See Masco Opertors, Inc. v. Thompson Tractor Co., Inc., 2012 WL
3028075, *2 (S.D. Tex. 2012). First, the court can infer from the amended petition that the damages
sought from Boles will readily exceed the $75,000 threshold. In addition to costs, interests and
attorneys’ fees, Boles seeks the following damages: (1) actual damages; (2) mental anguish; (3)
treble damages pursuant to the Texas Insurance Code; and (3) compensatory damages, including
exemplary damages and damages for emotional distress, economic hardship, and losses due to nonpayment of the amount owed under the policy. Dkt. 1, Ex. A, No. 13, pp. 16-17. Given the nature
of damages sought, including treble damages, it is facially apparent from the amended petition that
Boles’ alleged damages will meet the $75,000 amount in controversy requirement. Additionally, and
as further confirmation to the court of Boles’ alleged damages, Boles previously sent a demand letter
to State Farm seeking damages in the amount of at least $343,715. Dkt. 1, Ex. D. Therefore, this
court finds it can properly exercise diversity jurisdiction over this case.
8
IV. CONCLUSION
The court finds that the Rule 11 agreement does not preclude State Farm’s removal of this
case to federal court, and further finds that State Farm has met its burden establishing the
requirements of diversity jurisdiction under 28 U.S.C. § 1332(a). Accordingly, plaintiffs’ motion
to remand (Dkt. 15) is DENIED.
It is so ORDERED.
Signed at Houston, Texas on July 23, 2013.
___________________________________
Gray H. Miller
United States District Judge
9
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?