Wein v. Liberty Lloyds of Texas Insurance Company et al

Filing 27

ORDER DENYING 12 Motion to Remand to State Court; STRIKING 4 Amended Complaint. Signed by Judge Sam Sparks. (jk)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION

2015

MAR 19

j

9:

MARC WEIN,
Plaintiff,
Case No. A-15-CA-19-SS

-vs-

LIBERTY LLOYDS OF TEXAS INSURANCE
COMPANY et al.,
Defendants.

ORDER
BE IT REMEMBERED on this day the Court reviewed the file in the above-styled cause, and

specifically Plaintiff Marc Wein's Motion to Remand [#12], Defendants Liberty Lloyds of Texas

Insurance Company, Liberty Mutual Group, Inc., and Liberty Mutual Auto and Home Services,
LLC ' s Response [#14], and Plaintiff's Reply [#15]. Having reviewed the documents, the governing
law, and the file as a whole, the Court now enters the following opinion and orders DENYING the

motion.

Background
This suit arises from an allegedly unpaid homeowner's insurance claim. On January 23,
2013, Plaintiff Marc Wein's home was vandalized, causing serious damage. Wein thereafter filed
an insurance claim with Liberty Mutual,' his insurer, which, according to Wein, has not paid all of

Wein has named Liberty Lloyds of Texas Insurance Company, Liberty Mutual Group, Inc., Liberty Mutual
Auto and Home Services, and Liberty Insurance Corporation (among others) as defendants. Because he refers to all of
the Liberty-affiliated defendants collectively as "Liberty Mutual," it is unclear which of the defendants Wein alleges
issued his insurance policy. See Am. Compl. [#4] at 1. This loose nomenclature is evidently a symptom of Wein's
allegations the Liberty defendants are engaged in a joint enterprise or are alter egos of one another. See id. at 14-15.
More on this below.
1

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the benefits to which Wein is entitled. Wein brings claims against various Liberty entities, several
Liberty adjusters and investigators assigned to his claim, and two arms of Blackmon Mooring, the

company that performed repairs on his home following the vandalism, for "unfair discrimination,"
negligence, gross negligence, breach of contract, violations of the Texas Deceptive Trade Practices
Act, violations of the Texas Insurance Code, bad faith, fraud, and negligent misrepresentation in

connection with the benefits dispute and repairs.

See

Am. Compi. [#4] at 7-13.

On December 9, 2014, Wein, who is a citizen of Texas, filed his Original Petition against

Liberty Lloyds of Texas Insurance Company, Liberty Mutual Group, Inc., and Liberty Mutual Auto
and Home Services, LLC in the 281st Judicial District Court of Travis County, Texas. Notice

Removal [#1, at 7-21] Ex. A (Orig. Pet.) at

1.

Liberty Lloyds thereafter filed a Verified Denial in

the state court, denying it is a proper party to this lawsuit on grounds it did not issue Wein's
insurance policy. Id. [#1, at 27-30] Ex. A (Verified Denial) at 1, 4. The defendants removed the
case to this Court on January 12,2015, arguing Liberty Lloyds, then the only non-diverse

defendant,2

was improperly joined and this Court could therefore exercise diversity jurisdiction over Wein's
claims.

See

id.

[#1,

at 1-6] at 3-5.

On January 23, 2015, without seeking leave from the

Court,2

Wein filed an Amended

Complaint [#4] which named an additional diverse defendant, Liberty Insurance Corporation, and
several new, non-diverse defendants: BlackmonMooring Corporation and Blackmon Mooring of

Austin, Inc. (collectively, Blackmon Mooring), the repair-company entities, and Mary Hamilton,

2

The parties do not dispute the citizenship of any party to the litigation.

section 11(B), infra (discussing the requirement a plaintiff seek leave of court before filing a post-removal
amended complaint which adds non-diverse defendants).
2

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Richard Campbell, Darrell Scott, and Nina Bujosa, the Liberty adjusters and investigators. The
instant motion to remand followed.

Analysis
I.

Legal Standard
Any civil action brought in state court over which a federal court would have original

jurisdiction maybe removed from state to federal court. 28 U.S.C.

§

144 1(a). Familiarly, district

courts have original jurisdiction over (1) federal-question suits and (2) diversity suits, which are civil
actions between "citizens of different States" where the amount in controversy is over $75,000. See
28 U.S.C.

§

1332(a). The Supreme Court has interpreted the diversity statute to require "complete

diversity"that is, the citizenship of every plaintiffmust be different from that of every defendant.
Caterpillar Inc.

v.

Lewis, 519 U.S. 61, 68 (1996). Further, diversity actions are removable "only if

none of the parties in interest properly joined and served as defendants is a citizen of the State in
which such action is brought." 28 U.S.C.

§

1441(b).

"[T]he burden of establishing federal

jurisdiction is placed upon the party seeking removal[,]" and because removal jurisdiction raises
significant federalism concerns, courts must strictly construe removal jurisdiction. Willy

v.

Coastal

Corp., 855 F.2d 1160, 1164 (5th Cir. 1988).

II.

Application
While Wein's glaringly obvious desire to avoid the federal forum has resulted in a

superficially complex confusion of briefing, only two issues ultimately control the disposition of

Wein's motion to remand: first, whether Liberty Lloyds was improperly joined, and second, what
effect Wein' s improperly-filed amended complaint has upon the Court's jurisdiction. As set forth

below, the Court finds Liberty Lloyds was improperly joined, as it neither issued Wein's
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homeowner's insurance policy nor participated in the handling of Wein's claim. Further, applying
the factors set forth in Hensgens v. Deere & Co., 833 F.2d 1179 (5th Cir. 1987), the Court finds it

would not have granted Wein leave to file his amended complaint. The Court therefore strikes

Wein's amended complaint and denies his motion to remand.
A.

Improper Joinder
To prove improper joinder, a removing party must show the plaintiff is unable to establish

a cause of action against the non-diverse defendant under state

law.3

Cantor v. Wachovia Mortg.,

FSB, 641 F. Supp. 2d 602, 606 (N.D. Tex. 2009). In conducting an improper joinder analysis,
the test. . . 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.

Smallwoodv. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (enbanc). "A 'mere theoretical

possibility of recovery under local law' will not preclude a finding of improper joinder." Id. at 573
n.9 (quoting Radon

v.

RJR Nabisco, Inc., 236 F.3d 282, 286 n.4 (5th Cir. 2000)).

Courts assess

whether a plaintiff has a reasonable basis for recovery by conducting "a Rule 1 2(b)(6)-type analysis,

looking initially at the allegations ofthe complaint to determine whether the complaint states a claim

under state law against the in-state defendant." Id. at 573. Generally, if the plaintiff can survive a
Rule 1 2(b)(6) challenge, there is no improper joinder. Id. However, if the plaintiff "has stated a

The removing party may also show actual fraud in pleading the jurisdictional facts, Cantor, 641 F. Supp. 2d
at 606, a theory Liberty does not raise.
'

Strangely, Wein claims this aspect of the standard was rejected by the Smaliwood court. See Reply [#15] at
of recovery is not
enough to prevent an improper-joinder finding, and the Fifth Circuit has since restated the principle. See, e.g.,African
Methodist Episcopal Church v. Lucien, 756 F.3d 788, 793 (5th Cir. 2014) ("A mere theoretical possibility of recovery
in state court will not preclude a finding of improper joinder." (citing Smallwood)).
3. Wein is plainly incorrect. The Smaliwood court affirmed that a merely theoretical possibility

claim, but has misstated or omitted discrete facts that would determine the propriety ofjoinder[,]...
the district court may, in its discretion, pierce the pleadings and conduct a summary inquiry." Id.
In all cases, "the focus of the inquiry must be on the joinder, not the merits of the plaintiff's case,"

and the "party seeking removal bears a heavy burden of proving that the joinder of the in-state party

was improper." Id. at 573, 574.
As all ofWein' s causes of action against Liberty Lloyds are based upon issuance ofthe policy
to Wein and handling of Wein's claim, Defendants assert improperjoinder. Defendants argue Wein

has no reasonable basis for recovery against Liberty Lloyds because Liberty Lloyds did not issue

Wein's insurance policy or participate in handling his claim in any way. Defendants raised this
argument in their notice ofremoval and attached a verified denial to that effect.

See Notice Removal

[#1, at 1-6] at 4; Verified Denial at 1. In his motion to remand, Wein addresses Defendants'

argument by noting the "sole evidence" Liberty Lloyds was not the issuer was Defendants' own
verified denial, stating he "pled that Liberty Lloyds issued the insurance policy," and concluding "at
best, [the] verified denial creates a fact issue that must be resolved in [Wein' s] favor." Mot. Remand
[#12] at 3-4

The Court does not agree this fact issue must be resolved in Wein's favor. Rather, the Court

believes this is precisely the sort of scenario where it is appropriate to pierce the pleadings and
consider summary evidence, as Wein has omitted discrete facts that would determine the propriety

ofjoinder. The Smaliwood court gave several examples of the type of factual questions which might
appropriatelylead a court to consider summary evidence: "For example, the in-state doctor defendant
did not treat the plaintiff patient, the in-state pharmacist defendant did not fill a prescription for the

plaintiff patient, a party's residence was not as alleged, or any other fact that easily can be disproved
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ifnot true." Smaliwood, 385 F.3d at 574 & n. 12. Here, whether or not Liberty Lloyds issued Wein' s
policy or handled his claim is as uncomplicated and straightforward a question as whether a doctor
treated a patient or whether a pharmacist filled a prescription. Consequently, the Court will consider
Defendants' summary evidence.
Defendants present two undisputed pieces of evidence: the affidavit of Jonathan Farsaci, a
Senior Property Loss Specialist with Liberty and the custodian of records related to Wein's claim,
and a copy of Wein's insurance policy. Based upon his review of Wein's claim file and the reports,

correspondence, and invoices related to the claim, Farsaci avers the policy was issued, the claim was

handled, and payments to Wein were made by Liberty Insurance Corporation, not Liberty Lloyd's.
See Resp. [#14-1] Ex. A (Farsaci Aff.) ¶J 1, 3. Further, the insurance policy attached to Farsaci's

affidavit indicates, on page two of the Policy Declarations, that the coverage under the policy is

"provided and underwritten by Liberty Insurance Corporation, Boston MA." Id. [#14-2] Ex. Al
(Policy) at LM0005. In his reply to Defendants' response, Wein failed to produce any evidence

disputing the Farsaci affidavit or the Policy.
In light of Defendants' undisputed evidence, the Court would normally end its inquiry here

and find Liberty Lloyds improperlyjoined. See Cuevas v. BACHome Loans Servicing, LP, 648 F.3d
242, 250 (5th Cir. 2011) (finding defendants carried their burden to demonstrate improper joinder

where they adduced undisputed affidavit and loan documents showing non-diverse financial
institution neither originated nor serviced the loan at issue). Wein, however, raises a second
argument, claiming Liberty Lloyds is nevertheless properlyjoined because Wein pled joint enterprise
and alter ego theories of recovery. This argument need not detain us long, however, as Wein' s

allegations related to joint enterprise and alter ego easily fail a Rule 12(b)(6)-type analysis; all are

conclusory and unsupported by any factual material, let alone enough factual material to nudge them
across the line from conceivable to plausible. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570(2007). The entiretyofWein'sjoint-enterprise allegations

are: "[The Liberty defendants] have engaged in a joint enterprise in that they have (1) an express or

implied agreement, (2) a common purpose, (3) a common pecuniary interest, and (4) an equal right
to control the enterprise. [The Liberty defendants] are therefore jointly liable for the acts of the

others." Am. Compl. [#4] at 14. Wein's alter ego allegationswhich allege, in five theories
separately alleged "in the alternative," that each Liberty defendant is the alter ego of Liberty Lloyds
and all of the Liberty defendants are alter egos of one

anotherare equally conclusory

and

unsupported. The only allegation concerning whether Liberty Mutual Group is an alter ego of
Liberty Lloyds, for example, is: "Further pleading in the alternative, Liberty Mutual Group, Inc. is
the alter ego of Liberty Lloyds[]. Therefore Liberty Mutual Group, Inc. is liable for the actions of
Liberty Lloyds[]." Id. Clearly, this is not enough.

Wein's labels, conclusions, and formulaic recitations concerning joint enterprise and alter
ego fail a Rule 1 2(b)(6) analysis, and thus fail to persuade the Court Liberty Lloyds is properlyjoined

despite having neither issued nor serviced Wein' s insurance policy. See Smallwood, 385 F.3d at 573;
see also Papasan v. Allain, 478 U.S. 265, 286 (1986) (stating courts "are not bound to accept as true
a legal conclusion couched as a factual allegation"). Because all of Wein's causes

of action against

Liberty Lloyds stem from issuing the policy in question or handling the claim, because Liberty
Lloyds did neither, and because Wein's joint enterprise and alter ego allegations fail to state a claim,

the Court concludes Liberty Lloyds was improperlyjoined. Accordingly, the Court will not consider

Liberty Lloyd's Texas citizenship in determining whether complete diversity obtains.
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Effect of Wein's Improperly-Filed Amended Complaint

B.

As previously noted, Wein filed an amended complaint eleven days after the state-court

Liberty defendants removed the case, naming Liberty Insurance Corporation, the individual Liberty

adjusters and investigators, and the Blackmon Mooring entities as defendants, all of whom save
Liberty Insurance Corporation are non-diverse. Nineteen days later, Wein filed his motion to

remand. As explained below, before filing a post-removal amended complaint joining non-diverse

parties, Wein was required to seek leave of court. Even had Wein properly sought leave, however,
the Court would have denied it, as it appears to the Court Wein's primary purpose in adding the
additional defendants was to destroy federal diversity jurisdiction. Consequently, the Court strikes

Wein's amended complaint and denies his motion to remand.
As a general rule, jurisdictional facts are determined at the time of removal, not by

subsequent events. Louisiana v. Am. Nat'l Prop. & Cas. Co., 746 F.3d 633, 635 (5th Cir. 2014).
Thus, a court would retain jurisdiction even

if the amount in controversy falls below the

jurisdictional amount or one of the parties changes residency during the pendency of the suit.
Hensgens, 833 F.2d at 1180-8 1. In diversity cases, however, addition of a non-diverse party
destroys diversity jurisdiction. Id. at 81 (citing Owen Equip. & Erection Co.

v.

Kroger, 437 U.s.

365, 374 (1978)). When an amended complaint filed after removal destroys diversity, leave of court

is required even where the existing defendant has not filed responsive pleadings. Ascension Enters.,
Inc.

v.

Allied Signal, Inc., 969 F. Supp. 359, 360 (M.D. La. 1997) (citing Whitworth v. TNTBestway

Transp. Inc., 914 F. Supp. 1434, 1435 (E.D. Tex. 1996)). If the Court gives leave, the suit must be

remanded to state court. See 28 U.S.C.

§

1447(e) ("If after removal the plaintiff seeks to join

additional defendants whose joinder would destroy.

. .

jurisdiction, the court may deny joinder, or

permit joinder and remand the action to the State court."); Sharp v. Kmart Corp., 991 F. Supp. 519,
527 (M.D. La. 1998) ("If a non-diverse party is added to the case after it is removed.. . the Court

must remand the suit to state court.")
Because adding new, non-diverse parties in a removed case threatens the original defendant's

choice of forum, when determining whether to permit an amended pleading which does so, courts
"should scrutinize that amendment more closely than an ordinary amendment." Hensgens, 833 F.2d
at 1182. In Hensgens, the Fifth Circuit set forth five factors to guide the analysis: (1) the extent to

which the purpose of the amendment is to defeat federal jurisdiction; (2) whether the plaintiff has
been dilatory in amending; (3) whether the plaintiff will be significantly injured if the amendment
is not permitted; and (4) any other factors bearing on the equities. Id.; Anzures v. Prologis Tex.

I

LLC, 886 F. Supp. 2d 555, 562 (W.D. Tex. 2012). Application of those factors to this case shows

leave to file Wein' s amended complaint would not have been granted.
1.

Extent to which the purpose of the amendment is to defeat federal jurisdiction

The first Hensgens factor weighs against Wein. In analyzing the first factor, courts in this
Circuit "consider whether the plaintifif] knew or should have known the identity of the nondiverse

defendant when the state court complaint was filed." Anzures, 886 F. Supp. 2d at 562 (internal
quotes omitted). Where the plaintiffknew about the non-diverse party's activities at the time he filed

suit but did not include that party as an original defendant, "courts have viewed any later attempt to
add the nondiverse party as a defendant as nothing more than an attempt to destroy diversity." In

re Norplant Contraceptive Prods. Liab. Litig., 898 F. Supp. 433, 435 (E.D. Tex. 1995).
That is precisely the situation here. At the time Wein filed his original petition in state court,

he knew the identities of all the non-diverse defendants he added in his amended complaint; indeed,

in the original petition, Wein named Mary Hamilton, referenced the investigatory examinations he

was given by Nina Bujosa (unnamed), and described some of the communications he had with Rick
Campbell and Darrell Scott (also unnamed) during handling of the claim. See Orig. Pet. at 3-4. As
for the Blackmon Mooring defendants, Wein has not argued or even suggested he did not know their

identities at the time he filed the original petitionperhaps because, given that Blackmon Mooring
performed the repairs on Wein' s home, he cannot do so credibly. Additionally, when Defendants
pointed out most of the above in their briefing, Wein chose to sidestep the issue altogether rather

than engage with the questions raised.5 See Reply [#15] at 6 ("Since Plaintiff has asserted valid
causes of action against Blackmon Mooring and Individual [sic] Defendants and timely added them,

they are proper parties to this lawsuit."). Given all of the above, the Court concludes Wein named
the individual and Blackmon Mooring defendants for the purpose of defeating diversity jurisdiction.
See O'Connor v. Auto. Ins. Co., 846 F. Supp. 39, 41 (E.D. Tex. 1994) (concluding amendment was

primarily intended to destroy jurisdiction where plaintiff referred to non-diverse defendant in the
original petition); Adey/Vandling, Ltd.

v.

Am.

First Ins. Co., No. A-i i-CV-1007-LY, 2012 WL

534838, at *3 (W.D. Tex. Feb. 17, 2012) (Austin, Mag. J.), adopted by Order Adopting Report &

Recommendation [#36] (W.D. Tex. May ii, 2012) (same).
2.

Whether Wein has been dilatory in amending

While the question is somewhat closer, the second Hensgens factor also weighs against Wein.

"A delay of two

months after the filing of the original complaint or almost thirty days after the

notice of removal has been found dilatory." Id. (quoting Irigoyen v. State Farm Lloyds, No. CA-C51t appears Wein also believes the salient question is whether the individual and Blackmon Mooring defendants
were improperly (or, in the old parlance, fraudulently) joined. Wein is incorrect. "The fraudulentjoinder doctrine does
not apply to joinders that occur after an action is removed. . . . [TIjhe doctrine has permitted courts to ignore (for
jurisdictional purposes) only those non-diverse parties on the record in state court at the time of removal." Cobb v. Delta
Exports, 186 F.3d 675, 677 (5th Cir. 1999).

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03-324-H, 2004 WL 398553, at *4 (S.D. Tex. Jan. 5, 2004)). Additionally, courts have found

plaintiffs acted in a dilatory fashion by failing to sue a non-diverse defendant in state court although
the non-diverse defendant's role in the case was known at that time. See O'Connor, 846 F. Supp.
at 41 (holding plaintiff was dilatory in failing to sue insurance agency in state court where agency

was named in original petition); Gallegos v. Safeco Ins. Co., No. H-09-2777, 2009 WL 4730570, at
*4 (S.D. Tex. Dec. 7, 2009) (finding dilatory factor weighed against plaintiff who filed motion to

amend two months after filing original action and who knew identity of non-diverse defendant at
time state suit was filed). Additionally, in some cases, the speed with which the plaintiff seeks to
add non-diverse defendants following removal "is strong evidence of the.

. .

true motive being to

force the remand of the case." Adey/Vandling, 2012 WL 534838 at *4

Wein filed his amended complaint on January 13, 2015, a month and a half after filing his
original state petition on December 9, 2014, and eleven days after Defendants filed their notice of

removal on January 12, 2015. A month and a half approaches the two-month delay between filing
the original complaint and filing the amendment found dilatory in other cases. Additionally, as

previously discussed, Wein knew the identities of the individual and Blackmon Mooring defendants
at the time he filed his state petition. Wein also fails to address or dispute Defendants' argument he

was dilatory in seeking to join the non-diverse defendants. Consequently, the Court finds the second
factor weighs slightly against Wein.
3.

Whether Wein will be significantly injured if amendment is not permitted &
other equitable factors

The Court finds the third Hensgens factor also weighs against Wein. In analyzing whether
a plaintiffwill be significantly injured if not permitted to amend, courts consider "whether a plaintiff

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can be afforded complete relief in the absence of the amendment," and whether "the plaintiff will

be forced to litigate their action against the non-diverse defendants in a different court system."

Adey/Vandling, 2012 WL 534838 at *4 (internal quotes omitted). Here, there is no indication the

originally-sued Liberty defendants would be unable to satisfy a judgment. And while it is true

Plaintiff will be required to pursue suit against the individual Liberty defendants and Blackmon
Mooring defendants in state court if he so desires, given Plaintiff did not name those defendants in
his state suit despite being aware of their respective roles, there is reason to question whether Wein

will do so. See id. (noting "it is not at all clear" whether the plaintiff would pursue state suit against
non-diverse defendants which he knew of but did not name in his original petition). In any event,
the Court agrees with Defendants the possibility ofparallel litigation "cannot, by itself, outweigh the

firstand most importantfactor.

'Jurisdiction is not so malleable that plaintiffs can creatively

forum shop through manipulation of the Rules." Id. (quoting Sanders

v.

Gen. Motors Corp., No.

01-1579, 2001 WL 1297443, at *3 (N.D. Tex. Oct. 10, 2001)).
Finally, no other equitable factors are present in this case. In sum, the Hensgens factors

weigh against permitting Wein's amended complaint to stand.

Conclusion
Struggling to avoid the federal forum, Wein improperly joined one non-diverse defendant
and filed a post-removal amendment attempting to strengthen his case for remand. Wein was

unsuccessful; the original Liberty defendants are entitled to their federal forum.

Accordingly,
IT IS ORDERED that Plaintiff Marc Wein's Amended Complaint [#4] is

STRICKEN; and
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IT IS FINALLY ORDERED that Plaintiff Marc Wein's Motion to Remand [#12] is

DENIED.
SIGNED this the

J&day of March 2015.

PA2

SAM S
UNITED STATES DISTRICT JUDGE

019 motrernandordba.fnn

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