South Austin Pharmacy, LLC v. Pharmacists Mutual Insurance Company
REPORT AND RECOMMENDATIONS re 10 Motion to Remand to State Court filed by South Austin Pharmacy, LLC, 9 Motion for Leave to File Document, Motion to Sever filed by South Austin Pharmacy, LLC. Signed by Judge Mark Lane. (dm)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SOUTH AUSTIN PHARMACY, LLC,
PHARMACISTS MUTUAL INSURANCE
REPORT AND RECOMMENDATION
OF THE UNITED STATES MAGISTRATE JUDGE
TO THE HONORABLE LEE YEAKEL
UNITED STATES DISTRICT JUDGE
Before the Court are Plaintiff’s Opposed Motion for Leave to File First Amended
Complaint [#9], Plaintiff’s Opposed Motion to Remand [#10], Defendant’s Response in
Opposition to Motion for Leave to File First Amended Complaint [#14], Defendant’s Response
in Opposition to Motion for Remand [#15], and Plaintiff’s Reply in Support of Motion to
Remand [#20]. The Motions were referred by United States District Judge Lee Yeakel to the
undersigned for a Report and Recommendation as to the merits pursuant to 28 U.S.C. §
636(b)(1)(B), Rule 72 of the Federal Rules of Civil Procedure, and Rule 1(d) of Appendix C of
the Local Rules of the United States District Court for the Western District of Texas. After
reviewing the pleadings, the relevant case law, and the case file as a whole, the undersigned
issues the following Report and Recommendation to the District Court.
This is a removal case in which Plaintiff South Austin Pharmacy lost the proverbial race
to the courthouse by a mere 90 minutes. Mot. Leave Amend at 2. Plaintiff, a Texas-based
pharmacy, originally filed suit against its insurer, Iowa-based Pharmacists Mutual Insurance
Company (“Pharmacists Mutual”), on February 20, 2015, in the 53rd Judicial District Court of
Travis County, Texas. Id. On April 9, Plaintiff sought to amend its pleadings to join Grant W.
Guthrie, a the Texas-based insurance agent of Pharmacists Mutual. Id. However, some three
hours earlier that day, Pharmacists Mutual had already filed its Notice of Removal based on
diversity jurisdiction. Id.
Plaintiff now seeks (1) leave to file an Amended Complaint in federal court joining the
non-diverse defendant, Guthrie, and (2) remand to the state court based on the lack of complete
diversity that would be caused by Guthrie’s addition as a defendant.
A. Propriety of Removal
A case may be removed to federal court if the action is one over which the federal court
possesses subject matter jurisdiction. 28 U.S.C. § 1441(a). If the asserted basis of federal
jurisdiction is the diversity of the parties, 28 U.S.C. § 1332, the party seeking to invoke federal
diversity jurisdiction bears the burden of establishing both that the parties are diverse and that the
amount in controversy exceeds $75,000. Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d
720, 723 (5th Cir. 2002). For purposes of establishing the propriety of removal, “the sum
demanded in good faith in the initial pleading shall be deemed to be the amount in controversy.”
28 U.S.C. § 1446(c)(2). “If it is facially apparent that the amount in controversy likely exceeds
$75,000.00 . . . , remand is not warranted unless the plaintiff establishes "to a legal certainty that
the claim is really for less than the jurisdictional amount. . . .” Ray Mart, Inc. v. Stock Bldg.
Supply of Tex., L.P., 435 F. Supp. 2d 578, 588 (quoting St. Paul Mercury Indem. Co. v. Red Cab
Co., 303 U.S. 283, 289 (1938). The plaintiff cannot meet this burden by simply stipulating, post2
removal, to an amount of damages below the jurisdictional minimum. Ray Mart, Inc., 435 F.
Supp. 2d at 588 (citing St. Paul Mercury Indem. Co., 303 U.S. at 292; Gebbia v. Wal-Mart
Stores, Inc., 233 F.3d 880, 883 (5th Cir. 2000).
In the instant case, Plaintiff’s Original
Complaint demanded “monetary relief over $1,000,000.” Notice of Removal [#1] Ex. A, Orig.
Compl. at ¶ 47. It is further undisputed that the citizenship of Texas-based Plaintiff, South
Austin Pharmacy, is diverse from that of Iowa-based Defendant, Pharmacists Mutual. See
Notice of Removal [#1] at ¶ 14. Thus, at the time of removal in this case, diversity jurisdiction
was well established. Gebbia, 233 F.3d at 883.
B. Propriety of Amendment Joining Non-Diverse Party
Under Rule 15(a), “leave to amend shall be freely given when justice so requires,” and
should be granted absent some justification for refusal. Foman v. Davis, 371 U.S. 178, 182, 83
S. Ct. 227, 230 (1962).
Although Rule 15(a) ordinarily governs pretrial amendments to
pleadings, the rule is limited by the removal statute, which states that “[i]f after removal the
plaintiff seeks to join additional defendants whose joinder would destroy subject matter
jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State
court.” 28 U.S.C. § 1447(e); see also Hensgens v. Deere & Co., 833 F.2d 1179, 1182 (5th
Cir.1987). “If the court grants the joinder, it must, under 1447(c) . . . [,] remand the case to state
court. If it denies the joinder, it cannot remand.” Hensgens, 833 F.2d. at 1182. Therefore, the
court “must scrutinize an amendment [to a pleading] that would add a non-diverse party more
closely than an ordinary amendment.” Priester v. JP Morgan Chase Bank, N.A., 708 F.3d 667,
679 (5th Cir. Tex. 2013).
In Hensgens, the Fifth Circuit recognized whether to permit the post-removal joinder of a
non-diverse, non-indispensable party presents competing interests when that joinder would
destroy diversity jurisdiction. Hensgens, 833 F.2d. at 1182. The Fifth Circuit thus advised
courts to use discretion in reaching a decision and to “consider a number of factors to balance the
defendant’s interests in maintaining the federal forum with the competing interests of not having
parallel lawsuits.” Id. The Fifth Circuit suggested consideration of: (1) the extent to which the
purpose of the amendment is to defeat federal jurisdiction; (2) whether plaintiff has been dilatory
in asking for an amendment; (3) whether plaintiff will be significantly injured if amendment is
not allowed; and (4) any other factors bearing on the equities involved. Id.
I. Is the Purpose of the Amendment to Defeat Federal Jurisdiction?
The first Hensgens factor asks to what extent the purpose of the amendment appears to be
to defeat federal jurisdiction. Id. 1 In analyzing this factor, it cannot be overlooked that in federal
court, Plaintiff filed its Motion for Leave to File First Amended Complaint [#9] and its Opposed
Motion to Remand [#10] contemporaneously, each document in reliance on the other. The
Motion to Remand specifically asserts remand is necessary because “the Court lacks subject
matter jurisdiction over this case due to the inclusion of Defendant GRANT W. GUTHRIE.”
Mot. Remand [#10] at 1. This is, of course, the relief sought in the Motion for Leave to File First
Amended Complaint. Mot. Leave to Amend [#9] at 2-3. The Motion for Leave to File First
Amended Complaint is thus specifically intended to defeat federal jurisdiction.
Plaintiff nevertheless asserts that, because it has valid Texas causes of action against
Guthrie individually, “there is no evidence that the destruction of diversity by virtue of Plaintiff’s
proposed amendment is anything other than incidental . . ..” Mot. Leave to Amend [#9] at 5.
Defendants correctly assert the fact that Plaintiff first attempted to file an amendment adding Guthrie in
state court is not dispositive of this issue. Resp. Mot. Amend at 6. Although the attempted state court amendment
was made the same day as the federal court removal, Plaintiff had been served two days earlier with the Defendants’
request for a certified copy of the docket sheet—a fairly clear procedural signal. Id. Plaintiffs likely “knew that
removal . . . was incoming” at the time they prepared and filed their Amended Petition in state court. Id.
Indeed, “if [Plaintiff] has stated a viable claim against [Guthrie] under Texas law, then it is
unlikely that the primary purpose of the amendment is to destroy diversity jurisdiction.” McNeel
v. Kemper Cas. Ins. Co., No. 3:04-CV-0734-G, 2004 U.S. Dist. LEXIS 13887, *7 (N.D. Tex.
July 21, 2004).
In support of this position, Plaintiff states “[t]he Texas Supreme Court has made clear
that individuals such as Mr. Guthrie can be sued and chapter 541 of the Texas Insurance Code
provides a private cause of action against any person that engages in unfair or deceptive acts.”
Mot. Leave to Amend [#9] at 4 (citing TEX. INS. CODE § 41.003). “The Fifth Circuit, however,
has made clear that in order to find a reasonable possibility that a Texas court would allow
recovery against an insurance adjuster, the plaintiff must demonstrate that the [agent], as an
individual, committed the Texas Insurance Code or DTPA violation that caused the harm.”
Green v. Nationwide Mut. Ins. Co., No. A-12-CV-600 LY, 2012 U.S. Dist. LEXIS 155062, *1112 (W.D. Tex. Oct. 17, 2012) (citing Hornbuckle v. State Farm Lloyds, 385 F.3d 538, 545 (5th
Cir. 2004). Conclusory repetitions of the statutory language that “allege no actionable facts
specific to [the non-diverse defendant]” do not establish any potential liability. Griggs v. State
Farm Lloyds, 181 F.3d 694, 699 (5th Cir. 1999). Rather, a plaintiff seeking to assert a complaint
in federal court against an individual insurance agent or adjuster must “satisfy Rules 8, 9, and
12(b)(6) and Twombly, to allege specific actionable conduct by the adjuster and to distinguish
claims against the adjuster from generic, conclusory, statute-tracking claims against the insurer.”
Okenkpu v. Allstate Tex. Lloyd’s, No. H-11-2376, 2012 U.S. Dist. LEXIS 41705, *22 (S.D. Tex.
Mar. 27, 2012) (collecting cases).
Plaintiff’s proposed First Amended Original Complaint makes purely boilerplate
allegations against Guthrie that fail to establish any specific misrepresentation, made to any
specific person, at any specific time. Mot. Leave. Amend. [#9] Ex. B, ¶¶ 13-15; 29-39. This
generic complaint, which Plaintiff attempted to file in state court only after removal was
imminent, and which Plaintiff now seeks leave to file in federal court in conjunction with a
motion to remand, is specifically intended to defeat federal jurisdiction. The first Hensgens
factor thus weighs in favor of denying the Motion for Leave to Amend. 833 F.2d at 1182.
II. Has Plaintiff Been Dilatory In Asking For an Amendment?
“Where the plaintiff knew 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.’”
Wein v. Liberty Lloyds of Tex. Ins. Co., No. A-15-CA-19-SS, 2015 U.S. Dist. LEXIS 33895, *14
(W.D. Tex. Mar. 18, 2015) (quoting In re Norplant Contraceptive Prods. Liab. Litig., 898 F.
Supp. 433, 435 (E.D. Tex. 1995)). The proposed new defendant, Guthrie, was the agent who
sold Plaintiff the policy at issue. Mot. Leave to Amend [#9] Ex. B, Pf’s 1st. Am. Orig. Compl. at
¶¶ 10-15. Plaintiff asserts Guthrie’s “oral representations” concerning the policy and the claims
handling process only came to light after Plaintiff’s prompt payment dispute was filed against the
insurer. Id. at 2. Plaintiff fails to explain, however, in what way Guthrie’s unspecified alleged
representations, discovered “subsequent to the filing of Plaintiff’s original petition on February
20, 2015,” could have formed the basis for Plaintiff’s claimed reliance in purchasing the
insurance policy or in making a claim under the policy on April 30, 2014. Id. at 2. Clearly, if
Plaintiff has any claim based on representations by Guthrie, Plaintiff was aware of the facts
underlying that claim before this suit was filed. See Wein, 2015 U.S. Dist. LEXIS at *14.
Therefore, Plaintiff’s delay in attempting to join Guthrie until removal was imminent is a factor
that weighs in favor of denying the Motion for Leave to Amend. Hensgens, 833 F.2d at 1182.
III. Will Plaintiff Be Significantly Injured If the Amendment Is Not Allowed?
Plaintiff has identified no prejudice that would flow from denying the Motion to Amend.
In fact, Plaintiff acknowledges that “[a]s the employer of Defendant Guthrie, Defendant PMIC
would still be implicated were any judgment rendered against Defendant Guthrie for acts
committed in the course and scope of his employment.” Mot. Leave to Amend at 6. By the
same token, Plaintiff “can thus be afforded complete relief” against PMIC under the theory of
respondeat superior should this suit proceed without the addition of Guthrie as a defendant.
Green, 2012 U.S. Dist. LEXIS 155062, *16 (citing Pac. Mut. Life Ins. Co. v. Haslip, 499 U.S. 1,
15, 111 S. Ct. 1032, 1041 (1991)).
IV. Are There Any Other Factors Bearing on the Equities Involved?
Plaintiff asserts equity requires the amendment because “its case for the independent
damages caused by Defendant Guthrie would be prohibitively difficult to present absent the
proposed amendment.” Mot. Leave to Amend [#9] at 5. Plaintiff’s complaint on this count is
without merit. The fraud and DTPA claims Plaintiff seeks to assert against Guthrie “are separate
and distinct” from the prompt payment and other claims alleged against Pharmacists Mutual, and
Plaintiff can pursue those claims against Guthrie in state court. Walicek v. Mut. Protective Ins.
Co., No. 4:07-cv-03750, 2009 U.S. Dist. LEXIS 19037, *6 (S.D. Tex. March 4, 2009).
“Although [Plaintiff] would have to litigate these separate claims in separate proceedings, one
federal and one state, this is not a significant injury under Hensgens.” Id.
(citing Arthur v.
Stern, No. H-07-3742, 2008 U.S. Dist. LEXIS 52725, *18-19 (S.D. Tex. June 26, 2008)).
Plaintiff has identified no other equitable factors that would affect the analysis.
Because none of the Hensgens factors favors an amendment destroying diversity
jurisdiction in this case, the undersigned RECOMMENDS the District Court DENY the Motion
for Leave to File First Amended Complaint [#14].
Because Defendants’ removal of this case was proper under 28 U.S.C. § 1441, the
amount in controversy was properly established pursuant to 28 U.S.C. § 1446, and diversity
jurisdiction was established and (absent the post-removal joinder of a non-diverse defendant)
continues to exist under 28 U.S.C. § 1332, the undersigned RECOMMENDS that the District
Court DENY the Motion to Remand.
The parties may file objections to this Report and Recommendation. A party filing
objections must specifically identify those findings or recommendations to which objections are
being made. The District Court need not consider frivolous, conclusive, or general objections.
See Battles v. United States Parole Comm’n, 834 F.2d 419, 421 (5th Cir. 1987).
A party’s failure to file written objections to the proposed findings and recommendations
contained in this Report within fourteen (14) days after the party is served with a copy of the
Report shall bar that party from de novo review by the District Court of the proposed findings
and recommendations in the Report and, except upon grounds of plain error, shall bar the party
from appellate review of unobjected-to proposed factual findings and legal conclusions accepted
by the District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140, 150-53, 106
S. Ct. 466, 472-74 (1985); Douglass v. United Services Automobile Ass’n, 79 F.3d 1415 (5th Cir.
To the extent that a party has not been served by the Clerk with this Report &
Recommendation electronically, pursuant to the CM/ECF procedures of this District, the Clerk is
ORDERED to mail such party a copy of this Report and Recommendation by certified mail,
return receipt requested.
SIGNED May 19, 2015
UNITED STATES MAGISTRATE JUDGE
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