Nelson v. State Farm Lloyds et al

Filing 12

ORDER DISMISSING 7 Motion ; GRANTING 10 Motion to Remand to State Court. Signed by Judge Sam Sparks. (dl)

IN THE UNITED STATES DISTRICT COURO/5 EB

FOR THE WESTERN DISTRICT OF TEXAS.,
AUSTIN DIVISION

°

f)

MELVIN NELSON,

Plaintiff,
Case No. A-17-CA-962-SS

-vs-

FARM

STATE

LLOYDS

and

SHANE

FORDHAM,
Defendants.

ORDER
BE IT REMEMBERED on this day the Court reviewed the file in the above-styled cause, and
specifically Plaintiff Melvin Nelson's Motion to Remand [#10] and Defendants State Farm Lloyds
(State Farm) and Shane Fordham (collectively Defendants)' Response [#11] in opposition.1 Having

considered the documents, the governing law, and the case file as a whole, the Court now enters the
following opinion and orders.

Background
Plaintiff is a Texas citizen and the named insured on an insurance policy issued by State Farm
(the Policy). The Policy covers Plaintiff's real property located at 902 Glass Drive, Leander, Texas
(the Property). State Farm is an unincorporated association whose underwriters are all citizens of the
State of Illinois. Removal Notice[ #1] ¶ 5. Mr. Fordham, a citizen of Texas, is an insurance adjuster.
Id.

¶6.

State Farm also filed a motion to abate. Mot. Abate [#7]. Because the Court concludes it lacks subject matter
jurisdiction, the Court dismisses this motion.
1

On April 20, 2016, a hail storm allegedly caused damage to the Property. Id. [#1-1] Ex. A

(State Court Records) at 8. Plaintiff submitted a claim to State Farm for the damage, which included
replacement of the Property's roof. Id. State Farm assigned Mr. Fordham to adjust the claim, and Mr.

Fordham inspected the Property and adjusted Plaintiff's claim on State Farm's behalf Id.
On August 31, 2017, Plaintiff filed suit in Texas state court. Id. at 6. Plaintiff alleges Mr.

Fordham violated Texas Insurance Code § 541.060 when he improperly evaluated the Property and
failed to include the true cost of repairing the Property in his adjustment. Id. at 8, 32-3 9. In addition,

Plaintiff alleges State Farm failed to review the adjustment and improperly denied coverage for the
full extent of the Property's damages. Id. ¶J 14-16. As a result, Plaintiff contends State Farm

wrongfully denied his claim, breached the insurance contract, violated multiple sections of the Texas
Insurance Code, and breached its duty of good faith and fair dealing. Id. ¶J 40-52.
State Farm removed the case to this Court, arguing the Court possesses diversity jurisdiction.

According to State Farm, Mr. Fordham was improperly joined because Plaintiff failed to state a

reasonable basis for recovering against Mr. Fordham. Plaintiff filed a motion for remand, which is
ripe for a decision.

Analysis
I.

Legal Standard
"{T]he burden of establishing federal jurisdiction is placed upon the party seeking removal."

Willy v. Coastal Corp., 855 F.2d 1160, 1164(5th Cir. 1988). Moreover, because removal jurisdiction

raises significant federalism concerns, courts must strictly construe removal jurisdiction. Id. Any
doubts or ambiguities regarding the propriety of removal are construed against removal and in favor

-2-

of remand to the state court. Manguno
Cir4

v.

Prudential Prop. & Gas. Ins. Go., 276 F.3d 720, 723 (5th

2002). Here, State Farm invoked federal court diversity jurisdiction under 28 U.S.C. § 1332(a).

District courts have diversity jurisdiction over civil actions between citizens of different
states when the amount in controversy exceeds $75,000.00. 28 U.S.C.

§

1332(a). Section 1332

requires "complete diversity"that is, the citizenship of every plaintiff must be different from that

of every defendant. Gaterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). Parties upon whose citizenship
diversity jurisdiction is grounded must be real and substantial parties to the controversy. Navarro
Say. Ass 'n v. Lee, 446 U.S. 458, 460-61 (1980). Thus, the Court must "disregard nominal or formal

parties and rest jurisdiction only upon the citizenship of the real parties to the controversy." Id.; see

also Americold Realty Trust v. Gonagra Foods, Inc., 136 S. Ct. 1012 (2016).

II.

Application
The parties dispute whether Mr. Fordham, who is a nondiverse defendant, is properlyjoined.

If Mr. Fordham is improperly joined, then this Court has subject matter jurisdiction.
A nondiverse defendant is improperly joined if "(1) the plaintiff has stated a claim against
a diverse defendant that he fraudulently alleges is nondiverse, or (2) the plaintiff has not stated a

claim against a defendant that he properly alleges is nondiverse." Int'l Energy Ventures Mgmt.,
L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 199 (5th Cir. 2016) (emphasis in original).

Because it is undisputed Mr. Fordham is nondiverse, only the latter option is relevant. See id.

When deciding whether a nondiverse defendant has been improperly joined because the

plaintiff failed to state a claim against him, the court may conduct a Rule 1 2(b)(6)type analysis. Int'l
Energy Ventures Mgmt., L.L.C.

v.

United Energy Grp., Ltd., 818 F.3d 193, 200 (SthCir. 2016). "To

pass muster under Rule 12(b)(6), [a] complaint must have contained enough facts to state a claim to

-3-

relief that is plausible on its face." Id. (citations and internal quotation marks omitted) (alternation
in original). In deciding a motion to dismiss under Rule 12(b)(6), a court generally accepts as true
all factual allegations contained within the complaint. Leatherman v. Tarrant Narcotics Intelligence
& Coordination Unit, 507 U.S. 163, 164 (1993). However, a court is not bound to accept legal

conclusions couched as factual allegations. Papasan v. Allain, 478 U.S. 265, 286 (1986). Although
all reasonable inferences will be resolved in favor of the plaintiff, the plaintiff must plead "specific

facts, not mere conclusory allegations." Tuchman v. DSC Commc 'ns Corp., 14 F.3d 1061, 1067 (5th
Cir. 1994).

Here, Plaintiff asserts Texas Insurance Code claims against Mr. Fordham for his activities
as an adjuster concerning the Property. Under Texas law, an adjuster can be liable for Texas

Insurance Code violations. See Gasch

HartfordAcc. & Indem. Co., 491 F.3d 278, 282 (5th Cir.

v.

2007) ("To be liable under the Texas Insurance Code, one must be 'in the business of insurance."

(quoting

TEx. INS.

CODE

§

541.002)); Vail v. Texas Farm Bureau Mut. Ins. Co., 754 S.W.2d 129,

132 (Tex. 1988) ("The business of insurance includes the investigation and adjustment of claims and

losses."). Moreover, "several courts

. .

.

have concluded that an insurance adjuster may be held

personally liable for engaging in unfair settlement practices under [Texas Insurance] Code
541 .060(a)(2) because the adjuster has the ability to effect or bring about the settlement

claim." Arrow Bolt & Elec., Inc.

v.

§

of the

Landmark Am. Ins. Co., No. 3:17-CV-1894-M, 2017 WL

4548319, at *3 (N.D. Tex. Oct. 12, 2017) (collecting cases).
As result, the only issue before this Court is whether Plaintiffs petition alleges facts that state
a claim against Mr. Fordham. If Plaintiffs petition properly asserts a claim against Mr. Fordham,

then Mr. Fordham was properlyjoined and the Court must remand the case for lack of subject matter

jurisdiction. If the petition fails to establish a claim against Mr. Fordham, then Fordham was not
properly joined and the Court has diversity jurisdiction.

Plaintiff's petition includes allegations Mr. Fordham "conducted a substandard investigation

of the claim and failed to throughly scope all of the damages to the property." State Court Records
at 8. Plaintiff also claims Mr. Fordham "misrepresented the size

of the roof as smaller than it truly

is in an effort to artificially keep State Farm's payments as low as possible." Id. According to

Plaintiff, Mr. Fordham "failed to include the true cost to repair the interior damage to Plaintiff's

home by ignoring damage in the hallwaybathroom and master bathroom." Id. Furthermore, Plaintiff
alleges Mr. Fordham and State Farm, "[t]ogether,.. . set about to deny and/or underpay on properly

covered damages." Id. at 9. Resting on these factual allegations, Plaintiff contends Mr. Fordham

violated Texas Insurance Code

§

541.060 by "(1) failing to conduct a reasonable inspection and

investigation of Plaintiff's damages; (2) stating that Plaintiff's damages were less severe than in fact
they were; (3) using their own statements about the non-severity of the damages as a basis for
denying properly covered damages and/or underpaying damages; and (4) failing to provide an

adequate explanation for the inadequate compensation Plaintiff received." Id. at 13.

These allegations are enough to state a plausible claim for relief against Mr. Fordham.

Plaintiff offers specific facts and more than mere conclusory allegations indicating Mr. Fordham
could be liable under the Texas Insurance Code. See Martinez

v.

State Farm Lloyds, No.

3:l6-CV-00040-M, 2016 WL 4427489, at *3 (N.D. Tex. Aug. 22, 2016) (finding the plaintiff
sufficiently alleged Texas Insurance Code violations against an adjuster where plaintiff alleged
adjuster conducted an inadequate inspection and provided an unfair adjustment). Thus, Mr. Fordham
was not improperly joined.

-5-

Conclusion
Because Mr. Fordham was properlyjoined, his citizenship destroys diversityjurisdiction and
requires the Court to remand this case. Because this Court lacks subject matterjurisdiction, the Court
dismisses all other pending motions.

Accordingly,
IT IS ORDERED that Defendant State Farm Lloyds's Motion to Abate [#7] is

DISMISSED;
IT IS FURTHER ORDERED that PlaintiffMelvin Nelson's Motion to Remand [#10]

is GRANTED; and
IT IS FINALLY ORDERED that the Clerk shall REMAND the above-styled cause

to the 425th Judicial District Court of Williamson County, Texas, for further proceedings.

SIGNED this the

tO day of February 2018.

UNITED STATES DISTRICT JUDGE