United States District Court

EASTERN DISTRICT OF TEXAS

SHERMAN DIVISION

ARIEL MURPHY, INDIVIDUALLY and 

a/n/f OF K.G., A MINOR,

Plaintiffs,

v. 

ON YOUR SIDE NATIONWIDE 

INSURANCE AGENCY, INC. a Foreign 

For-Profit Corporation, Registered to do 

business in the State of Texas under filing 

# 802106136, 11/24/2014, and 

HARLEYSVILLE INSURANCE 

COMPANY, A FOREIGN 

CORPORATION, and HIBBSHALLMARK & CO. n/k/a HIBBS 

HALLMARK INSURANCE, a Texas 

Corporation.

Defendants. 

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Civil Action No. 4:23-CV-01044

Judge Mazzant

MEMORANDUM OPINION AND ORDER

Pending before the Court is Plaintiffs’ Motion to Remand (Dkt. #12). Having considered 

the motion and the relevant pleadings, the Court finds that the motion should be DENIED.

BACKGROUND

This lawsuit arises from a default judgment entered against SALDAP, LLC (“Saldap”) in 

a separate underlying lawsuit in state court based on the abuse that Plaintiff Ariel Murphy’s son, 

K.G., suffered from one of Saldap’s daycare employees (Dkt. #12 at pp. 1–2). The daycare 

employee broke K.G.’s ankle, femur, and eight ribs (Dkt. #12 at p. 2). After conducting a hearing, 

the state court awarded damages in the amount of $63,000,000 (Dkt. #12 at pp. 1–2, 24–27).

Plaintiffs Ariel Murphy, individually and a/n/f of K.G., a minor, are now suing to enforce that 

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default judgment against Defendants—the insurers who provided Saldap’s liability insurance 

policy and the insurance agency that procured the policy (Dkt. #1, Exhibit 1 at pp. 5–8). 

The named insurers are On Your Side Nationwide Insurance Agency, Inc. (“Nationwide”) 

and Harleysville Insurance Company (“Harleysville”) (Dkt. #12 at p. 3). Defendants Nationwide

and Harleysville are both corporations organized under the laws of Ohio and maintain their

principal places of business in Ohio (Dkt. #1 at p. 4). The procuring insurance agency is HibbsHallmark & Company (“HH&C”) (Dkt. #23 at p. 2). Defendant HH&C is a corporation organized 

under the laws of Texas and maintains its principal place of business in Texas (Dkt. #1 at p. 4).

Plaintiffs are individuals domiciled in Texas (Dkt. #1). 

On October 25, 2023, Plaintiffs filed their original petition in Texas state court, seeking a 

declaratory judgment that they are entitled to collect the full default judgment amount of 

$63,000,000 and asserting that the doctrines of waiver and estoppel preclude any defenses by 

Defendants (Dkt. #1, Exhibit 1 at pp. 1, 8–10). On November 27, 2023, Defendants Nationwide 

and Harleysville removed the case based on diversity of citizenship jurisdiction, asserting that 

Defendant HH&C is improperly joined (Dkt. #1 at p. 4). 

On December 27, 2023, Plaintiffs filed the pending motion (Dkt. # 12). On January 17, 

2024, Defendant HH&C filed a response (Dkt. #22). That same day Defendants Nationwide and 

Harleysville also filed a response (Dkt. #23). On February 23, 2024—thirty-seven days after the 

responses were filed—Plaintiffs filed a reply (Dkt. #25) and Defendant HH&C filed a sur-reply

(Dkt. #26). On February 26, 2024, Defendants Nationwide and Harleysville filed a sur-reply. 

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LEGAL STANDARD

A defendant may remove any civil action from state court to a district court of the United 

States which has original jurisdiction. 28 U.S.C. § 1441. District courts have original jurisdiction 

over all civil actions that are between citizens of different states and involve an amount in 

controversy in excess of $75,000, exclusive of interest and costs. 28 U.S.C. § 1332. The party 

seeking removal “bears the burden of establishing that federal jurisdiction exists and that removal 

was proper.” Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002); Weaver 

v. Zurich Am. Ins. Co., No. Civ. A. H–10–1813, 2010 WL 3910053, at *1 (S.D. Tex. Oct.1, 2010). 

The removal statute must “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–

82 (5th Cir. 2007). A district court is required to remand the case to state court if, at any time 

before final judgment, it determines that it lacks subject matter jurisdiction. See 28 U.S.C. § 

1447(c); Groupo Dataflux v. Atlas Glob. Grp., L.P., 541 U.S. 567, 571 (2004).

For diversity jurisdiction to exist under 28 U.S.C. § 1332(a)(1), there must be complete 

diversity of citizenship between plaintiffs and defendants. 28 U.S.C. § 1332. In determining 

whether complete diversity exists, a federal court “must disregard nominal or formal parties and 

rest jurisdiction only upon the citizenship of real parties to the controversy.” Navarro Sav. Ass'n 

v. Lee, 446 U.S. 458, 460-61 (1980). To establish that a non-removing defendant is a nominal party, 

the removing party must show that there is no possibility that the plaintiff would be able to establish 

a cause of action against the non-removing defendant in state court. Farias v. Bexar Cty. Bd. of Trs. 

for M.H.M.R. Serv., 925 F.2d 866, 871 (5th Cir. 1991) (citing B. Inc. v Miller Brewing Co., 663 F.2d 

545, 549 (5th Cir. 1981). 

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Like the nominal party test, “[t]he improper joinder doctrine constitutes a narrow 

exception to the rule of complete diversity.” Cuevas v. BAC Home Loans Servicing, LP, 648 F.3d 

242, 249 (5th Cir. 2011) (citing McDonal v. Abbott Labs., 408 F.3d 177, 183 (5th Cir. 2005)). Under 

the improper joinder doctrine, a case involving a nondiverse defendant may nevertheless be 

removed to federal court if it is established that the nondiverse defendant was improperly joined.

See id. “[T]he purpose underlying the improper joinder inquiry is to determine whether or not the 

in-state defendant was properly joined. Thus, the focus of the inquiry must be on the joinder, not 

on the merits of the plaintiff's case.” Id. (citation and quotation marks omitted). “The party 

seeking removal bears a heavy burden of proving that the joinder of the in-state [defendant] was 

improper.” Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 574 (5th Cir. 2004) (en banc). If the party 

fails to meet this burden and joinder of the in-state party was proper, removal will be inappropriate, 

and the federal court will not have subject-matter jurisdiction. Id. at 575.

To establish improper joinder, the party seeking removal must demonstrate either “(1) 

actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause 

of action against the non-diverse party in state.” Id. at 573 (quoting Travis v. Irby, 326 F.3d 644, 

646-47 (5th Cir. 2003)). The party alleging improper joinder bears the burden of persuasion and 

that burden is quite stringent. Lott v. Dutchmen Mfg., Inc., 422 F. Supp. 2d 750, 753 (E.D. Tex. 

2006); see Hart v. Bayer Corp., 199 F.3d 239, 246 (5th Cir. 2000) (“The burden of persuasion 

placed upon those who cry ‘fraudulent joinder’ is indeed a heavy one.”). When, as here, a 

defendant argues the latter method, the test “is whether the defendant has demonstrated 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.” Smallwood, 385 F.3d at 573. 

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To determine whether a plaintiff has a reasonable basis of recovery under state law, “[t]he 

court may [either] conduct a Rule 12(b)(6)-type analysis . . . [or], in its discretion, pierce the 

pleadings and conduct a summary inquiry.” Int'l Energy Ventures Mgmt., L.L.C. v. United Energy 

Grp., Ltd., 818 F.3d 193, 207 (5th Cir. 2016) (second and third alterations in original) (quoting 

Smallwood, 385 F.3d at 573). The Fifth Circuit has held that the federal pleading standard, rather 

than the state pleading standard, applies in the improper joinder context. Id. at 208. Further, “a 

summary inquiry is appropriate only to identify the presence of discrete and undisputed facts that 

would preclude plaintiff's recovery against the in-state defendant.” Smallwood, 385 F.3d at 573–74. 

ANALYSIS

Plaintiffs move to remand this case back to state court, arguing that the Court lacks subject 

matter jurisdiction under 28 U.S.C. § 1332 because there is no complete diversity of citizenship 

(Dkt. #12 at pp. 3, 17). In response, Defendants argue that complete diversity exists because

Defendant HH&C, the non-diverse defendant, was improperly joined (Dkt. #22 at pp. 4–12; 

Dkt. #23 at pp. 6–15). It is undisputed that the amount in controversy exceeds $75,000. “When 

assessing whether diversity jurisdiction exists, a court must disregard non-diverse citizenship of an 

improperly joined defendant.” Doucet v. State Farm Fire and Cas. Co., No. 1:09–CV–142, 2009 WL 

3157478, at *4 (E.D. Tex. Sept.25, 2009) (citing Smallwood, 385 F.3d at 572–73). Therefore, the 

sole issue to be decided is whether Defendant HH&C is an improperly joined party.

The Court finds that Defendant HH&C is an improperly joined party because Defendants 

have shown that Plaintiffs have no reasonable basis of recovery against Defendant HH&C under

Texas law. See Smallwood, 385 F.3d at 573. Plaintiffs have no reasonable basis to recover against 

Defendant HH&C because they do not allege sufficient facts in the state petition establishing a 

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plausible claim for relief against Defendant HH&C. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 

(2007). Plaintiffs merely allege that Defendant HH&C was “the agency that participated in the 

issuance of the policy at issue and at all times material to this action” (Dkt. #1, Exhibit 1 at p. 4). 

This lone allegation against Defendant HH&C holds no meaning or value in the context of 

Plaintiffs’ claims, and nowhere else in the state petition do Plaintiffs specifically attribute further 

conduct—let alone tortious conduct—to Defendant HH&C. 

Namely, Plaintiffs seek a declaratory judgment that they are entitled to collect against 

Defendants the full amount under the default judgment taken against Saldap—the insured. 

However, as Defendants correctly point out, Plaintiffs do not allege facts establishing that 

Defendant HH&C—the procuring insurance agency—owed any contractual or legal duty to 

provide Saldap liability coverage under Texas law. See Data Specialties v. Transcon. Ins. Co., 125 

F.3d 909, 911 (5th Cir. 1997) (“Texas law clearly states that for an insurance company to be liable 

for a breach of its duty to satisfy a claim presented by its insured, the insured must prove that its 

claim falls within the insuring agreement of the policy . . . The insurer’s duty to indemnify, or 

provide coverage, is triggered by the actual facts establishing liability in the underlying suit.”) 

(citations omitted).

Rather, Plaintiffs mainly allege that the “insurance companies represented that they had a 

policy of insurance in full force and effect to cover [K.G.’s] injuries,” that Defendant Nationwide 

“wrongfully denied coverage,” and that Defendants “wrongfully refused to defend the underlying 

claims” (Dkt. #1, Exhibit 1 at pp. 5–6). Such allegations only evince that the insurers—Defendants 

Nationwide and Harelysville—breached their duties to provide coverage and to defend the 

underlying suit. They do not suggest in any way that Defendant HH&C was a party to Saldap’s 

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liability insurance contract. Plaintiffs have simply failed to allege specific actionable conduct 

against the non-diverse defendant as required by federal pleading standards. See Griggs v. State 

Farm Lloyds, 181 F.3d 694, 699 (5th Cir. 1999) (finding no basis in Texas law for an insured’s claims 

against an insurance agent when the only factual allegation even mentioning the agent merely 

stated that “Defendants [sic], through its local agent, Lark Blum issued an insurance policy.”);

Castlebrook at Ridgeview Homeowners Ass’n v. Starr Surplus Lines Ins. Co., No. 4:12CV652, 2013 

WL 949860, at *4 (E.D. Tex. Jan. 30, 2013), report and recommendation adopted, No. 4:12CV652, 

2013 WL 943589 (E.D. Tex. Mar. 8, 2013) (“Merely lumping diverse and non-diverse defendants 

together in undifferentiated liability averments of a petition does not satisfy the requirement to 

state specific actionable conduct against the non-diverse defendant.”) (citing Griggs, 181 F.3d at 

699). Thus, Defendant HH&C should be dismissed from the suit as improperly joined. 

That Plaintiffs allege newfacts in the motion to remand itself does not change this outcome.

“A determination of improper joinder must be based on an analysis of the causes of action alleged 

in the petition at the time of filing and at the time of removal.” Blackburn v. Right Way Auto Transp., 

Inc., No. 1:23-CV-250, 2023 WL 9051263, at *4 (E.D. Tex. Dec. 29, 2023) (citing Brown v. Wright 

Nat’l Flood Ins. Co., No. 20-30525, 2021 WL 2934730, at *4 (5th Cir. July 12, 2021); accord 

Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 264 (5th Cir. 1995) (holding that removal 

jurisdiction must be determined “on the basis of claims in the state court complaint as it exists at 

the time of removal”). “Without such a rule, disposition of the issue would never be final, but 

would instead have to be revisited every time the plaintiff sought to amend the complaint to assert 

a new cause of action against the nondiverse defendant . . . .” Cavallini, 44 F.3d at 264. In their 

motion, Plaintiffs allege in the first instance that Defendant HH&C “misrepresented the coverage 

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afforded to SALDAP,” proposing that insurance agents may be liable under Texas law for 

negligent misrepresentations made to insureds (Dkt. #12 at p. 9). Plaintiffs, however, assert no 

cause of action for negligent misrepresentation nor even mention the word “misrepresentation” 

in their state petition. Thus, the Court must disregard these new allegations in analyzing the 

plausibility of the claims originally asserted against Defendant HH&C in state court.1

In a last-ditch effort, Plaintiffs argue that 28 U.S.C. 1332(c)(1) applies to this case, despite 

conceding that it is not dispositive of the case and despite raising such argument for the first time 

in their reply (Dkt. #25 at pp. 3–4). The statute provides an exception to the general rule when 

determining a corporation’s citizenship: “in any direct action against insurer of a policy or contract 

of liability insurance, whether or incorporated or unincorporated, to which action the insured is 

not joined as a party-defendant, such insurer shall be deemed a citizen” of the state where the 

insured is a citizen. 28 U.S.C. 1332(c)(1). Nevertheless, as contended by Defendants, “Texas law 

does not permit direct actions against third-party liability insurers to which the direct action 

provision of 28 U.S.C. § 1332(c)(1) could apply.” Harris v. Peerless Indemn. Ins. Co., No. A-14-CV1087-LY, 2015 WL 1010527, at *2 (W.D. Tex. Mar. 5, 2015) (citing Ohio Cas. Ins. Co. v. Time 

Warner Ent. Co., L.P., 244 S.W.3d 885, 888 (Tex. App.—Dallas 2008, pet. denied)). Therefore, 

Defendants Nationwide and Harleysville are not deemed citizens of Texas, and diversity of 

citizenship remains intact. 

1 Because the Court’s Rule 12(b)(6) analysis is limited to the state petition as it existed at removal, the Court declines 

to address the parties’ pleading arguments under Federal Rule of Civil Procedure 9(b).

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CONCLUSION

It is therefore ORDERED that Plaintiffs’ Motion to Remand (Dkt. #12) is hereby 

DENIED.

It is further ORDERED that Defendant Hibbs-Hallmark & Company is dismissed from 

the case as improperly joined.

IT IS SO ORDERED.

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