Source: http://tx.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20190711_0001219.STX.htm/qx
Timestamp: 2020-06-07 04:15:09
Document Index: 773736833

Matched Legal Cases: ['§ 542', '§ 542', '§ 541', '§ 17', '§ 542', '§ 1441', '§ 1447', '§ 1441', '§ 1332', '§ 1332']

FindACase™ | Yarco Trading Co., Inc. v. United Fire & Casualty Co.
Yarco Trading Co., Inc. v. United Fire & Casualty Co.
YARCO TRADING COMPANY, INC., et al., Plaintiffs,
UNITED FIRE & CASUALTY COMPANY, et al, Defendants.
Defendant United Fire & Casualty Company removed this case-an insurance dispute regarding storm damage sustained by Plaintiffs' commercial buildings-from state court on the basis of diversity jurisdiction. (Dkt. Nos. 1 at 1; 1-3 at 4). In its notice of removal, United Fire recognized that the parties are not completely diverse: Plaintiffs Yarco Trading Company and T&T Forwarding Services and Defendant Patrick Peden are all Texas citizens. (Id. at 2). Although that would normally defeat diversity jurisdiction, Defendants ask the Court to ignore Peden's citizenship and dismiss him under the improper-joinder doctrine, arguing that (1) Plaintiffs have failed to state a claim against Peden under the federal pleading standard, and (2) even if Plaintiffs had adequately pleaded claims against Peden, those claims are precluded by United Fire's post-suit election to accept liability under Texas Insurance Code § 542A.006. (Id. at 2-3).
Now before the Court is Plaintiffs' Motion to Remand (Dkt. No. 3). Plaintiffs argue that Peden's citizenship cannot be ignored for diversity purposes because they have pleaded valid state-law claims against him and United Fire's § 542A.006 election cannot retroactively render him improperly joined. Because the Court agrees, Plaintiffs' Motion to Remand is GRANTED, and this case is REMANDED to the 49th Judicial District of Webb County.
In May 2017, a severe storm damaged Plaintiffs' commercial buildings, which were insured by United Fire. (Dkt. No. 1-3 at 4). To repair their property Plaintiffs filed an insurance claim. (Id.). United Fire eventually assigned Patrick Peden, an adjuster, to inspect Plaintiffs' property for any storm damage. (Id.). Plaintiffs claim that he conducted a substandard, dilatory investigation of the buildings' roofs, failed to respond to and repeatedly misled Plaintiffs about his investigation, and employed an engineering firm and metallurgist who were biased toward findings favorable to insurance companies; as a result, United Fire refused to pay damages owed under Plaintiffs' insurance policy. (Id. at 4-6).
Plaintiffs filed this lawsuit in the 49th Judicial District of Webb County, asserting that United Fire and Peden violated §§ 541.051, 541.060, and 541.061 of the Texas Insurance Code and § 17.50(a) of the Texas Deceptive Trade Practices Act. (Id. at 1, 6-9). After receiving service of Plaintiffs' petition, United Fire elected to accept liability for Peden under Texas Insurance Code § 542A.006, (Dkt. No. 1-4 at 9), and then removed the case to this Court, arguing that Peden was improperly joined and his citizenship should not be considered when assessing federal diversity jurisdiction, (Dkt. No. 1).
Under 28 U.S.C. § 1441, an action filed in state court may be removed to federal court when (1) the federal court has subject matter jurisdiction, and (2) the removal procedure is properly followed. However, "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c).
The removing party bears the burden of establishing that federal jurisdiction exists over the controversy. Winters v. Diamond Shamrock Chem. Co., 149 F.3d 387, 397 (5th Cir. 1998). That burden requires all disputed factual issues and any uncertainties under controlling state law to be resolved in favor of remand. Guillory v. PPG Indus., Inc., 434 F.3d 303, 308 (5th Cir. 2005) (citations omitted).
With limited exceptions, "[a] federal district court has removal jurisdiction over an action if the district court could have exercised original jurisdiction over it." Elam v. Kan. City S. Ry. Co., 635 F.3d 796, 803 (5th Cir. 2011) (citing 28 U.S.C. § 1441(a)). Federal courts have original jurisdiction in cases that are between "citizens of different States" where the amount in controversy exceeds $75, 000. 28 U.S.C. § 1332(a)(1).
Section 1332 "requires 'complete diversity' of citizenship." Stiftung v. Plains Mktg., L.P., 603 F.3d 295, 297 (5th Cir. 2010) (quoting Whalen v. Carter, 954 F.2d 1087, 1094 (5th Cir. 1992)). That is, federal courts "cannot exercise diversity jurisdiction if one of the plaintiffs shares the same citizenship as any one of the defendants." Id.
The improper-joinder doctrine provides a narrow exception to the rule that parties must be completely diverse for federal courts to exercise subject matter jurisdiction under 28 U.S.C. § 1332. McDonal v. Abbott Labs., 408 F.3d 177, 183 (5th Cir. 2005). Under this doctrine, the court may disregard the citizenship of an improperly joined, non-diverse defendant, dismiss that defendant from the case, and exercise subject matter jurisdiction over the remaining diverse defendants. Flagg, 819 F.3d at 136.
The removing party bears the heavy burden of proving improper joinder, Cuevas v. BAC Home Loans Servicing, LP, 648 F.3d 242, 249 (5th Cir. 2011), and can establish it in two ways: "(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 court." Smallwood v. III. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc) (quoting Travis v. Irby, 326 F.3d 644, 646-47 (5th Cir. 2003)). To make the second showing, a defendant must demonstrate 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." Id.
There are two methods of determining whether the plaintiff could possibly recover against the non-diverse defendant: (1) conduct a Rule 12(b)(6)-type analysis, looking to the face of the complaint to assess whether it states a claim against the non-diverse defendant; or (2) pierce the pleadings and conduct a summary judgment-type analysis to identify discrete facts that would preclude recovery against the non-diverse defendant. Id. at 573-74. The latter method is applicable only when the plaintiff has stated a claim against the non-diverse defendant, but summary-judgment evidence reveals misstated or omitted facts relevant to the propriety of joinder. Id.
C. Pleading Standard
The federal pleading standard is applied during an improper-joinder analysis. Int'l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 208 (5th Cir. 2016). Under the federal standard, the pleadings must contain "enough facts to state a claim to relief that is plausible on its face." Bell Ail. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Labels and conclusions, formulaic recitations of the elements of a cause of action, or naked assertions devoid of further factual enhancement will not suffice. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). And for fraud claims, a heightened pleading standard requires parties to "state with particularity the circumstances constituting fraud." FED. R. Civ. P. 9(b).