Opinion ID: 51542
Heading Depth: 2
Heading Rank: 3

Heading: Was Frazier Properly Joined?

Text: The defendants contend that the Gasches did not present a colorable claim against Frazier, because, they assert, (1) Frazier, as an adjuster, cannot be held individually liable under Texas law, and (2) even if she could be held liable individually, the Gasches have offered no evidence to support a viable claim against Frazier. Both prongs of the defendants’ argument fails. First, even if we assume that the Gasches cannot maintain their Texas common law and DTPA claims against Frazier, Texas law clearly authorizes Article 21.21 actions against insurance adjusters in their individual capacities. In Liberty Mutual Insurance Co. v. Garrison Contractors, Inc.,12 the Texas Supreme Court held that an insurer’s employee who “engage[s] in the business of insurance” is a “person” for purposes of Article 21.21 and thus may be held liable individually for a violation of that article.13 The Garrison court clarified that an “employee who has no responsibility for the sale or servicing of insurance policies and no special insurance expertise, such as a clerical worker or janitor, 11 Id. at 366; Acuna v. Brown & Root Inc., 200 F.3d 335, 339 (5th Cir. 2000). 12 966 S.W.2d 482 (Tex. 1988). 13 Id. at 484-86. 7 does not engage in the insurance business.”14 Frazier, as a claims adjuster responsible for the servicing of insurance policies for Hartford, “engage[d] in the business of insurance.”15 Contrary to the defendants’ argument, then, Frazier and others in her position very well may be held individually liable for a violation of Article 21.21. In their supplemental brief on improper joinder, the defendants cite Natividad v. Alexsis, Inc.16 for the proposition that a claims “adjuster cannot be held liable to the claimant for a breach of the duty of good faith and fair dealing,” as “[t]he duty of the insurer is non-delegable.” The Natividad defendants had made this same assertion in their notice of removal, arguing that the “statutory standards [of Article 21.21] were held [in Natividad] to belong uniquely to the insurance carrier and non-delegable to adjustors.” They are flat wrong: Natividad does not insulate Frazier from personal liability for a violation of Article 21.21. First, the defendants overstate Natividad’s holding, as the Texas Supreme Court’s opinion in that case does not preclude absolutely recovery from every employee of an insurance company. In Natividad, the workers’ compensation 14 Id. 15 Id. at 486. The defendants do not argue that Frazier was not involved the business of insurance. Indeed, the defendants ignore Garrison. 16 875 S.W.2d 695 (Tex. 1994). 8 insurance carrier, National Union Fire Insurance Co., had contracted with AIG Risk Management (“AIG”) to provide all services under the policy. AIG, in turn, contracted with Alexsis, Inc., to provide all claims-adjusting services under the contract.17 On appeal, the court held that Alexsis and its adjuster, “because they were not parties to a contract with Natividad giving rise to a ‘special relationship,’ owed Natividad no duty of good faith and fair dealing.”18 Thus, Natividad held that subcontracting companies (and their agents) do not owe claimants a duty of good faith and fair dealing; it did not address the potential liability of the contracting carrier’s agents. In addition, Natividad’s holding was limited to common law claims alleging a violation of the duty of the good faith and fair dealing. As the claimant’s Article 21.21 claim had already been dismissed, the court never addressed whether the duty under Article 21.21 was delegable.19 Thus, even if we assume that the Gasches’ common law claim were to fail under Natividad, that case’s holding still does not bar their Article 21.21 claim against Frazier —— and Garrison explicitly authorizes it.20 17 Id. at 696. 18 Id. at 698. 19 Id. at 696 n.2. 20 The defendants note that “the standards under . . . Article 21.21 section 16 and the common law duty of good faith and fair dealing have been specifically held to be identical.” 9 Citing Hornbuckle v. State Farm Lloyds,21 the defendants next contend that there is no evidence of a viable claim against Frazier. In Hornbuckle, we concluded that [f]or removal purposes, a local defendant is deemed fraudulently joined not only when there is no arguably reasonable basis for predicting that the local law would recognize the cause of action pled against that defendant, but also when, as shown by piercing the pleadings in a summary judgment type procedure, there is no arguably reasonable basis for predicting that the plaintiff would produce sufficient evidence to sustain a finding necessary to recover against that defendant.22 Even assuming arguendo that there is no reasonable basis for predicting that the Gasches would produce sufficient evidence to sustain their claims against Frazier, informed by our en banc holding in Smallwood v. Illinois Central Railroad Co.,23 we conclude that joinder was proper in this case. In Smallwood, we explained that “[w]hen the only proffered justification for improper joinder is that there is no reasonable basis for predicting recovery against the in-state defendant, and that showing is equally dispositive of all Although this might provide some support for extending Natividad’s holding to Article 21.21 claims in the absence of the court’s holding in Garrison, such an extension is clearly precluded by Garrison. 21 385 F.3d 538, 543 (5th Cir. 2004). 22 Id. at 545. 23 385 F.3d 568 (5th Cir. 2004) (en banc), cert. denied, 566 U.S. 992 (2005) 10 defendants rather than to the in-state defendants alone,”24 there is no improper joinder. Rather, in such a case, “there is only a lawsuit lacking merit.”25 “In other words, there is no improper joinder if a defense compels the same result for the resident and nonresident defendants, because this would simply mean that ‘the plaintiff's case [is] ill founded as to all the defendants.’”26 Here, a finding that there is no reasonable basis for predicting that the Gasches would produce sufficient evidence to sustain their claims against Frazier would compel dismissal of the suit in its entirety. The evidence demonstrates that Hartford was acting through Frazier when it denied the Gasches’ claim for benefits.27 Indeed, as the defendants themselves note, “[t]he allegations against Frazier were joined with and identical to the allegations against Hartford.” As such, the defendants’ assertion that the Gasches could not produce evidence to support their claim against Frazier “is more properly an attack on the merits of the claim, rather than an inquiry into the propriety of the 24 Id. at 575 (emphasis added). 25 Id. at 574. 26 McDonal v. Abbott Labs., 408 F.3d 177, 183 (5th Cir. 2005) (quoting Smallwood, 385 F.3d at 574) (internal quotation marks and citation omitted, alteration in original). 27 We may pierce the pleadings and consider summary judgment evidence. See, e.g., Smallwood, 385 F.3d at 574; Hornbuckle, 385 F.3d at 545. 11 joinder of the local party.”28 Regardless of any doubts that we might have about the merits of the Gasches’ claim against Frazier (or their claim against Hartford, for that matter), a meritless claim against an in-state defendant is not the equivalent of improper joinder.29 As a finding that the Gasches could not have produced evidence against Frazier would apply uniformly to both Hartford and Frazier and would require dismissal of the suit in its entirety, Frazier “w[as] no more improperly joined than the non-resident defendant[],” Hartford.30 Finally, the defendants would make much of the fact that counsel for the Gasches stipulated agreement with the defendants’ assertion of “Diversity Jurisdiction under 28 U.S.C. § 1332 and 28 U.S.C. § 1441 (removal jurisdiction), including the allegation of fraudulent joinder.” Yet the defendants do not cite any specific factual stipulations by the Gasches that support a finding of improper joinder. More importantly, of course, is the truism that subject matter jurisdiction “cannot be conferred by consent, agreement, or other conduct of the 28 McDonal, 408 F.3d at 183. 29 Smallwood, 385 F.3d at 573 (“[T]he focus of the inquiry must be on the joinder, not on the merits of the plaintiff’s case.”) 30 Id. 12 parties.”31 As subject matter is non-waivable,32 this argument would fail even if its factual underpinnings were present.