Dallas Fort Worth Insurance Lawyer Blog
Here is a case that originated in a Fort Worth State District Court that insurance attorneys need to read. The opinion is from the Northern District of Texas, Fort Worth Division. It is styled, Yolonda Carney v. Allstate Vehicle And Property Insurance Company et al.
The facts of the case are undisputed. This is claim by a homeowner, Yolonda, against her insurance company, Allstate, for hail damage. Yolonda sued Allstate and the adjuster, after Allstate failed to respond to respond to a demand letter. Yolonda filed a lawsuit against both of them in the Fort Worth State Court. Allstate removed the case to this Federal Court and simultaneously elected to assume the adjuster’s liability in connection with insurance code claims against him. Allstate contends that the adjuster is improperly joined due to Allstate accepting liability for the adjuster.
Title 28 U.S.C. Section 1441(a) permits the removal of “any civil action brought in a state court of which the district courts of the United States have original jurisdiction.”
Pursuant to Sections 1331 and 1332, there are two principal bases upon which a district court may exercise removal jurisdiction: the existence of a federal question and complete diversity of citizenship among the parties. Here, Allstate, the removing defendant, asserted only diversity of citizenship as a basis for jurisdiction. Courts can properly exercise jurisdiction on the basis of diversity of citizenship after removal only if: (1) the parties are of completely diverse citizenship; and (2) none of the properly joined defendants are a citizen of the state in which the case is brought. If a nondiverse party is present in the action, the court may nonetheless have jurisdiction if an in-state defendant has been
improperly joined.
The doctrine of improper joinder is a narrow exception to the requirement of complete diversity and provides that a defendant may remove a case to a federal forum if the plaintiff improperly joined the sole in–state defendants. A nondiverse defendant has been improperly joined if the plaintiff has failed to state a claim against that defendant on which relief may be granted. However, if the plaintiff has stated a claim against a nondiverse defendant on which relief may be granted, a federal court is without diversity jurisdiction over that claim and, by extension, over any claims. To establish that a plaintiff has improperly joined a nondiverse defendant to defeat diversity jurisdiction, the removing party must show: (1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the nondiverse party in state court.
There is no allegation of fraud in the pleading in this case, so the first ground is
inapplicable. The second ground for improper joinder then requires a court to find no reasonable basis to predict that the plaintiff might be able to recover against an in–state defendant. To predict whether a plaintiff has a reasonable
basis of recovery under state law, a court may conduct a Rule 12(b)(6)-type analysis or pierce the pleadings and conduct a summary inquiry. When conducting a 12(b)(6)-type analysis, a federal court must apply the federal pleading standard.
Allstate makes no argument that the adjuster was improperly joined at the litigation’s inception. Instead, Allstate contends that once it elected to assume responsibility for the adjuster’s liability, his citizenship should be disregarded when considering whether diversity jurisdiction exists in this case. The primary question then is whether an action non–removable when commenced due to the lack of complete diversity among the parties, becomes removable based solely on a diverse insurer’s election to accept complete liability of a nondiverse adjuster.
On this question, Yolonda argues this case should be remanded because Allstate elected to accept liability for the nondiverse adjuster after this litigation commenced and therefore the voluntary–involuntary rule provides his citizenship is to be considered for diversity purposes. Allstate responds that the timing of its election is not dispositive because certain cases indicate that removal is proper when an insurance company elects responsibility for its adjustor no matter when the election was made.
The voluntary–involuntary rule recognizes that a case nonremovable on the initial
pleadings may become removable only pursuant to a voluntary act of plaintiff.
In this case, Allstate elected to accept liability for—and presumably sought to unilaterally obtain a dismissal of the adjuster under Texas Insurance Code Section 542A.006 after Plaintiff filed suit. Section 542A.006 provides Allstate “unabridged discretion in deciding whether to elect to accept legal liability . . . for its agent/adjuster.” Notably, Allstate’s decision “is not contingent on and does not
anticipate [Plaintiff’s] assent.” Here, Allstate made no effort to accept liability before suit was filed, even though it had notice, deciding instead to wait. While its election means Plaintiff cannot recover from Aniekwena, it does not undermine the propriety of the adjuster’s initial joinder.
Accordingly, the Court finds that this case did not “become removable only pursuant to a voluntary act of plaintiff,” and should be remanded to state court.