Doctors Hosp. at Renaissance, Ltd. v. Emp'rs Ins. Co. of Wausau

579 F.Supp.3d 912

DOCTORS HOSPITAL AT RENAISSANCE, LTD., Plaintiff,

v.EMPLOYERS INSURANCE COMPANY OF WAUSAU; Christopher Alvarez; GSM Insurors; and Jim Hansen, Defendants.

CIVIL ACTION NO. 7:21-cv-00418

United States District Court, S.D. Texas, McAllen Division.

Signed January 7, 2022

Gregory F. Cox, Cathryn Jaime Schexnaider, Mostyn Law Firm, Houston, TX, Juan Mendez, III, Brownsville, TX, for Plaintiff.

Bennett A. Moss, Shannon Marie O'Malley, Zelle LLP, Dallas, TX, for Defendants Employers Insurance Company of Wausau, Christopher Alvarez.

Rick Lee Oldenettel, Kevin Michael Long, Oldenettel & Long, Houston, TX, for Defendants GSM Insurors, Jim Hansen.

OPINION AND ORDER

Micaela Alvarez, United States District Judge

The Court now considers "Plaintiff Doctors Hospital at Renaissance, Ltd.’s Opposed Motion to Remand"¹ and Defendants Employers Insurance Company of Wausau's and Christopher Alvarez's (Defendants’) response.² The Court acknowledges Defendants’ earlier-filed motion to dismiss,³ but the Court must first address its jurisdiction before adjudicating a motion on the merits. The Court adds that, as a threshold matter, Defendants’ brief lacks numbered paragraphs entirely, hindering the Court's reference to Defendants’ arguments. The Court cautions Defendants that future submissions should consistently number each paragraph to properly comply with the Federal Rules of Civil Procedure.⁴ After considering Plaintiff's motion to remand, the record, and relevant authorities, the Court GRANTS Plaintiff's motion and remands this case.

I. BACKGROUND AND PROCEDURAL HISTORY

This is an insurance dispute. Plaintiff Doctors Hospital at Renaissance, Ltd. commenced this case in the 139th District Court of Hidalgo County, Texas on September 24, 2021.⁵ Plaintiff alleges essentially that it procured an insurance policy, through Defendants GSM Insurors and its agent Jim Hansen, effective May 2019 to May 2020 that Defendants represented would cover all risks including "coverage for loss of business income (Time Element losses), civil authority, decontamination, [and] payroll losses."⁶ Plaintiff alleges that COVID-19-related losses are covered under its insurance policy.⁷ In April 2020, Plaintiff submitted a claim for insurance coverage.⁸ In October 2020, after an investigation, Defendants Employers Insurance Company of Wausau and its adjuster Christopher Alvarez denied insurance coverage.⁹ Plaintiff alleges violation of the Texas Insurance Code, negligence, violation of the Texas Deceptive Trade Practices-Consumer Protection Act, fraud, conspiracy to commit fraud, breach of contract, and breach of the covenant of good faith and fair dealing.¹⁰

Plaintiff's process server served Defendant Employers Insurance Company of Wausau on October 5, 2021,¹¹ and Defendant Christopher Alvarez on October 12, 2021.¹² Those two Defendants alone removed the case to this Court on November 1st.¹³ Defendants promptly filed a motion to dismiss on November 8th.¹⁴ On the response deadline to that motion, Plaintiff filed the instant motion to remand.¹⁵ The motion has been briefed and is ripe for consideration. The Court turns to the analysis.

II. DISCUSSION

a. Legal Standard

District courts have limited jurisdiction and the authority to remove an action from state to federal court is solely conferred by the Constitution or by statute.¹⁶ "Removal [to federal court] is proper only if that court would have had original jurisdiction over the claim."¹⁷ While the Court has jurisdiction to determine its jurisdiction,¹⁸ it cannot exercise any "judicial action" other than dismissal when the Court lacks jurisdiction.¹⁹ It is a "long-standing canon of statutory interpretation that removal statutes are to be construed strictly against removal and for remand"²⁰ so the Court will resolve all legal and factual issues, doubts, and ambiguities in favor of remand,²¹ because the exercise of jurisdiction over a removed case "deprives a state court of a case properly before it and thereby implicates important federalism concerns."²²

If the removing party claims federal diversity jurisdiction under 28 U.S.C. § 1332, the removing party must demonstrate complete diversity: that each defendant is a citizen of a different state from each plaintiff²³ and the amount in controversy exceeds $75,000.²⁴ Accordingly, "[w]hen original federal jurisdiction is based on diversity ... a defendant may remove only ‘if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.’ "²⁵ Citizenship, domicile, and residency are frequently conflated terms; for diversity jurisdiction purposes, a person is a citizen of the state where that person resides and has an intention to remain or make his or her home, and a business entity is typically a citizen of the state both where it is incorporated and where it has its principal place of business.²⁶ "The removing party, the party seeking the federal forum, bears the burden of showing that federal jurisdiction exists and that removal was proper,"²⁷ and must overcome this Court's presumption that cases lie outside its narrow jurisdiction.²⁸ "Each factual issue necessary to support subject matter jurisdiction ‘must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation.’ "²⁹

If each defendant is not a citizen of a different state from each plaintiff, a party—usually a removing defendant—may claim that the plaintiff improperly or fraudulently joined parties to defeat federal diversity jurisdiction. The citizenship of an improperly joined party is then disregarded in determining the Court's jurisdiction.³⁰ The doctrine of improper joinder ensures "that the presence of an improperly joined, non-diverse defendant does not defeat federal removal jurisdiction premised on diversity."³¹ There is a heavy burden upon the party claiming improper or fraudulent joinder.³² The Fifth Circuit has "recognized two ways to establish improper joinder: ‘(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.’ "³³ The Court determines "whether [the plaintiff] has any possibility of recovery against the party whose joinder is questioned. If there is arguably a reasonable basis for predicting that the state law might impose liability on the facts involved, then there is no fraudulent joinder. This possibility, however, must be reasonable , not merely theoretical."³⁴

To test this reasonable basis for recovery, the Court may resolve the issue with a two-step analysis. First, "[t]he court may conduct a [Federal Rule of Civil Procedure] 12(b)(6) -type analysis, looking initially at the allegations of the complaint to determine whether the complaint states a claim under state law against the in-state defendant."³⁵ The Court uses federal pleading standards in assessing the state court complaint.³⁶ A Rule 12(b)(6) analysis "leaves intact the well-pleaded complaint doctrine with all its intended reach,"³⁷ so the analysis accepts all well-pled facts in the complaint as true and interprets those facts in the light most favorable to the plaintiff, then asks whether the plaintiff has alleged "enough facts to state a claim to relief that is plausible on its face."³⁸ The Court does not make credibility determinations or discount the complaint's factual allegations.³⁹ "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. ... Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice."⁴⁰ If a complaint can survive a Rule 12(b)(6) analysis, there is no improper joinder as to that party.⁴¹ "[T]he existence of even a single valid cause of action against in-state defendants (despite the pleading of several unavailing claims) requires remand of the entire case to state court."⁴² But if "there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against an in-state defendant," the party was improperly joined.⁴³ The focus of the inquiry on a motion to remand must "must be on the joinder, not the merits of the plaintiff's case."⁴⁴

In instances in which the propriety of joinder is still questionable after the Rule 12(b)(6) -like analysis, or if the plaintiff has misstated or omitted facts that would determine the propriety of joinder, the Court may in its discretion pierce the pleadings and conduct a "summary inquir y" to consider "summary judgment-type evidence such as affidavits and deposition testimony" but will not pretry factual issues.⁴⁵

b. Analysis

1. Ripeness

In its original petition in state court (the live complaint in this case), Plaintiff alleges that the non-diverse Texas Defendants GSM Insurors and its insurance agent Jim Hansen are liable to Plaintiff under various causes of action for misrepresenting what insurance coverage they were seeking to provide to Plaintiff and for misrepresenting the extent of the insurance coverage they actually obtained.⁴⁶ Defendants, in their notice of removal, claim that the in-state Defendants are improperly joined as Plaintiff fails to state a claim against each,⁴⁷ and because Plaintiff's claims, if any, are not ripe.⁴⁸ The Court first addresses the ripeness issue.

In support of remand, Plaintiff argues that its claims against in-state Defendants GSM Insurors and Jim Hansen are ripe because Defendant Employers Insurance Company of Wausau has denied coverage and thus joinder of the in-state Defendants is proper.⁴⁹ Defendants respond that Plaintiff has not yet suffered any injury—i.e., only if it is ultimately determined that no coverage exists wil Plaintiff suffer injury, thus Plaintiff's claims are not...