Polinard v. Covington Specialty Ins. Co.

HERBERT LAWRENCE POLINARD JR, Plaintiff v. COVINGTON SPECIALTY INSURANCE COMPANY, TABAK INSURANCE AGENCY, ARACELI GRANADOS, Defendants

No. SA-21-CV-00353-XR

United States District Court, W.D. Texas, San Antonio Division

August 24, 2021

ORDER

XAVIER RODRIGUEZ, UNITED STATES DISTRICT JUDGE

On this date, the Court considered Plaintiff's motion for remand (ECF No. 11), Defendant Covington Specialty Insurance Company's response (ECF No. 16), and Plaintiff's reply (ECF No. 23). After careful consideration Plaintiff's motion for remand is DENIED.

BACKGROUND

This case arises out of an insurance dispute between Plaintiff Herbert Polinard, Jr. and Defendants Covington Specialty Insurance Company (“Covington”), Tabak Insurance Agency (“Tabak”), and Araceli Granados (“Granados”). Plaintiff owns the property located at 1010 North Main Avenue, San Antonio, Texas 78212 (the “Property”), which he leases to the Gold Group 1 LLC, dba Club Essence (“Club Essence”). Under the terms of the lease agreement, Club Essence was required to insure the Property and list Plaintiff as an additional insured.

Tabak and Granados, as independent agents, were responsible for placing the policy under which Covington was the insurer. On August 17, 2018 Granados emailed Plaintiff to let him know that the previous year's policy on the Property had expired on August 8, 2018, and had not been renewed. Thereafter, Covington issued a new policy to Club Essence (the “Policy”), which included Plaintiff as an additional insured and covered the Property for a policy period of August 21, 2018 to August 21, 2019.

The Property was damaged by a fire on or about March 26, 2019 and Plaintiff submitted an insurance claim to Covington. Plaintiff's claim was denied, however, because the Policy had been cancelled in December 2018 for nonpayment. Plaintiff was unaware that Club Essence had failed to pay the monthly premium amount and asserts that Covington and its agents Tabak and Granados, failed to notify him about the non-payment before the Policy was canceled. Plaintiff filed suit on February 19, 2021, in the 73rd Judicial District Court, Bexar County, Texas, bringing claims for negligence, negligent misrepresentation, and violations of the Texas Deceptive Trade Practices Act (“DTPA”) and Texas Insurance Code against all three Defendants. ECF No. 1-5.

On April 8, 2021, Covington removed the case to this Court on the basis of diversity jurisdiction.^[1] ECF No. 1. According to Covington, this Court has jurisdiction under 28 U.S.C. § 1332 because the amount of controversy exceeds $75, 000, and there is complete diversity of citizenship between the parties. ECF No. 1 ¶¶ 6-7. Covington alleges that for diversity purposes Plaintiff is a citizen of Texas and that Covington is a citizen of New Hampshire and Georgia. ECF No. 6 ¶¶ 6-7. Although Tabak and Granados are believed to be citizens of Texas, Covington contends that their citizenship should be disregarded because neither is a proper party under the doctrine of improper joinder. ECF No. 1 ¶¶ 8-17.

Plaintiff timely moved to remand the case to state court, arguing that Tabak and Granados were properly joined and that removal was procedurally defective. See ECF No. 11. Covington opposes remand. ECF No. 16.

DISCUSSION

I. Legal Standards

A. Improper Joinder

A defendant may remove an action to federal court where the matter in controversy exceeds $75, 000 and is between “citizens of different states.” 28 U.S.C. § 1332(a); 28 U.S.C. § 1441(a). Diversity jurisdiction typically requires “complete diversity” between all plaintiffs and all defendants. Lincoln Prop. Co. v. Roche, 546 U.S. 81, 89 (2005). The removing party bears the burden of showing that federal jurisdiction exists and that removal was proper. De Aguilar v. Boeing Co., 47 F.3d 1404, 1408 (5th Cir. 1995). The removal statute is strictly construed in favor of remand. Vantage Drilling Co. v. Hsin-Chi Su, 741 F.3d 535, 537 (5th Cir. 2014) (citing Acuna v. Brown & Root, Inc., 200 F.3d 335, 339 (5th Cir. 2000)).

The court must evaluate the removing party's right to remove “according to the plaintiffs' pleading at the time of the petition for removal.” Pullman Co. v. Jenkins, 305 U.S. 534, 537 (1939); see also Gebbia v. Wal-Mart Stores, Inc., 233 F.3d 880, 883 (5th Cir. 2000) (“The jurisdictional facts that support removal must be judged at the time of removal.”); Martinez v. Pfizer Inc., 388 F.Supp.3d 748, 761 (W.D. Tex. 2019) (“because jurisdiction is fixed at the time of removal, the jurisdictional facts supporting removal are examined as of the time of removal”).

A removing party can establish federal jurisdiction based on 28 U.S.C. § 1332 by demonstrating that an in-state defendant has been “improperly joined.” Smallwood v. Illinois Cent. R. Co., 385 F.3d 568, 573 (5th Cir. 2004). To establish improper joinder, a removing party must show an “inability of the plaintiff to establish a cause of action against the non-diverse party in state court.” Id. (quoting Travis v. Irby, 326 F.3d 644, 646-47 (5th Cir. 2003). A plaintiff cannot establish a cause of action against an in-state defendant 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.” Smallwood, 385 F.3d at 573.

A court may resolve the issue in one of two ways. The court may conduct a Rule 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. Ordinarily, if a plaintiff can survive a Rule 12(b)(6) challenge, there is no improper joinder. However, in some cases a plaintiff may state a claim, but misstate or omit discrete facts that would determine the propriety of joinder; in such cases, the district court may, in its discretion, pierce the pleadings and conduct a summary inquiry. Smallwood, 385 F.3d at 573. The burden is on the removing party, and the burden of demonstrating improper joinder is a heavy one. Cuevas v. BAC Home Loans Servicing, LP, 648 F.3d 242, 249 (5th Cir. 2011) (citing Griggs v. State Farm Lloyds, 181 F.3d 694, 699 (5th Cir. 1999)).

B. Rule 12(b)(6)

Federal Rule of Civil Procedure 12(b)(6) allows a party to move for the dismissal of a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). To survive a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “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.” Iqbal, 556 U.S. at 678. A claim for relief must contain: (1) “a short and plain statement of the grounds for the court's jurisdiction”; (2) “a short and plain statement of the claim showing that the pleader is entitled to the relief”; and (3) “a demand for the relief sought.” Fed.R.Civ.P. 8(a). A plaintiff “must provide enough factual allegations to draw the reasonable inference that the elements exist.” Innova Hosp. San Antonio, L.P. v. Blue Cross & Blue Shield of Georgia, Inc., 995 F.Supp.2d 587, 602 (N.D. Tex. Feb. 3, 2014) (citing Patrick v. Wal-Mart, Inc.-Store No. 155, 681 F.3d 614, 617 (5th Cir.2012)); see also Torch Liquidating Trust ex rel. Bridge Assocs. L.L.C. v. Stockstill, 561 F.3d 377, 384 (5th Cir.2009) (“[T]he complaint must contain either direct allegations or permit properly drawn inferences to support every material point necessary to sustain recovery”) (internal quotation marks and citations omitted).

“Claims alleging fraud and fraudulent inducement are subject to the requirements of Rule 9(b) of the Federal Rules of Civil Procedure.” Schnurr v. Preston, No. 5:17-CV-512-DAE, 2018 WL 8584292, at *3 (W.D. Tex., May 29, 2018). Rule 9(b) states that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). “[A]rticulating the elements of fraud with particularity requires a plaintiff to specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent.” Williams v. VMX Technologies, Inc., 112 F.3d 175, 177 (5th Cir. 1997). “Directly put, the who, what, when, and where must be laid out.” Id. at 178. “Facts and circumstances constituting charged fraud must be specifically demonstrated and cannot be presumed from vague allegations.” Howard v. Sun Oil Co., 404 F.2d 596, 601 (5th Cir. 1968). “Anything less fails to provide defendants with adequate notice of the nature and grounds of the claim.” Hart v. Bayer Corp., 199 F.3d 239, 247 n.6 (5th Cir. 2000).

“Although the language of Rule 9(b) confines its requirements to claims of . . . fraud, the requirements of the rule apply to all cases where the gravamen of the claim is fraud even though the theory supporting the claim is not technically termed fraud.” Frith v. Guardian Life Ins. Co. of Am., 9 F.Supp.2d 734, 742 (S.D. Tex. March 31, 1998). Thus “[c]laims alleging violations of the Texas Insurance Code and the DTPA and those asserting . . . negligent misrepresentation are subject to the requirements of Rule 9(b).” Id.

In a Rule 12(b)(6) analysis, all factual allegations from the complaint should be taken as true, and the facts are to be construed in the light most favorable to the nonmoving party. Fernandez-Montes v. Allied Pilots Assoc., 987 F.2d 278, 284 (5th Cir. 1993). Still, a complaint must contain “more than labels and conclusions, and a formulaic...