Rasberry v. Capitol County Mut. Fire. Ins. Co.

609 F.Supp.2d 594

Vanessa RASBERRY v. CAPITOL COUNTY MUTUAL FIRE INSURANCE COMPANY, et al.

No. 1:08-CV-392.

United States District Court, E.D. Texas, Beaumont Division.

February 19, 2009.

COPYRIGHT MATERIAL OMITTED

Michael R. Ramsey, Gregory F. Cox, The Mostyn Law Firm, Beaumont, TX, John Steven Mostyn, Mostyn Law Firm, Houston, TX, for Plaintiff.

Reagan Mark Brown, Melinda Rich Harper, Fulbright & Jaworski, Christopher Weldon Martin, Martin Disiere Jefferson & Wisdom, Houston, TX, Jonathan Allen, Morris C. Carrington, Mehaffy & Weber, Beaumont, TX, for Defendants.

ORDER ADOPTING UNITED STATES MAGISTRATE JUDGE'S REPORT

RON CLARK, District Judge.

The court referred this matter to the Honorable Earl S. Hines, United States Magistrate Judge, for pretrial proceedings pursuant to an order of reference entered on August 4, 2008. The court has received and considered the report of the United States magistrate judge, who recommends that the court grant plaintiff's motion to remand.

Defendant objects to the magistrate judge's findings, conclusions, and analysis. This requires a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made. 28 U.S.C § 636(b)(1)(C). After conducting such review, the court concludes that the magistrate judge's findings, conclusions and analysis are correct.

Accordingly, defendant's objections are OVERRULED, and the magistrate judge's report is hereby ADOPTED. It is further

ORDERED that "Plaintiff's Motion to Remand" (Docket No. 12) is GRANTED. An order remanding this action to the 58th Judicial District Court of Jefferson County, Texas will be entered separately.

The purpose of the referral having been served, it is further ORDERED that the reference to the magistrate judge is VACATED.

Report and Recommendation Re Motion to Remand

EARL S. HINES, United States Magistrate Judge.

This report concerns the plaintiff's motion to remand this action to the 58th Judicial District Court of Jefferson County, Texas. To resolve this motion, the court must address several contested issues including two which appear to be matters of first impression under the Class Action Fairness Act. See discussion infra Section V. These novel issues are (1) whether the "minimal diversity" element of federal class action jurisdiction may be established by citizenship of a defendant against whom no class relief is sought; and, if so, (2) whether the "home state" exception to federal class action jurisdiction contemplates that a party against whom no class relief is sought may be a "primary defendant."

I. Magistrate Judge Authority

This case is assigned to the Hon. Ron Clark, United States district judge, and is referred to the undersigned United States magistrate judge for pretrial proceedings. Pursuant to the order of reference entered on August 4, 2008, the magistrate judge is authorized to hear and determine all pretrial matters before the court except certain case-dispositive motions listed in 28 U.S.C. § 636(b)(1)(A). As to those, the magistrate judge is designated to conduct hearings and submit proposed findings of fact and recommendations for disposition thereof. 28 U.S.C. § 636(b)(1)(B).

A threshold question is whether motions to remand are ones that magistrate judges may hear and determine absent the parties' consent, or whether they are case-dispositive matters that require reports with recommendations for appropriate disposition. There is no definitive circuit rule, and other courts differ in their resolution of this issue.¹ For that reason, the undersigned elects in this instance to submit a report with a recommendation. This procedure preserves the prerogative of the district judge, and any potentially aggrieved party may secure de novo review by the presiding district judge prior to final action by filing a timely objection.

II. Parties

Plaintiff is Vanessa Rasberry ("Rasberry"), a resident of Jefferson County, Texas, and a citizen of Texas.

Defendants are Capitol County Mutual Fire Insurance Company ("Capitol County"), ICA, Inc. ("ICA"), Todd Dwayne Bilbrey and Brenda Louise Denby. Capitol County is a Texas corporation with its principal place of business in Texas. ICA is a North Carolina corporation with its principal place of business in North Carolina. Bilbrey and Denby are individuals residing in and citizens of the state of Texas.

III. Background; Nature of Suit

Initially, this action appears to be a suit on a Texas Homeowners' Insurance Policy just like hundreds of other actions that were brought against insurers and adjusters after Hurricane Rita caused widespread devastation in southeast Texas in September, 2005. However, uncharacteristic of those actions, Rasberry asserts an additional claim in behalf and as a representative of a proposed class of persons.

A. Typical Claims

Rasberry alleges that she is the owner of a Texas Homeowners' Insurance Policy issued by Capitol County insuring her home from windstorm and hurricane damage. Rasberry further alleges that (a) her property was damaged during Hurricane Rita; (b) she submitted to Capitol County a timely claim under her policy for repairs and additional living expenses; (c) Capitol County refused to pay all amounts due under the policy; and (d) Capitol County engaged in multiple improper actions that breached the insurance contract, breached Capitol County's common law duty of good faith and fair dealing and violated the Texas Insurance Code.

Rasberry further alleges that Capitol County retained ICA to adjust her policy claim, and that ICA assigned Bilbrey and Denby to inspect her property and estimate damages and amounts necessary for repairs. Rasberry alleges that these adjuster defendants also committed wrongful acts that violated the Texas Insurance Code in numerous respects, and engaged in common law fraud.

In connection with the above causes of action against all four defendants, Rasberry seeks to recover additional amounts allegedly due and owing under the insurance policy, treble damages, statutory penalties, attorney fees, interest and costs under Texas law.

B. Class Action Claim

In addition to her individual claims described above, Rasberry proffers class action allegations against one defendant only, Capitol County. Rasberry alleges that Capitol County systematically and pervasively improperly handled policy holders' claims for damages caused by Hurricane Rita to residential properties in Texas in one or more of the following material respects:

• failing to timely acknowledge receipt of the claim;

• failing to timely commence an investigation of the claim;

• misrepresenting material policy provisions;

• failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of the claim;

• failing to provide a reasonable explanation to the insureds of the basis for the claims handling decision;

• failing to affirm or deny coverage within a reasonable time; or

• assigning a person not licensed as an adjuster in the state of Texas to adjust claims.

Rasberry seeks to represent and obtain relief for all policy owners whose claims were improperly handled in any of the ways described above, were adjusted by persons not licensed to adjust claims in the state of Texas, and who are not represented by counsel or resolving their claims through separate litigation. In behalf of that class, Rasberry seeks declaratory and injunctive relief suspending the statute of limitations and preventing Capitol County from asserting limitations as an affirmative defense until each class member's policy claim is evaluated by a licensed adjuster.²

IV. Proceedings

Rasberry filed this action on March 26, 2008, in the 58th Judicial District Court of Jefferson County, Texas. Capitol County subsequently removed it to this federal court, invoking federal jurisdiction under the Class Action Fairness Act of 2005.

On August 15, 2008, Rasberry moved to remand, arguing that federal jurisdiction is lacking, or, alternatively, that relevant circumstances require the court to decline jurisdiction under 28 U.S.C. § 1332(d)(4).

V. Class Action Fairness Act of 2005

The Class Action Fairness Act of 2005, 28 U.S.C. §§ 1332, 1453, 1711-15 (2005) (hereafter "CAFA")³ was enacted to curtail "forum shopping" and prevent "inconsistent and inadequate judicial involvement" in interstate class actions. S. Comm. on the Judiciary, Class Action Fairness Act of 2005, S.Rep. No. 109-14 (Feb. 28, 2005), reprinted in 2005 U.S.C.C.A.N. 3, 40, 2005 WL 627977. To further this legislative objective, the statute greatly expands and liberalizes diversity jurisdiction of federal courts with respect to class actions.⁴ It also relaxes the standard for removal by eliminating both requirements of unanimous consent among defendants and the one-year deadline.⁵ Finally, it authorizes federal courts of appeal to accept appeals from interlocutory district court orders granting or denying motions to remand, irrespective of whether the court based its decision on jurisdictional, statutory or non-statutory grounds.⁶

As a counterpoise to this oceanic enlargement of federal judicial jurisdiction, CAFA delineated exceptions designed to insure that truly local controversies will be adjudicated in state courts. 28 U.S.C. § 1332(d)(4). Thus, a federal district court must decline to exercise its expanded CAFA jurisdiction under two provisions: (1) the local controversy exception, § 1332(d)(4)(A); and (2) the home state exception, § 1332(d)(4)(B). See discussion infra Section VII. In addition, a district may, "in the interests of justice and looking at the totality of the circumstances" decline to exercise jurisdiction when certain demographic circumstances exist and after considering several enumerated statutory factors.⁷

VI. CAFA Jurisdiction

CAFA confers original federal jurisdiction over class actions when: (1) any member of the plaintiff class is a citizen of a different state than any defen...