WF/TX Invs. v. Seneca Ins. Co.

WF/TX INVESTMENTS, LLC Plaintiff, v. SENECA INSURANCE COMPANY, INC. and BRIAN DEBROWSKI Defendant.

Civil Action No. 4:19-cv-00751

United States District Court EASTERN DISTRICT OF TEXAS SHERMAN DIVISION

April 9, 2020

Judge Mazzant

MEMORANDUM OPINION AND ORDER

Pending before the Court is Plaintiff, WF/TX Investments, LLC's, Motion to Remand with Incorporated Memorandum (Dkt. #8). Having considered the motion and the relevant pleadings, the Court finds that WF/TX's Motion is GRANTED.

BACKGROUND

This action concerns a dispute over an insurance policy. On March 26, 2017, a commercial strip center owned by WF/TX Investments, LLC ("WF/TX") located in Flower Mound, Texas sustained wind and hail damage (Dkt. #8; Dkt. #11). WF/TX thereafter filed a claim with Seneca Insurance Company, Inc ("Seneca") with whom WF/TX held Insurance Policy Number CMP4801454 ("the Policy") (Dkt. #8; Dkt. #11). The Policy was effective August 22, 2016 through August 22, 2017. Upon receiving WF/TX's claim, Seneca retained Brian Debrowski ("Debrowski"), an independent field adjuster, to investigate and determine the amount due pursuant to the Policy (Dkt. #8; Dkt. #11). On approximately September 26, 2017, Debrowksi advised WF/TX that "it was entitled to actual cash value benefits totaling $102,501.26 (Dkt. #8). On October 27, 2017, WF/TX responded by providing Seneca "with evidence that the actual building loss damages related to the hailstorm totaled over $726,000" (Dkt. #8). Seneca disagreed and invoked the appraisal process pursuant to the Policy (Dkt. #8; Dkt. #11).

On September 6, 2018, in Seneca Ins. Co., Inc. v. WF/TX Inv., LLC, 4:18-cv-00628 (the "Appraisal Matter") Seneca requested a court-appointed umpire (Dkt. #11). The parties filed several status reports and notified the Court that "they were able to agree on an umpire and that an award was issued" (Dkt. #11). Following the issuance of said award, Seneca "determined that damage included in the award was not caused by a covered cause of loss and was therefore not covered. Seneca requested that the Court hold a Rule 16 Scheduling Conference after the award was issued; however, WF/TX disputed considering coverage issues in the Appraisal Matter and instead argued that it should be dismissed" (Dkt. #11). While the Appraisal Matter was ongoing, WF/TX filed the present action against Seneca and Debrowski in Denton County, Texas (Dkt. #8; Dkt. #11). The complaint was filed on September 9, 2019 (Dkt. #8; Dkt. #11). Seneca was served on or about September 12, 2019 and Debrowski was served on September 24, 2019 (Dkt. #1; Dkt. #8). Seneca subsequently removed the state court action to federal court on October 11, 2019 (Dkt. #1; Dkt. #8; Dkt. #11). Debrowski did not join in Seneca's removal (Dkt. #8). The time for joinder has expired.¹

In Defendant Seneca Insurance Company, Inc.'s Notice of Removal, Seneca alleges that removal is proper based on diversity of citizenship pursuant to 28 U.S.C. §§ 1332(a), 1441(a), and 1446 (Dkt. #1). Seneca avers, and it is undisputed, that the amount in controversy exceeds the sum of $75,000 (Dkt. #1). As for citizenship, Seneca originally argued that WF/TX was a citizen of Texas and that Debrowski, a citizen of Texas, was joined solely to defeat diversity jurisdiction (Dkt. #1). Seneca thus claimed that diversity was still met because Debrowski was improperlyjoined to the lawsuit (Dkt. #1). WF/TX opposes Seneca's characterization of Debrowski's joinder and argues that it properly joined Debrowski; thus, according to WF/TX, there is no diversity of citizenship (Dkt. #8). Seneca's claim as to WF/TX's citizenship, however, was unsupported by any evidence and predicated on a misunderstanding of the law—i.e., Seneca identified WF/TX's citizenship by its principal place of business rather than the citizenship of WF/TX's members.² The Court accordingly ordered that Seneca submit supplemental briefing and correctly notify the Court of WF/TX's citizenship (Dkt. #19). On January 27, 2020, Seneca filed Defendant Seneca Insurance Company, Inc.'s First Amended Notice of Removal (Dkt. #21). Seneca informed the Court that WF/TX is a California limited liability company with both of its members—Marcia Withers and William Withers—being citizens of the State of California (Dkt. #21). Accordingly, WF/TX is a citizen of the State of California, not Texas (Dkt. #21). Seneca also notified the Court that it is a citizen of New York as it is an insurance company organized under the laws of the State of New York with its principal place of business in New York (Dkt. #21).

Following Seneca's filing of its Amended Notice of Removal, the Court held a telephone conference and ordered supplemental briefing on whether Debrowski was required to consent to removal given the peculiar procedural posture of the case. The particulars of each party's supplemental briefs will be discussed in greater detail below. With that being said, the Court finds that Seneca has failed to carry its burden in establishing that removal of this case is appropriate; thus, is only prudent for the Court to remand the case to the 431^st Judicial District Court, Denton County, Texas for further proceedings

LEGAL STANDARD

"Federal courts are courts of limited jurisdiction, possessing only that power authorized by Constitution and statute." Gunn v. Minton, 568 U.S. 251, 256 (2013) (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994)). "Only state court actions that originally could have been filed in federal court may be removed to federal court by the defendant." Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987) (citing 28 U.S.C. § 1441(a)). "In an action that has been removed to federal court, a district court is required to remand the case to state court if, at any time before final judgment, it determines that it lacks subject matter jurisdiction." Humphrey v. Tex. Gas Serv., 2014 WL 12687831, at *2 (E.D. Tex. Dec. 11, 2014) (citations omitted). The Court "must presume that a suit lies outside [its] limited jurisdiction," Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001), and "[a]ny ambiguities are construed against removal and in favor of remand to state court." Mumfrey v. CVS Pharmacy, Inc., 719 F.3d 392, 397 (5th Cir. 2013) (citing Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002)). "When considering a motion to remand, the removing party bears the burden of showing that federal jurisdiction exists and that removal was proper." Humphrey, 2014 WL 12687831, at *2 (quoting Manguno, 276 F.3d at 723).

ANALYSIS

This is a case of mistakes. Seneca removed this case predicated upon diversity. In its Notice of Removal, Seneca averred that WF/TX was a citizen of the State of Texas, Debrowski was a citizen of the State of Texas, and Seneca was a citizen of the State of New York. Seneca argued that removal was proper because Debrowski was improperly joined to defeat diversity jurisdiction. Seneca, however, was mistaken in assessing the citizenship of WF/TX. To be sure, WF/TX is a citizen of California given the citizenship of its members. See Harvey, 542 F.3d at1080; Temple Drilling, 946 F.2d at 393. Thus, from the outset of this action, diversity of citizenship has existed: WF/TX is a citizen of the State of California suing Seneca, a citizen of the State of New York, and Debrowski, a citizen of the State of Texas. Despite the existence of diversity jurisdiction, the parties briefed the Court as though diversity jurisdiction was questionable given a potential issue of improper joinder.

The parties briefed the Court on a non-existent issue not only because of Seneca's misunderstanding of the law surrounding citizenship, but because WF/TX, the party who should have understood its own citizenship, failed to properly notify Seneca, Debrowski, and the Court that it is a citizen of the State of California rather than that State of Texas. Indeed, a proper statement of citizenship was only ascertained after WF/TX filed a Motion to Remand. In that Motion to Remand, WF/TX argued that Debrowski was properly joined and that he failed to consent to removal of this action to federal court. Consequently, WF/TX maintained that Seneca's removal was procedurally deficient. WF/TX made no mention, however, of the forum defendant rule as the rule was not implicated here because Debrowski neither removed this action nor joined in Seneca's removal.³ Following said Motion to Remand and all subsequent responses and replies, a proper statement of citizenship was elicited when the Court ordered Seneca to file an Amended Notice of Removal with a correct statement of citizenship.

Subsequent to Seneca's filing of the Amended Notice of Removal, the Court, as previously mentioned, held a hearing to address the peculiar facts of this case. At the telephone conference, each party was ordered to provide the Court with supplemental briefing on whether Debrowski was required to consent to removal given the new, accurate facts of the case. Seneca, abandoningits improper joinder argument for diversity purposes, argued that the Court should extend the improper joinder doctrine to the forum defendant rule and hold that Debrowski was not required to consent because he was improperly joined as a forum defendant. No Circuit, let alone the Fifth Circuit, has conclusively held that the improper joinder doctrine extends to forum defendants. See DeLong v. car2go NA, LLC, 2019 WL 3423442, at *2 n.2 (W.D. Tex. July 30, 2019) (citing Butler v. ENSCO Intercontinental GmbH, 2017 WL 496073, at *6 (S.D. Tex. Feb. 7, 2017); OAM Corp. v. Owners Ins. Co., 2013 WL 12128782, at *2 (N.D. Tex. Dec. 5, 2013)) ("[I]t is unclear whether the improper joinder doctrine would even apply had it not been waived."); see also Morris v. Nuzzo, 718 F.3d 660 (7th Cir. 2013) (discussing whether the improper joinder doctrine should extend to the forum defendant rule without deciding the issue). Moreover, as previously discussed, the...