MSO Seals & Gaskets, Inc. v. Scottsdale Insurance Company, 4:19-cv-04491

MSO Seals sued Scottsdale Insurance and adjuster Erin Meiwes in Texas state court for storm damage to commercial property, asserting breach of contract, common-law bad faith, Texas Insurance Code violations, and DTPA claims; damages alleged at no less than $1,000,000.
Meiwes and MSO are both Texas residents; Scottsdale removed the case to federal court invoking diversity jurisdiction and arguing Meiwes was improperly joined.
MSO moved to remand, arguing lack of complete diversity because Meiwes is a Texas citizen.
The central legal question was whether Meiwes was improperly joined (i.e., whether there is no reasonable basis for MSO to recover against her), which would allow removal despite non-diversity.
The court applied the Smallwood Rule 12(b)(6)-type improper-joinder analysis and considered whether MSO pleaded a plausible claim against Meiwes.
The court concluded MSO’s Texas Insurance Code allegations as to Meiwes were deficient but that MSO pled a plausible DTPA misrepresentation claim against Meiwes; therefore joinder was proper and the case was remanded for lack of diversity jurisdiction.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether federal diversity jurisdiction exists given Meiwes’s citizenship	Meiwes is a Texas resident; her presence destroys complete diversity, so case must remain in state court	Meiwes was improperly joined; her citizenship should be ignored for removal	Court: Scottsdale failed to show improper joinder; complete diversity absent; remand granted
Whether MSO stated a plausible claim against Meiwes (improper-joinder inquiry)	MSO alleged Meiwes misrepresented amount/nature of damage and fabricated non-covered causes, asserting a DTPA misrepresentation claim with factual allegations and motive	Scottsdale: MSO’s pleadings fail to state viable claims against Meiwes under the Texas Insurance Code or DTPA	Court: Insurance Code claims insufficient, but DTPA pleading is plausible under Rule 12(b)(6)-type review; reasonable basis to predict recovery against Meiwes exists; joinder proper

Smallwood v. Illinois Central R.R. Co., 385 F.3d 568 (5th Cir.) (en banc) (improper-joinder framework and Rule 12(b)(6)-type analysis)
International Energy Ventures Management, L.L.C. v. United Energy Group, Ltd., 818 F.3d 193 (5th Cir.) (federal pleading standards govern improper-joinder review)
Gasch v. Hartford Acc. & Indem. Co., 491 F.3d 278 (5th Cir.) (removal statute strict construction and remand in doubt)
Caterpillar Inc. v. Lewis, 519 U.S. 61 (U.S. Supreme Court) (complete diversity requirement)
Manguno v. Prudential Property & Casualty Co., 276 F.3d 720 (5th Cir.) (removal burden on removing party)
New York Life Ins. Co. v. Deshotel, 142 F.3d 873 (5th Cir.) (non-resident cannot remove when co-defendant joined in good faith destroys diversity)
Cuevas v. BAC Home Servicing, LP, 648 F.3d 242 (5th Cir.) (improper joinder narrow exception to complete diversity rule)
Mumfrey v. CVS Pharmacy, Inc., 719 F.3d 392 (5th Cir.) (standards for proving no possibility of recovery)