Vallejo v. Allstate Vehicle and Property Insurance Company
7:17-cv-00094
| S.D. Tex. | May 23, 2017Background
- Vallejo held a homeowners policy with Allstate for property in Hidalgo County, Texas and reported two losses (Feb 6, 2016 and May 31, 2016) for weather/fallen-object damage.
- Allstate assigned adjusters; Doll was assigned to the February claim and allegedly delayed inspection until July 11, 2016; Sledge prepared an estimate for the May claim that plaintiff says understated damages.
- Allstate denied the claims and plaintiff sued in Texas state court alleging violations of the Texas Insurance Code (§§ 541, 542), breach of contract, and breach of the duty of good faith and fair dealing.
- Defendants removed the case to federal court based on diversity jurisdiction; plaintiff moved to remand, arguing non-diverse adjusters Doll and Sledge defeat diversity.
- The district court evaluated whether Doll and Sledge were properly joined (improper-joinder analysis) under Fifth Circuit standards and Twombly/Iqbal pleading rules.
- Court concluded plaintiff’s statutory claims against Doll and Sledge were conclusory and factually insufficient, dismissed those defendants without prejudice, and denied remand because diversity jurisdiction existed as to the remaining diverse parties (Vallejo v. Allstate).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Doll and Sledge were properly joined such that their Texas citizenship defeats diversity | Doll and Sledge engaged in unfair settlement practices under Tex. Ins. Code § 541 (misrepresentation, failure to investigate, delay, etc.), so they are proper parties | Adjusters are improperly joined because plaintiff cannot state viable § 541 claims against them under federal pleading standards; if improperly joined, their residency is ignored | Court held adjusters were improperly joined; claims against them were conclusory and failed Twombly/Iqbal pleading standards; dismissed them without prejudice; diversity jurisdiction remains |
| Whether plaintiff stated a § 542 claim against in-state adjusters | Plaintiff alleged unfair settlement practices and delay that fall under § 542 | Defendants argued § 542 applies only to insurers, not adjusters | Court held § 542 applies only to insurers; plaintiff cannot maintain § 542 claims against Doll or Sledge |
| Sufficiency of § 541 claims (misrepresentation, failure to settle, failure to explain, failure to affirm/deny, failure to investigate) | Plaintiff tracked statutory language and alleged errors in estimates, delayed inspection, and attempted delay via EUO request | Defendants pointed to lack of particularized facts, failure to differentiate actions by Allstate vs. individual adjusters, and record showing other non-party acted (e.g., EUO request) | Court held § 541 allegations were conclusory, lacked factual enhancement, and failed to state claims under Twombly/Iqbal; thus no reasonable basis to predict recovery against adjusters |
| Effect of dismissal of in-state defendants on remand | Vallejo argued remand required because adjusters are non-diverse | Defendants argued dismissal of in-state defendants renders parties completely diverse (Vallejo v. Allstate) | Court dismissed in-state defendants without prejudice and denied remand because the only remaining parties are diverse |
Key Cases Cited
- Howery v. Allstate Ins. Co., 243 F.3d 912 (5th Cir.) (removing party bears burden to establish federal jurisdiction)
- Acuna v. Brown & Root, Inc., 200 F.3d 335 (5th Cir.) (resolve doubts about removal in favor of remand)
- Salazar v. Allstate Tex. Lloyd’s, Inc., 455 F.3d 571 (5th Cir.) (residency of improperly joined non-diverse defendants disregarded for diversity)
- Smallwood v. Ill. Cent. R. Co., 385 F.3d 568 (5th Cir.) (standards for improper joinder)
- Int’l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193 (5th Cir.) (predicting whether plaintiff might recover against in-state defendant)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (Supreme Court) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (Supreme Court) (application of Twombly two-prong plausibility test)