558 F.Supp.3d 385
S.D. Tex.2021Background
- Valverde sued Maxum (insurer) and Rodgers Paul Truitt (insurance adjuster) in Texas state court alleging an inadequate, outcome-oriented investigation and wrongful denial of benefits after wind/hail damage to a commercial strip center.
- On June 14, 2021 Maxum filed a Texas Insurance Code §542A.006 election to assume Truitt’s liability in state court and removed the case to federal court the same day, invoking diversity jurisdiction.
- The Court questioned diversity because Truitt appears to be a Texas citizen and ordered clarification; Maxum moved to dismiss Truitt as improperly joined; Valverde did not timely respond and the motion was unopposed under local rule.
- The panel evaluated whether Maxum’s §542A.006 election effectively forecloses recovery against Truitt (making him improperly joined) and whether the voluntary–involuntary rule bars removal when an in-state defendant is dismissed over the plaintiff’s objection.
- After analyzing Fifth Circuit and Supreme Court precedents and distinguishing contrary N.D. Tex. opinions (Morgan, Kessler), the Court reaffirmed Ramirez, concluded Truitt was improperly joined, dismissed Truitt with prejudice, and retained diversity jurisdiction because the amount in controversy likely exceeds $75,000.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Maxum’s §542A.006 election requires dismissal of the in‑state adjuster as improperly joined | Valverde had a valid claim against Truitt at filing and thus dismissal does not create removability | Maxum’s election to assume adjuster liability eliminates any possibility of recovery against Truitt, so his citizenship may be disregarded | Court held Maxum’s §542A.006 election rendered Truitt improperly joined and dismissed him with prejudice |
| Whether the voluntary–involuntary rule prevents removal when an in‑state defendant is involuntarily removed by the state court | Valverde argued the voluntary–involuntary rule protects her forum choice and bars removal when a resident defendant is involuntarily dismissed | Maxum argued the improper‑joinder doctrine controls where no possibility exists to restore the nondiverse defendant | Court held the voluntary–involuntary rule does not bar removal if the nondiverse defendant cannot reasonably be restored (finality/appealability rationale) |
| Timing of improper‑joinder inquiry: assess at time of filing or time of removal | Valverde contended claims should be evaluated as they existed when first asserted | Maxum argued improper joinder is assessed at the time of removal (when its §542A.006 election was in the record) | Court followed Fifth Circuit precedent and held improper‑joinder is assessed at time of removal |
| Whether ambiguity in precedent requires remand when removal is contested | Valverde urged doubts and tensions in authority (e.g., Morgan) favor remand | Maxum urged the Court to resolve the precedential tensions and exercise jurisdiction | Court found law sufficiently settled under controlling Fifth Circuit authority and declined remand; it exercised jurisdiction |
Key Cases Cited
- Smallwood v. Ill. Cent. R.R., 385 F.3d 568 (5th Cir. 2004) (en banc) (framework for improper/fraudulent joinder inquiry)
- Flagg v. Stryker Corp., 819 F.3d 132 (5th Cir. 2016) (improper‑joinder must be evaluated at time of removal; jurisdictional facts fixed then)
- Hoyt v. Lane Constr. Corp., 927 F.3d 287 (5th Cir. 2019) (applied improper‑joinder exception to voluntary–involuntary rule where nondiverse defendant could not be restored)
- Weems v. Louis Dreyfus Corp., 380 F.2d 545 (5th Cir. 1967) (held the voluntary–involuntary rule survived the 1949 statutory amendment)
- Am. Car & Foundry Co. v. Kettelhake, 236 U.S. 311 (1915) (explained finality/appealability rationale underlying the voluntary–involuntary rule)
- Pullman Co. v. Jenkins, 305 U.S. 534 (1939) (removal right determined by plaintiffs' pleading at time of removal)
- Ramirez v. Allstate Vehicle & Prop. Ins. Co., 490 F. Supp. 3d 1092 (S.D. Tex. 2020) (relevant district precedent holding insurer’s §542A.006 election can make adjuster improperly joined)
- Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (1994) (federal courts have limited jurisdiction)