Claims Denial Law Firm – Procedural Rules In Federal Court

When an insurance claim gets denied and a lawsuit results, the resulting legal battle needs to be dealt with properly.  This can be challenging.  An illustration of this can be found in a 2020, opinion from the Eastern District, Sherman Division, in an opinion styled, Oscar Bermudez and SA Polo, Inc., v. Indemnity Insurance Company of North America and Tin Top Insurance Agency, LLC.

This case was originally filed in State Court by Plaintiffs and Defendants promptly removed the case to Federal Court.  The case needs to be read to get further background information on some of the procedural steps but ultimately the Court denied Plaintiffs Motion For Remand and Plaintiffs filed a Motion for Reconsideration or Clarification, which is the issue presented here.

Even though the Motion to Reconsider is found nowhere in the Federal Rules of Civil Procedure, it is one of the more popular indoor courthouse sports at the district court level.  Motions to reconsider serve the very limited purpose permitting a party to correct manifest errors of law or fact, or to present newly discovered evidence.  Granting a motion to reconsider is an extraordinary remedy that should be used sparingly.

Mere disagreement with a district court’s order does not warrant reconsideration of an order.  Moreover, parties should present their strongest arguments upon initial consideration of a matter—motions for reconsideration cannot serve as vehicles for parties to restate, recycle, or rehash arguments that were previously made.  Motions for reconsideration should not be used to raise arguments that could, and should, have been made before the entry of judgment or to re-urge matters that have already been advanced by a party.   A district court’s opinions are not intended as mere first drafts, subject to revision and reconsideration at a litigant’s pleasure.

The manifest error Plaintiffs’ Motion alleges is that the Court’s remand analysis utilized an incorrect standard for improper joinder, one which is “not faithful to Smallwood”, a prior 5th Circuit opinion on this topic.  Specifically, Plaintiffs argue that instead of engaging the Smallwood framework that calls for a “12(b)(6)-type analysis,” the Court follows a “trend” of substituting the “Twombly/Iqbal” analysis, from the U.S. Supreme Court, which Plaintiffs maintain is the incorrect standard.   Plaintiffs’ argument is wrong for two reasons.

First, precedent plainly contradicts their position.  The Fifth Circuit squarely addressed the overlap between the Smallwood improper-joinder analysis and Twombly/Iqbal decisions in International Energy Ventures Management, L.L.C. v. United Energy Group, Inc.  There, the panel explained that “the so-called Rule 12(b)(6)–type analysis . . . is shorthand for the federal pleading standard itself.”   At the time the Fifth Circuit decided Smallwood, “the Conley opinion verbalized the federal pleading standard.”  Since then, Conley has been “supplanted by . . . the Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal opinions.”  But contrary to Plaintiffs’ argument here, because “the Smallwood opinion instructs courts to apply the Rule 12(b)(6)–type analysis” and such analysis “is inseparable from the federal pleading standard,” then “this is an instruction to apply the federal pleading standard” under Twombly/Iqbal.  Moreover, as recently as September 2020, the Fifth Circuit has interpreted Smallwood and its progeny to mean that “district courts conduct a Federal Rule of Civil Procedure 12(b)(6) analysis” to “determine whether the plaintiff can establish a cause of action against the non-diverse defendant.”  Plaintiffs’ argument is directly at odds with Fifth Circuit caselaw.  Second, even if the Court was inclined to agree with Plaintiffs’ position advanced in their Motion, it would not be within the Court’s power to rule in any other fashion.  As an inferior federal court, the Court is bound by Fifth Circuit precedent.

The Motion for Reconsideration was denied.

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