Insurance Company Did Wrongful Removal?

Here is another one of those removal cases wherein the situation is a situation that will not occur very often.  This case is from the Northern District of Texas, Dallas Division, and is styled, Jeff Conkey and Shannon Mitchell v. Monica Corker, IAT Insurance Group Specialty, and Acceptance Indemnity Insurance Company.

In this case the Mitchell’s (Plaintiffs) filed a State Court lawsuit alleging violations of the Texas Insurance Code and the DTPA against IAT and Acceptance and conversion and trespass claims against Corker.  This Court sue sponte determined that it lacked subject matter jurisdiction and remanded to the State Court.

Plaintiffs owned property insured by IAT and Acceptance.  Allegedly, Corker entered the property and stole equipment belonging to the Plaintiffs.  The insurers denied the claim.

The insurers removed the case based on their allegation that Corker was improperly joined in the lawsuit and not a necessary party pursuant to Federal Civil Rule of Procedure 19 and can be dropped at any time under Rule 21.  With Corker dismissed, then complete diversity exists between the parties.

When seeking removal based on improper joinder, the removing party bears a heavy burden.  As the party wishing to invoke federal jurisdiction by alleging improper joinder, IAT and Acceptance Indemnity have the burden to establish that Ms. Corker was joined by Plaintiffs to defeat federal jurisdiction.  The Court is to then, resolve any doubt as to the propriety of the removal in favor of remand.

To establish improper joinder, IAT and Acceptance Indemnity must prove: (1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in State Court.  When a defendant seeks to remove a case, the question of whether jurisdiction exists is resolved by looking at the complaint at the time the notice of removal is filed.

IAT and Acceptance Indemnity acknowledge that Plaintiffs assert two claims— conversion and trespass—against Ms. Corker in their Amended Petition.  They do not, however, make any allegations that Plaintiffs cannot establish these causes of action against her, and, based on a review of the pleadings, the court determines that Plaintiffs pled sufficient facts to support their claims against Ms. Corker.  Moreover, there are no allegations that Plaintiffs added Ms. Corker to this action to defeat diversity of citizenship jurisdiction.  Thus, IAT and Acceptance Indemnity also failed to show that the second test of the improper joinder analysis has been satisfied.  Despite their inability to meet the established test, IAT and Acceptance Indemnity assert that Ms. Corker is improperly joined because the claims against her are wholly independent from those asserted against them, and that she is not a necessary party to this action.

The court, without deciding the merits of IAT and Acceptance Indemnity’s arguments, determines that it may be proper ultimately to sever Ms. Corker from this action; however, the court may not sever out a party unless it has jurisdiction to do so.  Without evidence of fraud or the inability to establish a cause of action against the non-diverse party, there is no basis for the Court to find improper joinder, and thus, subject matter jurisdiction is lacking.  Based on the arguments presented, the Court finds that IAT and Acceptance have failed to establish that Corker was improperly joined.