Opinion
Civil Action No: SA-05-CA-0627-XR.
August 24, 2005
ORDER
On this date, the Court considered Plaintiffs' Motion to Remand (docket no. 4), filed August 5, 2005, and Defendant's Response (docket no. 6), filed August 16, 2005. After careful consideration, the Court DENIES Plaintiffs' motion.
In conjunction with Plaintiffs' Motion to Remand, the Court considered and will GRANT Plaintiffs' Motion for Leave to Allow Filing of Motion to Remand in Excess of Ten Pages (docket no. 8).
Factual and Procedural Background
On May 27, 2005, Plaintiffs Robert and Belinda Silvas ("Silvas") filed suit in the County Court at Law Number 7, Bexar County, Texas, against defendants, Ohio Casualty Insurance Company ("Ohio Casualty") and Gloria Kuehler ("Kuehler") (collectively, "Defendants"), one of Ohio Casualty's claim adjusters. Plaintiffs alleged claims against Defendants for breach of contract, breach of the duty of good faith and fair dealing, fraud, negligent misrepresentation, and violations of the Texas Deceptive Trade Practices Act ("DTPA") and articles 21.21 and 21.55 of the Texas Insurance Code.
Plaintiffs insured their residence through a Texas homeowners' insurance policy(the "Policy") issued by Ohio Casualty. The Policy insured Plaintiffs' home against physical loss by water damage and plumbing leaks. Plaintiffs allege plumbing leaks caused their residence to suffer cosmetic damage and differential foundation movement. Plaintiffs claim that this damage was a covered occurrence under the Policy. Ohio Casualty assigned Kuehler to investigate Plaintiffs' claims. Through the investigation, Ohio Casualty determined that the plumbing leaks were a partial cause of the cosmetic damage, but denied Plaintiffs' claim for foundation damage.
Defendants Ohio Casualty and Kuehler were served on June 6, 2005. Defendants timely removed the case to this Court on July 6, 2005, on the basis of diversity jurisdiction. See 28 U.S.C. § 1332. According to the Petition, Plaintiffs are residents of Texas, Ohio Casualty is an Ohio corporation, and Kuehler is a resident of Texas. Defendants contend that "Plaintiffs joined Ms. Kuehler in this lawsuit in an attempt to defeat diversity." The presence of the non-diverse defendant Kuehler would destroy diversity jurisdiction. Thus, this Court has jurisdiction over this case only if Defendants establish that Kuehler was fraudulently joined.
Analysis
Defendants bear the burden of establishing that Kuehler was fraudulently joined. See Griggs v. State Farm Lloyds, 181 F.3d 694, 699 (5th Cir. 1999). "To prove their allegations of fraudulent joinder, [removing parties] must demonstrate that there is no possibility that [plaintiffs] would be able to establish a cause of action against [the non-diverse defendant] in state court." Dodson v. Spiliada Maritime Corp., 951 F.2d 40, 42 (5th Cir. 1992). The court must initially resolve all disputed questions of fact and all ambiguities in the controlling state law in favor of the non-removing party. Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 259 (5th Cir. 1995). The court then determines whether the plaintiff has any possibility of recovery against the party whose joinder is questioned. Id. Fraudulent joinder claims can be resolved by "piercing the pleadings" and considering summary judgment-type evidence such as affidavits and deposition testimony. Griggs, 181 F.3d at 700.
Whether a plaintiff could possibly establish a claim against the non-diverse defendant is resolved by reference to state law. Hart v. Bayer Corp., 199 F.3d 239, 247 (5th Cir. 1999). Defendants argue that Plaintiffs have no cause of action against Kuehler for breach of contract and breach of the duty of good faith and fair dealing because Kuehler was neither a party to nor in privity to the Policy. The Court agrees. Texas law does not provide a cause of action for breach of contract or breach of the duty of good faith and fair dealing against a defendant who is not a party to the underlying contract. Natividad v. Alexsis, Inc., 875 S.W.2d 695, 698 (Tex. 1994) (claims adjuster who was not a party to the insurance contract owed plaintiff no duty of good faith and fair dealing); CC Partners v. Sun Exploration Prod., 783 S.W.2d 707, 721 (Tex.App.-Dallas 1989, writ denied) (non-party to contract cannot be held liable for breach of contract). Kuehler's uncontroverted affidavit clearly establishes she is not a party to the Policy. Notice of Removal, Ex. B. Plaintiffs cannot establish breach of contract or breach of the duty of good faith and fair dealing causes of action against Kuehler.
Defendants also argue that Kuehler, as a claims adjuster, is not subject to liability under article 21.55 of the Texas Insurance Code. Article 21.55 is a statutory scheme creating liability for "insurers" that fail to promptly pay claims. TEX. INS. CODE ANN. art. 21.55 (Vernon Supp. 2004). Article 21.55 definition of an "insurer" does not include a claims adjuster. Id. at 21.55, § 1(4). Article 21.55 creates a cause of action against an "insurer", such as Ohio Casualty, not a claims adjuster. There is no possibility Plaintiffs could establish a cause of action against Kuehler for violations of article 21.55.
With respect to Plaintiffs' claims against Kuehler for fraud, negligent misrepresentation, and violations of the DTPA and article 21.21 of the Texas Insurance Code, Defendants do not claim such causes of action do not exist, but rather assert that each is barred as a matter of law by the applicable statute of limitations. Both parties agree on the length of the respective limitations periods for fraud, negligent misrepresentation, and violations of the DTPA and article 21.21 of the Texas Insurance Code. The statute of limitations for negligent misrepresentation and violations of the DTPA and article 21.21 is two years. TEX. CIV. PRAC. REM. CODE § 16.003 (Vernon 2002); TEX. BUS. COMM. CODE § 17.565 (Vernon 2002); TEX. INS. CODE ANN. art. 21.21, § 16(d) (Vernon Supp. 2004). Fraud causes of action are governed by a four-year limitations period. TEX. CIV. PRAC. REM. CODE § 16.003 (Vernon 2002). Plaintiffs' fraud, negligent misrepresentation, DTPA, and article 21.21 causes of action accrued for limitations purposes when Defendants' alleged wrongful conduct caused them injury. See Childs v. Haussecker, 974 S.W.2d 31, 36 (Tex. 1998). Defendants argue that Plaintiffs' injury occurred and the limitations period commenced, at the latest, on May 4, 2001, when Kuehler denied coverage for the foundation claim. Notice of Removal, Ex. B. Plaintiffs filed suit on May 27, 2005, more than four years after Defendants denied their claim. However, Plaintiffs argue that the limitations periods did not commence on May 4, 2001 because the "discovery rule" tolled the limitations period.
Plaintiffs' reference to the numerous remand orders of other federal district courts in Texas regarding the existence of a cause of action against claims adjusters for violations of article 21.21 of the Texas Insurance Code while insightful, are completely inapposite to the Defendants' grounds for removal.
The discovery rule is a "very limited exception to statutes of limitations." Wagner Brown, Ltd. v. Horwood, 58 S.W.3d 732, 734 (Tex. 2001). The discovery rule applies only "when the nature of the [Plaintiffs'] injury is both inherently undiscoverable and objectively verifiable." Id.
An injury is inherently undiscoverable if it is, by its nature, unlikely to be discovered within the prescribed limitations period despite due diligence. "Inherently undiscoverable" does not mean that a particular plaintiff did not discover his or her particular injury within the applicable limitations period. Instead, we determine whether an injury is inherently undiscoverable on a categorical basis because such an approach "brings predictability and consistency to the jurisprudence.". . . [W]e must decide whether [the Plaintiffs' injury] is "the type of injury that generally is discoverable by the exercise of reasonable diligence.Id. at 734-35 (citations omitted). In Horwood, the Texas Supreme Court focused its discovery rule analysis on whether the injury underlying the plaintiffs' claims was inherently undiscoverable, not the individual causes of action. Id. at 735. Plaintiffs' argument that the discovery rule should apply because they had no way of discovering Defendants use of a biased engineering company is not relevant to the "categorical determination of inherent undiscoverability in a discovery rule analysis." Id. Thus, the issue before this court is not whether Plaintiffs determined the denial of their foundation claim was wrongful within the limitations period, but rather whether the denial of an insurance claim is "the type of injury that is generally discoverable by the exercise of reasonable diligence." Id.
The Court notes that Plaintiffs have not asserted in their state court petition or Motion to Remand the doctrine of fraudulent concealment. See KPMG Peat Marwick v. Harrison County Housing Fin. Corp., 988 S.W.2d 746, 749-50 (Tex. 1999) (plaintiff must plead the doctrine of fraudulent concealment); see also Horwood, 58 S.W.3d at 736 (citing Computer Assocs. Int'l, Inc. v. Altai, Inc., 918 S.W.2d 453, 456 (Tex. 1996) (noting that fraudulent concealment and the discovery rule are distinct concepts that exist for different reasons). However, even after resolving all factual questions in the Plaintiffs' favor, there simply are no facts supporting a finding that Defendants' fraudulently concealed Plaintiffs' causes of action against Kuehler. The doctrine of fraudulent concealment does not toll Plaintiffs' causes of action against Kuehler.
The injury underlying Plaintiffs' fraud, negligent misrepresentation, and violations of the DTPA and article 21.21 causes of action is the denial of their foundation damage claim. See Pls.' Pet. It is this denial of coverage that must have been inherently undiscoverable. Defendants' May 4, 2001 letter denied coverage for foundation damage and identified, and attached the report of, the allegedly biased engineering firm, Semmens Investigative Engineering, LLC, Defendants hired to investigate Plaintiffs' claims. More than four years prior to filing suit, Plaintiffs knew their claim had been denied, possessed the identity of the engineering firm Defendants hired, and had a copy of the engineering report Ohio Casualty used as the basis for denying their foundation claim. There was nothing "inherently undiscoverable" about the denial of Plaintiffs' foundation damage claim.
Because the Court finds Plaintiffs' injury was not inherently undiscoverable, it need not address the "objectively verifiable" prong of the discovery rule analysis. See Horwood, 58 S.W.3d at 737.
Although discovery rule determinations are usually questions for the trier of fact, "the commencement of the limitations period may be determined as a matter of law if reasonable minds could not differ about the conclusion to be drawn from the facts in the record." Childs, 974 S.W.2d at 44. The Court concludes, under the facts of this case, that reasonable minds could not differ. The limitations period commenced as a matter of law on May 4, 2001, when Plaintiffs' insurance claim was denied. The court finds that as a matter of law Plaintiffs' negligent misrepresentation, DTPA, and article 21.21 causes of action expired on May 4, 2003, and their fraud cause of action expired on May 4, 2005. Because Plaintiffs' did not file suit against Kuehler until May 27, 2005, these causes of action are barred.
Conclusion
The Court finds that Plaintiffs fraudulently joined the non-diverse defendant Kuehler to defeat diversity jurisdiction. Defendants have demonstrated that there is no possibility Plaintiffs could establish any cause of action against Kuehler in state court. Plaintiffs' breach of contract and breach of the duty of good faith and fair dealing causes of action fail because Kuehler was not a party to the insurance contract between Ohio Casualty and Plaintiffs. Similarly, Plaintiffs' cause of action for violations of article 21.55 of the Texas Insurance Code fails because Kuehler, a claims adjuster, does not fall within article 21.55's definition of an "insurer". Plaintiffs' fraud, negligent misrepresentation, and violations of the DTPA and article 21.21 of the Texas Insurance Code causes of action against Kuehler are barred by the statute of limitations as a matter of law. Ignoring the presence of Kuehler, the Court concludes that it has subject matter jurisdiction over this case based on diversity jurisdiction, and that removal was proper. Thus, Plaintiffs' Motion for Leave to Allow Filing of Motion to Remand in Excess of Ten Pages (docket no. 8) is GRANTED, and Plaintiffs' Motion to Remand (docket no. 4) is DENIED.