Dalton v. State Farm Lloyd's, Inc.
Dalton v. State Farm Lloyd's, Inc.
Opinion of the Court
OPINION AND ORDER
Pending before the Court in the above referenced cause arising out of an insurance dispute over recovery for alleged hail storm damage to Plaintiff Sara Dalton’s house and property on January 9, 2012 and over State Farm Lloyd’s handling of the claim, timely removed from state court on diversity grounds, are Plaintiffs second motion to remand based on new information (# 70) and supplement (# 72).
Plaintiff argues in # 72 that as a matter of law this case must be remanded based on the Fifth Circuit’s recent opinion, De Jongh v. State Farm Lloyds, 555 Fed.Appx. 435, No. 13-20174, 2014 WL 644564 (5th Cir. Feb. 20, 2014).
Undisputed Facts
In the case before this Court the following facts are undisputed and are supported by the record. On August 15, 2012 Plaintiff, a Texas citizen, filed her suit in the 165th Judicial District of Harris County, Texas against State Farm Lloyd’s, Inc. (“Lloyd’s, Inc.”), which she thought was her insurer, and against adjuster Stewart Brown (# 1, Ex. C), but served State Farm Lloyd’s (“State Farm”), her real insurer, on September 10, 2012. State Farm filed an Original Answer (# 1-4, Ex. D) in which it disclosed in the first sentence that it had been incorrectly named as “Lloyd’s, Inc.” On October 8, 2012 Plaintiff filed a First Amended Petition (# 1-5, Ex. E), still identifying the insurer Defendant as “State Farm Lloyd’s, Inc.”
On that same day State Farm removed the suit to this Court on diversity grounds, reiterating that Plaintiff incorrectly named Lloyd’s, Inc. as the defendant. Lloyds, Inc., like Plaintiff, is a citizen of Texas. In the Notice of Removal, State Farm explained that it is a citizen of the states of Illinois, Florida and Pennsylvania and a “Lloyd’s Plan” organized under Chapter 941 of the Texas Insurance Code, “consisting] of an association of underwriters, each of whom, at the time this civil action was commenced, were, and still are, citizens and residents of the states of Illinois, Florida and Pennsylvania making State Farm a citizen and resident of the states of Illinois, Florida and Pennsylvania for diversity purposes.”
Relevant Law
In De Jongh, a state court suit asserting the same kinds of claims brought by Plaintiff in this suit nominally against an individual adjuster and purported insurer, Lloyds, Inc., with a trade name similar to the real insurer, State Farm. Unlike in the instant action, De Jongh, a Texas resident, served Lloyd’s Inc., a Texas resident, and continued to assert her claims against it throughout the litigation. State Farm answered the suit, stated that De Jongh had incorrectly named Lloyd’s, Inc. as the Defendant, claiming a “misnomer,” and maintained that it was the correct defendant. 555 Fed.Appx. at 436, 437, 2014 WL 644564, at *1, 2. The Fifth Circuit highlighted the fact, however, that State Farm did not move to intervene or to ask the state court to substitute it as the proper party in interest. 555 Fed.Appx. at 436, 2014 WL 644564, at *1. State Farm then removed the case on diversity grounds, and in its notice of removal stated that De Jongh had named the wrong entity, that State Farm was a citizen of Illinois, Florida, and Pennsylvania, that the adjuster, Dwight Johnson (a Texas resident), had been improperly joined, and that complete diversity of citizenship existed among the real parties in interest, i.e., De Jongh and State Farm. Id. Unlike in the instant case, De Jongh did not move to remand, and the district court did not dismiss either Lloyds, Inc. or the adjuster. Following a bench trial, the district court entered a take-nothing judgment in favor of Johnson and State Farm; Lloyds, Inc. was not mentioned in the final judgment. De Jongh filed a timely appeal, arguing that the district court lacked subject matter jurisdiction because (1) State Farm was not a party to the suit and (2) all the actual
In questioning whether it had subject matter jurisdiction, the Fifth Circuit properly examined De Jongh’s original petition at the time of removal
Here, State Farm never became a party in this action. Jongh did not name State Farm as a defendant in her original petition; although it asserted in its answer and notice of removal that Jongh incorrectly named Lloyds as a defendant, State Farm did not move to intervene or otherwise request that the district court substitute it as the proper party in interest. Consequently it lacked the authority to remove this action to federal court. See Salazar, 455 F.3d at 575; Millwood, 472 F.2d at 272.
555 Fed.Appx. at 437, 2014 WL 644564, at *2. Noting the well established precept that a plaintiff is the master of her complaint, which is generally used to permit plaintiffs to draft their petitions to avoid federal jurisdiction and removal, the Fifth Circuit concluded that a plaintiff may choose the parties she wishes to sue and “[t]he district court lacked the authority to disregard Jongh’s choice to sue Lloyds, not State Farm, and assert diversity jurisdiction.” 555 Fed.Appx. at 438, 2014 WL 644564, at *2, citing Salazar, 455 F.3d at 575, 573 (under nearly identical facts, holding that “a district court cannot ‘create removal jurisdiction based on diversity by substituting parties.’ ”). Because in De Jongh State Farm “never properly became a defendant,” it lacked the authority to remove the case and the federal district court “lacked subject matter jurisdiction because each of the proper parties to this action — Jongh, Lloyds, and Johnson — are Texas residents.” 555 Fed.Appx. at 439, 2014 WL 644564, at *3. The Fifth Circuit vacated the final judgment and remanded the suit to state court. Id.
Nevertheless, Plaintiff ignores critical distinctions between De Jongh and this case, which undermine her argument for remand. Like State Farm in De Jongh, State Farm here argues that Plaintiffs erred in naming Lloyd’s Inc. as the defendant in her state court petitions. However in De Jongh, the Fifth Circuit in a footnote explains the distinction between a “misnomer” and a “misidentification”
*864 The misnomer/misidentification dichotomy usually arises in cases involving whether the statute of limitations was tolled by filing against a party that is defectively named in some way. With a misnomer, the correct party, although misnamed, is served with notice of the suit; in that situation, limitations is tolled .... This is in contrast to a misidentification, which “arises when two separate legal entities actually exist and a plaintiff mistakenly sues the entity with a name similar to that of the correct entity.” .... A misidentification, unlike a misnomer, does not toll the statute of limitations, [citations omitted]
555 Fed.Appx. at 438, 2014 WL 644564, at *3.
In the instant case, Plaintiff did serve State Farm (not Lloyd’s, Inc.) with her Original Petition when she initiated suit in state court, even though the Defendant was wrongly named. # 1, Ex. B. The Court observes that not only are the two full names of these entities almost identical, but the fact that State Farm as a Texas Lloyd’s Plan (see footnote 1) aids in possible confusion. Moreover, there was and is no dispute that State Farm issued the policy at issue and that Brown, the adjuster, worked for State Farm, not Lloyd’s, Inc.
State Farm points out that under Texas law, when a defendant is misnamed in a suit, but is served with the misnomer and involved in the suit, the court acquires jurisdiction over the misnamed party if it is clear that no one is prejudiced by the error. In Reddy Partnership/5900 North Freeway LP v. Harris County Appraisal, 370 S.W.3d 373, 376-77 (Tex. 2012), the Texas Supreme Court wrote,
*865 Misnomer arises when a party misnames itself or another party, but the correct parties are involved.” In re Greater Hous. Orthopaedic Specialists, Inc., 295 S.W.3d 323, 325 (Tex. 2009) (per curiam). When the correct party sues or is sued under the incorrect name, “the court acquires jurisdiction after service with the misnomer if it is clear that no one was misled or placed at a disadvantage by the error.” Sheldon v. Emergency Med. Consultants, I, P.A., 43 S.W.3d 701, 702 (Tex.App.—Fort Worth 2001, no pet.).
This is in contrast to misidentification, which “arises when two separate legal entities actually exist and a plaintiff mistakenly sues the entity with a name similar to that of the correct entity.” Chilkewitz v. Hyson, 22 S.W.3d 825, 828 (Tex. 1999). A misidentification’s consequences are generally harsh, but the same is not true for misnomers. See In re Greater Hous. Orthopaedic Specialists, Inc., 295 S.W.3d 323, 325 (Tex. 2009) (per curiam). Courts generally allow parties to correct a misnomer so long as it is not misleading. Id.
For all these reasons, the Court finds that the naming of State Farms as Lloyd’s Inc. in Plaintiffs state court petition was a misnomer that has been properly cured. Accordingly, the Court
ORDERS that Plaintiffs second motion to remand (# 70) is DENIED.
. As explained in Hebert v. State Farm Lloyds, Inc., Civ. A. No. 1:09-cv-532, 2009 WL 3297296, at *1 n. 1 (E.D.Tex. Oct. 14, 2009),
“It is important to note that State Farm Lloyds and Lloyd’s are distinct entities. Texas Lloyd's plans such as State Farm Lloyds are singular entities created by Texas law.” Cronin v. State Farm Lloyds, No. H-08-1983, 2008 WL 4649653, at *5 (S.D.Tex. Oct. 10, 2008). State Farm sells insurance under a “Lloyd’s plan,” through which a group of underwriters combine to issue insurance through an attorney-in-fact, in this case, Lloyds, Inc. Martinez v. State Farm Lloyds, 204 Fed.Appx. 435, 436 (5th Cir. 2006) (citing Tex. Ins.Code Ann. § 941.001); see Castillo v. State Farm Lloyds, 210 Fed.Appx. 390, 393 (5th Cir. 2006); Trevino v. State Farm Lloyds, 207 Fed.Appx. 422, 424 (5th Cir. 2006); Mata v. State Farm Lloyds, 206 Fed.Appx. 403, 404 (5th Cir. 2006); Santos v. State Farm, Lloyds, No. SA-06-CA-650, 2006 WL 3779798, at *3 (W.D.Tex. Nov. 3, 2006).
*862 " '[T]he attorney in fact acts as an agent for the Lloyd's group.’ ” Castillo, 210 Fed.Appx. at 393 (quoting Royal Ins. Co. of Am. v. Quinn-L Capital Corp., 3 F.3d 877, 882 (5th Cir. 1993)). An attorney-in-fact is authorized by the underwriters to execute insurance policies, but does not bear risks and has no contractual relationship with the insured. Martinez, 204 Fed.Appx. at 436; see Salazar v. Allstate Texas Lloyd’s, Inc., 455 F.3d 571, 572 n. 1. (5th Cir. 2006). "[A] Texas Lloyd’s Plan such as State Farm Lloyds possesses a legal identity separate and distinct from its underwriters.” Cronin, 2008 WL 4649653, at *5.
. In light of State Farm’s assertion that it was a citizen of Illinois, Florida and Pennsylvania and because the Court found that the claims against adjuster Brown were indistinguishable from those against the insurer, this Court subsequently dismissed Brown for improper joinder in an effort to defeat diversity jurisdiction, as well as all claims against State Farm under Rule 12(b)(6) for failure to state a claim for which relief may be granted (# 20). Plaintiff subsequently amended her pleadings (instrument # 24), with the style naming “Lloyd’s, Inc.” again, but with the content clearly identifying “State Farm” as the defendant.
. The right to remove depends upon the plaintiffs’ pleading at the time of the petition for removal. Pullman Co. v. Jenkins, 305 U.S. 534, 537-38, 59 S.Ct. 347, 83 L.Ed. 334 (1939); Cavallini v. State Farm Mutual Auto Ins., 44 F.3d 256, 264 (5th Cir. 1995).
. Usually the distinction becomes an issue where there is a statute of limitations challenge.
. According to # 1-2, Ex. B, Brown was also served.
. Federal Rule of Civil Procedure 15(c) "allows an amendment changing the name of a party to relate back to the original complaint only if the change is the result of error, such as a misnomer or misidentification.’ " Miller v. Mancuso, 388 Fed.Appx. 389, 391 (5th Cir. 2010), quoting and emphasizing Jacobsen v. Osborne, 133 F.3d 315, 320 (5th Cir. 1998). Rule 15(c) applies only to amended pleadings in the same action as the original timely pleading. Ultraflo Corp. v. Pelican Tank Parts, Inc., 926 F.Supp.2d 935, 947 (S.D.Tex. 2013).
Reference
- Full Case Name
- Sara DALTON v. STATE FARM LLOYD'S, INC. and Stewart Brown
- Cited By
- 3 cases
- Status
- Published