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DEFENDANT ’S NOTICE OF REMOVAL Page 1
4846-4678-3469v1 IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
MIDLAND-ODESSA DIVISION
QUADRIGA INVESTMENTS, INC.,
Plaintiff,
v. AFFILIATED FM INSURANCE COMPANY AND WILLIAM TERRELL BUGG,
Defendants. §
§ § § § § § § § § §
CIVIL ACTION NO.: 7:21-cv-00115
DEFENDANT’S NOTICE OF REMOVAL
COMES NOW, Defendant Affiliated FM Insu rance Company (“AFM”) and files this
Notice of Removal under 28 U.S.C. §§ 1332, 1441, and 1446 and states:
I.
SUMMARY OF NOTICE
1. This lawsuit arises out of Plaintiff Quadri ga Investments, Inc.’s claim for coverage
under a commercial property insurance policy i ssued by AFM for fire damage purportedly
sustained by a commercial property. Plaintiff – who according to its Pet ition is currently doing
business in Ector County, Texas – asserts seve ral common law and statutory causes of action
against AFM – a foreign insurance company organized under the laws of Rhode Island, with its principal place of busin ess in Rhode Island.
2. In a transparent attempt to deprive this Court of diversity ju risdiction, Plaintiff’s
petition also asserts causes of ac tion against William Terrell Bugg (“ Bugg”), an individual resident
of Allen, Texas, who was AFM’s cl aims adjuster in this matter. Bu t, as set forth below, Bugg has
been improperly joined as defendant in this laws uit, because the vague a nd conclusory allegations
in Plaintiff’s Petition fail to establish a viable basis for recovery against Bugg. Accordingly, this Case 7:21-cv-00115 Document 1 Filed 06/21/21 Page 1 of 11
DEFENDANT ’S NOTICE OF REMOVAL Page 2
4846-4678-3469v1 Court may disregard Bugg’s citizensh ip in determining its jurisdic tion over this matter under 28
U.S.C. § 1332(a).
3. Because the amount in controversy in this case plainly exceeds $75,000, and
complete diversity of citizenship exists betw een Plaintiff and AFM (t he only properly joined
defendant in this lawsuit), removal of th is action is proper un der 28 U.S.C. § 1332(a).
II.
INTRODUCTION
4. Plaintiff Quadriga Investments, Inc., (“ Plaintiff”), commenced this action on May
20, 2021, by filing Plaintiff’s Original Petit ion (“Original Petition”) in the 244th Judicial District
Court of Ector County, Texas – Cause No.C-21-05-0570-CV.
5. AFM accepted service of Plaintiff’s Orig inal Petition on June 10, 2021 and it
entered an appearance in this action on June 17, 2021. AFM thus files this Notice of Removal
within the 30-day period requi red by 28 U.S.C. § 1446(b)(2)(B).
6. Venue is proper in this district under 28 U.S.C. § 1441(a) because the state court
where the action is pending is located in this district.
III.
BASIS FOR REMOVAL
7. Removal is proper under 28 U.S.C. § 1332(a) if there is complete diversity between
the parties and the amount in controversy exceeds $75,000 excluding interest, costs, and attorneys’
fees. These two conditions are clearly satisfied in this matter.
A. Removal is Proper Because Complete Di versity of Citizenship Exists Between
Plaintiff and AFM
8. A corporation is a citizen of the state where it is incorporated as well as the state
where it has its principal place of business. Here, Pl aintiff Quadriga Investments, Inc. is a Texas
corporation with its principal pl ace in Midland, Texas. Because Plai ntiff is an entity incorporated Case 7:21-cv-00115 Document 1 Filed 06/21/21 Page 2 of 11
DEFENDANT ’S NOTICE OF REMOVAL Page 3
4846-4678-3469v1 under the laws of the state of Texas and has its prin cipal place of business in Texas, Plaintiff is a
citizen of Texas for purposes of diversity jurisdiction.
9. Defendant AFM is an insurance company incorporated in the State of Rhode Island
with its principal place of busin ess in Rhode Island. AFM is thus a citizen of Rhode Island for
diversity jurisdiction purposes.
10. Because Plaintiff is a citi zen of Texas and AFM is a citizen of Rhode Island,
complete diversity of citizenship exists in this lawsuit.
(i) Plaintiff Improperly Joined Bugg as a Defe ndant to Defeat This Court’s Diversity
Jurisdiction.
11. Improper joinder is es tablished in two ways: “(1) actual fraud in the pleading of
jurisdictional facts, or (2) inability of the plaint iff to establish a cause of action against the non-
diverse party in state court.”1 Under the second approach, which applies here, a defendant claiming
improper joinder must show “there is no reasonable basis for the dist rict court to predict that the
plaintiff might be able to recove r against an in-state defendant.”2
12. When evaluating a plaintiff’s reasonable possibility of recovery, the Court may
conduct “a Rule 12(b)(6) type analysis, looking init ially at the allegations of the complaint to
determine whether the complaint states a claim under state law ag ainst the in-state defendant.”3
And, if the plaintiff has “ misstated or omitted discrete facts th at would determine the propriety of
joinder, the court may, in its di scretion, pierce the pleadings and consider summary judgment-type
1 Cuevas v. BAC Home Loans Servicing, LP , 648 F.3d 242, 249 (5th Cir. 2011) (citing McDonal v. Abbott Labs. ,
408 F.3d 177, 183 (5th Cir. 2005)).
2 Id. (quoting Smallwood, 385 F.3d at 573).
3 Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004). Case 7:21-cv-00115 Document 1 Filed 06/21/21 Page 3 of 11
DEFENDANT ’S NOTICE OF REMOVAL Page 4
4846-4678-3469v1 evidence to determine whether the plaint iff has a basis in fact for the claim.4 This analysis
“necessarily incorporates th e federal pleading standard….”5
13. Under a Rule 12(b)(6) analysis, a plaintif f’s obligation to provide the grounds of
his entitlement to relief requires more than labels and conclusions.6 Importantly, a court is not to
strain to find inferences favorable to the plai ntiff and is not to accept conclusory allegations,
unwarranted deductions, or legal conclusions.7 Indeed, as the United States Supreme Court has
stated, a pleading offering only “labels and conclu sions,” “a formulaic recitation of the elements
of a cause of action” or “naked assertions devoid of fu rther factual enhancemen t” is not sufficient
and must be dismissed.8 Finally, to pass muster under a Rule 12(b)(6) analysis, the factual
allegations in a petition must state a cla im for relief that is plausible on its face.9 Plausibility
requires more than a mere possi bility; it calls for enough facts to raise a reasonable expectation
that discovery will reveal eviden ce of actionable misconduct conduct.10
(ii) The sparse and conclusory allegations in Plaintiff’s Petition fail to
establish a reasonable possibility of recovery against Bugg under Texas
law.
14. Under this standard, it is clear Plaintiff’s Petition fails to establish a reasonable
possibility of recovery against Bugg. Indeed, rather than allegi ng specific facts against Bugg which
4 Id.
5 Int’l Energy Ventures Mgmt., L.L.C. v. United Energy Group, Ltd. , 818 F.3d 193, 200 (5th Cir. 2016).
6 See Papasan v. Allian, 478 U.S. 265, 286 (1986) (on a motion to dismiss, courts “are not bound to accept as true
a legal conclusion couched as a factual allegation”).
7 R2 Invs. LDC v. Phillips , 401 F.3d 638, 642 (5th Cir. 2005).
8 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
9 See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 565 (2007).
10 See id. Case 7:21-cv-00115 Document 1 Filed 06/21/21 Page 4 of 11
DEFENDANT ’S NOTICE OF REMOVAL Page 5
4846-4678-3469v1 (if established) would lead to individual liabil ity, Plaintiff has articulated only non-specific and
conclusory allegations against Bugg, together with near-verbatim quot ations of statutory
provisions that Plaintiff contends Bugg violated.11 At bottom, Plaintiff’s Petition alleges nothing
more than Bugg violated the Texa s Insurance Code. These “naked assertions devoid of further
factual enhancement” fall fatally short of establishing a viable cause of action against Bugg under
Texas law.12
(iii) Bugg cannot be held liable under Section 541.060 of the Texas Insurance
Code under the facts alleged in Plaintiff’s Petition.
15. In addition to being vague, many of Plaint iff’s allegations against Bugg fail for yet
another reason: Federal courts a pplying Texas law have repeatedly held that insurance adjusters –
like Bugg – cannot be held liable on the claims asserted in Plaintif f’s Petition. Plaintiff’s Petition
alleges, for example, that Bugg committed the following violations of the Texas Insurance Code:
misrepresenting one or more materi al facts and/or policy provisions
relating to coverage;
failing to attempt in good faith to ef fectuate a prompt, fair, and equitable
settlement of a claim with respect to which their liability has become
reasonably clear;
failing to promptly prov ide a reasonable explanation of the basis in law
or fact for the denial of Plaintiff’s claim;
refusing to affirm or deny c overage in a reasonable time;
refusing to conduct a reas onable investigation;
11 See Plaintiffs’ Petition at 4, 8-9.
12 Ashcroft, 556 U.S. at 678 (2009); see also See Griggs v. State Farm Lloyds , 181 F.3d 694, 698 (5th Cir. 1999) ;
Patel v. Acceptance Indem. Ins. Company, No. 4:15-CV-944-A, 2016 WL 361680, at *3 (N.D. Tex. Jan 28, 2016)
(McBryde, J.) (holding that similar allegations agains t in-state adjuster “[were] nothing more than mere
conclusions,” thus making the plaintiff’s lawsuit “but a nother in a long line of cases in which attorneys for an
insured-plaintiff joined as a defendant in a lawsuit file d against an insurance company to recover policy benefits
the insurance adjuster or another repr esentative of the insurance company in an effort to avoid removal of the
case from state court to federal court”). Case 7:21-cv-00115 Document 1 Filed 06/21/21 Page 5 of 11
DEFENDANT ’S NOTICE OF REMOVAL Page 6
4846-4678-3469v1 hiring biased experts;
ignoring damage known to be covered by the Policy; and/or
conducting an outcome-oriented investigation…13
16. Texas law permits claims adjusters to be he ld individually liable for violations of
the Texas Insurance Code.14 “But for [such an individual] to be held individually liable, [he] must
have committed some act that is prohibited by the [Code], not just be connected to an insurance company’s denial of coverage.”
15 .
17. Consistent with this well-settled principle, federal courts have held that adjusters –
like Bugg – cannot be held liable under Section 541.060(a)(1) of th e Texas Insurance Code where
the alleged misrepresentations made the basis of the insured’s clai m involve the cause or scope of
damage to the plaintiff’s pr operty, not the deta ils of the insurance policy at issue.16 To state a claim
13 See Plaintiffs’ Petition at 6-8.
14 Messersmith v. Nationwide Mut. Fire Ins. Co. , 10 F.Supp.3d 721, 724 (N.D. Tex. 2014) (Solis, J.).
15 Id. “[E]ven though an adjuster is a “person” [against wh om claims may be asserted] under the Insurance Code,
an adjuster cannot be held liable for violation of the Code unless he causes an injury distinguishable from the
insurer's actions.” Aguilar v. State Farm Lloyds , No. 4:15–CV–565–A, 2015 WL 5714654, at *3 (N.D. Tex. Sept.
28, 2015) (McBryde, J.). “In other words, the adjuster must have committed some act prohibited by the statute, not just be connected to an insurance company's denial of coverage.” Id.
16 See, e.g., Messersmith , 10 F. Supp. 3d at 724 (holding that adjuster’s post-loss representations regarding the nature
and extent of storm damage to the insured’s roof failed to support the insured’s claim under section 541.060(a)(1),
because those alleged statements did no t relate to the coverage at issue); Mainali Corp. v. Covington Specialty
Ins. Co., No. 3:15–CV–1087–D, 2015 WL 5098047, at *4 (N.D. Tex. Aug. 31, 2015) (Fitzwater, J.) (insured
failed to state a claim against adjuster under section 54 1.060(a)(1) where petition allege d the adjuster “failed to
conduct a reasonable investigation, substantially underestimated the damage to the Property, and denied obvious
covered damage to the Property,” but “d[id] not allege [the adjuster] made misrepresentations about the details of
the Policy”); One Way Investments v. Century Ins. Co. , No. 3:14-CV-2839-D, 2014 WL 6991277, at *4 (N.D.
Tex. Dec. 11, 2014) (Fitzwater, J.) (insured’s allegations that adjuster misrepresented the extent of the storm
damage to the insured’s property and misstated that such damage was caused by factors not covered under the
policy failed to state a claim under s ection 541.060(a)(1 ), because “those statements d[id] not relate to the
‘coverage at issue’”) (quoting Messersmith , 10 F. Supp. 3d at 724); accord Slabaugh v. Allstate Ins. Co. , No.
4:15-CV-115, 2015 WL 4046250, at *9 (E.D. Tex. June 30, 2015) (holding that insured’s allegations against
adjuster, “all of which relate[d] to his inspection and determination regarding the extent of hail and wind damage, [we]re not actionable under the Texas Insurance Code because they d[id] not relate to misrepresentations about coverage provided by the terms of the policy”). Case 7:21-cv-00115 Document 1 Filed 06/21/21 Page 6 of 11
DEFENDANT ’S NOTICE OF REMOVAL Page 7
4846-4678-3469v1 under Section 541.060(a)(1), “[t]he misr epresentations must be about the details of the policy, not
the facts giving rise to a claim for coverage.”17 And here, Plaintiff does not allege that Bugg made
any representations about policy de tails. Instead, Plaintiff’s allegati ons concern the facts that give
rise to Plaintiff’s claim under the AFM policy.18
18. Plaintiff fares no better with its contention that Bugg vi olated Section the Texas
Insurance Code by “failing to a ttempt in good faith to effectuate a prom pt, fair, and equitable
settlement of a claim with respect to whic h their liability has become reasonably clear”19 – a
statutory provision under which federal courts applying Texas law have concluded insurance
claims adjusters (like Bugg) cannot be held liable.20 Plaintiff’s Petition thus fails to state a claim
against Bugg for purported viola tions of Section 541.060(a)(2)(A).
19. Plaintiff also misses the mark with its allegation that that Bugg violated Section
541.060(a)(3) of the Texas Insurance Code by “f ailing to promptly provide a reasonable
explanation of the basis in law or fact for the denial of Plaintiff’s claim.”21 As federal courts
applying Texas law have explai ned, “an adjuster cannot be held liable under § 541.060(a)(3)
because an adjuster has no obligation to provide a policyholder a reasonable explanation of the
basis in the policy for the insurer' s denial of a claim, or offer of a compromise settlement of a
17 One Way , 2014 WL 6991277, at *4 (quoting Messersmith , 10 F.Supp.3d at 724).
18 See Plaintiff’s Petition, Exhibit B at 7-8.
19 See Plaintiff’s Petition, Exhibit B at 7-8.
20 See Messersmith , 10 F.Supp.3d at 724; Meritt Buffalo Events Ctr., 2016 WL 931217 at *4; Mainali Corp. , 2015
WL 5098047 at *4; Mercury Multifamily Mgmt., LLC v. Peleus Ins. Co. , No. 3:16-CV-2557-D, 2016 WL
9091289, at *3 (N.D. Tex. Nov. 30, 2016) (Fitzwater, J.).
21 T EX. INS. CODE § 541.060(a)(3). Case 7:21-cv-00115 Document 1 Filed 06/21/21 Page 7 of 11
DEFENDANT ’S NOTICE OF REMOVAL Page 8
4846-4678-3469v1 claim.”22 Plaintiff thus has no reasonable basi s for recovery against Bugg under Section
541.060(a)(3).
20. Plaintiff further cl aims that Bugg violated Se ction 541.060(a)(4) of the Texas
Insurance Code by “refusing to affirm or deny coverage in a reasonable time.”23 However, as
several federal courts have noted, an adjuster ca nnot be held liable under th is section because an
adjuster lacks authority to affirm or deny coverage of a claim to a policyholder.24 Plaintiff is thus
precluded from prevailing on its causes of against Bugg under Section 541.060(a)(4).
21. Plaintiff is also prohibited from rec overing against Bugg under Texas Insurance
Code § 541.060(a)(7), which provides for potential li ability against an insurer who “refus[es] to
pay a claim without conducting a reasonable investigation with respect to that claim.”25 As the
federal courts applying Texas law have recognized:
Like § 541.060(a)(2), the bad behavi or that [§ 541.060(a)(7)] targets
is an insurer's refusal to pay unde r certain circumstances. Those who
can be held liable are the insuran ce company or the individual at the
insurance company who refuses to pay the claim, not the individual
responsible for conducti ng the investigation.26
Plaintiff’s Petition thus falls s hort of establishing a possibilit y of recovery against Bugg under
Section 541.060(a)(7) of th e Texas Insurance Code.
22 Mainali Corp. , 2015 WL 5098047, at *4 (holding that insured could not recover against adjuster under section
541.060(a)(3) of the Texas Insurance Code); see also Meritt , 2016 WL 931217, at *4 (same).
23 See Plaintiffs’ Petition, Exhibit B at 6-8.
24 See, e.g., One Way Investments , at *5, 2014 WL 6991277.
25 T EX. INS. CODE § 541.060(a)(7).
26 Mainali Corp. , 2015 WL 5098047, at *4 (N.D. Tex. Aug. 31, 2015) (Fitzwater, J.) (quoting Messersmith , 10
F.Supp.3d at 725) (internal brackets omitted); see also Mercury Multifamily Mgmt. , 2016 WL 9091289 at *3
(same); Meritt Buffalo Events Ctr., 2016 WL 931217 at *4 (same). Case 7:21-cv-00115 Document 1 Filed 06/21/21 Page 8 of 11
DEFENDANT ’S NOTICE OF REMOVAL Page 9
4846-4678-3469v1 (iv) Bugg cannot be held liable for alleged violations of Chapter 542 of the
Texas Insurance Code.
22. Plaintiff also misses the mark with their suggestion that Bugg can be held liable for
alleged violations of Chapter 542 of the Texas Insurance Code howev er, as federal courts applying
Texas law have aptly noted, “the Prompt Payment of Claims Act applies only to insurers”27 – not
individual insurance claims ad justers, like Bugg. As a result, Plaintiff’s Petition has not
established (and cannot establis h) a reasonable probability of recovery from Bugg under any
section of Chapter 542 for the Texas Insurance Code. B. Removal is Proper Because Plaintiff’ s Claimed Damages Exceed This Court’s
Jurisdictional Threshold of $75,000
23. Under 28 U.S.C. § 1332(a), diversity subject matter jurisd iction requires that the
matter in controversy “exceed[] the sum or valu e of $75,000, exclusive of in terest and costs.” “To
determine whether the amount in co ntroversy is satisfied, the Court must look to th e complaint at
the time it was filed. . . . An allegation in th e complaint of the requisite amount will normally
suffice to confer juri sdiction upon the court if the claim is made in good faith . . . .”28
24. Here, Plaintiff’s Petition states that Plaint iff seeks to recover damages in excess of
$1,000,000 in this lawsuit.29 AFM denies the validity and merits of Plaintiff’s claims, the legal
theories upon which those claims are based, and the allegations for monetary and other relief
requested by Plaintiff. However, for purposes of removal only, and without conceding that Plaintiff
is entitled to any damages or other relief in this ac tion, it is facially appa rent that the amount in
27 Messersmith , 10 F. Supp. 3d at 723; see also Mainali Corp. , 2015 WL 5098047, at *6.
28 Gutierrez v. Nissan N. Am., Inc. , No.: A–15–CA–01250–SS, 2016 WL 8258790, *2 (W.D. Tex. Apr. 12, 2016)
(citations and internal quotation marks omitted); see also KVOS, Inc. v. Associated Press , 299 U.S. 269, 277, 57
S. Ct. 197, 200, 81 L. Ed. 183 (1936) (same).
29 See Plaintiff’s Petition, Exhibit B. Case 7:21-cv-00115 Document 1 Filed 06/21/21 Page 9 of 11
DEFENDANT ’S NOTICE OF REMOVAL Page 10
4846-4678-3469v1 controversy exceeds $75,000, exclusiv e of interest and costs.
25. Because there is complete diversity between the parties and the amount in
controversy exceeds $75,000 excluding interest, cost s, and attorneys’ fees, this Court has
jurisdiction under 28 U.S.C. § 1332(a), and this action is removable under 28 U.S.C. § 1441(b).
IV.
COMPLIANCE WITH 28 U.S.C. § 1446
26. As required by 28 U.S.C. § 1446(a), a copy of each of the following are attached to
(or filed with) this Notice of Removal:
a. the docket sheet in the state court acti on, attached as Exhibit A to this Notice
of Removal; and
b. each pleading, writ, or order filed, issued, or entered in the state court action
(as separate attachments arra nged in chronological order acc ording to state court filing
date), attached as Exhibits B – C to this Notice of Removal.
27. Pursuant to 28 U.S.C. § 1446( d), written notice of filing of this Notice of Removal
will be given to all adverse parties promptly after the filing of this Notice of Removal, and AFM
will promptly file a copy of this Notice of Removal with the clerk of the state court where the action is pending.
WHEREFORE, Defendant Affilia ted FM Insurance Company he reby provides notice that
this action is duly removed from the 244th Judicial District Court of Ector County, Texas, to the
United States District Court for the Western Di strict of Texas, Midl and-Odessa Division, and
respectfully requests that this Court enter such fu rther orders as may be necessary and appropriate.
Case 7:21-cv-00115 Document 1 Filed 06/21/21 Page 10 of 11
DEFENDANT ’S NOTICE OF REMOVAL Page 11
4846-4678-3469v1 Respectfully submitted,
ZELLE LLP
By: /s/ Todd M. Tippett
Thomas H. Cook, Jr.
State Bar No. 00783869
[email protected] Todd M. Tippett State Bar No. 24046977 [email protected]
Crystal L. Vogt
State Bar No. 24048768 [email protected]
901 Main Street, Suite 4000 Dallas, TX 75202-3975 Telephone: 214-742-3000 Facsimile: 214-760-8994
ATTORNEYS FOR DEFENDANTS AFFILIATED FM INSURANCE COMPANY AND WILLIAM TERRELL BUGG
CERTIFICATE OF SERVICE
A true and correct copy of the forgoing has been served on the followi ng counsel of record
in accordance with F EDERAL RULES OF CIVIL PROCEDURE on this 21st day of June 2021:
Shannon E. Loyd State Bar 24045706 [email protected]
Robert A. Pollom
State Bar No. 24041703 [email protected]
LOYD & POLLOM , P.L.L.C.
12703 Spectrum Drive, Suite 201 San Antonio, TX 78249 Telephone: 210-775-1424 Facsimile: 210-775-1410 Attorneys for Plaintiff Quadriga Investments, Inc.
/s/ Todd M. Tippett
Todd M. Tippett
Case 7:21-cv-00115 Document 1 Filed 06/21/21 Page 11 of 11