United States District Court, W.D. Texas, El Paso Division.
MANUEL ARRIOLA, Plaintiff,
MARC JONES CONSTRUCTION, LLC D/B/A SUNPRO SOLAR, et al., Defendants.
MEMORANDUM OPINION AND ORDER
THE HONORABLE DAVID BRIONES SENIOR UNITED STATES DISTRICT JUDGE
*1 On this day, the Court considered Plaintiff Manuel Arriola’s (“Mr. Arriola”) “[ ] Opposed Motion to Remand” (“Motion”) filed in the above-captioned case on August 1, 2022. ECF No. 5. Defendant Marc Jones Construction, LLC (“Marc Jones Construction”) filed a Response on August 15, 2022. ECF No. 9. Mr. Arriola did not file a Reply in the seven days that followed—the time allowed to submit a Reply per the Local Rules for the Western District of Texas. Local Rule CV-7(E)(2). After due consideration, the Court will grant Mr. Arriola’s Motion to Remand and will remand the entire case to state court.
This case stems from injuries Mr. Arriola sustained while he was lifting solar panels onto a rooftop at work. Orig. Pet. ¶ 6, ECF No. 1-1. Those injuries left Mr. Arriola disabled, and unable to work. Id. at. ¶ 8. Mr. Arriola was placed on medical leave and he sought benefits under the Texas Workers Compensation Act. Id. at. ¶ 7–8. About two months later, Mr. Arriola was notified that he had been fired. Id. at ¶ 9.
On May 19, 2022, Mr. Arriola filed his Original Petition in the 327th District Court of El Paso County, Texas. Notice of Removal ¶ 1, ECF No. 1. In his Original Petition, Mr. Arriola asserted two claims: (1) that Marc Jones Construction retaliated against him for asserting a workers’ compensation claim in violation of Tex. Lab. Code § 451 and (2) that Marc Jones Construction discriminated against him due to his disability in violation of Chapter 21 of the Texas Labor Code. Orig. Pet. ¶ 11–12, ECF No. 1-1.
On June 30, 2022, Marc Jones Construction removed the case based on this Court’s diversity jurisdiction under 28 U.S.C. §§ 1441 and 1332. Notice of Removal ¶¶ 3–7, ECF No. 1. A month later, Mr. Arriola filed a timely Motion to Remand arguing that Court must remand the case because “one of [his] claims arises under the workers’ compensation law, and cases arising under the workers’ compensation law are nonremovable. 28 U.S.C. § 1445.” Mot. ¶ 6, ECF No. 5. Marc Jones Construction concedes that Mr. Arriola’s workplace retaliation claim is not removable per 28 U.S.C. § 1445, which makes nonremovable any “civil action in any State court arising under the workmen’s compensation laws of such State,” and it agrees that the Court should remand this claim. Resp. 2, ECF No. 9; 28 U.S.C. § 1445. However, Marc Jones Construction argues that the Court maintains subject matter jurisdiction over Mr. Arriola’s workplace discrimination claim, and that it should keep that claim in federal court. Id.
The issue before the Court is whether § 1445 deprives this Court of jurisdiction over an otherwise removable state-law discrimination claim. The Court finds that it does. As a result, it will grant Mr. Arriola’s Motion and remand the entire case to state court.
Defendants may remove a case from state to federal district court when a complaint filed in state court could have been properly filed in federal court under the federal court’s original jurisdiction. 28 U.S.C. § 1441(a). A federal court has original diversity jurisdiction over a case when the amount in controversy is greater than $75,000 and there is complete diversity among the parties, such that no plaintiff is a citizen of the same state as any defendant. 28 U.S.C. § 1332(a); Strawbridge v. Curtiss, 7 U.S. 267, 267 (1806). Removal raises significant federalism concerns. Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5th Cir. 1998). Thus, Courts should construe removal jurisdiction narrowly and “any doubt as to the propriety of removal should be resolved in favor of remand.” Id.; Gutierrez v. Flores, 543 F.3d 248, 251 (5th Cir. 2008) (internal quotations omitted).
*2 If a case cannot be removed, it must be remanded. The text of § 1441, which governs the removal of cases, suggests that cases must be removed in their entirety. Recent opinions issued by district courts in Texas hold that unless Congress provides an exception, cases must also be remanded in their entirety. After examining the language of the removal statute and the policy reasons for these decisions, the Court ultimately concludes that Mr. Arriola’s case must be remanded in its entirety.
1. The Language of the Removal Statute Suggests That When Any Portion of a Case is Nonremovable, the Entire Case is Nonremovable.
The Court begins by examining the text of the statute that allows for the removal of a case from state court to federal court:
“Except as otherwise expressly provided by Act of Congress, any civil action brought in a State Court ... may be removed by the defendant or the defendants, to the district court of the United States .... ”
28 U.S.C. § 1441(a) (emphasis added).
The term “civil action” generally refers to an entire case. Escobedo v. Time Warner Entm’t Advance Newhouse P’ship, 811 F.Supp.2d 1289, 1292 (W.D. Tex. 2011). The notes accompanying various revisions to § 1441 support this proposition. As explained in those notes, the 1948 revision substituted the phrase “civil action” for previously used phrases like “in suits of a civil nature, at law or in equity,” and the words case, cause, and suit. 28 U.S.C.A. § 1441 (West) (1948 Revision Notes). All of these words are used to refer to a case in its entirety, rather than to the distinct claims within a case.
The case for interpreting “civil action” as referring to the entire case is strengthened by the language used within § 1441. For example § 1441(c)(1)(A), which relates to cases where the Court has federal question jurisdiction, clearly distinguishes between an individual “claim” and an entire “civil action.” It reads: “If a civil action includes a claim arising under the Constitution, laws, or treaties of the United States ... and ... a claim that has been made nonremovable by state, the entire action may be removed ....” This language shows that a civil action is made up of the claim or claims within it.
Federal district courts in Texas have recently analyzed the question of remanding a civil action that includes a claim made nonremovable by § 1445. They have found that “when ‘any civil action’ in § 1441(a) is construed to encompass the entire case and a claim is not removable under § 1441(a), the entire civil action must be remanded—even if there are other claims within the district court’s original jurisdiction.” Carey v. Bank of America, Marc Jones Construction cites a string of cases to argue that the Court should reach the opposite conclusion. Resp. 2-3, ECF No. 9. However, the majority of those cases are not analogous to this one because they involve instances where the Court had federal question jurisdiction, not diversity jurisdiction. For claims allowing Courts to exercise federal question jurisdiction, the statute expressly allows nonremovable claims to be severed and remanded and allows federal courts to keep the remaining claims. 28 U.S.C. § 1441(c)(2). The statute includes no such provision for cases where the Court exercises diversity jurisdiction over an action.
*3 Marc Jones Construction does cite a few cases implicating diversity jurisdiction where federal courts retained some of the claims while remanding the nonremovable claims. See Salazar v. Indem. Ins. Co. of N. Am., No. EP-10-CV-370 PRM, 2010 WL 11566257, at *3 (W.D. Tex. Dec 6, 2010, report and recommendation adopted, No. EP-10-CV-370-PRM, 2011 WL 13234891 (W.D. Tex. Jan. 3, 2011); Climer v. Twin City Fire Ins. Co., 2004 WL 1531796 at *5 (N.D. Tex. Jul. 8, 2004); Smith v. Fujicolor Processing, Inc., No. 02-CV-1218, 2002 WL 1798918, at *2 (N.D. Tex. Aug 2, 2002). However, these cases either involve breach of good faith and fair dealing claims, which the Fifth Circuit has decidedly declared do not arise under worker’s compensation laws and can be kept in federal court, or are almost twenty years old.
After interpreting the language of the removal statute, the Court concludes that only entire civil actions are removable, and thus only entire civil actions may be remanded unless Congress has provided an exception (as it has for federal question actions). Now that the Court has analyzed the language of the statute, the Court examines the policy reasons for remanding the entire case back to state court.
2. The Entire Civil Action Should be Remanded to Promote Efficiency and to Keep State Law Claims Together in State Court.
From a policy perspective, remanding the entire case to state court is preferable for two reasons. First, remand will promote efficiency and preserve judicial resources. Both of Mr. Arriola’s claims involve allegations of discrimination as an essential element: one focuses on discrimination due to the injury, and the other focuses on discrimination due to filing a worker’s compensation claim as a result of the injury. These allegations will inevitably involve similar, if not the same, facts. Thus, it makes sense for efficiency purposes for one court to analyze the claims together. Second, this case involves only issues of state law. State court is generally the preferred forum for issues involving state law. Purser v. Coralli, No. 3:11-CV-03295-L, 2012 WL 5875600, at *6 (N.D. Tex. Nov. 21, 2012).
Recent decisions by federal district courts in Texas have held that except when Congress says otherwise, a civil action that includes claims made nonremovable by § 1445 should be remanded to state court in its entirety. After examining the language of. § 1441(a), the Court agrees. Furthermore, the Court finds that remanding the entire action will promote efficiency and sensible institutional choice by keeping state law claims in state court. Therefore, the Court is of the opinion that the Motion should be granted and the following orders entered.
IT IS HEREBY ORDERED that Plaintiff Manuel Arriola’s “[ ] Opposed Motion to Remand,” ECF No. 5, is GRANTED.
IT IS FURTHER ORDERED that the Clerk remand the entire case to the state court.
SIGNED this 7th day of September 2022.
United States District Court, W.D. Texas, Pecos Division.
ALFREDO ODAR, Plaintiff,
FELIX ENERGY HOLDINGS II, LLC and ROCKY MOUNTAIN CRUDE OIL LLC, Defendants.
ORDER ADOPTING REPORT AND RECOMMENDATION
DAVID COUNTS UNITED STATES DISTRICT JUDGE
*1 BEFORE THE COURT is United States Magistrate Judge David B. Fannin’s Report and Recommendation (“R&R”) filed on April 12, 2022, in connection with Plaintiff Alfredo Odar’s (“Plaintiff”) Motion to Remand. (Doc. 9). Plaintiff filed Objections to the R&R. (Doc. 13). After due consideration, the Court ADOPTS the R&R (Doc. 12) and DENIES Plaintiff’s Motion to Remand. (Doc. 9).
This is a personal injury action originally filed in the 143rd District Court of Reeves County, Texas, Cause No. 21-03-23887-CVR, and subsequently removed to this Court on diversity jurisdiction. (Docs. 1, 1-2). Plaintiff alleges he was employed by Defendant Rocky Mountain Crude Oil, LLC (“RMCO”) as a “tanker truck driver” offloading crude oil to a depository pump owned by Defendant Felix Energy Holdings II, LLC (“Felix”) when he suffered bodily injury from a burst oil hose. (Doc. 1-2 at 16–18). Plaintiff asserts negligence claims against RMCO and Felix as well as a premises liability claim against Felix. (Id.).
On March 12, 2021, Plaintiff filed his First Amended Petition against RMCO and Felix. (Doc. 1-2 at 16). On April 22, 2021, Felix filed its first Notice of Removal (“First Notice of Removal”) with this Court under Cause No. 4:21-CV-00027-DC (W.D. Tex. Apr. 22, 2021) (“Odar I”) (ECF No. 1), invoking this Court’s diversity jurisdiction under 28 U.S.C. § 1332(a), premised upon RMCO’s purported fraudulent joinder due to a state law immunity from suit. (Doc. 1-2 at 35–36). On May 20, 2021, Plaintiff filed a motion to remand (the “Original Motion”) in the prior removed case, asserting RMCO appeared to be properly joined. Odar I (ECF No. 3). On June 15, 2021, Felix filed a Notice of Non-Opposition to Remand (“Non-Opposition Notice”), arguing that RMCO “has not answered or appeared before this Court,” or the state court action prior to removal, and attached an agreed order granting Plaintiff’s First Motion to Remand. (Doc. 9-2 at 2–3). The Court entered an Order Granting Motion for Remand (“Remanding Order”) on June 23, 2021. Odar I (ECF No. 5 at 1).
On October 22, 2021, Felix filed another Notice of Removal (“Second Notice of Removal”) with this Court, effectively removing the state court case to federal court for a second time. (Doc. 1). Felix argues that removal is now timely, and that complete diversity exists because, as Felix alleges it can now prove based upon a Certificate of Liability Insurance (“Insurance Document”), RMCO was fraudulently joined. Plaintiff filed his Motion to Remand in the instant case on November 4, 2021, claiming a second remand is appropriate for the following reasons: (1) Felix waived federal court jurisdiction by consenting to the Original Motion and is now judicially estopped from removing again; (2) Felix’s Second Notice of Removal is based upon the same grounds as the First Notice of Removal; (3) even if it were not, RMCO’s Insurance Document does not constitute “other paper” or is otherwise untimely. (Doc. 9). Plaintiff also requests attorney fees for the second removal. (Id. at 10–11). Felix filed a Response on November 17, 2021, to which Plaintiff replied on November 24, 2021.
*2 The Magistrate Judge recommended denying Plaintiff’s Motion to Remand, denying Plaintiff’s request for attorney fees, and dismissing RMCO from the present action as an improperly joined party on April 12, 2022. (Doc. 12). On April 26, 2022, Plaintiff objected to the R&R on the following grounds: (1) Plaintiff argues that policy considerations support remand; (2) subsequent removals on the same grounds are prohibited; and (3) Felix waived its right to proceed in federal court. (Doc. 13).
II. LEGAL STANDARD
Any party who desires to object to a Magistrate Judge’s findings and recommendations must serve and file written objections within fourteen (14) days after being served with a copy of the findings and recommendations. 28 U.S.C. § 636(b)(1). Failure to file written objections to the R&R within fourteen (14) days after being served with a copy shall bar that party from de novo review by the district court of the proposed findings and recommendations. Id. Moreover, except upon grounds of plain error, it shall also bar the party from appellate review of proposed factual findings and legal conclusions accepted by the district court to which no objections were filed. Id.; Thomas v. Arn, 474 U.S. 140, 150–53 (1985); United States v. Wilson, 864 F.2d 1219 (5th Cir. 1989) (per curiam).
The Court finds Plaintiff’s objections concern purely procedural matters. At first blush, it would seem that the inclusion of RMCO as a defendant would preclude removal. But RMCO was Plaintiff’s employer and immune from suit, and therefore, was improperly joined. In this case, Plaintiff’s objections based on policy considerations, whether a removal after a voluntary remand constitutes a prohibited subsequent removal on previously unadjudicated grounds, and waiver are OVERRULED because the Court concludes this case can remain in federal court. Plaintiff’s objections are procedural in nature and not jurisdictional. This Court will not remand the case because RMCO was improperly joined, and this Court has subject-matter jurisdiction over this action because the amount in controversy exceeds $75,000.00 and the parties are diverse in citizenship.
A. Improper Joinder
The test for improper joinder is “whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant, which stated differently means that there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against an in-state defendant.” Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004). Plaintiff has no cause of action in tort against RMCO because RMCO was Plaintiff’s employer at the time of the accident, and thus, Plaintiff’s exclusive remedy against RMCO is found in Texas’s workers’ compensation laws. Plaintiff does not claim RMCO committed an intentional tort. The Magistrate Judge found that Plaintiff is unable to establish a cause of action against the non-diverse defendant, RMCO, in state court; therefore, RMCO was improperly joined. No party objects to this finding. Accordingly, the R&R is ADOPTED on this ground and Plaintiff’s claims against RMCO shall be DISMISSED. In sum, RMCO was improperly joined, and the Court has subject-matter jurisdiction over this action.
B. Procedural Objections
The Court agrees with the Magistrate Judge that the instant removal presents a set of facts not previously adjudicated in the Court’s prior remand order. (Doc. 12 at 5–6). The prior remand order was devoid of substantive factual or legal analysis and presented to the Court as unopposed; therefore, the Court did not adjudicate any factual basis of the First Notice of Removal Accordingly, the Court OVERRULES Plaintiff’s objection and ADOPTS the R&R on this ground.
*3 Alternatively, the evidence Felix relies on in support of the second removal was not in Felix’s possession and therefore could not have been presented to the Court prior to the first Remanding Order. Thus, Felix would still be entitled to remove a second time based on new evidence. See Everett Fin., Inc. v. Kocher, No. 3:19-CV-1563-B, 2019 WL 4597574, at *3–*4 (N.D. Tex. Sept. 20, 2019). Because there is a new factual basis for the Second Notice of Removal, Plaintiff’s objections are OVERRULED, and the R&R is ADOPTED.
Next, the Court agrees with the Magistrate Judge that Felix filed its second notice of removal timely. Generally, to timely remove a case, a defendant must file a notice of removal within thirty days after the receipt of the initial pleading. Everett Fin., Inc. v. Kocher, No. 3:19-CV-1563-B, 2019 WL 4597574, at *2 (N.D. Tex. Sept. 20, 2019) (citing 28 U.S.C. § 1446(b)(1)). The removal must be nevertheless filed within one year after commencement of the state court action. 28 U.S.C. § 1446(c)(1). Plaintiff filed his petition in state court on March 12, 2021. (Doc. 1-2). Felix filed its Second Notice of Removal on October 22, 2021, within one year of the filing of the petition. (Doc. 1).
The removal statute further provides: “a notice of removal may be filed within 30 days after receipt by the defendant ... of a copy of an ... other paper from which it may first be ascertained that the case is one which is or has become removable.” 28 U.S.C. § 1446(b)(3). Essentially, § 1446(b) “provides a two-step test for determining whether a defendant timely removed a case.” Decatur Hosp. Auth. v. Aetna Health, Inc., 854 F.3d 292, 297 (5th Cir. 2017). If the case initially pleaded is removable, the defendant must file a notice of removal within thirty days of the receipt of the initial pleading; if not, the defendant must file a notice removal within thirty days from the receipt of an other paper “from which the defendant can ascertain that the case is removable.” Id.
The Court agrees with the Magistrate Judge that “other paper” includes acts or events not necessarily predicated upon the plaintiff’s voluntary act. See S.W.S. Erectors v. Infax, Inc., 72 F.3d 489, 494 (5th Cir. 1996). Felix received the Insurance Document at issue on October 8, 2021. Felix filed its Second Notice of Removal two weeks later. Accordingly, the Second Notice of Removal is timely, the R&R is ADOPTED, and Plaintiff’s objections are OVERRULED.
Finally, the Court rejects Plaintiff’s contention that the R&R did not address Plaintiff’s waiver argument. As stated by the R&R, “Plaintiff additionally cites no support for the proposition that Felix was required to make ‘reservations’ in Felix’s Non-Opposition Notice.” (Doc. 12 at 13). The Court agrees with the Magistrate Judge that Felix was not required to make a reservation of rights in its initial voluntary remand to avoid waiver of the right to remove to federal court upon discovery of an “other paper” that supports diversity jurisdiction based on fraudulent joinder. Accordingly, the Court OVERRULES Plaintiff’s objection and ADOPTS the R&R.
For the foregoing reasons, the Court ADOPTS the R&R (Doc. 12), OVERRULES Plaintiff’s Objections (Doc. 13), DENIES Plaintiff’s Motion to Remand (Doc. 9), DENIES Plaintiff’s request for attorney fees, and DISMISSES WITHOUT PREJUDICE Defendant Rocky Mountain Crude Oil, LLC as immune from suit and improperly joined.
*4 It is so ORDERED.
SIGNED this 13th day of May, 2022.
ALFREDO ODAR, Plaintiff,
FELIX ENERGY HOLDINGS II LLC, and ROCKY MOUNTAIN CRUDE OIL, LLC, Defendants.
REPORT AND RECOMMENDATION OF THE U.S. MAGISTRATE JUDGE
DAVID B. FANNIN UNITED STATES MAGISTRATE JUDGE
*1 TO THE HONORABLE DAVID COUNTS, U.S. DISTRICT JUDGE:
BEFORE THE COURT is Plaintiff Alfredo Odar’s (“Plaintiff”) Motion for Remand (hereafter, “Motion to Remand”) (Doc. 9). This case is before the U.S. Magistrate Judge by a standing order of referral from the District Judge pursuant to 28 U.S.C. § 636 and Appendix C of the Local Rules for the Assignment of Duties to United States Magistrate Judges. After due consideration, the undersigned RECOMMENDS that Plaintiff’s Motion to Remand be DENIED. (Doc. 9).
This case’s genesis is Plaintiff’s employment with Defendant Rocky Mountain Crude Oil, LLC (“RMCO”). On March 26, 2019, Plaintiff claims he was employed with RMCO at a site in Reeves County, Texas. (Doc. 1-2 at 16). Plaintiff alleges he was working as a “tanker truck driver” for RMCO and offloading crude oil from said tanker to a depository pump allegedly owned, operated, and controlled by Defendant Felix Energy Holdings II, LLC (“Felix”). Id. Plaintiff alleges that, while he was offloading oil via hoses, the depository pump “shut down,” causing a “buildup of pressure in the hose” and leading to its eventual bursting. Id. at 18. According to Plaintiff, the burst hose struck his face and sprayed crude oil on him, causing him injuries and pain. Id. Plaintiff now asserts negligence claims against RMCO and Felix, as well as a premises liability claim against Felix.
On March 12, 2021, Plaintiff filed his live First Amended Petition (hereafter, “Complaint”) against RMCO and Felix under Cause No. 21-03-23887-CVR, Alfredo Odar v. Felix Energy Holdings II, LLC, et al., in the 143rd District Court of Reeves County, Texas. (Doc. 1-2 at 16). On April 22, 2021, Felix filed its first Notice of Removal (hereafter, “First Notice of Removal”) with this Court under case style Alfredo Odar v. Felix Energy Holdings II, LLC, et al. (Odar I), No. 4:21-CV-00027-DC (W.D. Tex. Apr. 22, 2021) (ECF No. 1), invoking this Court’s diversity jurisdiction under 28 U.S.C. § 1332(a), premised upon RMCO’s purported fraudulent joinder due to a state law immunity from suit. (Doc. 1-2 at 35–36). On May 20, 2021, Plaintiff filed a motion to remand (hereafter, “Original Motion”) in the prior removed case, asserting that RMCO appeared to be properly joined. See Odar I (ECF No. 3). On June 15, 2021, Felix filed a Notice of Non-Opposition to Remand (hereafter, “Non-Opposition Notice”), arguing that RMCO “has not answered or appeared before this Court,” or the state court action prior to removal, and attached an agreed order granting Plaintiff’s First Motion to Remand. (See Doc. 9-2 at 2–3). The Court entered an Order Granting Motion for Remand (hereafter, “Remanding Order”) on June 23, 2021. Odar I (ECF No. 5 at 1).
On October 22, 2021, Felix filed another Notice of Removal (hereafter, “Second Notice of Removal”) with this Court, effectively removing the state court case to federal court for a second time. (Doc. 1). Felix argues that removal is now timely, and that complete diversity exists because, as it alleges it can now prove based upon a Certificate of Liability Insurance (hereafter, “Insurance Document”), RMCO was fraudulently joined. See id. Plaintiff submitted his Motion to Remand in the instant case on November 4, 2021, claiming that a second remand is appropriate for the following reasons: (1) Felix waived federal court jurisdiction by consenting to the Original Motion and is now judicially estopped removing again; (2) Felix’s Second Notice of Removal is based upon the same grounds as the First Notice of Removal; (3) even if it were not, RMCO’s Insurance Document does not constitute “other paper” or is untimely. (Doc. 9). Plaintiff also requests attorney’s fees for the second removal. See id. at 10–11. Felix filed a Response on November 17, 2021, to which Plaintiff produced a Reply on November 24, 2021. Accordingly, this matter is ripe for disposition.
*2 It is undisputed that RMCO and Plaintiff both possess Texas citizenship, and that Felix is otherwise a diverse defendant. (See Docs. 9, 10). The following issues are thus presented for the Court’s consideration: (1) Does an unopposed order for remand constitute an adjudication on the merits of the underlying motion to remand? (2) Does a certificate of liability insurance constitute an “other paper” pursuant to 28 U.S.C. § 1446(b)? (3) If so, does co-representation of two defendants, one of which has been fraudulently joined, by the same counsel commence the thirty-day “other paper” secondary removal timeframe?
II. LEGAL STANDARD
Federal courts are courts of limited jurisdiction, possessing “only that power authorized by [the] Constitution and statute.” Gunn v. Minton, 133 S. Ct. 1059, 1064 (2013) (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994)). “It is to be presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction.” Energy Mgmt. Servs., LLC v. City of Alexandria, 739 F.3d 255, 258–59 (5th Cir. 2014) (quoting Kokkonen, 511 U.S. at 377). A defendant may remove a state-court civil action to a federal district court if the latter has original jurisdiction. See 28 U.S.C. § 1441(a). “A federal district court may exercise original jurisdiction over any civil action that either satisfies diversity requirements or that arises under the federal constitution, statutes, or treaties—commonly referred to as ‘federal question’ jurisdiction.” Energy Mgmt., 739 F.3d at 258–59. “Thus, under § 1441, removal is proper only when the court has original jurisdiction over at least one asserted claim under either federal question or diversity jurisdiction.” Id. at 259. Diversity jurisdiction exists “where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between... citizens of different States.” 28 U.S.C. § 1332(a)(1).
Once the case is removed, the district court must, however, remand “[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction.” 28 U.S.C. § 1447(c). The removing party bears the burden of proving by preponderance of evidence that federal jurisdiction exists. New Orleans & Gulf Coast Ry. Co. v. Barrois, 533 F.3d 321, 327 (5th Cir. 2008). Significantly, the jurisdictional facts must be judged as of the time of removal of the state court case to federal court. Louisiana v. Am. Nat’l Prop. & Cas. Co., 746 F.3d 633, 635 (5th Cir. 2014).
1) Judicial Estoppel/Res Judicata
Plaintiff’s first argument for remand is that Felix is judicially estopped from removing the case to federal court for a second time because Felix consented to the first remand, and does not here propose any new factual basis for the instant removal. (See Doc. 9). Plaintiff’s argument thus rests primarily upon two facts, both of which are undisputed: (1) Felix withdrew its opposition to the remand in Odar I, and (2) Felix’s argument that removal is proper based upon RMCO’s improper joinder is identical in this case to the one propounded in Odar I. The first issue concerning the agreed remand has not been addressed by any Fifth Circuit court, but its resolution against Felix would be dispositive of this case at this stage, warranting remand. Therefore, the Court is presented with a novel issue of significant importance: Does an order, without any substantive analysis, entered upon an unopposed motion to remand constitute an adjudication of those facts?
*3 The federal removal statute, 28 U.S.C. § 1441(a), permits a defendant to remove any civil action filed in state court to federal court where the federal court has original jurisdiction. 28 U.S.C. § 1441(a). One such form of original jurisdiction is diversity jurisdiction, which requires an amount in controversy over $75,000.00 and all parties to be “citizens of different States,” known as complete diversity. 28 U.S.C. § 1332(a)(1). Assuming at this analytical juncture that the original removal in Odar I was timely,1 the United States Court of Appeals for the Fifth Circuit has authorized subsequent removals after a case has been remanded back to state court so long as the second removal is not sought “on the same ground.” Everett Fin., Inc. v. Kocher, No. 3:19-CV-1563-B, 2019 U.S. Dist. LEXIS 161477, at *4, 2019 WL 4597574, at *2 (N.D. Tex. Sept. 20, 2019) (citing S.W.S. Erectors v. Infax, Inc., 72 F.3d 489, 492 (5th Cir. 1996)). The prohibition against removal “ ‘on the same ground’ does not concern the theory on which federal jurisdiction exists (i.e., federal question or diversity jurisdiction), but rather the pleading or event that made the case removable.” S.W.S. Erectors, 72 F.3d at 492.
Courts must nevertheless be careful to avoid the indirect appeal or ostensible reconsideration of a prior remand order in a second removal attempt. See Ashford v. Aeroframe Servs., No. 19-cv-610, 2020 U.S. Dist. LEXIS 223196, at *26, 2020 WL 6948088, at *9 (W.D. La. May 29, 2020), report and recommendation adopted, No. 2:19-cv-610, 2020 U.S. Dist. LEXIS 222350, 2020 WL 6947844 (W.D. La. July 2, 2020). The removal statute prescribes that a remand order “is not reviewable on appeal or otherwise.” 28 U.S.C. § 1447(d). Thus, the second removal must be upon a different factual basis than the first order, one “not ... adjudicated with the [original] remand order,” in order to not be barred by res judicata. Green v. R.J. Reynolds Tobacco Co., No. H-99-2579, 2000 U.S. Dist. LEXIS 16293, at *30, 2000 WL 33993335, at *9 (S.D. Tex. Aug. 16, 2000) (quoting S.W.S. Erectors, 72 F.3d at 493), aff’d, 274 F.3d 263 (5th Cir. 2001). If the factual basis in the second removal was “not deemed adjudicated” in the prior remand order, the subsequent removal, if timely, is proper. See Winfield v. Quiktrip Corp., No. 3:19-CV-2652-B, 2019 U.S. Dist. LEXIS 218803, at *8, 2019 WL 7037588, at *3 (N.D. Tex. Dec. 20, 2019) (quoting S.W.S. Erectors, 72 F.3d at 493).
In this case, the undersigned holds that the instant removal presents a set of facts not previously adjudicated in the Court’s prior remand order. In Odar I, Felix had asserted diversity jurisdiction in its first removal, even though RMCO’s undisputed Texas citizenship would ordinarily preclude complete diversity, upon the theory that RMCO was improperly joined. Odar I (ECF No. 1 at 3–4). Specifically, Felix had asserted that Plaintiff’s “exclusive remedy against [RMCO]” was “under a Workers’ Compensation claim,” thereby precluding the state court cause of action and mandating its dismissal from the lawsuit. Id. at 4. In Odar I, Plaintiff moved for remand, insisting that Felix failed to exclaim that the parties were diverse, and that Felix “provide[d] absolutely no support or evidence to establish th[e] proposition” that RMCO was rendered immune from suit based upon the availability to Plaintiff of workers’ compensation. Odar I (ECF No. 3 at 5–6). Felix, instead of putting forth a formidable defense to its removal, filed its Non-Opposition Notice, citing RMCO’s non-appearance in both the state court action and in this Court post-removal, and requesting that the Court “enter an agreed order” for remand back to the state court. Odar I (ECF No. 4 at 1). On June 23, 2021, the Court entered its Remanding Order, referencing the Plaintiff’s first motion to remand and Felix’s Non-Opposition Notice. Odar I (ECF No. 5 at 1). The Remanding Order notably offered no legal standard, analysis, or factual background, and simply ordering that Plaintiff’s Original Motion be granted. See id.
*4 As described above, the pertinent question at this juncture is whether Felix’s first ground for removal—RMCO’s fraudulent joinder based upon workers’ compensation immunity—was deemed adjudicated in Odar I. In the negative does the undersigned answer this question. The instant Second Notice of Removal indubitably features the same assertions as to complete diversity for federal diversity jurisdiction. (Doc. 1 at 3–5). Specifically, Felix argues that this Court has diversity jurisdiction over the case, and that RMCO, the only obstacle to the initial removal, was fraudulently joined. Id. There is no reconsideration of the remand order in Odar I, since the Odar I Remanding Order did not consider any facts, legal standards, or analysis. See Brown v. Protective Ins. Co., No. 20-638, 2020 U.S. Dist. LEXIS 80415, at *19, 2020 WL 2215388, at *7 (E.D. La. May 6, 2020) (finding defendants’ secondary removal a “mere request[ ] that the [c]ourt reconsider its prior remand Order” in which the court there had definitively found that “the amount in controversy was not satisfied in the first removal proceedings”); see also Leininger v. Marriott Int’l Inc., No. SA-21-CV-01160-JKP, 2022 U.S. Dist. LEXIS 11098, at *12, 2022 WL 199272, at *4 (W.D. Tex. Jan. 21, 2022) (preventing “an attempt to correct [the defendant’s] previous errors” due to the fact that the presiding judge previously “analyzed the[ ] same arguments and speculative information in the first removal”).
While the Court was perhaps not required in Odar I to make a detailed, analytical finding on the merits of Plaintiff’s Original Motion due to the unopposed nature of the motion following Felix’s Non-Opposition Notice, it is but a specious futility to consider the Remanding Order, which is comprised of half a page of substantive text and devoid of any factual or legal analysis, as having adjudicated any factual basis of the First Notice of Removal. Felix’s use of the word “agreed” in the proposed order attached to its Non-Opposition Notice is insufficient to transform Court’s Remanding Order into one which substantively drew conclusions regarding the merits of the first removal attempt. (See Doc. 9 at 6); Odar I (ECF 4-1 at 1). The undersigned therefore finds that the Court’s inevitable adjudication—along with this Report and Recommendation—of the existence of diversity jurisdiction over this case will be truly maiden.2 Accordingly, the undersigned RECOMMENDS that the Motion to Remand be DENIED on this ground. (Doc. 9).
2) Timeliness of Removal
*5 Having decided that the Remanding Order did not adjudicate any factual basis for Felix’s first attempt at removal with the First Notice of Removal, and accordingly does not preclude a second removal as a matter of law, the undersigned turns to the timeliness issue presented by Plaintiff. Plaintiff maintains that RMCO’s Insurance Document does not constitute “other paper” under the removal statute, and therefore, Felix’s second removal is untimely. (Doc. 9 at 9–10). Plaintiff also insists that even if RMCO’s Insurance Document could be considered “other paper” under the removal statute, Felix would be unable to utilize it to justify a second removal since it was produced by RMCO, a co-Defendant of Felix, and not by an act of Plaintiff. Id. Furthermore, even if a co-Defendant’s acts could justify removal, because at one point Felix’s counsel was also the counsel for RMCO, the production of the Insurance Document would count as Felix’s own act, thereby precluding secondary removal. Id. In any event, neither party disputes that, if RMCO, the Texas Defendant, were never a part of this case, this Court would have original diversity jurisdiction under 28 U.S.C. § 1332(a).
a. Other Paper
There are two categories into which removal cases typically fall: “amount disputes” and “timeliness disputes.” Mumfrey v. CVS Pharm., Inc., 719 F.3d 392, 398 (5th Cir. 2013). This case involves a timeliness dispute, which “occurs when the defendant did not remove within thirty days after receipt of the initial pleadings under § 1446(b)’s first paragraph [concerning the general removal timeframe], but instead removed under the second paragraph, within thirty days of receiving some ... other paper.” Id.; see also Napier v. Humana Marketpoint, Inc., 826 F. Supp. 2d 984, 986–87 (N.D. Tex. 2011) (describing the “two procedural postures”). The Fifth Circuit follows a “liberal allowance of subsequent removals.” Leininger, 2022 U.S. Dist. LEXIS 11098, at *12, 2022 WL 199272, at *4. Other courts have stated the policy perhaps most explicitly, that “the only effect of adopting an absolute one-bite rule would be to encourage plaintiffs to be coy.” Benson v. SI Handling Sys., Inc., 188 F.3d 780, 783 (7th Cir. 1999) (Easterbrook, J.).
Generally, to timely remove a case, a defendant must file a notice of removal within thirty days after the receipt of the initial pleading. Everett Fin., Inc. v. Kocher, No. 3:19-CV-1563-B, 2019 U.S. Dist. LEXIS 161477, at *4, 2019 WL 4597574, at *2 (N.D. Tex. Sept. 20, 2019) (citing 28 U.S.C. § 1446(b)(1)). The removal must be nevertheless filed within one year after commencement of the state court action.3 28 U.S.C. 1446(c)(1). The removal statute further provides that,
if the case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant, through service or otherwise, of a copy of an ... other paper from which it may first be ascertained that the case is one which is or has become removable.
28 U.S.C. § 1446(b)(3) (emphasis added). Thus, the existence of an “other paper” received by the defendant can allow for removal if the state court action to federal court if made within thirty days. In effect, the originally nonremovable lawsuit becomes removable if a sufficient “other paper” presents itself, from which jurisdiction “is ‘unequivocally clear and certain’ from the document.” Bradley v. Wal-Mart Stores, No. 21-498-BAJ-RLB, -- F. Supp. 3d -- , 2021 U.S. Dist. LEXIS 251898, at *8, 2021 WL 6751667, at *3 (M.D. La. Nov. 18, 2021) (quoting Boskey v. Kroger Tex., LP, 288 F.3d 208, 2011 (5th Cir. 2002)), report and recommendation adopted, No. 21-00498-BAJ-RLB, 2022 U.S. Dist. LEXIS 15982, 2022 WL 264541 (M.D. La. Jan. 27, 2022). This “other paper” does not need to be filed in the state court proceedings to provide a defendant the ability to remove the lawsuit. Addo v. Globe Life & Accident Ins. Co., 230 F.3d 759, 761 (5th Cir. 2000). Merely, once an such “other paper” is received by the defendant, the thirty-day removal clock commences, and “a notice of removal must be filed within thirty days of the defendant’s receipt” of this document. Allen v. Bulk Logistics, Inc., 485 F. Supp. 3d 691, 693–94 (S.D. Miss. 2020) (citing Mumfrey, 719 F.3d at 397, 398).
*6 Essentially, § 1446(b) “provides a two-step test for determining whether a defendant timely removed a case.” Decatur Hosp. Auth. v. Aetna Health, Inc., 854 F.3d 292, 297 (5th Cir. 2017) (citing Chapman v. Powermatic, Inc., 969 F.2d 160, 161 (5th Cir. 1992)). If the case initial pleaded is removable, the defendant must file a notice of removal within thirty days of the receipt of the initial pleading; if not, the defendant must file a notice removal within thirty days from the receipt of an other paper “from which the defendant can ascertain that the case is removable.” Id.
“Other paper” initially was found by the Fifth Circuit to only include those documents produced by a voluntary act of the plaintiff. See Gaitor v. Peninsular & Occidental S.S. Co., 287 F.2d 252, 524 (5th Cir. 1961) (observing that “such conversion can only be accomplished by the voluntary amendment of his pleadings by the plaintiff”); see also Nanez v. Sanchez, No. SA-08-CA-485-FB, 2009 U.S. Dist. LEXIS 135929, at *11, 2009 WL 10669600, at *4 (W.D. Tex. Feb. 13, 2009) (finding procedural defects as to removal on the basis that “both items of new evidence were generated by defendants”), report and recommendation adopted, No. SA-08-CA-485-FB, 2009 U.S. Dist. LEXIS 135922, 2009 WL 10669788 (W.D. Tex. Mar. 6, 2009) . In S.W.S. Erectors, however, the Fifth Circuit refined its understanding of the “other paper” trigger, allowing the defendant to submit a deposition of the plaintiff’s president to constitute a “new paper or event that changed the facts regarding the removableness of the case. “See S.W.S. Erectors v. Infax, Inc., 72 F.3d 489, 494 (5th Cir. 1996). Since S.W.S Erectors, district courts have found that other acts or events not predicated upon the plaintiff’s voluntary act can constitute an “other paper.” See, e.g., Green v. R.J. Reynolds Tobacco Co., No. H-99-2579, 2000 U.S. Dist. LEXIS 16293, at *32–*34, 2000 WL 33993335, at *9–*10 (S.D. Tex. Aug. 16, 2000) (rejecting the argument that Fifth Circuit precedent could not constitute a new factual basis), aff’d, 274 F.3d 263 (5th Cir. 2001). This “judge-made exception” to the removability requirements under §§ 1441 and 1446 is known as the “voluntary-involuntary rule.” Scout 5 Props., LLC v. Acadia Ins. Co., No. 2:21-cv-00231-JRG-RSP, 2021 U.S. Dist. LEXIS 209860, at *3–*4, 2021 WL 5051564, at *2 (E.D. Tex. Oct. 31, 2021).
Here, the undersigned finds that the Insurance Document constitutes an “other paper” sufficient to trigger the thirty-day removal timeframe. It is a settled rule that a defendant is unable to self-generate the evidence necessary to prompt a subsequent removal. See Nanez, 2009 U.S. Dist. LEXIS 135929, at *11, 2009 WL 10669600, at *4. The conduct of a co-Defendant may be able to activate the thirty-day “other paper” removability trigger, though this issue has not been addressed explicitly by the Fifth Circuit. See Jernigan v. Ashland Oil, 989 F.2d 812, 815 (5th Cir. 1993) (finding a co-defendant’s answer to trigger the thirty-day “other paper” removal countdown). Conscious of this predicament, the undersigned also holds that an important and distinguishing fact is that RMCO, Felix’s co-Defendant, itself did not participate in the removal of this case, either for the First Notice of Removal or the Second Notice of Removal. (See Doc. 1); see also Odar I (ECF No. 1). It has been Felix’s own volition each time; RMCO more or less is a bystander Defendant who possesses workers’ compensation insurance. Furthermore, the Insurance Document itself appears to have been produced by Acord Corporation, and is not a documented generated by either RMCO or Felix. (See Doc. 10-2). While this distinction has not been addressed by any Fifth Circuit court, the undersigned believes it appropriately aligns with the policy of both the Fifth Circuit itself and 28 U.S.C. § 1446 to exercise a liberal perspective towards permitting subsequent removals. Being the removing party, but not the party who created or generated the evidence tipping the scales in this case in favor of removability, the undersigned finds that Felix is not precluded by the voluntary-involuntary rule.
*7 Specifically that RMCO non-appearance in the state court case prior to the First Notice of Removal, Felix has argued that it only uncovered the previously illusory Insurance Document after the Remanding Order was released. (Doc. 1 at 3 (received on October 8, 2021)). Plaintiff has asserted that Felix was aware of the document due to the sharing of counsel between Felix and RMCO. (Doc. 9 at 3, 4). In particular, Plaintiff correctly notes that Felix and RMCO, while not initially represented by the same counsel, began to share the same counsel on September 15, 2021, per an order of the state court, nearly five weeks prior to the filing of the Second Notice of Removal on October 22, 2021. (Docs. 1-2 at 45–48; 9 at 3, 4, 10 n.1).
The undersigned is left unconvinced by Plaintiff’s cries. Judging by the fact that, if Felix possessed the document which would have supported its original claim of federal diversity jurisdiction under the First Notice of Removal at any time before Felix’s Non-Opposition Notice or the Remanding Order were released, Felix would have no practical reason to withhold its production, the most likely inference is that Felix did not possess said document before Odar I was remanded. See Paxton v. Kirk Key Interlock Co., No. 08-583-D-M2, 2008 U.S. Dist. LEXIS 110623, at *21–*22, 2008 WL 4977299, at *4 (M.D. La. Oct. 21, 2008) (finding that a case was “not removable” until the removing party possessed an “inability to prove” the ground for removal as to the non-removing defendant), report and recommendation adopted in part, No. 08-583-JJB, 2008 U.S. Dist. LEXIS 97409, 2008 WL 5043428 (M.D. La. Nov. 21, 2008); but see Nexbank, SSB v. BAC Home Loan Servicing, LP, No. 3:11-CV-00279-L, 2011 U.S. Dist. LEXIS 125897, at *14, 2011 WL 5182118, at *5 (N.D. Tex. Oct. 28, 2011) (holding against a later removal countdown trigger where “Defendants have not shown that the facts supporting this new argument were discovered since this case was last remanded”).
Plaintiff has not demonstrated that Felix’s counsel was definitively aware of the Insurance Document before September 22, 2021, or cited any case law indicating that the substitution of counsel automatically imputes all information to the new counsel that prior counsel possessed about a given client or case. The Second Notice of Removal came thirty-seven days after Felix’s current counsel was substituted; for Felix’s second removal to have been timely on October 22, 2021, Felix’s counsel must have acquired the information concerning the Insurance Document on September 22, 2021. The one-week gap between September 15, 2021—the date of substitution—and September 22, 2021, surely is reasonable to allow for Felix’s current counsel to adjust and consider the available information, thereby starting the timer on September 22, 2021. Further, if Felix’s assertion of an October 8, 2021, date of receipt for the Insurance Document is to be believed, Felix’s Second Notice of Removal is irrefutably timely. Additionally, because RMCO did not make an appearance either in the initial state court proceedings or in this Court in Odar I before the dreaded Remanding Order remanded the case, certainly Felix’s acquisition of the Insurance Document would have been strenuous at best without any established contact with RMCO’s counsel.
From a holistic perspective, Felix’s Non-Opposition Notice was an apparent mastermind maneuver: before the Court could, theoretically, rule on the merits of the Original Motion, Felix, realizing it did not possess the evidence necessary to definitively persuade the Court to retain its case, decided to withdraw its opposition to the Original Motion. Fortunately for Felix, and as the Court could be expected to do given the agreed status of the Original Motion, the Court produced a laconic, abridged order which implicitly deemed adjudication of the merits of the motion unnecessary. Now, having come forth with substantial evidence undisputed even by Plaintiff himself, Felix faces a Seventh Coalition-type return. At this point in the case, however, Felix has arrived at the removal battle equipped with one more fact—that of the Insurance Document—to overwhelm Plaintiff.4 See Ashford v. Aeroframe Servs., No. 19-cv-610, 2020 U.S. Dist. LEXIS 223196, at *29, 2020 WL 6948088, at *10 (W.D. La. May 29, 2020) (“[L]ike the defendants in S.W.S. ..., [defendant] now possesses more facts to support its claims.”), report and recommendation adopted, No. 2:19-cv-610, 2020 U.S. Dist. LEXIS 222350, 2020 WL 6947844 (W.D. La. July 2, 2020).. Plaintiff additionally cites no support for the proposition that Felix was required to make “reservations” in Felix’s Non-Opposition Notice. (Docs. 9 at 5, 6, 11; 11 at 2, 3). In this universe, it is Plaintiff instead who must hold a white flag over removal Waterloo.5 Therefore, Felix’s subsequent removal as proposed by the Second Notice of Removal is proper and falls outside the proscription of the voluntary-involuntary rule. Accordingly, the undersigned RECOMMENDS that the Motion to Remand be DENIED on this ground as well. (Doc. 9).
b. Fraudulent Joinder6 Exception
*8 Even if the production of the RMCO Insurance Document does not constitute an act or event which would trigger the thirty-day clock for removal due to application of the voluntary-involuntary rule, thereby precluding Felix’s subsequent removal here, the undersigned finds that Felix’s removal still withstands application of the rule. The Insurance Document as referenced by Felix goes strictly towards proving its claim that RMCO was fraudulently joined. If RMCO was fraudulently joined by Plaintiff, RMCO’s dismissal from this suit will unquestionably be warranted; the last obstacle to Felix’s federal removal victory therefore is RMCO’s status as a proper party to this lawsuit.
As noted above, a diversity of citizenship action removed to federal court must be remanded if even one of the “defendants is a citizen of the State in which such action is brought.” 28 U.S.C. § 1441(b). However, “a case may still be removed where a claim against an in-state defendant is dismissed because of fraudulent joinder.” Wilkins v. Arthur J. Gallagher & Co., No. MO-10-CV-40, 2010 U.S. Dist. LEXIS 155806, at *7, 2010 WL 11652141, at *3 (W.D. Tex. May 12, 2010) (citing Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d 529, 532 (5th Cir. 2006)), report and recommendation adopted, No. MO-10-CV-040, 2010 U.S. Dist. LEXIS 155807, 2010 WL 11652183 (W.D. Tex. May 27, 2010). A non-diverse or forum-defendant is improperly joined “such that its citizenship can be ignored” for the purpose of evaluating the case’s invocation of diversity jurisdiction if the removing party shows one of the following: (1) “actual fraud in the pleading of jurisdictional facts; or (2) [that] the plaintiff is unable to establish a cause of action against the non-diverse defendant in state court.” Williams v. Homeland Ins. Co., 18 F.4th 806, 812 (5th Cir. 2021) (citing Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc)). The removing party bears the burden to establish improper joinder. Id. (citation omitted).
Felix alleges a tangential argument that it “believes Plaintiff was aware of RMCO’s immunity from suit,” which is the only basis in the pleadings and briefs for actual fraud. (Doc. 10 at 6 n.6). However, Felix has produced no evidence supporting a prescient knowledge and therefore concealment by Plaintiff of RMCO’s purported immunity from suit—this claim must be rejected accordingly. Felix’s briefings, however, argue and more appropriately substantiate a claim that Plaintiff is in fact definitively unable to bring his suit against RMCO in state court, and therefore, the second mechanism for demonstrating improper joinder is most applicable. Under this mechanism, the court must consider “whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against the in-state defendant.” Graves v. Decca Consulting, No. PE:20-CV-00021-DC-DF, 2020 U.S. Dist. EXIS 259110, at *5, 2020 WL 10317466, at *2 (W.D. Tex. June 11, 2020) (citing Flagg v. Stryker Corp., 819 F.3d 132, 136 (5th Cir. 2016)) (emphasis added); see also Jernigan v. Ashland Oil, 989 F.2d 812, 815 (5th Cir. 1993). If a state court has not yet ruled on the merits of the plaintiff’s claims, the federal court asks whether “there is any reasonable possibility that a state court would rule against the non-diverse defendant.” Hoyt v. Lane Const. Corp., 927 F.3d 287, 296 (5th Cir. 2019) (internal citation and quotation marks omitted). The “motive or purpose of the joinder of in-state defendants is not relevant.” Flagg v. Stryker Corp., 819 F.3d 132, 136 (5th Cir. 2016) (quoting Smallwood, 385 F.3d at 574).
In this instance, the undersigned finds that Felix has met this heightened burden. Utilizing the possibility of recovery framework, the Court must determine whether the Felix as the removing Defendant has shown that Plaintiff “lacks a viable state law cause of action against the non-diverse defendant,” here RMOC. See Williams, 18 F.4th at 812. By the live Complaint, Plaintiff’s sole cause of action against RMOC is negligence. (Doc. 1-2 at 18–20). Felix asserts that RMOC, who is undisputedly a Texas resident, which would thereby preclude this Court’s diversity jurisdiction, is a “Workers’ Compensation subscriber,” and Plaintiff a “covered employee.” (Doc. 10 at 7). According to Felix, workers’ compensation payments “are the exclusive remedy” in this scenario, which would indicate that RMOC is entitled to immunity from suit. Id. Plaintiff at no point in the current federal litigation disputes that RMOC is covered under workers’ compensation and his claim subsequently precluded. (See generally Docs. 9, 11).
*9 The Texas Workers’ Compensation Act (“TWCA”) provides that the “[r]ecovery of workers’ compensation benefits is the exclusive remedy of an employee covered by workers’ compensation insurance coverage ... against the employer or an agent or employee of the employer for ... a work-related injury sustained by the employee.” Tex. Lab. Code Ann. § 408.001 (West 2005). Thus, an injured individual who is employed by an employer subscribed to a workers’ compensation insurance plan can only seek, with the exception of gross negligence, workers’ compensation benefits. See Port Elevator-Brownsville, L.L.C. v. Casados, 358 S.W.3d 238, 241 (Tex. 2012) (interpreting Tex. Lab. Code Ann. § 408.001). Essentially, the TWCA allots “workers’ compensation benefits [a]s the ‘exclusive remedy’ against the employer” if the defendant employer (1) employed the plaintiff, (2) who suffered work-related injuries, and is not asserting a claim for gross negligence, and (3) possessed active workers’ compensation insurance at the time of the injury. See Martinez v. Peterbilt Motors Co., No. SA-04-0332-RF, 2004 U.S. Dist. LEXIS 22780, at *12–*13, 2004 WL 3218388, at *3 (W.D. Tex. Nov. 10, 2004) (citing Payne v. Galen Hosp. Corp., 4 S.W.3d 312, 316 (Tex. App.—Houston [1st Dist.] 1999), aff’d, 28 S.W.3d 15 (Tex. 2000)).
Plaintiff’s injuries purportedly occurred while he “was working as an employee of [RMOC] ... as a tanker truck driver,” on March 26, 2019. (Doc. 1-2 at 17–18). Felix, in its Second Notice of Removal, portends that RMOC was a workers’ compensation subscriber at the time in question. (See Doc. 1). RMOC’s answer, now filed in federal court in this case, additionally asserts the TWCA exclusivity defense as a bar to this action. (Doc. 7 at 2); see Gonzalez v. Robles & Sons, Inc., No. SA-14-CA-733-OLG, 2014 U.S. Dist. LEXIS 191172, at *6–*7, 2014 WL 12490000, at *2 (W.D. Tex. Dec. 22, 2014), report and recommendation adopted, No. SA-14-CA-733-OLG, 2015 U.S. Dist. LEXIS 183035, 2015 WL 11570996 (W.D. Tex. Jan. 13, 2015). In support of Felix’s improper joinder claim, Felix refers to the Insurance Document which lists RMOC has a subscriber to workers’ compensation insurance, spanning a period from January 1, 2019, until January 1, 2020. (Doc. 10-2 at 2–5). Plaintiff has not disputed in this case whether RMOC was subscribed as such. (Docs. 9, 11). Because RMOC has claimed, and Felix has conjunctively supplemented with undisputed evidence, that RMOC was a subscriber of workers’ compensation insurance when Plaintiff’s injuries occurred, the undersigned finds that RMOC possessed insurance under the terms of the TWCA. Further, given the undisputed qualities of Plaintiff’s employment with RMOC, as well as his injuries being work-related, the undersigned must conclude that the TWCA’s exclusivity defense applies here, and relegates Plaintiff to workers’ compensation plan benefits and payments. Accordingly, the action as it pertains to RMOC, which is strictly the negligence claim, is barred.
Having found that RMOC is barred in this lawsuit under the TWCA, the undersigned also holds that RMOC was improperly joined. Felix has established without contradiction that RMOC is immune from lawsuit—correspondingly, Plaintiff’s chances for recovery against RMOC here are nonexistent. Accord Gonzalez, 2014 U.S. Dist. LEXIS 191172, at *7, 2014 WL 12490000, at *3. Texas courts have re-affirmed the principle many a time that the TWCA, absent an allegation of gross negligence, provides that workers’ compensation is the exclusive remedy for such alleged injuries as Plaintiff’s. Perio v. Titan Mar., LLC, No. H-13-1754, 2013 U.S. Dist. LEXIS 145229, at *19, 2013 WL 5563711, at *6 (S.D. Tex. Oct. 8, 2013) (citing Port Elevator-Brownsville, 358 S.W.3d at 239–40, 44). Even in state court, were this case to be remanded, Plaintiff’s action against RMOC could not proceed. Because Plaintiff has no possible chance of recovery under the theories presented in his active Complaint, the undersigned can reach no other conclusion than that RMOC is improperly joined. The remaining party, Felix, is still undisputedly diverse, allowing this Court to retain jurisdiction. See Gonzalez, 2014 U.S. Dist. LEXIS 191172, at *7, 2014 WL 12490000, at *3. Therefore, the undersigned RECOMMENDS that RMOC should be DISMISSED from this action.
*10 The undersigned’s conclusions about fraudulent joinder in this case circumvent any application of the voluntary-involuntary rule in the event that the Court holds that RMOC’s Insurance Document does not constitute an other paper. Ordinarily, as delineated above, the voluntary-involuntary rule requires that federal jurisdiction can only be created by the plaintiff in an otherwise nonremovable case. See Scout 5 Props., LLC v. Acadia Ins. Co., No. 2:21-cv-00231-JRG-RSP, 2021 U.S. Dist. LEXIS 209860, at *4, 2021 WL 5051564, at *2 (E.D. Tex. Oct. 31, 2021). However, there an exists an exception to the voluntary-involuntary exception based upon improper joinder. Diais v. Liberty Mut. Ins. Co., No. MO:20-CV-00008-DC, 2020 U.S. Dist. LEXIS 256071, at *5–*6, 2020 WL 10054495, at *2 (W.D. Tex. May 21, 2020). Specifically, previous jurisprudence as promulgated by the United States Supreme Court has indicated that fraudulent or improper joinder can permit a defendant to perform an end-run around the other paper threshold, allowing the federal court to dismiss a nondiverse defendant and assume diversity jurisdiction. See Valverde v. Maxum Cas. Ins. Co., No. 7:21-cv-00240, -- F. Supp. 3d -- , 2021 U.S. Dist. LEXIS 164575, at *12–*13, 2021 WL 3885269, at *5 (S.D. Tex. Aug. 31, 2021) (observing that “plaintiff’s improper or fraudulent joinder of an in-state defendant may ... create federal jurisdiction in spite of the plaintiff’s objection”); see also Diais, 2020 U.S. Dist. LEXIS 256071, at *8–*9, 2020 WL 10054495, at *3 (dismissing a nondiverse defendant for improper joinder under a Texas state law’s immunity provision and “exercis[ing] diversity jurisdiction”).
Thus, the Plaintiff’s “voluntary” action can be recounted as follows: a case with a forum-defendant cannot be removed to federal court under diversity jurisdiction unless “(1) the plaintiff voluntarily dismisses all out-of-state defendants, or (2) the plaintiff improperly joined all out-of-state defendants such that no out-of-state defendant may be restored to the case by any court.” Valverde, 2021 U.S. Dist. LEXIS 164575, at *17, 2021 WL 3885269, at *6. Plaintiff’s voluntary act here, should the Court reject the undersigned’s conclusion that the Insurance Document is not an “other paper” under the removal statute, is fraudulently joining RMOC. Accord Delaney v. Viking Freight, Inc., 41 F. Supp. 2d 672, 678 (E.D. Tex. 1999) (opining that “one could argue that a plaintiff’s act of filing a civil complaint that names a fraudulently joined defendant is itself a voluntary act”).
In either event, Plaintiff has improperly joined RMOC, the only non-diverse Defendant, and the only prohibitor to diversity jurisdiction. Accordingly, the undersigned RECOMMENDS that the Motion to Remand be DENIED on this ground as well. (Doc. 9). The undersigned additionally RECOMMENDS that RMOC be DISMISSED as a defendant from this suit for immunity under the TWCA.
3) Attorney’s Fees and Costs
Plaintiff also includes in his Motion to Remand a request for attorney’s fees and costs, pursuant to 28 U.S.C. § 1447(c). (Doc. 9 at 10–11). Attorney’s fees and costs are awarded under § 1447(c) only by “[a]n order remanding the case” as to those costs “incurred as a result of the removal.” 28 U.S.C. § 1447(c). “Absent unusual circumstances, courts may award attorney’s fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal.” Martin v. Franklin Cap. Corp., 546 U.S. 132, 136 (2005) (citing Valdes v. Wal-Mart Stores, Inc., 199 F.3d 290, 293 (5th Cir. 2000)); see also Sticker Synergy Corp. v. Gwyn, No. 14-2521, 2015 U.S. Dist. LEXIS 87944, at *38, 2015 WL 4097215, at *11 (E.D. La. July 6, 2015). The undersigned, having concluded that Plaintiff’s Motion to Remand should be denied, consequently finds that Plaintiff’s request for attorney’s fees and costs also be DENED. (Doc. 9 at 10–11).7
*11 Accordingly, the undersigned RECOMMENDS that Plaintiff’s request for attorney’s fees and costs be DENIED. (Doc. 9 at 10–11).
For the foregoing reasons, the undersigned RECOMMENDS that Plaintiff’s Motion to Remand be DENIED. (Doc. 9).
In addition, the undersigned RECOMMENDS that Plaintiff’s request for attorney’s fees and costs be DENIED. (Doc. 9 at 10–11).
Further, the undersigned RECOMMENDS that Defendant RMCO, having been improperly joined, be DISMISSED from the instant action.
SIGNED this 12th day of April, 2022.
INSTRUCTIONS FOR SERVICE AND RIGHT TO APPEAL/OBJECT
In the event that a party has not been served by the Clerk with this Report and Recommendation electronically, pursuant to the CM/ECF procedures of this District, the Clerk is ORDERED to mail such party a copy of this Report and Recommendation by certified mail, return receipt requested. Pursuant to 28 U.S.C. § 636(b), any party who desires to object to this report must serve and file written objections within fourteen (14) days after being served with a copy unless the time period is modified by the District Judge. A party filing objections must specifically identify those findings, conclusions, or recommendations to which objections are being made; the District Judge need not consider frivolous, conclusive, or general objections. Such party shall file the objections with the Clerk of the Court and serve the objections on the U.S. Magistrate Judge and on all other parties. A party’s failure to file such objections to the proposed findings, conclusions, and recommendations contained in this report shall bar the party from a de novo determination by the District Judge. Additionally, a party’s failure to file written objections to the proposed findings, conclusions, and recommendations contained in this report within fourteen (14) days after being served with a copy shall bar that party, except upon grounds of plain error, from attacking on appeal the unobjected-to proposed factual findings and legal conclusions accepted by the District Judge. Douglass v. United Services Auto. Ass’n, 79 F.3d 1415, 1428–29 (5th Cir. 1996).
That the instant secondary removal was untimely is an issue raised by Plaintiff. (Doc. 9 at 9–10). Due to the conceptual complexity of the issues presented, the undersigned will assume arguendo that removal was timely for the purpose of evaluating the judicial estoppel/res judicata arguments. Whether the second removal was actually timely will be discussed in a later section.
If the Court finds that the Remanding Order did indeed constitute an adjudication of the facts supporting the First Notice of Removal, the undersigned still holds that the instant Second Notice of Removal is proper. While, as explained below, Felix claims the Insurance Document does definitively and indisputably support its claim that RMCO is improperly joined, the undersigned recognizes that, generally, a new piece of evidence cannot support a factual basis which has been previously adjudicated. See Everett Fin., Inc. v. Kocher, No. 3:19-CV-1563-B, 2019 U.S. Dist. LEXIS 161477, at *9–*10, 2019 WL 4597574, at *3–*4 (N.D. Tex. Sept. 20, 2019) (finding that the presentation of new evidence to buttress the same factual basis indicates the defendant “has not asserted a different ground or reason for removal” and constitutes an impermissible appeal of the prior remand order). Furthermore, it is well-established that a defendant cannot present as supporting evidence that which was available at the time of the first removal. See Leininger, 2022 U.S. Dist. LEXIS 11098, at *12, 2022 WL 199272, at *4 (noting the “liberal allowance of subsequent removals does not allow for multiple attempts to obtain evidence it could have presented previously”). In particular, the Insurance Document consists of information which Felix did not possess and therefore could not present prior to the Court’s Remanding Order. Plaintiff has not controverted otherwise. Accordingly, if the Court finds that the Remanding Order constituted an initial adjudication of the First Notice of Removal’s factual basis, the Court should still find that the existence of the Insurance Document, acquired only after the first attempt at removal failed, represents a new factual basis for the Second Notice of Removal.
Plaintiff’s live Complaint in state court, the same petition which was the subject of the initial removal to this Court in the First Notice of Removal, was filed on March 12, 2021. (Doc. 1-2). The active Second Notice of Removal was filed on October 22, 2021, well within a year of the filing of the Complaint. Therefore, the only issue of timeliness refers to the thirty-day timeframe for an “other paper” removal. (See generally Doc. 9).
The undersigned will detail below precisely how the Insurance Document transforms this case into one which is removable for a second time under diversity jurisdiction.
This is no “second bite at the apple” (Doc. 11 at 5); rather, this is Felix’s first bite at the apple, made upon Felix’s return after it realized the orchard was closed on Tuesdays.
In the Fifth Circuit, the terms “improper joinder” and “fraudulent joinder” are used interchangeably. See Williams v. Homeland Ins. Co., 18 F.4th 806, 811–13 (5th Cir. 2021) (using “fake,” “fraudulent,” and “improper” to describe the phenomenon); see also Martinez v. Peterbilt Motors Co., No. SA-04-CA-0332-RF, 2004 U.S. Dist. LEXIS 22780, at *3 n.2, 2004 WL 3218388, at *1 n.2 (W.D. Tex. Nov. 10, 2004) (“[T]he Fifth Circuit adopts the term ‘improper joinder’ as more accurately characterizing the concept that is frequently referred to as ‘fraudulent joinder.’ ”).
Should the Court grant the Motion to Remand, the undersigned concludes that Felix had an objectively reasonable basis upon which he could seek removal. RMCO is patently an improperly joined party, and should be dismissed from the case. That Felix elected to take advantage of the first removal deadline in the likely hopes that RMCO would make an appearance in this Court in Odar I does not make a second removal once the necessary evidence was required one made in bad faith. If it is at all true that Felix lacked an objectively reasonable basis for seeking removal, it would have been more opportune to seek attorney’s fees in Odar I. However, out of a sort of altruism, Plaintiff only desires to do so now in his live Motion to Remand, once the ruse has been uncovered. Furthermore, as explained above, the issue as to whether an order, entered upon an unopposed Motion to Remand, which lacks analysis, facts, or even the explication of the applicable law, constitutes an “adjudication” of the prior factual basis is surely a novel one. Felix cannot be punished for seeking a good faith change or development in the law. See
United States District Court, W.D. Texas, San Antonio Division.
MARY ANN ELLIS, Plaintiff,
GOODHEART SPECIALTY MEATS, BLUEBONNET FOODS, AMALIA PALMAZ, OWNER, GOODHEART SPECIALTY MEATS/BLUEBONNET FOODS; FLORENCIA PALMAZ, OWNER, GOODHEART SPECIALTY MEATS/BLUEBONNET FOODS; ELIZABETH JOHNSON, ADJUSTER, TEXAS MUTUAL INSURANCE COMPANY; TEXAS MUTUAL INSURANCE, ERICA GOMEZ, TEXAS DEPARTMENT OF INSURANCE, WORKER’S COMPENSATION DIVISION; AND CHIEF CLERK OF PROCEEDINGS, TEXAS DEPARTMENT OF INSURANCE, WORKER’S COMPENSATION DIVISION; Defendants.
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
ELIZABETH S. (“BETSY”) CHESTNEY UNITED STATES MAGISTRATE JUDGE
*1 To the Honorable United States District Judge Xavier Rodriguez:
This Report and Recommendation concerns the review of the pleadings pursuant to 28 U.S.C. § 1915(e). This case was automatically referred to the undersigned for an order on Plaintiff’s motion to proceed in forma pauperis and service of Plaintiff’s Complaint pursuant to a divisional Standing Order. The undersigned therefore has authority to enter this recommendation pursuant to 28 U.S.C. § 636(b)(1)(B). For the reasons set forth below, it is recommended that Plaintiff’s Complaint be dismissed pursuant to Section 1915(e).
I. Procedural and Factual Background
Plaintiff Mary Ann Ellis filed this case on December 1, 2021, proceeding pro se, against Defendants Goodheart Specialty Meats (her former employer), Texas Mutual Insurance Company, Elizabeth Johnson (Adjuster for Texas Mutual Insurance Company), Texas Department of Insurance Workers’ Compensation Division, and Erica Gomez (Ombudsman for Texas Department of Insurance). (Pl.’s Compl. [#5] at 3–4.) Plaintiff’s Complaint alleges that she was injured on the job by a chemical spill and suffered a permanent injury to her right hand. (Id. at 8.) Plaintiff claims she attempted to file for workers’ compensation benefits in August 2018, but her claim was denied. (Id. at 7.) Plaintiff further contends she has never completely healed from her injury or medical condition because Defendants denied her appropriate medical treatment and compensation for her outstanding medical bills. (Id. at 7–8.) Plaintiff’s complaint lists the following causes of action: negligence, improper medical attention, unsafe work environment, and racial discrimination. (Id. at 7.)
After granting Plaintiff’s motion to proceed in forma pauperis and reviewing Plaintiff’s proposed Complaint, the Court ordered Plaintiff to file a More Definite Statement [#4] to assist the Court in determining whether Plaintiff had stated a plausible claim for relief such that Defendants should be served. The Court’s Order listed specific questions for Plaintiff to answer in her More Definite Statement, including: (1) details and dates of her employment with Goodyear Specialty Meats, the nature of her injury and medical condition, and the details of her termination; (2) details and dates of her attempt to obtain workers’ compensation benefits, any hearings held, the reasons for denial of benefits, and whether she attempted to appeal the decision; (3) an explanation of the racial discrimination she allegedly suffered and description of specific discriminatory actions taken against her; and (4) description of each named Defendant and the unlawful conduct attributed to that specific Defendant. The Court also directed Plaintiff to attach to her More Definite Statement any orders denying workers’ compensation benefits, any other documentation of the injury, communications from Defendants leading to this lawsuit, and any complaints she filed with the Equal Employment Opportunity Commission (“EEOC”), the Texas Workforce Commission (“TWC”), or any other governmental agency regarding race discrimination.
*2 Plaintiff timely filed her More Definite Statement on January 21, 2022 [#7]. In her More Definite Statement, Plaintiff answered some of the Court’s questions but did not provide all of the requested information and did not attach any copies of any documentation regarding her workers’ compensation claim or any charge of discrimination filed with a governmental agency prior to filing this lawsuit. Plaintiff’s More Definite Statement explains that she began work for GoodHeart Specialty Meats on January 6, 2017; was injured by a chemical spill on June 8, 2017; and was terminated on October 17, 2017, due to a previous back injury. According to Plaintiff’s Original Complaint, she filed her workers’ compensation claim in August 2018, following her termination. Plaintiff does not provide any other dates regarding the resolution of her workers’ compensation claim.
Pursuant to 28 U.S.C. § 1915(e), the Court is empowered to screen any civil complaint filed by a party proceeding IFP to determine whether the claims presented are (1) frivolous or malicious; (2) fail to state a claim on which relief may be granted; or (3) seek monetary relief against a defendant who is immune from such relief.1 See 28 U.S.C. § 1915(e)(2)(B). Based on the filings before the Court, Plaintiff has failed to plead any claim upon which relief can be granted.
A. Plaintiff fails to plead a plausible claim of race discrimination.
Plaintiff alleges a claim of race discrimination. The only reference to race discrimination in her More Definite Statement is that she believes the reason she did not receive prompt medical attention for her on-the-job injury (like other employees) is that she is Black. Plaintiff does not allege her termination was based on race discrimination.
Plaintiff has failed to plead a claim of race discrimination under Title VII of the Civil Rights Act, 42 U.S.C. § 2000e-2. Plaintiff’s race discrimination claim alleges disparate treatment. A plaintiff raising a disparate-treatment claim must plead sufficient facts to plausibly suggest she suffered an adverse employment action and that the action was taken “because of her protected status.” Cicalese v. Univ. of Tex. Med. Branch, 924 F.3d 762, 767 (5th Cir. 2019) (quotations omitted, emphasis in original). Adverse employment actions include “only ultimate employment decisions such as hiring, granting leave, discharging, promoting, or compensating.” Welsh v. Fort Bend Indep. Sch. Dist., 941 F.3d 818, 824 (5th Cir. 2019) (internal quotations and citation omitted). “An employment action that does not affect job duties, compensation, or benefits is not an adverse employment action.” Id. (quotations and brackets omitted). Plaintiff’s receipt of inadequate medical treatment is not an adverse employment action affecting her job duties, compensation, or benefits and therefore is not actionable under Title VII.
Moreover, even if Plaintiff could advance a race discrimination claim based on disparate medical treatment on account of her race under Title VII, any such claim would be barred for failure to plead exhaustion of administrative remedies as to this claim prior to filing suit. As a precondition to seeking relief under Title VII, Plaintiff must exhaust her administrative remedies by filing a charge of discrimination with the EEOC or TWC. Pacheco v. Mineta, 448 F.3d 783, 788 (5th Cir. 2006). An aggrieved employee must initiate contact with a Counselor regarding the alleged discrimination within 45 days of the matter alleged to be discriminatory. 29 C.F.R. § 1614.105(a). If the matter cannot be resolved informally, the Counselor must notify the employee of the right to file a discrimination complaint no later than the 30th day after contacting the Counselor. Id. at § 1614.105(d). An employee then has 15 days after receipt of the notice to file a discrimination complaint with the EEOC or state agency. Id. An employee’s failure to notify a Counselor of her complaint within 45 days bars her claims, absent a defense of waiver, estoppel, or equitable tolling. Pacheco v. Rice, 966 F.2d 904, 905 (5th Cir. 1992).
*3 The Court directed Plaintiff to provide copies of any complaints she filed with the EEOC or TWC so that the Court could evaluate whether Plaintiff satisfied her obligation to exhaust. She failed to do so, and her More Definite Statement does not contain any references to any actions taken regarding her race discrimination claim prior to filing this lawsuit. This claim should therefore be dismissed for failure to state a claim and failure to exhaust administrative remedies.
B. Plaintiff’s claims of negligence are barred.
Plaintiff couches her claim regarding her on-the-job injury as a claim of negligence based on a failure to maintain a safe workplace and a failure to provide prompt and adequate medical attention. Plaintiff’s complaint indicates that her employer was a workers’ compensation insurance subscriber. Her sole remedy for any workplace injury is therefore the Texas Workers’ Compensation Act. See Tex. Lab. Code § 408.001(a) (“Recovery of workers’ compensation benefits is the exclusive remedy of an employee covered by workers’ compensation insurance coverage ....”). Plaintiff’s claims of negligence are barred under Texas law.
Even if her negligence claims were not barred by the exclusive remedy provision of the Texas Workers’ Compensation Act, they would also be time-barred. The statute of limitations for a claim of negligence is two years. Tex. Civ. Prac. & Rem. Code Ann. § 16.003(a). Plaintiff’s on-the-job injury allegedly due to her employer’s failure to maintain a safe workplace occurred on June 8, 2017, over four years ago. Plaintiff’s allegations regarding the failure to provide prompt medical attention also concern this same time period. Plaintiff failed to timely file any claim of negligence against her employer.
C. Plaintiff fails to plead a plausible claim related to the denial of her workers’ compensation benefits.
Finally, Plaintiff also seeks judicial review of the denial of her workers’ compensation claim. This claim also fails as a matter of law.
Where conditions of diversity jurisdiction exist, a federal district court may sit in review of a Texas agency’s disposition of a workers’ compensation claim, so long as the review action was initially brought in federal not state court. Horton v. Liberty Mut. Ins. Co., 367 U.S. 348, 352 (1961); cf. Sherrod v. Am. Airlines, Inc.,
Moreover, even if the requirements of diversity jurisdiction were satisfied, Plaintiff has not provided the Court with any of the requested information regarding her workers’ compensation claim so that the Court might be able to evaluate it for timeliness. Under Texas law, an employee may seek judicial review of a final decision of the Texas Workers’ Compensation Commission by filing suit “not later than the 45th day after the date on which the division mailed the party the decision of the appeals panel.” Tex. Labor Code Ann. § 410.252(a). Plaintiff’s pleadings refer to an unsuccessful appeal of her workers’ compensation claim (which was originally filed in August 2018), but she does not provide the Court with the date of this administrative action or with any copies of the relevant decisions. In light of Plaintiff’s failure to follow a court order and the other identified defects, the Court should summarily dismiss Plaintiff’s request for review of the denial of her workers’ compensation claim.
III. Conclusion and Recommendation
*4 Having considered Plaintiff’s Complaint and More Definite Statement under the standards set forth in 28 U.S.C. § 1915(e), the undersigned recommends Plaintiff’s claims be DISMISSED.
IV. Instructions for Service and Notice of Right to Object/Appeal
The United States District Clerk shall serve a copy of this report and recommendation on all parties by either (1) electronic transmittal to all parties represented by attorneys registered as a “filing user” with the clerk of court, or (2) by mailing a copy to those not registered by certified mail, return receipt requested. Written objections to this report and recommendation must be filed within fourteen (14) days after being served with a copy of same, unless this time period is modified by the district court. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b). The party shall file the objections with the clerk of the court, and serve the objections on all other parties. A party filing objections must specifically identify those findings, conclusions or recommendations to which objections are being made and the basis for such objections; the district court need not consider frivolous, conclusive or general objections. A party’s failure to file written objections to the proposed findings, conclusions and recommendations contained in this report shall bar the party from a de novo determination by the district court. Thomas v. Arn, 474 U.S. 140, 149–52 (1985); Acuña v. Brown & Root, Inc., 200 F.3d 335, 340 (5th Cir. 2000). Additionally, failure to file timely written objections to the proposed findings, conclusions and recommendations contained in this report and recommendation shall bar the aggrieved party, except upon grounds of plain error, from attacking on appeal the unobjected-to proposed factual findings and legal conclusions accepted by the district court. Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1428–29 (5th Cir. 1996) (en banc).
SIGNED this 7th day of February, 2022.
Under 28 U.S.C. § 1915(e), a court may at any time dismiss a case if it determines that the case filed by the IFP plaintiff is frivolous, but is not required to screen non-prisoner cases for frivolousness at the outset. In contrast, when an IFP case is filed by a prisoner, the court is required to screen a complaint for frivolousness prior to docketing or as soon as possible. See 28 U.S.C. § 1915A(a).
SENTRY SELECT INSURANCE COMPANY, Plaintiff,
CHRISTIAN ULISES RUIZ; RUDOLPH CHEVROLET, LLC; RUDOLPH AUTOMOTIVE, LLC d/b/a RUDOLPH MAZDA; MARCELO FLORES; and LYNN CRAWFORD, Defendants.
CHRISTIAN ULISES RUIZ; RUDOLPH CHEVROLET, LLC; RUDOLPH AUTOMOTIVE, LLC d/b/a RUDOLPH MAZDA, Third-Party Plaintiffs,
NORTH AMERICAN CAPACITY INSURANCE COMPANY, Third-Party Defendant.
DAVID C. GUADERRAMA UNITED STATES DISTRICT JUDGE
Pending before the Court is Plaintiff Sentry Select Insurance Company’s (“Sentry”) “Motion to Reopen Case” (ECF No. 54). Sentry requests that the Court reopen the case so that it may file, pursuant to Federal Rule of Civil Procedure 54(b), a motion for reconsideration that, in turn, would ask the Court to reconsider its decision made nearly three years ago. For the reasons that follow, the Court denies the motion to reopen.
On August 16, 2016, Sentry brought this diversity action, seeking declaratory relief pursuant to 28 U.S.C. § 2201 against, among others, Defendants Rudolph Automotive, LLC d/b/a Rudolph Mazda, and Rudolph Chevrolet, LLC (collectively, the “Rudolph Entities”). It sought declarations that under an insurance policy it issued, it had no duty to defend or indemnify the Rudolph Entities in a state-court lawsuit styled as Andrea Juarez, individually and as Permanent Guardian of Irma Vanessa Villegas, an incapacitated person v. Christian Ulises Ruiz, et. al., Cause No. 2015-DCV-0473, brought in the 384th Judicial District Court, El Paso County, Texas (hereinafter, the “Underlying Lawsuit”).
The Underlying Lawsuit, which was initiated in February 2015, arose from a vehicle-pedestrian accident that occurred on the Rudolph Entities’ parking lot on December 27, 2013. The accident involved Christian Ulises Ruiz and Irma Vanessa Villegas—both employees of the Rudolph Entities at the time. While driving his truck, Ruiz struck Villegas, who was walking on foot, and Villegas sustained injuries to her head, neck, and other parts of her body. Andrea Juarez, individually and on behalf of Villegas, sued the Rudolph Entities for Ruiz’s negligence under the respondeat superior theory of liability.
Before this Court, the parties requested a trial on written submissions and stipulated facts. On February 1, 2018, their trial briefing was completed, and on June 20, 2018, the Court issued its “Findings of Fact and Conclusions of Law” (ECF No. 50). Therein, the Court declared that Sentry has a duty to defend the Rudolph Entities in the Underlying Lawsuit, but deferred ruling on the duty to indemnification issue until the Underlying Lawsuit is resolved. Findings of Fact & Conclusions of Law at 19–20, ECF No. 50; see also Sentry Select Ins. v. Ruiz, 324 F. Supp. 3d 874, 887 (W.D. Tex. 2018). On the same day, the Court administratively closed the case pending resolution of the Underlying Lawsuit. Sentry Select, 324 F. Supp. 3d at 887.
On July 19, 2018, Sentry appealed that decision. On May 23, 2019, the Fifth Circuit dismissed Sentry’s appeal for lack of appellate jurisdiction. Sentry Select Ins. v. Ruiz, 770 F. App’x 689, 691 (5th Cir. 2019). The Fifth Circuit explained that by administratively closing the case, this Court retained jurisdiction, and that reservation of jurisdiction precluded appellate jurisdiction. Id. at 690 (cleaned up).
On January 10, 2021, Sentry filed the instant motion to reopen the case. The Rudolph Entities filed a response (ECF No. 55), and Sentry followed by filing a reply (ECF No. 56).
A. Reopening Administratively Closed Cases
Administrative closings “perform[ ] docket management.” Sw. Elec. Power Co. v. Certain Underwriters at Lloyds of London, 772 F.3d 384, 388 (5th Cir. 2014). They are used “in circumstances in which a case, though not dead, likely to remain moribund for an appreciable period of time,” Papotto v. Hartford Life & Acc. Ins., 731 F.3d 265, 275 (3d Cir. 2013) (cleaned up). “[A]dministratively closing a case is not a dismissal or final decision.” S. La. Cement, Inc. v. Van Aalst Bulk Handling, B.V., 383 F.3d 297, 302 (5th Cir. 2004). The district court “can ‘reopen the case—either on its own or at the request of a party—at any time.’ ” Ruiz, 770 F. App’x at 690 (quoting Papotto, 731 F.3d at 275).
B. Motion for Reconsideration
Federal Rule of Civil Procedure 54(b) governs reconsideration of interlocutory orders. Six Dimensions, Inc. v. Perficient, Inc., 969 F.3d 219, 227 (5th Cir. 2020). Rule 54(b) provides, in relevant part: “any order or other decision, however designated, that adjudicates fewer than all the claims ... does not end the action as to any of the claims ... and may be revised at any time before the entry of a judgment adjudicating all the claims.” Fed. R. Civ. P. 54(b). It is “less stringent” and “more flexible” than Rule 59(e), which governs motions to alter or amend a final judgment. Austin v. Kroger Texas, L.P.,
The decision of whether to grant or deny a Rule 54(b) motion for reconsideration is committed to the sound discretion of the trial court. See McClendon v. United States, 892 F.3d 775, 781 (5th Cir. 2018) (“[W]e typically review the denial of a motion for reconsideration, whether under Rule 54(b) or Rule 59(e), for abuse of discretion.”); Smith v. H. E. Butt Grocery Co., 992 F.2d 324, 1993 WL 152106, at *2 (5th Cir. 1993) (unpublished precedent per Fifth Cir. R. App. P. 47.5.3) (concluding that district court did not abuse its discretion in granting Rule 54(b) motion for reconsideration); Holoway v. Triola, 172 F.3d 866, 1999 WL 129656, at *1 (5th Cir. 1999) (unpublished) (“It is a well established rule of trial procedure that a district court may reconsider and reverse a previous interlocutory order at its discretion.” (citing Fed. R. Civ. P. 54(b))).
Sentry moves to reopen the case so that it may file a motion for reconsideration of the Court’s prior ruling that Sentry has a duty to defend the Rudolph Entities in the Underlying Lawsuit. The parties have briefed on the basis for Sentry’s prospective motion for reconsideration in sufficient details such that the Court may evaluate it on this posture. Specifically, Sentry’s motion for reconsideration turns on the meaning of the phrase “in the course of... [e]mployment” as used in the employer liability exclusion provision of the policy. The provision provides, in relevant part: “ ‘This insurance does not apply to ... ‘Bodily injury’ to[ ] [a]n ‘employee’ of the ‘insured’ arising out of and in the course of. (1) Employment by the ‘insured’; or (2) Performing the duties related to the conduct of the “insured’s business[.]’ ” Sentry Select, 324 F. Supp. 3d at 879 (quoting policy) (emphasis added; alterations in original).
Given the long lapse of time since the Court decided the duty to defend issue, it is helpful to begin with a brief recount of the parties’ trial arguments and the Court’s ruling as relevant to Sentry’s arguments on the instant motion. Before trial, Sentry urged the Court to construe the policy’s “in the course of employment” language in parity with the statutory phrase “in the course and scope of employment” in the Texas Workers’ Compensation Act, Pl.’s Tr. Br. at 16–18, ECF No. 44; Pl.’s Resp. to Defs.’ Tr. Br. at 5, ECF No. 47; see also Tex. Lab. Code Ann § 401.011(12) (defining “Course and scope of employment”).1 Specifically, Sentry invited the Court to construe the policy’s term in accordance with the “access” and/or “on premises” doctrines, which are applied in the workers’ compensation cases to determine if an injury was “in the course and scope of employment” and therefore, is compensable. See Pl.’s Tr. Br. at 16–18.2 In so arguing, Sentry pointed to no language in the policy that calls for applying such workers’ compensation doctrines to construe the term at issue; nor did it point to any binding authority that interpreted the term in the way it proposed.3
The Rudolph Entities, on the other hand, urged that instead of applying the access doctrine from workers’ compensation cases, the Court should apply the analysis of “within course and scope of employment” from common law vicarious liability cases. Defs.’ Tr. Br. at 11–13, ECF No. 45; Defs.’ Resp. to Pl.’s Tr. Br. at 4, ECF No. 46. Specifically, the Entities pointed out that under Texas law in order for an act to be done “within course and scope of employment,” it is necessary that: (1) it be done within the general authority of the master (2) in furtherance of the master’s business (3) and for the accomplishment of the object for which the servant is employed. Defs.’ Tr. Br. at 13 (citing London v. Tex. Power & Light Co., 620 S.W.2d 718, 720 (Tex. Civ. App.—Dallas 1981, no writ)).
Sentry, then, argued against the Rudolph Entities’ position. It explained that “the language of the employer’s liability exclusion is different from what is required to establish respondeat superior liability on the part of an employer,” pointing out that for respondeat superior liability, a plaintiff must show “the employee was acting in the course and scope of the employment.” Pl.’s Reply Tr. Br. at 5–6 (bold emphasis in original), ECF No. 49. Sentry claimed: “This is far different from the language of the employer’s liability exclusion, which does not contain the ‘scope of employment’ requirement.” Id. at 6 (emphasis added). To Sentry, this difference was “significant.” Id. Yet, the access doctrine on which Sentry relied is an interpretation of “in the course and scope of employment,” albeit a statutory phrase in the Texas Workers’ Compensation Act. Tex. Lab. Code Ann §§ 406.031, 401.0112(12); see generally Leordeanu v. Am. Prot. Ins., 330 S.W.3d 239, 240–45 (Tex. 2010) (discussing the statutory phrase “course and scope of employment,” the “coming and going rule,” and several exceptions to the rule); Gibson v. Grocers Supply Co., 866 S.W.2d 757, 759 (Tex. App.—Houston [14th Dist.] 1993, no writ) (discussing access doctrine).
The Court declined Sentry’s invitation to import the access doctrine to interpret the policy term (it also did not adopt the Rudolph’s Entities’ construction).4 Specifically, in declining Sentry’s invitation, the Court was guided by Nautilus Insurance Company v. Zamora, 114 F.3d 536 (5th Cir. 1997). There, as this Court explained, in construing an insurance policy term, the lower court imported the so-called “positional risk” theory that is commonly applied in workers’ compensation cases, and making an Erie guess, the Fifth Circuit expressed doubts about the lower court’s approach, stating: ‘ “We cannot conclude ... that the Texas Supreme Court would turn to workers’ compensation principles as a means of interpreting the terms of an insurance contract.’ ” Sentry Select, 324 F. Supp. 3d at 885-86 (quoting Zamora, 114 F.3d at 537). Instead, this Court turned to dictionaries and prior court decisions interpreting same or similar provisions and construed the policy term “in the course of ... [e]mployment” to mean “while the employee is performing work-related duties.” Id. at 886. Applying that interpretation to the facts, the Court ultimately found that Villegas was not in the course of her employment when her injury occurred, and therefore, the exclusionary provision does not apply. Id. at 887.
Fast forward three years. In the instant motion, Sentry argues that the Court’s ruling based on Zamora that the employer’s liability exclusion does not apply is legally erroneous. Mot. to Reopen Case at 2-3, ECF No. 54. This is so because, Sentry claims, a “recent” decision issued by the Texas Supreme Court, namely Painter v. Amerimex Drilling I, Ltd., 561 S.W.3d 125 (Tex. 2018), and a “just issued” Texas appellate court decision, namely In re Rudolph Auto., LLC, 616 S.W.3d 171 (Tex. App.—El Paso 2020), constitute “an intervening change in law” requiring the Court to vacate its prior ruling that Sentry has a duty to defend the Rudolph Entities. Mot. to Reopen Case at 1-2.
Briefly, Painter involved a vicarious lability claim against an employer based upon its employee’s [such as Ruiz] negligence that caused personal injury to another [such as Villegas], and the claim required proof that the employee-wrongdoer “was acting in the course and scope of his employment.” Painter, 561 S.W.3d at 131. In assessing what that element of proof requires, the Texas Supreme Court looked to the “coming-and-going” rule and an exception to the rule, namely “special mission,” as they are applied in the workers’ compensation context. Id. at 136–37. And in In re Rudolph, which was decided on a petition for writ of mandamus challenging a decision by the state trial court in the Underlying Lawsuit,5 the Eighth Court of Appeals, in light of Painter, stated that the “on-premises/access” doctrine from workers’ compensation cases applies to vicarious liability cases.6
Relying on Painter and In re Rudolph, Sentry argues, “if workers’ compensation principles apply in determining liability in the tort context, such principles should be considered in interpreting the employer’s liability exclusion, since the policy is insuring against tort liability.” Mot. to Reopen Case at 3.
Critically, the Painter decision was issued on April 13, 2018. That was two months before the Court issued its opinion on the duty to defend issue. And although Painter was decided about two months after the parties’ briefing on the paper-trial was completed, Sentry never sought leave of the Court to file supplemental briefs addressing Painter before the Court ruled on the duty to defend issue. Sentry waited nearly three years to make the Painter argument. This delay, in and of itself, is a ground for denying request for reconsideration. Moreover, neither Painter, nor In re Rudolph, involves insurance contract interpretation. So, these cases do not undermine this Court’s reliance on Zamora, 114 F.3d 536, in which, the Fifth Circuit, has interpreted an exclusionary provision identical to the one in this case.
Consequently, the Court, exercising its discretion, would deny Sentry’s proposed motion for reconsideration, and therefore denies Sentry’s motion to reopen the case. Calpetco 1981 v. Marshall Expl., Inc., 989 F.2d 1408, 1415 (5th Cir. 1993) (concluding district court was not required to reconsider a summary judgment because plaintiff “belatedly came forward with evidence not submitted prior to the ruling,” “[o]therwise, the cycle of reconsideration would be never-ending,” and stating “a district judge must have considerable discretion in determining when enough is enough”); Bhatnagar v. Surrendra Overseas Ltd., 52 F.3d 1220, 1231 (3d Cir. 1995) (rejecting a motion for reconsideration as a “second bite at the apple” and explaining that “[h]aving failed in its first effort to persuade the court,” the plaintiff “simply changed theories and tried again”).
Accordingly, IT IS ORDERED that Plaintiff Sentry Select Insurance Company’s “Motion to Reopen Case” (ECF No. 54) is DENIED.
So ORDERED and SIGNED this 28th day of September 2021.
The Act provides for liability “for compensation for an employee’s injury without regard to fault or negligence if: (1) at the time of injury, the employee is subject to this subtitle; and (2) the injury arises out of and in the course and scope of employment.” Tex. Lab. Code Ann § 406.031 (emphasis added)). It defines “Course and scope of employment” as “an activity of any kind or character that has to do with and originates in the work, business, trade, or profession of the employer and that is performed by an employee while engaged in or about the furtherance of the affairs or business of the employer.” See also Tex. Lab. Code Ann § 401.011(12). “The term includes an activity conducted on the premises of the employer or at other locations.” Id. The term does not include:
(A) transportation to and from the place of employment unless:
(i) the transportation is furnished as a part of the contract of employment or is paid for by the employer;
(ii) the means of the transportation are under the control of the employer; or
(iii) the employee is directed in the employee’s employment to proceed from one place to another place; or
(B) travel by the employee in the furtherance of the affairs or business of the employer if the travel is also in furtherance of personal or private affairs of the employee unless:
(i) the travel to the place of occurrence of the injury would have been made even had there been no personal or private affairs of the employee to be furthered by the travel; and
(ii) the travel would not have been made had there been no affairs or business of the employer to be furthered by the travel.
The access doctrine ‘ “is used by courts in workers’ compensation cases as a limited exception to the more general rule recognizing that compensation benefits do not extend to injuries incurred by employees going to and from work.’ ” Sentry Select, 324 F. Supp. 3d at 885 (quoting OCI Beaumont LLC v. Barajas, 520 S.W.3d 83, 85 n.l (Tex. App.—Beaumont 2017, no pet.)). The doctrine expands the scope of employment to include “cases in which the employer has evidenced an intention that the particular access route or area be used by the employee in going to and from work, and where such access route or area is so closely related to the employer’s premises as to be fairly treated as a part of the premises.” Tex. Comp. Ins. v. Matthews, 519 S.W.2d 630, 631 (Tex. 1974). According to one Texas appellate court, “[i]n Texas, the access doctrine has been applied when the injury occurs on or very near the employer’s premises, but only when those premises of the employer are also the employee’s place of work.” Turner v. Tex. Emp’rs’ Ins. Ass’n, 715 S.W.2d 52, 54 (Tex. App.—Dallas 1986, writ ref’d n.r.e.); see also Bordwine v. Tex. Emp’rs’ Ins. Ass’n, 761 S.W.2d 117, 120 (Tex. App.—Houston [14th Dist.] 1988, writ denied) (“Where the injury occurs on a parking lot owned by the employer, and at the place of employment when the employee is either going to or from work and where the employee is authorized to park, the rule is almost universal that workers’ compensation coverage attaches to the same extent as if the injury occurred on the main premises.”).
Cf. United Teacher Assocs. Ins. v. Union Labor Life Ins., 414 F.3d 558, 565–66 (5th Cir. 2005) (“While decisions of intermediate state appellate courts provide guidance, they are not controlling. If a state’s highest court has not ruled on the issue in question, a federal court must determine, to the best of its ability, what the highest court of the state would decide.” (cleaned up)).
At this point in the Court’s analysis, Sentry had the burden to show that the exclusion applies. Turner v. Cincinnati Ins., 9 F.4th 300, 314 (5th Cir. 2021) (“If the insured carries its initial burden of showing that a claim is potentially within the scope of coverage, then the burden shifts to the insurer to show that a limitation or exclusion precludes coverage of all claims, also within the confines of the eight comers rule.” (cleaned up)).
As set out In re Rudolph, the Underlying Lawsuit was tried to a jury, which returned a verdict on April 13, 2018. The jury awarded roughly $4 million to the plaintiffs, Juarez and Villegas, and found, among others, that neither Ruiz, nor Villegas, was acting in the course and scope of their employment at the time of the accident. After trial, the state trial judge granted Juarez and Villegas’s motion for a new trial, in light of Painter, which was issued on the same day on which the jury reached the verdict. The Rudolph Entities filed a petition for writ of mandamus, challenging the trial judge’s grant of new trial. On December 30, 2020, the Texas Eighth Court of Appeals denied the petition.
In February 2020, it appears, the Rudolph Entities appealed the denial to Texas Supreme Court—which is currently pending. Texas Judicial Branch, Case No. 21-0135, at https://search.txcourts.gov/Case.aspx?cn=21-0135&coa=cossup (last visited on Sept. 24, 2021).
The Texas appellate court explained:
Painter [ ] does state that the coming-and-going rule applies to both workers’ compensation and vicarious liability cases.... Painter [ ] dealt with and applied an exception to the coming-and-going rule known as the special mission exception to hold that there was a fact question on vicarious liability in the nonsubscriber context. It would follow that if the Supreme Court of Texas held in Painter [ ] that the coming-and-going rule applies across both the subscriber and nonsubscriber contexts, and that one exception to the rule also applied, then logically speaking, another exception to the coming-and-going rule (the on-premises/access doctrine) could equally apply with force here. Although we find that the general principles enunciated in Painter [ ] applied here, we do not otherwise decide whether there is a need for an access instruction as that issue is not now before us.
In re Rudolph Auto., 616 S.W.3d at 193 n.10 (emphasis added).
United States District Court, W.D. Texas,
TEXAS MUTUAL INSURANCE COMPANY, Plaintiff
KINSALE INSURANCE COMPANY, Defendant
Case No. 1:19-CV-529-LY
Attorneys & Firms
R. Scott Placek, Arnold & Placek, P.C., Round Rock, TX, for Plaintiff.
Andres Cordova, Pro Hac Vice, Sina Bahadoran, Pro Hac Vice, Clyde & CO US LLP, Miami, FL, Lisa M. Henderson, Clyde & CO US LLP, Dallas, TX, for Defendant.
REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
SUSAN HIGHTOWER, UNITED STATES MAGISTRATE JUDGE
TO: THE HONORABLE LEE YEAKEL
UNITED STATES DISTRICT JUDGE
Before this Court are Kinsale’s Opposed Motion for Leave to File Amended Answer to Assert Counterclaim, Instanter, filed August 6, 2019 (Dkt. No. 16); Plaintiff’s Opposed Motion to Dismiss, filed August 13, 2019 (Dkt. No. 18); and the Response and Reply Briefs. On September 10, 2019, the District Court referred the above motions to the undersigned Magistrate Judge for Report and Recommendation pursuant to 28 U.S.C. § 636(b)(1), Federal Rule of Civil Procedure 72, and Rule 1 of Appendix C of the Local Rules of the United States District Court for the Western District of Texas.
Plaintiff Texas Mutual Insurance Company (“Texas Mutual”) issued a Texas workers’ compensation and employers’ liability insurance policy to Quality South Texas Trucking, Inc. (“Quality Trucking”), with a policy period from August 18, 2017 to August 19, 2018 (“Texas Mutual Policy”). Defendant Kinsale Insurance Company (“Kinsale”) issued a commercial general liability insurance policy to Quality Trucking, with a policy period from August 18, 2017 to August 18, 2018 (“Kinsale Policy”). Both Parties contend that they have no duty to defend in an underlying state negligence lawsuit.
A. The Underlying Lawsuit
In October 2017, SM Energy Company and Trinidad Drilling hired Quality Trucking to move a large drilling rig from Catarina, Texas, to a nearby location. Quality Trucking hired Steven Martinez to help move the drilling rig. On November 3, 2017, during the drilling rig move, Mr. Martinez was seriously injured when his right leg was crushed by a crane operated by Fred Gonzalez, the owner of Quality Trucking. Mr. Martinez underwent five major surgeries, and ultimately had to have his right leg amputated.
On January 26, 2018, Mr. Martinez and his wife, Bertha Martinez, individually and as next friends of their children (the “Martinez Plaintiffs”), filed their first negligence lawsuit against Quality Trucking, Trinidad Drilling, SM Energy Company, and Fred Gonzalez. See Martinez v. Trinidad Drilling, No. 18-01-1335-DCVAJA (365th Dist. Ct. Dimmit County, Tex. Jan. 26, 2018).
Once notified of the underlying lawsuit, Texas Mutual informed Quality Trucking that it had no duty to defend Quality Trucking in the lawsuit because the Texas Mutual Policy “covers only bodily injury arising out of and in the course of an injured employee’s employment by the insured.” Dkt. No. 1-1 at ¶ 11. Because Mr. Martinez had not alleged that he was an employee of Quality Trucking, Texas Mutual took the position that there was no coverage under the Policy. When Quality Trucking informed Texas Mutual that Kinsale had also denied coverage under the Kinsale Policy, however, Texas Mutual agreed to defend Quality Trucking and Mr. Gonzalez in the lawsuit “with gratuitous defenses as business courtesy.” Id. at ¶ 12.
Subsequently, Texas Mutual notified Kinsale that Kinsale had the sole duty to defend Quality Trucking in the lawsuit because the Martinez Plaintiffs sought damages for bodily injuries and Mr. Martinez was not an employee of Quality Trucking. Kinsale denied it had a duty to defend the lawsuit, contending that Texas Mutual was under a duty to defend.
*2 The Martinez Plaintiffs eventually non-suited their first state court action and, on June 14, 2018, re-filed the case in Webb County. See Martinez v. Trinidad Drilling, No. 001195-D3 (341st Dist. Ct. Webb County, Tex. June 14, 2018) (“Underlying Lawsuit”). Mr. Martinez specifically alleged in the Underlying Lawsuit that he was hired as “an independent contract driver,” and that he “was not an employee of [Quality Trucking and Mr. Gonzalez] at the time he sustained his injuries.” Dkt. No. 1-1 at Exh. D, p. 3.
On January 15, 2019, Texas Mutual again contacted Kinsale and requested that Kinsale defend Quality Trucking in the Underlying Lawsuit. Again, Kinsale took the position that it had no duty to defend because Quality Trucking was covered under the Texas Mutual Policy. Id. at Exh. C.
B. The Instant Lawsuit
On April 17, 2019, Texas Mutual filed the instant lawsuit against Kinsale in state court, seeking a declaratory judgment under the Texas Uniform Declaratory Judgment Act that “it has no duty to defend” and that Kinsale does have a duty to defend Quality Trucking in the Underlying Lawsuit. See Texas Mutual Ins. Co. v. Kinsale Ins. Co., No. D-1-GN-19-002114 (126th Dist. Ct. Travis County, Tex. Apr. 17, 2019). Texas Mutual contends that the Kinsale Policy does not exclude independent contractors from coverage, and Kinsale thus has a duty to defend.
On May 16, 2019, Kinsale removed this case to federal court on the basis of diversity jurisdiction under 28 U.S.C. § 1441. See Dkt. No. 1. Shortly after this case was removed to federal court, the Texas Department of Insurance, Division of Workers’ Compensation (“DWC”), issued a decision finding that Mr. Martinez was not an employee of Quality Trucking. Accordingly, Kinsale now has assumed its defense of the Underlying Lawsuit, pursuant to a reservation of rights letter. Accordingly, Texas Mutual has withdrawn its gratuitous defense in the Underlying Lawsuit.
Nevertheless, on August 6, 2019, Kinsale filed its Motion for Leave to file an Amended Answer in order to assert counterclaims against Texas Mutual, pursuant to Federal Rules of Civil Procedure 13 and 15(a)(2). Kinsale claims that it has no duty to defend Quality Trucking because Texas Mutual “voluntarily paid worker’s compensation benefits to Steven Martinez for his employment related injuries,” and thus Texas Mutual’s claims are barred under the doctrines of waiver and estoppel. See Dkt. No. 16 at p. 4. Kinsale also argues that coverage is barred under various exclusions from the Policy, including exclusions and endorsements relating to independent contractors, the duty to defend, employer liability, workers’ compensation, and medical payments. Kinsale seeks to file a counterclaim for declaratory relief under 28 U.S.C. § 2201 against Texas Mutual “to establish that there is no coverage under a commercial general liability and commercial excess liability policies that Kinsale issued to [Quality Trucking] for workplace injuries Steven Martinez allegedly sustained while working as an independent contractor for [Quality Trucking].” Dkt. No. 16 at p. 6.
In response, Texas Mutual argues that “Kinsale’s assumption of the defense, and Texas Mutual’s withdrawal, has mooted the case asserted by Texas Mutual and renders this case non-justiciable.” Dkt. No. 18 at p. 3. Texas Mutual contends that there is no longer a case or controversy regarding its duty to defend because it has already withdrawn from the defense in the Underlying Lawsuit. Accordingly, Texas Mutual moves to dismiss this case without prejudice under Federal Rule of Civil Procedure 41(a)(2).
II. LEGAL STANDARD
*3 A plaintiff may unilaterally dismiss his action without prejudice by filing a notice of dismissal before the opposing party serves either an answer or a motion for summary judgment. FED. R. CIV. P. 41(a)(1)(A)(i). If the defendant has filed a motion for summary judgment or an answer, as in this case, however, Rule 41(a)(2) permits dismissal at the plaintiff’s request “only by court order, on terms that the court considers proper.” Id. at Rule 41(a)(2). “Voluntary dismissal under Rule 41(a)(2) is a matter within the sound discretion of the district court, and the district court’s decision on this issue is reviewed only for abuse of discretion.” Templeton v. Nedlloyd Lines, 901 F.2d 1273, 1274-75 (5th Cir. 1990); see also Welsh v. Correct Care, L.L.C., 915 F.3d 341, 343 (5th Cir. 2019).
The Fifth Circuit has explained that, “as a general rule, motions for voluntary dismissal should be freely granted unless the non-moving party will suffer some plain legal prejudice other than the mere prospect of a second lawsuit.” Elbaor v. Tripath Imaging, Inc., 279 F.3d 314, 317 (5th Cir. 2002). And the mere fact that the plaintiff “may gain a tactical advantage by dismissing its suit without prejudice and refiling in another forum is not sufficient legal prejudice.” Bechuck v. Home Depot U.S.A., Inc., 814 F.3d 287, 299 (5th Cir. 2016) (internal quotation omitted). The “purpose of the grant of discretion under Rule 41(a)(2) ... is primarily to prevent voluntary dismissals which unfairly affect the other side[.]” 9 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 2364 (3d ed. 2018) (internal quotation omitted). Absent such a showing or other “evidence of abuse by the movant,” the motion should be granted. Elbaor, 279 F.3d at 317.
As noted, Texas Mutual filed this lawsuit in state court seeking a declaratory judgment under the Texas Uniform Declaratory Judgment Act that it has no duty to defend and Kinsale does have a duty to defend in the Underlying Lawsuit. When a Texas Declaratory Judgment Act (“DJA”) suit is removed to federal court, it is treated as though it had been originally filed under the Federal DJA. Edionwe v. Bailey, 860 F.3d 287, 294 n.2 (5th Cir. 2017), cert. denied, 138 S. Ct. 687 (2018); see also Wells Fargo Bank, N.A. v. American Gen. Life Ins. Co., 670 F. Supp. 2d 555, 565 (N.D. Tex. 2009) (“Because the Texas [DJA] is procedural in nature, it does not govern a declaratory-judgment action in federal court.”). Texas Mutual argues that this Court lacks jurisdiction to issue a declaratory judgment in this case because there is no longer a case or controversy between it and Kinsale. The Court agrees.
Federal courts lack subject matter jurisdiction to issue a declaratory judgment unless an “actual controversy” exists between the parties. 28 U.S.C. § 2201(a). “It has been said that the case or controversy requirement of Article III of the United States Constitution is identical to the actual controversy requirement under the Declaratory Judgment Act.” State of Tex. v. West Pub. Co., 882 F.2d 171, 175 (5th Cir. 1989). “In order to demonstrate that a case or controversy exists to meet the Article III standing requirement when a plaintiff is seeking injunctive or declaratory relief, a plaintiff must allege facts from which it appears there is a substantial likelihood that he will suffer injury in the future.” Bauer v. Texas, 341 F.3d 352, 358 (5th Cir. 2003). In other words, “[a] claim for declaratory judgment seeks to define the legal rights and obligations of the parties in anticipation of some future conduct, not to proclaim liability for a past act.” Haggard v. Bank of the Ozarks, Inc., 547 F. App’x 616, 620 (5th Cir. 2013). Accordingly, a request for declaratory relief “can be mooted by subsequent developments.” Id. “An action becomes moot when ‘the issues presented are no longer ‘live’ or the parties lack a legal cognizable interest in the outcome.’ ” Fla. Bd. of Bus. Regulation v. N.L.R.B., 605 F.2d 916, 918 (5th Cir. 1979) (quoting Flast v. Cohen, 392 U.S. 83, 95 (1968)). This is the situation in the case at bar.
*4 Because Kinsale has assumed the defense in the Underlying Lawsuit and Texas Mutual has withdrawn from the case, Texas Mutual’s request for declaratory relief is now moot because it has received all the relief sought in this case. See Haggard, 547 F. App’x at 620 (finding that plaintiff’s claim for declaratory relief had been rendered moot where it obtained the relief it sought). This Court does not have jurisdiction to issue an advisory opinion on a matter that is no longer a live case or controversy between the parties. See St. Pierre v. United States, 319 U.S. 41, 42 (1943) (“A federal court is without power to decide moot questions or to give advisory opinions which cannot affect the rights of the litigants in the case before it.”).
The Court also finds that Kinsale no longer has an adverse legal interest against Texas Mutual in this case. Although Kinsale’s proposed amended answer seeks to assert counterclaims against Texas Mutual, those proposed counterclaims are all directed toward Quality Trucking, not Texas Mutual. For example, Kinsale’s proposed amended answer states: “This is an action for declaratory relief under 28 U.S.C. § 2201 to establish that there is no coverage under a commercial general liability and commercial excess liability policies that Kinsale issued to Quality South Texas Trucking, Inc. [ ] for workplace injuries Steven Martinez allegedly sustained while working as an independent contractor for Quality [Trucking].” Dkt. No. 16 at p. 6. In addition, the proposed amended answer and counterclaims focus solely on the Kinsale Policy, and why Kinsale has no duty to defend under the Kinsale Policy. Thus, Kinsale does not have an actual controversy with Texas Mutual, but rather with Quality Trucking. Kinsale concedes as much in its Response brief when it states: “Kinsale’s counterclaim presents a justiciable controversy regarding coverage for Martinez’s underlying tort lawsuit against Quality [Trucking] ... In particular, Kinsale seeks a declaration that there is no coverage because the Limitation—Independent Contractors endorsement bars coverage for bodily injury to Quality [Trucking]’s independent contractors.” Dkt. No. 22 at p. 3-4 (emphasis added). Accordingly, Kinsale’s dispute is with Quality Trucking, not Texas Mutual.
Kinsale argues in its Response that there is an actual controversy with Texas Mutual “because Texas Mutual may assert a claim against Kinsale for reimbursement of defense costs and medical payments it made prior to withdrawing its defense of Quality [Trucking].” Id. at p. 4 (emphasis added). Texas Mutual, however, has not asserted such claims in this case and, therefore, Kinsale’s argument is merely speculative. “Ripeness separates those matters that are premature because the injury is speculative and may never occur from those that are appropriate for judicial review.” United Transp. Union v. Foster, 205 F.3d 851, 857 (5th Cir. 2000). A declaratory action must be ripe to be justiciable. Shields v. Norton, 289 F.3d 832, 835 (5th Cir. 2002). Because Kinsale relies only on speculative, unripe potential claims in this case, it has failed to show that any justiciable issues remain. Accordingly, this Court lacks subject matter jurisdiction to issue a declaratory judgment.
Because the Court finds that it lacks jurisdiction over this case, Texas Mutual’s Motion to Dismiss should be granted. The Court further finds that dismissal of this case under Rule 41(a)(2) will not unfairly prejudice Kinsale. See Elbaor, 279 F.3d at 317 (stating that “motions for voluntary dismissal should be freely granted unless the non-moving party will suffer some plain legal prejudice other than the mere prospect of a second lawsuit”).
*5 Based on the foregoing, the undersigned RECOMMENDS that the District Court GRANT Plaintiff’s Opposed Motion to Dismiss (Dkt. No. 18) and DISMISS this lawsuit without prejudice under Federal Rule of Civil Procedure 41(a)(2). The Court FURTHER RECOMMENDS that the District Court DENY Kinsale’s Opposed Motion for Leave to File Amended Answer to Assert Counterclaim (Dkt. No. 16).
IT IS FURTHER ORDERED that this case be removed from the Magistrate Court’s docket and returned to the docket of the Honorable Lee Yeakel.
The parties may file objections to this Report and Recommendation. A party filing objections must specifically identify those findings or recommendations to which objections are being made. The District Court need not consider frivolous, conclusive, or general objections. See Battle v. United States Parole Comm’n, 834 F.2d 419, 421 (5th Cir. 1987). A party’s failure to file written objections to the proposed findings and recommendations contained in this Report within fourteen (14) days after the party is served with a copy of the Report shall bar that party from de novo review by the District Court of the proposed findings and recommendations in the Report and, except on grounds of plain error, shall bar the party from appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the District Court. See 28 U.S.C. § 636(b)(1); Thomas v. Arn, 474 U.S. 140, 150-53 (1985); Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en banc).
United States District Court, W.D. Texas, El Paso Division.
CAMOCO, LLC, Plaintiff,
Carlos LEYVA a/k/a AJ&I Construction Clean Up, Defendant.
Attorneys & Firms
*605 Andrew J. Mongelluzzi, Clearwater Business Law, LLC, Clearwater, FL, James Allen Martinez, Law Office of James Martinez, El Paso, TX, for Plaintiff.
M. Mitchell Moss, Priscilla M. Castillo, Moss Legal Group, PLLC, El Paso, TX, for Defendant.
MEMORANDUM OPINION AND ORDER
DAVID C. GUADERRAMA, UNITED STATES DISTRICT JUDGE
Presently before the Court is Plaintiff Camoco, LLC’s “Emergency Motion to Extend Discovery Deadline and Compel Deposition of Non-Party Witness” (“Motion”) (ECF No. 79) filed on October 28, 2019. Therein, Plaintiff asks the Court to extend the discovery deadline for 30 days from the date of the Scheduling Order—November 1, 2019, see Scheduling Order (ECF No. 55) and compel the deposition of Ms. Carla Moreno (“Ms. Moreno”), a represented non-party witness, during the requested extended discovery period. Mot. at 7.1 For the reasons that follow, the Court GRANTS IN PART and DENIES IN PART Plaintiff’s Motion.
On July 13, 2018 Plaintiff filed this action against Defendant Carlos Leyva a/k/a/ AJ&I Construction Clean Up (“Defendant”) under the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”), Fla. Stat. § 501.204(1), alleging that Defendant breached an employment agreement with Plaintiff when he opened a side business during his employment, operated that business in competition with Plaintiff, and used Plaintiff’s employees, business assets, and resources to operate that business. Mot. at 2; see also Compl. at 2, ECF No. 2. Plaintiff claims to have lost more than $100,000 in business revenue and customer contracts since Defendant started his side business competing with it. See Compl. at 2.
Plaintiff seeks to depose Ms. Moreno, who worked for Plaintiff during the same time Plaintiff employed Defendant and again after Defendant stopped working for Plaintiff. Mot. at 2. Plaintiff asserts that Ms. Moreno is a non-party witness with knowledge of relevant facts in this case because Defendant claims that Plaintiff’s business losses “were caused in part by Moreno’s poor work performance.” Id. Moreover, Plaintiff asserts that “Defendant and Moreno are romantically involved and, [based] on information and *606 belief, now work together in business in competition with [Plaintiff].” Id.
While Ms. Moreno is not a party to this case, Plaintiff states that she has filed a complaint against it with the Equal Employment Opportunity Commission (“EEOC”), in which she is represented by attorneys Enrique Chavez and Michael Anderson. Id. at 2–3. On October 18, 2019, Plaintiff served Ms. Moreno a subpoena for her testimony at a deposition on October 25 regarding the above-captioned case. See Notice, ECF No. 78. On October 23, Plaintiff’s attorney in the EEOC matter, Nathan Pearman, emailed Ms. Moreno’s attorneys to inform them that “he would telephonically attend the deposition” of their client. Mot. at 3. But the next day, Ms. Moreno’s attorneys responded to Pearman’s email, stating that they would not attend the deposition and that:
Our firm does not represent Carla Moreno in the case of Camoco, LLC v. Carlos Leyva. We do not intend to make an appearance in that case. Ms. Moreno is not a party in that case.
We do not consent to any questioning of Ms. Moreno, at the deposition for the Leyva matter [sic], in any way concerning Ms. Moreno’s EEOC charges or claims at the deposition for the unrelated Leyva matter, any questions to Ms. Moreno regarding her EEOC charges are prohibited by the Rules of Professional Conduct.
Id., Ex. A at 2, ECF No. 79-1.
Before Ms. Moreno’s deposition began on October 25, 2019, Plaintiff’s attorney in the instant case spoke with one of Ms. Moreno’s attorneys by phone. Id. at 3. Ms. Moreno’s attorney told Plaintiff’s attorney that “he did not object to Moreno being deposed, but [that] he would not attend the deposition and objected that any questioning of Moreno about her past or present employment would violate the Rules of Disciplinary Conduct.” Id. at 3–4. Out of an abundance of caution, Plaintiff’s counsel limited his questioning of Ms. Moreno during the October 25 deposition. Id. at 4. Plaintiff’s counsel then suspended the deposition pending the outcome of the instant motion to compel. Id.
II. APPLICABLE LAW
A. Scope of Discovery
Under Rule 26(b), “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense.” Fed. R. Civ. P. 26(b)(1). “Relevant information encompasses ‘any matter that bears on, or that reasonably could lead to other matter that could bear on, any issue that is or may be in the case.’ ” Merrill v. Waffle House, Inc., 227 F.R.D. 467, 470 (N.D. Tex. 2005) (quoting Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351, 98 S.Ct. 2380, 57 L.Ed.2d 253 (1978)). “Relevancy is broadly construed, and a request for discovery should be considered relevant if there is ‘any possibility’ that the information sought may be relevant to the claim or defense of any party.” Sheldon v. Vermonty, 204 F.R.D. 679, 689 (D. Kan. 2001) (quoting Scott v. Leavenworth Unified School Dist. No. 453, 190 F.R.D. 583, 585 (D. Kan. 1999)). “The party seeking discovery bears the initial burden of showing that the materials and information sought are relevant to the action or will lead to the discovery of admissible evidence.” Reynolds v. Cactus Drilling Co., LLC, No. M015CV00101DAEDC, 2015 WL 12660110, at *2 (W.D. Tex. Dec. 21, 2015). However, “[o]nce the party seeking discovery establishes that the materials requested are within the scope of permissible discovery, the burden shifts to the party resisting discovery to show why the discovery is irrelevant, overly broad, unduly burdensome or oppressive, and thus should not be permitted.” Id.
The scope of discovery is within the sound discretion of the trial judge, see Freeman v. United States, 556 F. 3d 326, 341 (5th Cir. 2009), who may “tailor discovery narrowly and ... dictate the sequence of discovery,” Crawford–El v. Britton, 523 U.S. 574, 598, 118 S.Ct. 1584, 140 L.Ed.2d 759 (1998). However, the Court must limit discovery, if it determines, on motion or on its own, that “the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive” or “the *607 proposed discovery is outside the scope permitted by Rule 26(b)(1).” Fed. R. Civ. P. 26(b)(2)(C). Rule 26(b), although broad, may not be used “as a license to engage in an unwieldy, burdensome, and speculative fishing expedition.” Murphy v. Deloitte & Touche Grp. Ins. Plan, 619 F.3d 1151, 1163 (10th Cir. 2010).
B. Subpoenas and Motion to Quash or Modify Subpoenas
Federal Rule of Civil Procedure 30(a)(1) provides that a party may depose any party or non-party and compel their attendance to the deposition by a subpoena under Rule 45. Fed. R. Civ. P. 30(a)(1). Rule 45 governs discovery from non-parties through the issuance of subpoenas. See Fed. R. Civ. P. 45 advisory committee’s notes to 2013 amendment (In Rule 45, “ ‘person’ is substituted for ‘party’ because the subpoena may be directed to a nonparty.”). As with any other forms of discovery, the scope of discovery through a Rule 45 subpoena is governed by Rule 26(b). See Chamberlain v. Farmington Sav. Bank, No. 3:06CV01437 CFD, 2007 WL 2786421, at *1 (D. Conn. Sept. 25, 2007) (citing, inter alia, Fed. R. Civ. P. 45 advisory committee’s notes to 1970 amendment (stating “the scope of discovery through a subpoena is the same as that applicable to Rule 34 and the other discovery rules”)); Shukh v. Seagate Tech., LLC, 295 F.R.D. 228, 236 (D. Minn. 2013) (“[S]ubpoenas issued under Rule 45 are subject to the same constraints that apply to all of the other methods of formal discovery.” (internal quotation marks and citation omitted)).
C. Motions to Compel Discovery
Under Federal Rule of Civil Procedure 37(a)(3)(B)(i), a party seeking discovery may move for an order compelling an answer, designation, production, or inspection when “a deponent fails to answer a question asked under Rule 30 or 31.” Fed. R. Civ. P. 37 (a)(3)(B). The party resisting discovery must show how each discovery request is not relevant or otherwise objectionable. See McLeod, Alexander, Powel & Apffel, P.C. v. Quarles, 894 F.2d 1482, 1485 (5th Cir. 1990).
A. Extension of Deadline
While Plaintiff’s instant motion was pending, the parties filed on November 1, 2019, a “Stipulation Regarding Extension of Discovery Deadline” (ECF No. 82), in which the parties extended the Scheduling Order discovery deadline from November 1, 2019, see Scheduling Order (ECF No. 55), to December 1, 2019. Accordingly, the Court DENIES as MOOT Plaintiff’s motion as to the extension of the discovery deadline.
B. Compelling Ms. Moreno’s Testimony
Plaintiff moves to compel Ms. Moreno’s deposition after her attorneys declined to consent to Plaintiff asking any questions about her past employment with Plaintiff, her separation from it, her current employment, and anything relating to her EEOC discrimination claim. Mot. at 4; see also Suppl. Mot., Ex. 1 at 3 (ECF No. 80-1). Plaintiff claims that questions on these subjects are particularly relevant to its claims against Defendant and to Ms. Moreno’s credibility as a witness in this case, even though the facts here and those in the EEOC charge may overlap and be jointly relevant. Mot. at 4–5. Ms. Moreno’s attorneys communicated their opposition to questions on these subjects after stating that they would not attend Ms. Moreno’s deposition because they do not represent her in this case. Id., Ex. A at 2, ECF No. 79-1. Further, Ms. Moreno’s attorneys contend that if Plaintiff makes any such questions, then Plaintiff would be violating the Rules of Professional Conduct—namely, Texas Disciplinary Rule of Professional Conduct 4.02.2 Accordingly, the Court will first *608 address whether Plaintiff would be violating Rule 4.02 under these circumstances and then, whether Plaintiff can still depose Ms. Moreno on these facts.
1. Texas Disciplinary Rule of Professional Conduct 4.02
Texas Disciplinary Rule of Professional Conduct 4.02 provides that:
In representing a client, a lawyer shall not communicate or cause or encourage another to communicate about the subject of the representation with a person, organization or entity of government the lawyer knows to be represented by another lawyer regarding that subject, unless the lawyer has the consent of the other lawyer or is authorized by law to do so.
Tex. Disciplinary R. Prof’l Conduct 4.02(a) (2019). Specifically, Rule 4.02 prohibit all communications between a lawyer and a represented person only when:
(1) the communication occurs in the course of the lawyer’s representation of a client or the lawyer’s interests;
(2) the person with whom the lawyer communicates is represented;
(3) the communication is on the subject of both the lawyer’s representation and the person’s representation; and
(4) the lawyer knows that the person is represented on that subject.
In re Newell, 348 Or. 396, 234 P.3d 967, 972 (2010) (analyzing the text and purpose of Oregon’s Rule of Professional Conduct (“RPC”) 4.2); see also § 9:2. Rule 4.02 Communication with person represented by counsel, 48A Tex. Prac., Tex. Lawyer & Jud. Ethics § 9:2 (2019 ed.) (noting that Oregon’s RPC 4.2 is the counterpart to Texas’ Rule 4.02). Rule 4.02 does not “prohibit communication between a lawyer’s client and persons ... represented by counsel, as long as the lawyer does not cause or encourage the communication without the consent of the lawyer for the other party.” Tex. Disciplinary R. Prof’l Conduct 4.02(a) cmt. 2.; see also In re News Am. Pub., Inc., 974 S.W.2d 97, 100 (Tex. App.—San Antonio 1998), subsequent mandamus proceeding sub nom. In re Users System Services, Inc., 22 S.W.3d 331 (Tex. 1999). A lawyer may also engage in ex parte communications with a represented party without the knowledge or consent of that party’s lawyer if “authorized by law to do so.” Tex. Disciplinary R. Prof’l Conduct 4.02(a). The purpose of the rule is “to preserve the integrity of the client-lawyer relationship by protecting the represented party from the superior knowledge and skill of the opposing lawyer.” In re News, 974 S.W.2d at 100 (internal citations omitted). The rule protects the represented party not only from the influences of “opposing counsel’s ‘calculated and self-serving approaches’ [but also] from ‘misguided but well-intended communications.’ ” Id. (internal citations omitted).
Plaintiff’s first argument is that Rule 4.02 does not apply to limit its examination of Ms. Moreno because (1) Plaintiff’s counsel in this case does not represent Plaintiff in the EEOC matter; and (2) Ms. Moreno is unrepresented in this case. Mot. at 5. In support, Plaintiff cites to American Bar Association (“ABA”) Model Rule of Professional Responsibility 4.2.3 from which Texas Rule 4.02 is modeled after, and contends that “both rules state that ‘[i]n representing a client,’ the lawyer may not communicate ‘about the subject of the representation’ with a person represented by another lawyer ‘in the matter[.]’ ” Id. (alterations in original). In other words, at issue is the scope of Rule 4.02’s covered communications—namely, “the subject *609 of the representation.” Tex. Disciplinary R. Prof’l Conduct 4.02(a) (emphasis added). To date, no Texas ethics opinion or judicial decision has addressed this issue.
The Court finds that Plaintiff’s argument fails for multiple reasons. First, Plaintiff misunderstands the extent to which Local Rule AT-7 “permits consultation of the ABA Model Rules of Professional [Responsibility].” Mot. at 5. Plaintiff appears to interpret Local Rule AT-7 to allow unfettered consultation of the ABA Model Rules for issues regarding professional conduct. But instead, Local Rule AT-7 permits consultation of the ABA Model Rules of Professional Conduct only “[f]or matters not covered by the Texas [Disciplinary Rules of Professional Conduct].” W.D. Local R. AT-7(a). Here, Texas Disciplinary Rule of Professional Conduct 4.02 covers the same matters as ABA Model Rule of Professional Responsibility 4.2 because both “prohibit an attorney representing a client from communicating about the subject of the representation with a party the attorney knows to be represented by another attorney[,] ... without authorization from the other attorney, the law, or the court.” Del Mor Logistics, 2014 WL 12580441, at *2. Thus, pursuant to Local Rule AT-7, the issue before the Court must be analyzed under Texas Rule 4.02 and not under ABA Model Rule 4.2.
Second, while Texas Rule 4.02 is modeled after ABA Model Rule 4.2, the plain text of Rule 4.02 “is considerably broader in scope than the Model Rule.” § 9:2. Rule 4.02 Communication with person represented by counsel, 48A Tex. Prac., Tex. Lawyer & Jud. Ethics § 9:2 (2019 ed.). Rule 4.02 is broader in scope because it prohibits a lawyer from communicating about “the subject of the representation” with a person represented by another lawyer “regarding that subject.” Tex. Disciplinary R. Prof’l Conduct 4.02(a) (emphasis added). By contrast, ABA Model Rule 4.2 prohibits a lawyer from communicating about “the subject of the representation” with a person represented by another lawyer “in the matter.” Model Rules of Prof’l Responsibility R. 4.2 (Am. Bar. Ass’n 2002) (emphasis added). Put differently, Rule 4.02 covers communications between a lawyer and a represented person about subjects that may touch on any legal matter for which the latter is represented. See Newell, 234 P.3d at 972(holding that Oregon Rule of Professional Conduct 4.2—which is substantially similar to Texas Rule 4.02—was not limited to the specific proceedings in which the party is represented, and that it covered any communications related to the subject matter that necessarily involved such proceedings). Meanwhile, ABA Model Rule 4.2 is limited to communications between a lawyer and a represented person when the latter is represented in the specific legal matter on which the communications are based upon. See People v. Santiago, 236 Ill.2d 417, 339 Ill.Dec. 1, 925 N.E.2d 1122, 1129 (2010) (agreeing with the State in that the drafters of Illinois Rule of Professional Conduct 4.2—which is substantially similar to ABA Model Rule 4.2—“intended the application of the rule to be case specific: specific to the matter in which the party is represented.”).
The broader scope of Rule 4.02’s plain text is consistent with what the rule’s comments and Texas state courts have stated is the main purpose of the rule: “to preserve the integrity of the client-lawyer relationship by protecting the represented party from the superior knowledge and skill of the opposing lawyer.” In re News, 974 S.W.2d at 100 (internal citations omitted); Tex. Disciplinary R. Prof’l Conduct 4.02(a) cmt. 1 (“[T]his Rule is directed at efforts to circumvent the lawyer-client relationship existing between other persons ... and their respective counsel.”). It appears to the Court that the drafters’ main concern was the potential for attorneys, who are representing clients with adverse interests to those of the represented persons, to influence such persons outside the presence or without the consent of their own counsel. Accordingly, it stands to reason that it would make little practical sense for the rule to be oblivious to communications touching on subjects relating to matters for which such persons are represented.
*610 For that reason, Plaintiff fails to persuade the Court to adopt the narrower view by citing to the ABA Model Rule. As discussed supra, ABA Model Rule 4.2 does not govern this case; Texas Disciplinary Rule of Professional Conduct 4.02 does. To be sure, Texas Rule 4.02 was modeled after ABA Model Rule 4.2, but the plain text of Rule 4.02 strongly indicates that its drafters intended its application to differ. Therefore, Plaintiff’s counsel may violate Rule 4.02 if he asks Ms. Moreno any questions eliciting answers that are imbued with facts touching on the subject matter of her EEOC charge against Plaintiff. On that basis, Plaintiff may only ask Ms. Moreno questions with her attorneys’ consent—which the record establishes that he does not have—or if he is “authorized by law to do so.” Tex. Disciplinary R. Prof’l Conduct 4.02(a).
With that in mind, Plaintiff alternatively argues that, even if applicable, Rule 4.02 does not limit its examination of Ms. Moreno because her deposition was “authorized by law” after she was subpoenaed to testify in this case. Mot. 5. The precise scope and meaning of the phrase “authorized by law” has yet to be the subject of a reported Texas ethics opinion or judicial decision in the context of depositions. However, the same language was at issue in an analogous case before the Oregon Supreme Court where it construed that state’s counterpart to Rule 4.02.
In In re Newell, 348 Or. 396, 234 P.3d 967, 972 (2010), an accountant was alleged to have embezzled funds from the company that employed him and from a second company that had later purchased the employer-company. Newell, 234 P.3d at 968. The accountant’s wrongdoing spawned three lawsuits: (1) a civil lawsuit by the employer-company against the accountant for the funds he embezzled; (2) a criminal action against the accountant for embezzlement; and (3) a civil lawsuit by the second company against the employer-company for overpayment resulting in part from the accountant’s embezzlement. Id. at 968–69. While the second civil case was approaching trial, the first civil case settled, and the accountant was awaiting sentencing in the criminal case. Id. at 969. The second company’s counsel—the respondent in the disciplinary action—unsuccessfully attempted multiple times to interview the accountant through his attorney in the criminal case because the accountant was not represented in the second civil case. Id. As the trial date neared, the respondent issued a notice of deposition and subpoenaed the accountant without advising his counsel in the criminal case. Id. at 969–70. The accountant appeared for his deposition without his counsel and he was questioned extensively about matters germane not only to the relevant civil lawsuit, but also to the criminal action. Id. at 970–71. After he was reported to the state bar’s disciplinary authorities, the respondent argued that his communications with the accountant were “authorized by law” because he had subpoenaed the accountant prior to the deposition in compliance with the Oregon Rules of Civil Procedure. Id. at 974.
The Oregon Supreme Court disagreed with the respondent in his broad reading of the “authorized by law” exception. Id. The court noted that this broad reading was particularly problematic because it meant that:
[A]s long as a lawyer can subpoena a nonparty witness to testify at trial or in a deposition before the witness has an opportunity to contact his or her own lawyer, the “authorized by law” exception would permit the lawyer to ask that witness unlimited questions without any opportunity for the witness’s lawyer to protect his or her client’s interests. That interpretation of the exception, if accepted, would undermine the purpose of the rule.
Id. As such, the Oregon Supreme Court held that the respondent was not “authorized by law” just because he had complied with the applicable rules of civil procedure pertaining to the taking of depositions of non-party witnesses. Id. at 976.
The Court finds that Plaintiff’s argument is practically undistinguishable from that of the respondent’s in Newell. Nevertheless, Plaintiff attempts to distinguish his argument by arguing that *611 Federal Rule of Civil Procedure 45 provides an exception to Rule 4.02(a), citing to a 2002 opinion from the Texas Attorney General in which a Texas Workers’ Compensation Commission rule was deemed to provide an exception to Rule 4.02(a). Mot. at 5 (citing Tex. Att’y Gen. Op. No. JC-0572 (Nov. 5, 2002)). In that opinion, the issue was whether the Commission’s rule requiring insurance carriers, employers, and health care providers to send copies of all written communications related to a claim to both the represented claimant and the claimant’s attorney provided an exception to Rule 4.02(a). Id. This requirement, or notice provision, placed attorneys representing insurance carriers, employers, and health care providers “in a difficult and unfair position” because compliance with the Commission’s rule would violate Rule 4.02. Id. The Texas Attorney General opined that since state case law held that statutory notice provisions provided an exception to Rule 4.02,4 then “[a] procedural notice or service requirement imposed by an administrative rule ... may also provide an exception to Rule 4.02(a)” because rules and regulations promulgated “by an administrative agency acting within its statutory authority have the force and effect of legislation.” Id. (citing Lewis v. Jacksonville Bld. Loan Ass’n, 540 S.W.2d 307, 310 (Tex. 1976)). Further, the Texas Attorney General found that the rule was still consistent with Rule 4.02’s purpose, reasoning that:
[T]his procedural rule, which serves to keep claimants fully informed of the status of their claims through the receipt of written communications that must also be sent to their attorneys, see 24 Tex. Reg. 6488, 6489 (1999) (explaining purpose of amendment to rule), does not appear to provide attorneys with an opportunity to take advantage of claimants or to undermine claimants’ relationships with their attorneys.
But the issue in the Texas Attorney General’s opinion is distinguishable from the issue in the instant case. Specifically, they are distinguishable because Plaintiff’s argument impliedly conflates the functions of Federal Rules of Civil Procedure 30 and 45. Rule 30 provides that a party may depose any party or non-party and compel their attendance to the deposition by a subpoena under Rule 45. Fed. R. Civ. P. 30(a)(1). The two rules may interplay with one another, but their function in the context of attorney communications with represented persons differs. Rule 30 relates to the communications between an attorney and a represented person that take place during the examination by oral questions—a deposition—for purposes of discovery. Id. In contrast, Rule 45 relates to the communications between an attorney and a represented person to compel the attendance of such a person to the deposition, that is, by issuance of a subpoena. Fed. R. Civ. P. 45. Compelling a deponent’s attendance to a deposition via a subpoena under Rule 45 appears analogous to the Commission’s rule in the Texas Attorney General’s opinion because they both function as notice provisions and “do[ ] not appear to provide attorneys with an opportunity to take advantage of [the represented persons] or to undermine [their] relationships with their attorneys.” Tex. Att’y Gen. Op. No. JC-0572 (Nov. 5, 2002). However, an examination by oral questions for purposes of discovery—a deposition under Rule 30—does provide attorneys with such an opportunity, and if deemed to satisfy the “authorized by law” exception, “[s]uch a conclusion would minimize the attorney’s ethical obligation under the Rule and would create an exception that would threaten to swallow the Rule.” Monceret v. Bd. of Prof. Resp., 29 S.W.3d 455, 461 (Tenn. 2000). Thus, “[t]hese are two separate communications ... [and] [j]ust because counsel may have issued a subpoena permissible under [Rule 4.02] does not mean that counsel’s later deposition of the witness pursuant to that subpoena is also protected[.]” Parker v. Pepsi-Cola Gen. Bottlers, Inc., 249 F. Supp. 2d 1006, 1011 (N.D. Ill. 2003) (emphasis in original).
Therefore, the Court concludes that the deposition of represented persons under *612 Federal Rule of Civil Procedure 30 does not satisfy the “authorized by law” exception to Texas Disciplinary Rule of Professional Conduct Rule 4.02 just because attorneys have compelled their attendance to the deposition via subpoena under Federal Rule of Civil Procedure 45. As such, Plaintiff’s counsel is not “authorized by law” to depose Ms. Moreno just because he issued her a subpoena in compliance with Federal Rule of Civil Procedure 45.
To this end, Plaintiff’s counsel may only be “authorized by law” to depose Ms. Moreno on the requested subjects if authorized by court order. Compared to ABA Model Rule 4.2, Texas Rule 4.02 does not include the phrase “authorized by law or a court order.” Model Rules of Prof’l Conduct R. 4.2 (2002) (emphasis added). Whether the phrase “authorized by law” in Rule 4.02 includes authorization by court order is not covered in the rule’s comments. Nor is this question covered by a Texas ethics opinion or judicial decision. Accordingly, under Local Rule AT-7, the Court consults the ABA Model Rules of Professional Responsibility and their pertinent interpretive opinions. See W.D. Local R. AT-7(a).
Before Model Rule 4.2 contained the phrase “authorized by law or a court order”,5 the ABA issued a formal opinion in 1995 in which it defined the “authorized by law” phrase to include a court order. See ABA Committee on Ethics and Professional Responsibility Formal Opinion 95-396 at 20 [hereinafter “ABA Formal Opinion 95-396”]. The formal opinion particularly noted that “in appropriate circumstances, a court order could provide the necessary authorization.” Id. (citing United States v. Lopez, 989 F.2d 1032, 1099 (9th Cir. 1993), opinion amended and superseded, 4 F.3d 1455 (9th Cir. 1993)). Since the ABA’s 1995 formal opinion, “courts have generally agreed that they have the power to permit such ex parte communications in particular circumstances.” Wagner v. City of Holyoke, 183 F. Supp. 2d 289, 292 (D. Mass. 2001). In 2002, Model Rule 4.2 was revised and amended to include the phrase as it reads today to reflect the ABA’s 1995 formal opinion interpretation and “clarify that a court may permit or prohibit contact in a particular case.” Palmer v. Pioneer Inn Assocs., Ltd., 118 Nev. 943, 59 P.3d 1237, 1241 n.18 (2002).
Texas Rule 4.02 as it reads today was first adopted in October 1989 and became effective on January 1990—five years before the 1995 opinion interpreting the phrase “authorized by law” to include court orders. See Tex. Disciplinary R. Prof’l Conduct 4.02(a); ABA Formal Opinion 95-396. Accordingly, the Court finds that the phrase “authorized by law” in Texas Rule 4.02 includes authorization by court order. And thus, the Court now considers whether to authorize Plaintiff to depose Ms. Moreno based on the relevance of the information it seeks.
Plaintiff argues that facts related to Ms. Moreno’s past employment, her present employment, and her EEOC charge against Plaintiff are all relevant to this case. Mot. at 4. As a threshold matter, Plaintiff has the burden of proving that the information sought is relevant to this action. See Reynolds, 2015 WL 12660110 at *2. Plaintiff argues that information he seeks from Ms. Moreno is relevant because (1) she and Defendant were employed by Plaintiff during the same period of time; (2) Defendant “stated his belief that [Plaintiff’s] losses were caused in part by [her] poor work performance”; (3) she and Defendant are romantically involved; (4) she presently works together with Defendant in another business in competition with Plaintiff; and (5) specifically to the EEOC charge, it speaks to her credibility as a witness in the instant case. Mot. at 2, 4. Ms. Moreno’s attorneys do not object to the *613 relevance of the information Plaintiff seeks, but merely do not consent to questions related to her termination and her allegations to the EEOC. See Suppl. Mot. at 3 (“MR. ANDERSON: ... We’re not really concerned about the fact, you know, she admits she was an employee, what she was doing there, describe how she was a witness. It’s specifically the allegations of the EEOC and the reasons for her termination that we do not consent as to her being questioned.”).
The Court finds that facts related to Ms. Moreno’s past employment with Plaintiff during the time she and Defendant worked together, as well as her present employment with Defendant in a business that directly competes with Plaintiff, are relevant to the merits of Plaintiff’s claims for breach of contract and the FDUTPA. Particularly, these facts might be relevant to prove Plaintiff’s allegations that Defendant used Plaintiff’s employees, business assets, and resources to operate his business competing directly with Plaintiff. Mot. at 2; see also Compl. at 2. Such information might be also relevant towards Defendant’s assertion that Plaintiff’s “losses were caused in part by [Ms. Moreno’s] poor work performance.” Mot. at 2. Moreover, Ms. Moreno’s romantic involvement with Defendant might be relevant to such claims and to her credibility as a witness in the instant case. Id. Therefore, Plaintiff’s explanations are sufficient to meet its initial burden for these facts.
However, Plaintiff fails to persuade the Court that facts related to Ms. Moreno’s EEOC charge against it are relevant. Plaintiff has not made clear to the Court how exactly Ms. Moreno’s EEOC allegations are relevant to Defendant’s claims against it besides pointing to her credibility as a witness. Because her credibility as a witness can already be challenged through her romantic involvement with Defendant, Plaintiff’s explanation for the relevance of these facts makes this discovery “cumulative and duplicative.” Fed. R. Civ. P. 26(b)(2)(C). If anything, Plaintiff appears be seeking information that might be relevant to challenge the EEOC charge through Ms. Moreno’s deposition in this case. Particularly telling is the fact that Mr. Pearman, Plaintiff’s counsel in the EEOC charge, was attending Ms. Moreno’s deposition by phone. Mot. at 3. Mr. Pearman’s attendance suggests that Plaintiff is trying to engage in an “speculative fishing expedition” to effectively kill two birds with one stone. See Murphy, 619 F.3d at 1163. Hence, Plaintiff has failed to meet its burden regarding these facts.
Accordingly, Plaintiff’s Motion to Compel is GRANTED as to the information regarding Ms. Moreno’s past employment as it relates to the time she and Defendant worked together, her present employment, and her romantic involvement with Defendant. Further, it is DENIED as to any information regarding Ms. Moreno’s past employment as it relates to the basis of her EEOC charge.
Accordingly, IT IS ORDERED that Plaintiff Camoco, LLC’s “Emergency Motion to Extend Discovery Deadline and Compel Deposition of Non-Party Witness” (ECF No. 79) is GRANTED IN PART and DENIED IN PART.6 The parties SHALL COMPLY with the instructions provided in this Memorandum Order.
So ORDERED and SIGNED this 19th day of November 2019.
On October 30, 2019, Plaintiff also filed his “First Supplemental Emergency Motion to Extend Discovery Deadline and Compel Deposition of Non-Party Witness” (ECF No. 80) (“Supplemental Motion”). Therein, Plaintiff attaches excerpts from the deposition of Ms. Moreno because when the original motion was filed, Plaintiff states that the transcript was not yet available. Suppl. Mot. at 1. The Court will consider First Supplemental Motion as part of Plaintiff’s Motion.
The Local Rules of this district adopt by reference the standards of professional conduct set out in the Texas Disciplinary Rule of Professional Conduct for all attorneys permitted to practice before the Court. See W.D. Local R. AT-7(a); Del Mor Logistics, LLC v. GB Carriers, LLC, EP-14-CV-053-DB, 2014 WL 12580441, at *2 (W.D. Tex. July 7, 2014).
The ABA Model Rule of Professional Responsibility 4.2 provides that:
In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by law or a court order.
Model Rules of Prof’l Responsibility R. 4.2 (Am. Bar. Ass’n 2002).
See Lee v. Fenwick, 907 S.W.2d 88 (Tex. App.—Eastland 1995, writ denied).
In 1995, Model Rule 4.2 provided that:
In representing a client, a lawyer shall not communicate about the subject of the representation with a person that the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so.
Model Rules of Prof’l Responsibility R. 4.2 (1995).
Under Federal Rule of Civil Procedure 37(a)(5), a movant may request attorney’s fees and payment of reasonable costs incurred in the filing of a motion to compel that was granted. However, Rule 37(a)(5)(C) explains “[i]f the motion is granted in part and denied in part, the court ... may, after giving an opportunity to be heard, apportion the reasonable expenses for the motion.” Plaintiff did not request any relief under Rule 37(a)(5), and so the Court does not reach the question of the payment of expenses. Going forward, however, should the Court be called upon to resolve any further discovery disputes, it will not hesitate to sanction the non-prevailing party if it is found to have acted unreasonably.
United States District Court, W.D. Texas, Austin Division.
R.M. PERSONNEL, INC., Plaintiff,
LIBERTY MUTUAL FIRE INSURANCE COMPANY, Defendant.
Cause No.: A-16-CA-01030-SS
Attorneys & Firms
David E. Chamberlain, Timothy Poteet, Chamberlain McHaney, Austin, TX, David J. Campbell, O’Hanlon, McCollom & Demerath, Austin, TX, for Plaintiff.
David Lawrence Plaut, Hanna & Plaut, LLP, Austin, TX, for Defendant.
SAM SPARKS, SENIOR UNITED STATES DISTRICT JUDGE
*1 BE IT REMEMBERED on this day the Court reviewed the file in the above-styled cause, and specifically Plaintiff R.M. Personnel, Inc. (RMP)’s Motion for Leave to File First Amended Complaint [#44] and Motion for Leave to Amend Scheduling Order [#45], Defendant Liberty Mutual Fire Insurance Company (Liberty)’s Response [#46] in opposition and RMP’s Reply [#47] thereto. Having considered the case file and the applicable law, the Court enters the following opinion and orders.
This case concerns a dispute over insurance coverage in the aftermath of an accident at a commercial construction site in El Paso, Texas. RMP provides temporary workers to a number of business clients, including construction companies. At the time of the accident at the heart of this case, RMP was insured under a workers’ compensation and employer’s liability policy issued by Liberty. See Pl.’s Mot. Summ. J. Ex. 3 [#16-1] (Policy). Under the Policy, Liberty is required to provide defense and indemnity coverage for “bodily injury by accident” if “[t]he bodily injury ... arise[s] out of and in the course of the injured employee’s employment by [RMP].” Id. at LM 2796.
During the period covered by the Policy, RMP assigned employees to a company called Perspectiva, a general contractor and project architect in charge of a construction project in El Paso. Def.’s Status Report [#38-1] Ex. A (El Paso Opinion) at 2. On September 17, 2007, Luis Alberto Rodriguez, one of RMP’s assigned workers, fell fifty feet down an elevator shaft and sustained catastrophic injuries. Id. at 3–4.
Shortly after Rodriguez’s accident, a dispute arose between Liberty and New Hampshire Insurance Company—Perspectiva’s workers’ compensation insurance carrier—over which company should be responsible for paying benefits to Rodriguez. Id. at 4–5. To resolve this dispute, an administrative hearing was held in July 2009 before the Workers’ Compensation Division of the Texas Department of Insurance (the Division). Id. at 5. The Division was asked to determine which entity was Rodriguez’s employer at the time of the injury. Id. “The Division found that because Perspectiva controlled the details of Rodriguez’s work while he was at the job site, Perspectiva and not [RMP] was Rodriguez’s employer under the [Texas Workers’ Compensation] Act.” Id. The Division’s decision was not appealed. Id.
In September 2009, Rodriguez sued Perspectiva and a subcontractor, contending that both caused his injuries. Id. The trial court then granted the subcontractor’s request to hold RMP as a responsible third party, and on November 2, 2010, Rodriguez amended his petition to include RMP as a defendant in the state court suit. Id. at 5. After being served with Rodriguez’s amended petition, RMP requested Liberty provide its defense as required by the Policy. Compl. [#1] ¶ 6; Answer [#2] ¶ 6. Liberty denied this request, claiming it had no duty to defend because Rodriguez’s petition failed to allege an employment relationship between RMP and Rodriguez. See Compl. [#1] ¶ 11; Answer [#2] ¶ 11.
*2 Shortly after Liberty denied RMP’s request to defend, RMP moved for summary judgment in the state court suit, arguing it was immune from suit under the Texas Workers’ Compensation Act’s exclusive remedy provision. El Paso Opinion at 6. That provision states the “[r]ecovery of worker’s compensation benefits is the exclusive remedy of an employee covered by workers’ compensation insurance coverage.” TEX. LABOR CODE § 408.001(a). RMP contended that it was eligible for this exclusive remedy immunity because, under the Texas Supreme Court’s opinion in Wingfoot Enterprises v. Alvarado, 111.S.W.3d 134 (Tex. 2003), a temporary staffing agency may be an employer under the Texas Workers’ Compensation Act. In response, Rodriguez, New Hampshire Insurance, and the subcontractor argued that RMP was collaterally estopped by the Division’s order from asserting exclusive remedy immunity or, in the alternative, that RMP was not Rodriguez’s employer under the Act. See El Paso Opinion at 6. The trial court denied the motion for summary judgment for reasons that are not stated in the record. Id.
The state court trial began in March 2015. Compl. [#1] ¶ 9. At the close of evidence, RMP moved for directed verdict, reurging its argument that it was entitled to exclusive remedy immunity as Rodriguez’s employer under Wingfoot. See Brief of Appellant R.M. Personnel, Ltd. at 6–7, New Hampshire Insurance Company v. Rodriguez, 569 S.W.3d 275 (Tex. App.—El Paso 2019, pet. filed) (No. 08-15-00173-CV). Rodriguez again responded that RMP was not Rodriguez’s employer at the time of the accident and that the Division’s order precluded RMP from asserting exclusive remedy immunity. See id. at 14–15. The trial court again denied RMP’s motion for reasons that are not stated. See id. at 7. The jury found Rodriguez sustained $20.5 million in damages and attributed 17% of the responsibility for the accident to RMP. El Paso Opinion at 6. Accordingly, the trial court rendered judgement assessing $3,743,778.08 in damages against RMP. Id. at 7. RMP and codefendants then appealed.
While the state court appeal was pending, RMP filed a lawsuit in this Court seeking a declaratory judgment regarding Liberty’s duty to defend and indemnify RMP in the state court suit. See Compl. [#1] ¶¶ 14–16. RMP also claimed Liberty’s refusal to defend it in the state court suit was both a breach of the Policy and a violation of the Prompt Payment Act, TEX. INS. CODE § 542.051 et seq. Id. ¶¶ 17–20. RMP then moved for partial summary judgment on the duty-to-defend, breach, and Prompt Payment Act claims. Mot. Partial Summ J. [#11]. The Court granted the motion, reasoning that Liberty owed RMP a duty to defend because Rodriguez’s state court petition alleged that he was RMP’s employee at the time of the accident. See Order of Feb. 16, 2018 [#23] at 9. The Court also found that Liberty breached the Policy and was liable under the Prompt Payment Act because Liberty’s only argument against those claims was that it had owed no duty to defend. Id. Accordingly, the only issue remaining following the Court’s order was RMP’s duty-to-indemnify claim, which could not be resolved until the Court of Appeals issued its opinion in the state court suit.
That opinion was ultimately issued on January 11, 2019. In it, the Court of Appeals held that RMP was not entitled to exclusive remedy immunity because it was not Rodriguez’s employer at the time of the accident. The Court of Appeals concluded RMP was “collaterally estopped from asserting exclusive remedy immunity by virtue of the Division’s unappealed order[ ],” which found that RMP was not Rodriguez’s employer. El Paso Opinion at 21. RMP had argued the Division’s order was not entitled to preclusive effect because RMP was not a party to the administrative hearing and further argued the trial court’s judgment against it was clearly erroneous because it ignored Wingfoot in determining RMP was not Rodriguez’s employer. See id. at 22, 25. The Court of Appeals rejected RMP’s first argument, reasoning that collateral estoppel should apply to the Division’s order because Liberty had been a party before the Division and Liberty’s interests were “sufficiently aligned” with RMP’s. Id. at 24. Having found that collateral estoppel precluded relitigating the employer issue, the Court of Appeals did not determine whether the trial court’s judgment was clearly erroneous for failing to consider Wingfoot. See id. at 25. Following the judgment, RMP entered into a settlement with Rodriguez and filed an unopposed motion to dismiss its petition for review with the Texas Supreme Court. See Reply [#47] at 4; see also Motion to Dismiss of Petitioner at 2, New Hampshire Insurance Company v. Rodriguez, No. 19-0097 (Tex. Jan. 25, 2019). The petition for review from the Texas Supreme Court remains pending for the other state court defendants.
*3 In light of the El Paso Opinion, RMP now moves for leave to file a first amended complaint that differs from the original complaint in two ways. First, RMP seeks to add facts that would show collateral estoppel does not bar this Court from considering whether RMP was Rodriguez’s employer.1 See Mot. Amend [#44-1] at 23–25. Second, RMP seeks to add a claim that Liberty breached the Policy by failing to indemnify RMP as well as claims for fraud and unjust enrichment based on Liberty’s allegedly intentional failure to fairly represent RMP’s interests in the Division hearing. See id. at 28–29. RMP also seeks to amend the scheduling order because the key dates in the prior scheduling order have passed due to the exceptional length of the pendency of the state court appeals. Mot. Extend [#45].
I. Motion to Modify the Scheduling Order
“Rule 16(b) governs amendment of pleadings after a scheduling order deadline has expired.” S&W Enters., LLC v. Southtrust Bank of Ala., N.A., 315 F.3d 533, 536 (5th Cir. 2003). Thus, where the scheduling order precludes the filing of amended pleadings, the movant must first demonstrate good cause for modification of the order. FED. R. CIV. P. 16(b)(4). Only then may the court consider whether leave to amend should be granted or withheld under the more liberal pleading standard of Rule 15(a)(2).
The Fifth Circuit considers four factors in determining whether good cause exists to modify a scheduling order: (1) the explanation for the failure to timely move for leave to amend; (2) the importance of the amendment; (3) the potential prejudice to the nonmoving party; and (4) the availability of a continuance to cure prejudice. S&W Enters., 315 F.3d at 256. Consideration of these factors demonstrates good cause exists here.
First, RMP has provided an adequate explanation of its delay in moving to amend. RMP’s delay in amending its complaint was the result of the nearly four-year-long pendency of the state court appeal, a delay RMP could not avoid since resolution of the state court appeal directly impacts RMP’s causes of action in this case. Moreover, RMP moved to amend its complaint less than two weeks after a status conference held by the Court to determine what issues remained in the case. These facts lead the Court to conclude RMP did not unduly delay in moving for leave to amend.
Second, RMP’s proposed amendment is important. Not only does it include facts that will aid the Court in its consideration of the collateral estoppel question, it also includes new claims RMP learned as a result of its investigation into Liberty’s conduct before the Division. Refusing to allow RMP leave to amend its complaint would leave the Court with only minimal input from the parties on the issue of collateral estoppel and would prevent RMP from raising previously undiscovered claims for fraud and unjust enrichment. The Court therefore concludes the second element also favors granting RMP leave to amend.
Third, the proposed amendments are not so prejudicial as to justify denying RMP’s leave to amend. To start, the bulk of Plaintiff’s amendments involves facts and argument in anticipation of collateral estoppel, which is an affirmative defense that was raised by Liberty. Moreover, RMP’s new claims rely on the same facts the Court will be required to consider in the collateral estoppel analysis. The Court therefore anticipates the parties will be able to adapt their pleadings and arguments to take into account RMP’s amendments with relative ease, and it concludes the third element favors granting RMP leave to amend.
*4 Fourth, the Court retains the ability to issue a continuance if necessary. The Court does not believe a continuance is needed at this time but will entertain future requests from the parties.
In sum, the Court finds good cause exists to modify the scheduling order to allow RMP to move for leave to file its amended complaint.
II. Motion for Leave to File Amended Complaint
Having found good cause exists to modify the scheduling order, the Court considers Plaintiff’s motion for leave to amend under Rule 15(a)(2), which states courts should “freely give leave when justice so requires.” FED. R. CIV. P. 15(a)(2). Rule 15’s standard “evinces a bias in favor of granting leave to amend,” and courts may only deny leave when faced with a substantial reason for doing so, such as undue delay, bad faith, dilatory motive, repeated failures to cure deficiencies, futility, or undue prejudice to the opposing party. Mayeuax v. La. Health Serv. & Indem. Co., 376 F.3d 420, 425 (5th Cir. 2004); Stripling v. Jordan Prod. Co., 234 F.3d 863, 873 (5th Cir. 2000).
Liberty does not explain why RMP should not be granted leave to amend its complaint. Instead, it argues that RMP is collaterally estopped from litigating the employer issue in this case or, in the alternative, that such litigation would be an impermissible collateral attack on the El Paso Opinion. The Court construes these arguments as contending that RMP should not be granted leave to amend because the amendment would be futile. But Liberty’s briefing on the collateral estoppel issue is “less than comprehensive,” see El Paso Opinion at 21 n.6, and its Response does not address RMP’s claims for breach of the Policy, fraud, or unjust enrichment. In light of these deficiencies, the Court concludes amendment would not necessarily be futile and therefore GRANTS RMP’s Motion for Leave to First Amended Complaint [#44] without prejudice to Liberty reurging its collateral estoppel defense.
The Court grants RMP’s Motion for Leave to File First Amended Complaint [#44] and its Motion for Leave to Amend Scheduling Order [#45] for the reasons stated above.
IT IS ORDERED that Plaintiff R.M. Personnel, Inc.’s Motion for Leave to File First Amended Complaint [#44] is GRANTED, and
IT IS FURTHER ORDERED that Plaintiff R.M. Personnel, Inc.’s Motion for Leave to Amend Scheduling Order [#45] is GRANTED, and
IT IS FURTHER ORDERED that Plaintiff shall file an amended complaint in this case by July 3, 2019, and
IT IS FINALLY ORDERED that the parties shall file an agreed scheduling order by July 10, 2019 and that if the parties cannot agree the Court will set the scheduling order.
Because Liberty owes RMP a duty to indemnify only if RMP was Rodriguez’s employer at the time of the accident, if RMP is precluded from litigating the employer question it would be unable to prove its duty-to-indemnify claim.
United States District Court, W.D. Texas, El Paso Division.
Ruben MENDEZ, Plaintiff,
WAL-MART ASSOCIATES, INC., Defendant.
Attorneys & Firms
Tiffany Nicole Joudi, Scherr & Legate, PLLC, El Paso, TX, for Plaintiff.
Robert M. Estrada, Steven Joseph Blanco, Blanco Ordonez & Wallace, P.C., El Paso, TX, for Defendant.
ORDER GRANTING DEFENDANT’S MOTION TO COMPEL ARBITRATION
PHILIP R. MARTINEZ, UNITED STATES DISTRICT JUDGE
*1 On this day, the Court considered Defendant Wal-Mart Associates, Inc.’s [hereinafter “Defendant”] “Brief in Support of Demand for Arbitration” (ECF No. 25) [hereinafter “Motion”], filed on October 30, 2018; Plaintiff Ruben Mendez’s [hereinafter “Plaintiff”] “Response in Opposition to Defendant’s Motion to Compel Arbitration”1 (ECF No. 28) [hereinafter “Response”], filed on November 9, 2018; and Defendant’s “Reply to Plaintiff’s Response in Opposition to Defendant’s Demand for Arbitration” (ECF No. 29) [hereinafter “Reply”], filed on November 14, 2018, in the above-captioned cause. After due consideration, the Court is of the opinion that Defendant’s Motion should be granted for the reasons that follow.
I. FACTUAL AND PROCEDURAL BACKGROUND
This case arises out of a workplace injury. Plaintiff alleges that he suffered an injury in the course and scope of his employment with Defendant. Pl.’s Original Compl., Aug. 1, 2018, ECF No. 12 [hereinafter “Complaint”]. Specifically, Plaintiff asserts that he was “stocking a forty pound box of weights on the bottom of a shelf when the shelf broke.” Id. at 2. As a result, he injured his “right shoulder and other parts of his body.” Id.
*2 On May 1, 2018, Plaintiff brought suit against Defendant in state court, alleging that Defendant acted negligently.2 Notice of Removal Ex. A, June 18, 2018, ECF No. 1. Then, on June 18, 2018, Defendant removed the case to federal court, alleging that the Court has diversity jurisdiction over this action pursuant to 28 U.S.C. § 1332. Id. at 1.
Wal-Mart employees participate in a computer-based learning module titled “Texas Injury Care Benefit Plan.” Mot. 1–2, Ex. A. The module educates employees on their rights and responsibilities regarding on-the-job injuries. Id. Relevant here, the module includes information about arbitration. Specifically, employees must open a document—“Appendix D”—which includes an Arbitration Acknowledgement; after viewing the document, employees click to indicate that they have viewed the arbitration policy. Id. Ex. A. Further, while proceeding through the module, employees must click “I understand” in response to the following statement:
I acknowledge that this Walmart and Sam’s Club Texas Injury Care Benefit plan includes a mandatory policy requiring that claims or disputes relating to the cause on an on-the-job injury (that cannot otherwise be resolved between Walmart or Sam’s Club and me) must be submitted to an arbitrator, rather than a judge and jury in court. I acknowledge that I have received this arbitration policy. I understand that the Company is also accepting and agreeing to comply with these arbitration requirements....
Id. Plaintiff completed the module and represented that he understood these provisions by clicking on the relevant boxes. Id. Ex. C at 9.
Additionally, Wal-Mart employees are provided with a “Summary Plan Description,” which is a handbook describing Defendant’s Texas Injury Care Benefit Plan. See Mot. Ex. B. The Summary Plan Description’s Appendix A describes the arbitration process in detail. In relevant part, Appendix A provides that the policy “is equally binding upon, and applies to any such claims that may be brought by, an Employer and each associate....” Id. Ex. B (Summary Plan Description) App. A p. 6. The policy further specifies:
The Company shall have the right and power at any time and from time to time to amend this policy, in whole or in part, on behalf of Employer, and at any time to terminate this Policy or any Employer’s participation, hereunder; provided that no such amendment or termination shall alter the arbitration requirements of this Policy with respect to any injury occurring prior to the date of such an amendment or termination. In addition, any such amendment or termination of this policy shall not be effective until at least 14 days after written notice has been provided....
Id. App. A p. 7.
Based on these facts, Defendant filed the instant Motion on October 30, 2018. Therein, Defendant asserts that a valid arbitration agreement exists and that the Court should therefore compel the parties to participate in binding arbitration.
*3 Plaintiff does not dispute that he completed the module and demonstrated that he understood the arbitration policy by clicking on the pertinent boxes. Rather, Plaintiff disputes the validity of the arbitration agreement. Specifically, Plaintiff argues that the Federal Arbitration Act (“FAA”) does not apply to Plaintiff’s claims because: (1) the agreement does not involve a “contract evidencing a transaction involving commerce” as is required by the FAA, (2) Congress did not intend for the FAA to preempt States’ workers’ compensation schemes, and (3) the FAA as applied violates the Tenth Amendment. Additionally, even if the FAA applies to this type of claim, Plaintiff avers that the agreement to arbitrate should be unenforceable pursuant to Texas state common law because the agreement is illusory and because no valid consideration exists.
II. LEGAL STANDARD
The FAA § 2 provides that:
A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
9 U.S.C. § 2. This provision “reflect[s] both a ‘liberal policy favoring arbitration’ ... and the ‘fundamental principle that arbitration is a matter of contract.’ ” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983) and Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 67 (2010) ).
When considering a motion to compel arbitration pursuant to the FAA, courts employ a two-step analysis. “First, a court must ‘determine whether the parties agreed to arbitrate the dispute in question.’ ” Tittle v. Enron Corp., 463 F.3d 410, 418 (5th Cir. 2006) (quoting Webb v. Investacorp., Inc., 89 F.3d 252, 258 (5th Cir. 1996) ). “Second, a court must determine ‘whether legal constraints external to the parties’ agreement foreclosed the arbitration of those claims.’ ” Fleetwood Enters., Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 628 (1985) ).
The first step of the analysis—whether the parties agreed to arbitrate the dispute in question—consists of two distinct prongs: “(1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement.” Tittle, 463 F.3d at 418-19 (quoting Webb, 89 F.3d at 258). “[I]n determining whether the parties agreed to arbitrate a certain matter, courts apply the contract law of the particular state that governs the agreement.” Washington Mut. Fin. Grp., LLC v. Bailey, 364 F.3d 260, 264 (5th Cir. 2004).3
A. Whether the FAA Applies
First, the Court considers whether the FAA applies here. Plaintiff asserts several theories as to why the FAA cannot apply: (1) the agreement does not involve a “contract evidencing a transaction involving commerce” as is required by the FAA, (2) Congress did not intend for the FAA to preempt States’ workers’ compensation schemes, and (3) the FAA as applied violates the Tenth Amendment. Below, the Court considers each of Plaintiff’s theories in turn and concludes that the FAA properly applies to Plaintiff’s claims.
1. The agreement involves a “contract evidencing a transaction involving commerce.”
According to the FAA § 2, the Act applies to “[a] written provision in any maritime transaction or a contract evidencing a transaction involving commerce.” 9 U.S.C. § 2 (emphasis added). Plaintiff contends that the employment contract at issue here should not be within the reach of the FAA because “while performing his duties ... Plaintiff was not ‘working in commerce, was not producing goods for commerce, and was not engaged in activity that affected commerce’ within the meaning of those terms as interpreted by the Supreme Court.” Resp. 12 (citing Bernhardt v. Polygraph Co. of America, 350 U.S. 198 (1956) ). Notwithstanding Plaintiff’s position, the Court determines that Plaintiff’s employment contract is clearly within the reach of the FAA.
*4 “Employment contracts, except for those covering workers engaged in transportation, are covered by the FAA.” E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 289 (2002). Further, in Circuit City, the Supreme Court rejected an argument that § 2 “extends only to commercial contracts.” Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 113 (2001). The Court reasoned that it applies an “expansive reading” to § 2 and, therefore, asserted that the FAA covers employment contracts, except those which § 1 expressly removes from its reach. Id. Notably, the plaintiff in Circuit City—like the Plaintiff here—was employed by a local store for a national retail chain, and the Supreme Court determined that his claims were within the FAA’s reach. Id. at 109.
Nonetheless, Plaintiff cites to a Supreme Court case from 1956—Bernhardt v. Polygraph Co. of America—and contends that its reasoning obliges the Court to find that Plaintiff’s claims do not fall within the FAA’s scope. Resp. 9–12. Specifically, Plaintiff highlights language from Bernhardt asserting that there was “no showing that petitioner while performing his duties under the employment contract was working ‘in’ commerce, was producing goods for commerce, or was engaging in activity that affected commerce, within the meaning of our decisions.” Id. at 12 (citing Bernhardt, 350 U.S. at 200–01). However, the Court remains unpersuaded by Plaintiff’s arguments regarding Bernhardt for two reasons. First, Plaintiff fails to account for more recent decisions—including the cases cited above—which expressly hold that employment contracts are within the FAA’s reach. Instead, Plaintiff simply ignores recent Supreme Court jurisprudence that is directly applicable to the case at hand. Second, Bernhardt’s reasoning contains very little discussion regarding the FAA. In fact, its analysis focuses on the application of the Erie doctrine—not on whether the employer was involved in interstate commerce pursuant to the FAA. See generally Bernhardt, 350 U.S. 198. Thus, Bernhardt appears to be unhelpful here.
For the reasons articulated above, the Court determines that Plaintiff’s employment contract is a “contract evidencing a transaction involving interstate commerce” within the meaning of the FAA.
2. The FAA applies to claims pursuant to Texas’s workers’ compensation scheme.
The FAA generally preempts any state laws that would frustrate the FAA’s purpose. See Concepcion, 563 U.S. at 343 (“Although § 2’s saving clause preserves generally applicable contract defenses, nothing in it suggests an intent to preserve state-law rules that stand as an obstacle to the accomplishment of the FAA’s objectives.”). Notwithstanding this general principle favoring preemption, Plaintiff contends that “Congress did not intend the [FAA] to eviscerate or preempt [the] State’s Workers’ compensation scheme” and that, therefore, the FAA should not apply here. Resp. 13.
However, Plaintiff’s contention is belied by the Texas Supreme Court’s interpretation of how the FAA and Texas workers’ compensation scheme interact. Specifically, the Texas Supreme Court has held that “an application of the FAA ... does not have the effect of eviscerating the workers’ compensation scheme in Texas.” Vista Quality Markets v. Lizalde, 438 S.W.3d 114, 122 (Tex. App. 2014). The Texas Supreme Court reasoned that “a party who agrees to arbitration does not forgo any substantive rights afforded to him by statute, but rather submits their resolution in an arbitral, rather than a judicial forum.” Id. Therefore, according to the Texas Supreme Court, the FAA does not prevent employees from effectively vindicating the rights afforded to them by the Texas Workers’ Compensation Act. Id.
*5 Because the Texas Supreme Court has determined that claims pursuant to the State workers’ compensation scheme are arbitrable, there appears to be no conflict between the state and federal law. However, even if there were a conflict, Supreme Court precedent suggests that the FAA generally preempts state laws. Thus, in step with both the United States Supreme Court and the Texas Supreme Court, the Court determines that arbitration agreements regarding workers’ compensation claims may be enforced.4
3. The FAA as applied does not violate the Tenth Amendment.
Additionally, Plaintiff argues that the FAA “as applied would violate the Tenth Amendment.” Resp. 17. Again, Plaintiff’s argument is contrary to the Texas Supreme Court’s decision on this issue. The Texas Supreme Court has rejected this argument and held that “the FAA does not violate the Tenth Amendment by encroaching on a state power to enact and regulate its workers’ compensation system.” Vista Quality Markets, 438 S.W.3d at 122. The Texas Supreme Court stated:
We have recognized that a state has a Tenth Amendment power to enact and regulate its own workers’ compensation system, protecting workers’ claims against employers.... However, we have also held that statutory claims under the Texas Workers’ Compensation Act are arbitrable.... Thus, we conclude that compliance with the Federal Arbitration Act would not directly impair Texas’s ability to structure integral operations in areas of traditional government functions....
In re Odyssey Healthcare, Inc., 310 S.W.3d 419, 423–24 (Tex. 2010) (internal citations and alterations omitted). Accordingly, the Court concludes that requiring arbitration in this case does not violate the Tenth Amendment.
B. Whether the Agreement to Arbitrate is Valid
Having determined that the FAA is applicable here, the Court analyzes whether the parties agreed to arbitrate their claims. Defendant asserts that a valid arbitration agreement exists. According to Plaintiff, there is no legally enforceable agreement because “[t]he arbitration provisions fails [sic] for lack of consideration and/or is illusory.” Resp. 4. Thus, Plaintiff believes the agreement is invalid based on principles of contract law. Below, the Court considers Plaintiff’s arguments and determines that the agreement to arbitrate is not illusory and does not lack sufficient consideration.
1. The agreement to arbitrate is not illusory.
According to Plaintiff, Defendant “can amend or terminate the [ ] plan at any time,” and therefore the plan is illusory and unenforceable. Resp. 7. However, in Texas, an agreement is illusory if a party “possesses the right to modify or terminate an arbitration agreement without notice.” Zamora, 547 F. Supp. 2d at 702 (emphasis added). Texas law allows unilateral modifications to or termination of an agreement where: (1) the modification or termination is limited only to prospective, unknown claims and (2) the employer gives notice to the employees of the modification or termination. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 228 (Tex. 2003) (citing In re Halliburton Co., 80 S.W.3d 566, 570–71 (Tex. 2002) ).
*6 Here, Defendant’s policy provides that “no [ ] amendment or termination shall alter the arbitration requirements of this Policy with respect to any injury occurring prior to the date of such an amendment or termination.” Mot. Ex. B (Summary Plan Description) App. A p. 7. The policy further provides that, “any such amendment or termination of this policy shall not be effective until at least 14 days after written notice has been provided.” Id. Thus, the Agreement conforms to Texas law requiring that employers provide notice of any unilateral amendments to or termination of an arbitration agreement, and that all amendments only apply prospectively. Accordingly, Plaintiff’s argument that the agreement is illusory fails.
2. The agreement to arbitrate does not lack consideration.
According to Plaintiff, the agreement lacks consideration because “by its plain and express language, [Defendant’s] policy is a stand-alone agreement” and “the only valid consideration that may support a stand-alone arbitration agreement are the parties’ mutual promises to arbitrate each party’s potential claims.” Resp. 5 (emphasis omitted) (citing Mendivil v. Zanios Foods, Inc., 357 S.W.3d 827, 832 (Tex. App. 2012) ). Plaintiff’s assertion misrepresents Defendant’s policy. In fact, Defendant’s policy specifically provides for the mutuality of the arbitration agreement and “is equally binding upon” the employer and employee. Id. Ex. B (Summary Plan Description) App. A p. 7. Thus, mutual promises to arbitrate claims exist, and the agreement does not fail for a lack of consideration.
In conclusion, because the agreement is not illusory and contains valid consideration, the Court is unpersuaded by Plaintiff’s arguments that the agreement to arbitrate is invalid. Further, because the arbitration policy states that claims related to an on-the-job injury must be submitted to the arbitrator, Plaintiff’s claims are plainly in the scope of the agreement. Accordingly, the Court is of the opinion that the parties agreed to arbitrate the dispute in question.
C. Whether this Case Should be Stayed or Dismissed
In its Motion, Defendant seeks a stay of this case pending arbitration. Although Defendant does not seek dismissal, the Court sua sponte considers whether a stay or dismissal is appropriate. According to the Fifth Circuit, § 3 of the FAA “was not intended to limit dismissal of a case in the proper circumstances. The weight of authority clearly supports dismissal of the case when all of the issues raised in the district court must be submitted to arbitration.” Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992) (emphasis omitted). Thus, if all of a plaintiff’s claims must be submitted to arbitration, the district court may stay or dismiss the case. Finding no reason to keep this case pending on the Court’s docket until arbitration is complete, the Court determines that the case should be dismissed.
The Court concludes that the FAA applies to this case. Further, the parties entered into a valid agreement to arbitrate claims related to an on-the-job injury. Accordingly, the Court concludes that Plaintiff’s claims must be resolved via binding arbitration and that this case should be dismissed.
Accordingly, IT IS ORDERED that Defendant Wal-Mart Associates, Inc.’s “Brief in Support of Demand for Arbitration” (ECF No. 25) is GRANTED.
IT IS FURTHER ORDERED that the above-captioned cause is DISMISSED.
IT IS FURTHER ORDERED that Plaintiff Ruben Mendez’s claims against Defendant Wal-Mart Associates, Inc.’s claims must be submitted to ARBITRATION.
IT IS FURTHER ORDERED that all settings in this matter are VACATED.
IT IS FURTHER ORDERED that all pending motions, if any, are DENIED AS MOOT.
*7 IT IS FINALLY ORDERED that the Clerk shall CLOSE this case.
Plaintiff’s Response is longer than the page limit set by the local rules. The Fifth Circuit has not yet ruled on whether motions to compel arbitration are dispositive or nondispositive. DHI Grp., Inc. v. Kent, No. CV H-16-1670, 2018 WL 1150213, at *1 (S.D. Tex. Mar. 5, 2018). In Plaintiff’s “Unopposed Motion to Extend Time by Seven (7) Days to File Response ...” (ECF No. 26) [hereinafter “Motion to Extend Time”], filed on November 5, 2018, he seems to anticipate that this would be treated as a nondispositive motion, as Plaintiff assumed that the relevant deadline was seven days after Defendant’s Motion, which reflects the deadline for nondispositive motions. See Mot. to Extend Time. Thus, it appears that Plaintiff’s Response should have been limited to ten pages. Local Rule CV-7(e). Notably, even if this is properly considered a dispositive motion, Plaintiff’s Response would be limited to twenty pages. Id. However, Plaintiff’s Response is twenty-five pages; therefore, he exceeds the page limit by either standard. In advance of filing his Response, Plaintiff sought an extension of time for his response—which the Court granted—but did not seek leave to file a motion in excess of the page limit. See generally Mot. to Extend Time. Inexplicably, it also appears that Plaintiff switches from 12 point font—the smallest font size allowed by the local rules—to a smaller, 10 point font (with his footnotes in even smaller font), in violation of Local Rule CV-10. See, e.g., Resp. ¶¶ 22–23 (shrinking font size). Further, the Court recognizes that Defendant managed to reply to Plaintiff’s arguments in five pages, the limit for reply briefings regarding nondispositive motions. See Local Rule CV-7(f). In future cases, Plaintiff’s counsel would be well advised follow the local rules more carefully.
Wal-Mart is a “nonsubscribing employer.” A nonsubscribing employer is one that is not covered by workers’ compensation insurance obtained in a manner authorized by Texas Labor Code § 406.003. An employer covered by workers’ compensation is subject to limited liability for death and injury sustained by an employee in the course and scope of employment without regard to whether the employer acted negligently. A nonsubscribing employer is subject to unlimited liability for death and injury sustained by an employee in the course and scope of employment, but only where the employer acted negligently.
As both parties rely on Texas law in their briefing, the Court will apply Texas law. Zamora v. Swift Transp. Corp., 547 F. Supp. 2d 699, 702 (W.D. Tex. 2008), aff’d, 319 F. App’x 333 (5th Cir. 2009).
The Court also notes that it previously determined that Plaintiff’s claim should not be understood as a claim pursuant to Texas’s workers’ compensation scheme. Rather, Plaintiff’s claim derives from the common law. Defendant is a nonsubscribing employer. As the Court previously discussed in its “Order Denying Plaintiff’s Motion to Remand” (ECF No. 23), filed on September 10, 2018, the Fifth Circuit and Texas Supreme Court have suggested that claims against nonsubscribing employers are derived from common law rather than the Texas Workers’ Compensation Act, albeit in different contexts. Order Denying Pl.’s Mot. to Remand 8 (citing Am. Int’l Specialty Lines Ins. Co. v. Rentech Steel LLC, 620 F. 3d 558, 564 (5th Cir. 2010) ). Thus, even if the FAA did not apply to claims pursuant to State workers’ compensation schemes, the Court determines that the FAA could still apply to Plaintiff’s claim because his claim is brought pursuant to the common law.
United States District Court, W.D. Texas, Midland-Odessa Division,
Sharon Kay DICKENS, Plaintiff,
TASB RISK MANAGEMENT & Orlando Riddick, Self-Insured, Defendants,
Attorneys & Firms
Sharon Kay Dickens, Midland, TX, pro se.
ORDER DISMISSING CASE FOR LACK OF SUBJECT MATTER JURISDICTION
DAVID COUNTS, UNITED STATES DISTRICT JUDGE
*1 On this day, the Court sua sponte considered its subject matter jurisdiction in the above-captioned cause. For the reasons explained below, the Court finds that subject matter jurisdiction is lacking and hereby DISMISSES WITHOUT PREJUDICE Plaintiff’s remaining claims against Defendant Orlando Riddick. Further, the Court DISMISSES as MOOT Plaintiff’s claims against Defendant TASB Risk Management.
On April 20, 2018, Plaintiff Sharon Kay Dickens, proceeding pro se, filed an amended complaint against Defendants without adopting any of the claims raised in her original complaint.1 (Doc. 11). In her amended complaint, Plaintiff argued that on August 21, 2015, she had an accident at work. Id. at 6. Additionally, she alleged that at the time of the accident she was covered by a workers’ compensation insurance policy issued by Defendant Midland ISD. Id. Plaintiff requested that the Court “oversee and grant benefits, medical and financial, according to guidelines for mind and body healing.” Id. at 4. On May 8, 2018, Defendant Midland ISD filed a Motion to Dismiss alleging the Court lacked subject matter jurisdiction and, alternatively, that Plaintiff had not exhausted her administrative remedies. (Doc. 13). Plaintiff did not respond. On October 12, 2018, the Court granted Defendant’s Motion on the basis that the Court lacked subject matter jurisdiction over Plaintiff’s claim for workers’ compensation. (Doc. 14).
II. LEGAL STANDARD
Federal courts have limited jurisdiction. Peoples Nat’l Bank v. Office of the Comptroller of the Currency of the United States, 362 F.3d 333, 336 (5th Cir. 2004). The question of subject-matter jurisdiction may be raised not only by the parties, but also by the court sua sponte, and if a federal court perceives at any stage of the proceedings that it lacks subject-matter jurisdiction, it must take proper notice of the defect by dismissing the action. See Arbaugh v. Y&H Corp., 546 U.S. 500, 514 (2006) (holding that when a federal court concludes that it lacks subject-matter jurisdiction, the court must dismiss the complaint in its entirety). A district court can dismiss an action sua sponte for lack of federal subject-matter jurisdiction, therefore, even where the defendant makes no responsive pleadings and does not move to dismiss for want of subject-matter jurisdiction. 61A Am. Jur. 2d Pleading § 407; see also Howard v. Lemmons, 547 F.2d 290 (5th Cir. 1977). Finally, federal courts must address jurisdictional questions whenever they are raised and must consider jurisdiction sua sponte if not raised by parties. Rutherford v. Breathwite Marine Contractors, Ltd., 59 F. Supp. 3d 809 (S.D. Tex. 2014).
*2 As detailed in its previous Order, this Court does not have subject matter jurisdiction over Plaintiff’s workers’ compensation claim against Defendant Midland ISD as such claim arises under the Texas Workers’ Compensation Act. (Doc. 14). A federal court has subject matter jurisdiction over a case if there is a federal question or if the parties are completely diverse and meet the amount in controversy. 28 U.S.C. §§ 1331–32. The Court has federal question jurisdiction if the cause of action arises under federal law. Id. at § 1331. Here, Plaintiff’s claim against both Defendant Midland ISD and Defendant Riddick arises from state law, not federal law. (Doc. 11). Further, Plaintiff does not allege diversity exists between the parties and, even if Plaintiff did, Defendant Riddick appears to be a resident of Texas. (Doc. 11 at 1, 3). Accordingly, for the same reason the Court dismissed Plaintiff’s claim against Defendant Midland ISD, the Court finds that Plaintiff’s workers’ compensation claim against Defendant Riddick must also fail. Crawford v. Creative Risk Sols., CV H-17-1130, 2017 WL 6761823, at *1 (S.D. Tex. Oct. 5, 2017) (holding the workers’ compensation claim was “within the exclusive jurisdiction of the Texas Workers’ Compensation Division” and dismissing plaintiff’s claim).
For the foregoing reasons, the Court DISMISSES WITHOUT PREJUDICE Plaintiff’s remaining claim against Defendant Riddick and DISMISSES as MOOT Plaintiff’s claims under Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act against Defendant TASB Risk Management.
Accordingly, the Court ORDERS that Plaintiff’s workers’ compensation claim under the Texas Workers’ Compensation Act against Defendant Riddick is DISMISSED WITHOUT PREJUDICE.
The Court further ORDERS that Plaintiff’s Title VII and ADEA claims against Defendant TASB Risk Management are DISMISSED as MOOT.
It is so ORDERED.
In its original complaint Plaintiff asserted claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e, et seq. and under the Age Discrimination in Employment Act, 29 U.S.C. §§ 12102 et seq. against Defendants Midland ISD and TASB Risk Management. (Doc. 10). As noted above, in her amended complaint, Plaintiff did not adopt or incorporate any of the claims raised in her original complaint and only asserted a workers’ compensation cause of action against Defendant Midland ISD, not Defendant TASB, and added Defendant Orlando Riddick. (Compare Doc. 10, with Doc. 11). Because Plaintiff’s amended complaint superseded her original complaint, rendering the original complaint raising Title VII and age discrimination causes of action “of no legal effect,” Plaintiff’s claims against Defendant TASB are dismissed as moot. King v. Dogan, 31 F.3d 344, 346 (5th Cir. 1994) (noting that unless an amended complaint “refers to and adopts or incorporates by reference the earlier pleading,” the earlier pleading has no legal effect); Thompson v. Eason, 258 F. Supp. 2d 508, 511 (N.D. Tex. 2003) (citing Eason v. Holt, 73 F.3d 600, 603 (5th Cir. 1996) ) (dismissing six Defendants because they were not named in the amended complaint).