MEMORANDUM OPINION AND ORDER
GRAY H. MILLER, District Judge.
Pending before the court is plaintiff Howard Johnson II's motion to remand. Dkt. 5. Having considered the motion, response, complaint, and the applicable law, the court is of the opinion that the motion should be DENIED.
This is an insurance dispute between Johnson and defendants Allstate Vehicle and Property Insurance Company ("Allstate"), James Burt, and Wesley Arnold (collectively, Defendants). In 2015, Johnson purchased an Allstate House & Home Policy (the "Policy"), insuring his property at 7691 Ameswood Road, Houston, Texas 77095 (the "Property"). Dkt. 1-1 at 9. Johnson purchased the Policy from Arnold, who is an insurance agent for Allstate. Id. Johnson alleges that prior to purchasing the Policy, Arnold represented to him that the Policy included hail and windstorm coverage. Id. Allstate responds that the Policy plainly covers windstorm and hail damage unless the damage is to the Property's interior that is not the result of a storm-created opening. Dkt. 5-4 at 24.
The Policy states:
SECTION 1 — LOSSES WE COVER UNDER COVERAGES A, B AND C:
We do not cover:
Dkt. 5 at 5, Ex. D.
On or about April 17, 2016, the Property sustained damage from a storm.
On March 14, 2017, Johnson filed suit against Defendants in the 133rd Judicial District Court of Harris County, Texas. Id. at 1. Johnson asserts causes of action (1) against Arnold for violations of the Texas Deceptive Trade Practices Act ("DTPA"), the Texas Insurance Code, and common law fraud; (2) against Allstate for breach of contract, breach of the duty of good faith and fair dealing, fraud, and violations of the DTPA and Texas Insurance Code; and (3) against Burt for fraud, negligence, gross negligence, and violations of the DTPA and the Texas Insurance Code. Id. at 13-23 (citing Tex. Bus. & Com. Code Ann. § 17.41-63, § 17.50 (West 2017), Tex. Ins. Code Ann. § 541-42 (West 2017); Tex. Civ. P. & Rem. Code § 41.001(11)(A)-(B) (West 2017)).
On April 18, 2017, Allstate and Arnold removed the case to federal court on the basis of diversity jurisdiction. Id. at 1. On May 1, 2017, Johnson filed a motion to remand. Dkt. 5. On May 19, 2017, Defendants responded. Dkt. 10.
II. LEGAL STANDARDS
A defendant may remove an action to federal court in instances where the court would have original jurisdiction over the case. 28 U.S.C. § 1441 (2012). Subject matter jurisdiction based on diversity requires that (1) complete diversity exists among the parties, and (2) the amount in controversy exceeds $75,000. 28 U.S.C. § 1332. A case may be removed despite the presence of a non-diverse defendant if that defendant has been improperly joined, i.e., without a legal basis to do so. Hornbuckle v. State Farm Lloyds, 385 F.3d 538, 542 (5th Cir. 2004). As the removing party, the defendant bears the "heavy burden" of demonstrating improper joinder. Travis v. Irby, 326 F.3d 644, 649 (5th Cir. 2003). To meet this burden, the party seeking removal must demonstrate that "there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against the in-state defendant." McDonal v. Abbott Labs., 408 F.3d 177, 183 (5th Cir. 2005) (citations omitted). The statutory right to removal is strictly construed because "removal jurisdiction raises significant federalism concerns." Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5th Cir. 1998). Accordingly, any doubt about the propriety of removal "must be resolved in favor of remand." Gasch v. Hartford Accident & Indem. Co., 491 F.3d 278, 281-82 (5th Cir. 2007).
"A non-diverse defendant may be found to be improperly joined if the plaintiff fraudulently pled the jurisdictional facts or if the removing defendant demonstrates that the plaintiff cannot establish a cause of action against the non-diverse defendant." Robinson v. Allstate Tex. Lloyds, No. H-16-1569, 2016 WL 3745962, at *1 (S.D. Tex. July 13, 2016) (Atlas, J.); see also Int'l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 199 (5th Cir. 2013). Here, Defendants assert only the second basis for improper joinder, which requires the court to determine whether Johnson has pled any viable claims against Arnold. Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc). To establish improper joinder under the second basis, the court must find 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." Id. Therefore, Defendants have the heavy burden of establishing that Johnson has failed to meet the federal pleading standard on every claim asserted against Arnold. Willy, 855 F.2d at 1164 (5th Cir. 1998).
B. 12(b)(6) Standard
To demonstrate that Johnson failed to meet the federal pleading standard, the court performs a Rule 12(b)(6)-type analysis or by "piercing the pleadings" in a summary judgment-like inquiry. Smallwood, 385 F.3d at 573-74. In a 12(b)(6)-type analysis, a federal court must look to the original state court pleading but apply the federal pleading standard. Int'l Energy Ventures Mgmt., 818 F.3d at 205.
"In considering 12(b)(6) motions, courts generally must accept the factual allegations contained in the complaint as true." Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982). The court does not look beyond the face of the pleadings when determining whether the plaintiff has stated a claim under Rule 12(b)(6). Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999). "[A] complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, [but] a plaintiff's obligation to provide the `grounds' of his `entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 127 S. Ct. at 1964-65 (citing Sanjuan v. Am. Bd. of Psychiatry and Neurology, Inc., 40 F.3d 247, 251 (7th Cir. 1994)) (internal citations omitted). And, "[f]actual allegations must be enough to raise a right to relief above the speculative level." Id. at 1965 (supporting facts must be plausible—enough to raise a reasonable expectation). The supporting facts must be plausible—enough to raise a reasonable expectation that discovery will reveal further supporting evidence. Id. at 556. If "a complaint shows on its face that it is barred by an affirmative defense, a court may dismiss the action for failing to state a claim." Aspen Specialty Ins. Co. v. Muniz Eng'g, Inc., 514 F.Supp.2d 972, 980 (S.D. Tex. 2007) (Harmon, J.) (citing Kaiser Aluminum & Chem. Sales v. Avondale Shipyards, 677 F.2d 1045, 1050 (5th Cir. 1982)). Ultimately, "if a plaintiff can survive a 12(b)(6) challenge, there is no improper joinder." Smallwood, 385 F.3d at 573.
C. Summary Inquiry Standard
3 In some cases, a court may use its discretion to further pierce the pleadings and conduct a summary judgment-type inquiry to "identify the presence of discrete and undisputed facts that would preclude plaintiff's recovery against the in-state defendant." Id. at 573-74. This type of inquiry is appropriate when the plaintiff has stated a claim but has misstated or omitted facts that would determine the propriety of joinder.
It is undisputed that diversity of citizenship exists between Johnson and defendants Allstate and Burt. Dkt. 1 at 2; Dkt. 5. Allstate is a foreign organization incorporated pursuant to the laws of the State of Illinois and does not have its principal place of business in the State of Texas. Dkt. 1 at 2. Burt is an individual resident of Grove, Oklahoma. Id. It is also undisputed that Johnson and Arnold are both residents of Texas. Id. The parties agree that the amount in controversy exceeds $75,000. Id. Johnson contends that remand is appropriate because his claims against Arnold, the non-diverse defendant, are sufficiently well-pled and thus destroy the court's subject matter jurisdiction. Id. at 6-7. Defendants counter that this case should remain in federal court because Arnold was improperly joined. Dkt. 10. Defendants argue that the claims against Arnold should be dismissed because (1) Johnson's claims are conclusory and not sufficient to survive a 12(b)(6) dismissal, and (2) Johnson's alleged misrepresentation is not actionable. Dkt. 10. Therefore, the court will examine the Defendants' arguments and determine whether "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, 385 F.3d at 573.
A. The Sufficiency of Johnson's Claims Against Arnold
Johnson alleges that Arnold's conduct in selling the Policy to him violates (1) the DTPA, (2) the Texas Insurance Code, and (3) constitutes a claim for common law fraud. Dkt. 1-1. The court will (1) examine the elements Johnson needs to allege under the DTPA, the Texas Insurance Code, and common law fraud and (2) conduct a 12(b)(6) analysis on Johnson's allegations to determine if they are sufficient to state a claim.
1. DTPA, Texas Insurance Code, and Common Law Fraud
To state a valid claim under the DTPA, Johnson must show that (1) he is a consumer, (2) that the defendant engaged in false, misleading, or deceptive acts, and (3) that those acts were a producing cause of his damages." Tex. Bus. & Com. Code Ann. § 17.50(a)(1). The DTPA defines a consumer as "The DTPA defines a "consumer" as "an individual . . . who seeks or acquires by purchase or lease, any goods or services." § 17.54(4). "Purchase of an insurance policy is the purchase of a service within the meaning of the Texas DTPA." Webb v. UnumProvident Corp., 507 F.Supp.2d 688, 678 (W.D. Tex. 2005) (citing 3Z Corp v. Stewart Title Guar. Co., 851 S.W.2d 933, 937 (Tex.App.-Beaumont 1993, no writ)). Thus, Johnson is a consumer under the terms of the DTPA and can bring suit for any violations of the DTPA connected to his purchase of his Policy.
"Both the Texas Insurance Code and the Texas Deceptive Trade Practices Act permit a private cause of action against `any person' who commits one of the prohibited acts or practices." Griggs v. State Farm Lloyds, 181 F.3d 694, 701 (5th Cir. 1999); see also Tex. Ins. Code Ann. § 541.002(b); Tex. Bus. & Com. Code Ann. § 17.50. "Texas courts [recognize] that the statutory language is broad enough to permit in the appropriate circumstances a cause of action against an insurance agent who engages in unfair or deceptive acts or practices." Griggs, 181 F.3d at 701 (citing Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482 (Tex. 1998) and State Farm Fire & Cas. Co. v. Gros, 818 S.W.2d 908 (Tex. App.-Austin 1991, no writ)). Therefore, Arnold, Allstate's agent, can be held liable under the DTPA and the Texas Insurance Code.
The DTPA prohibits "the use or employment by any person of a false, misleading, or deceptive act or practice that is: (1) [a] breach of an express or implied warranty; (2) any unconscionable action or course of action by any person; [and] (3) the use or employment by any person of an act or practice in violation of Chapter 541, Insurance Code." Tex. Bus. & Com. Code Ann. § 17.50. Furthermore, "[the DTPA] enumerates various, nonexclusive, conduct that can constitute false, misleading, or deceptive practices — the so called `laundry list violations' contained in [section] 17.46(b)."
Section 541.051 of the Texas Insurance Code prohibits "mak[ing], issu[ing], or circulat[ing], or caus[ing] to be made, issued, or circulated an estimate, illustration, circular, or statement misrepresenting with respect to a policy issued or to be issued: (1) the terms of the policy; [or] (2) the benefits or advantages promised by the policy." Tex. Ins. Code Ann. § 541.051(1)(a)-(b).
Johnson also alleges that all of Arnold's acts, omissions, or failures were committed "knowingly" and "intentionally" as defined by the DTPA and the Texas Insurance Code. Dkt.1-1 at 23.
Finally, the elements of fraud under Texas law are: "(1)a [material] misrepresentation that (2) the speaker knew to be false or made recklessly (3) with the intention to induce the plaintiff's reliance, followed by (4) actual and justifiable reliance (5) causing injury." Rio Grande Royalty Co. v. Energy Transfer Partners. L.P., 620 F.3d 465, 468 (5th Cir. 2010).
2. 12(b)(6) Analysis
Johnson's allegations must feature more than labels and conclusions. See Twombly, 550 U.S. at 555 ("Courts `are not bound to accept as true a legal conclusion couched as a factual allegation.'") (quoting Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932 (1986)). The bulk of Johnson's allegations against Arnold merely tracks the statutory language of the relevant provisions of the DTPA and the Texas Insurance Code without alleging any case-specific facts. See, e.g., Dkt. 1-1 at 22 ("By Arnold's acts and omissions, failures, and conduct, Arnold violated sections 17.46(b)(2) and 17.46(b)(5) of the DTPA; Arnold's violations include causing confusion as to the policy benefits and representing that the Policy had benefits or characteristics that it did not possess;" "The conduct, acts, omissions, and failures of Arnold are unfair practices in the business of insurance in violation of section 17.50(a)(4) of the DTPA."); see also Mt. Olive Missionary Baptist Church v. Underwriters at Lloyd's London, No. CV H-16-234, 2016 WL 4494439, at *3 (S.D. Tex. Aug. 26, 2016) (Miller, J.) (citing Okenkpu v. Allstate Texas Lloyd's, CV H-16-234, 2016 WL 4494439, at *7 (S.D. Tex. Mar. 27, 2012) (Harmon, J.) (collecting cases)). Johnson's formulaic recitation of the statutory language in these allegations is insufficient to fulfill his obligation to provide the grounds on which he is entitled to relief. Twombly, 550 U.S. at 555.
Nonetheless, after separating the legal conclusions, one factual allegation remains which the court must assume is true for the purpose of this analysis: When Arnold sold the Policy to Johnson, Arnold misrepresented that the Policy afforded benefits in the form of payment for hail and wind damages, when it did not. Dkt. 1-1 at 16-18. The court will assume this is true and determine whether it "plausibly give[s] rise to an entitlement to relief." Iqbal, 556 U.S. at 678-79.
Because Johnson's remaining claim is based on a misrepresentation, he "must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b); Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 339 (5th Cir. 2008). "Put simply, Rule 9(b) requires the complaint to set forth the `who, what, when, where, and how' of the events at issue." Dorsey, 540 F.3d 339. Johnson's claims alleging misrepresentation in violation of the DTPA and the Texas Insurance Code are also subject to the heightened pleading requirements of Rule 9(b). Lone Star Ladies Inv. Club v. Schlotzsky's, Inc., 238 F.3d 363, 368 (5th Cir. 2001) ("Rule 9(b) applies by its plain language to all averments of fraud, whether they are part of a claim of fraud or not.") (citations omitted).
Defendants refer the court to Waters v. State Farm Mutual Auto Insurance Co., 158 F.R.D. 107 (S.D. Tex. 1994) (Harmon, J.) to argue that Johnson's claims of misrepresentation or common law fraud against Arnold are conclusory because Johnson's pleadings fail to specify a time, place, or the content of any alleged misrepresentation. Dkt. 1 at 5. In Waters, the insured sued his insurer and the insurer's agent who had written the insured's policy to recover benefits. Id. at 108. In addition, the insured alleged fraud and violations of the DTPA and of the Texas Insurance Code. Id. The insured merely alleged that the insurer's agent made a misrepresentation about the benefits of an insurance policy when the agent sold the policy to the insured. Id. The insured's counsel stated in a letter that he did not know of any evidence linking the insurance agent to a material misrepresentation, but that he suspected the evidence would show that the insurance agent had made a misrepresentation. Id. The Waters court found this allegation insufficient and that more specific facts were required for a claim of fraud under Rule 9(b). Id.
By contrast, Johnson does not merely plead that Arnold made a general misrepresentation about the policy's coverage, as was the case in Waters. Id. Johnson specifically alleges that when he purchased his Policy, Arnold misrepresented to him that the Policy included hail and windstorm coverage for the his home; yet, once Allstate interpreted the Policy, coverage was largely denied. Dkt. 1-1. Johnson claims that the denial damaged him because he did not receive his expected insurance payment. Dkt.1-1 at 9. Johnson's allegations are more specific because they identify who made the misrepresentation, the contents of the misrepresentation, and why the misrepresentation was false. Johnson does not expressly allege time and place in his complaint, but it is fair to infer that this alleged misrepresentation took place when Johnson purchased the Policy at Arnold's place of business. Dkt. 1-1; See U.S. ex. rel. Grubbs v. Kanneganti, 565 F.3d 180, 188 (5th Cir. 2009) (quoting Williams v. WMX Techs., Inc., 112 F.3d 175, 178 (5th Cir. 1997)) ("`Rule 9(b)'s ultimate meaning is context-specific,' and thus there is no single construction of Rule 9(b) that applies in all contexts.").
B. Actionable Misrepresentation
Second, the Defendants also argue that the alleged misrepresentation is not actionable. Defendants argue that there was no affirmative misrepresentation and Johnson's reliance on Arnold's alleged misrepresentation was not justifiable due to the express terms of the Policy.
"Before any misrepresentation can be said to be actionable, it must have induced the purchase." Tsao, 2017 WL 746451, at *9. Here, the court finds that Johnson's claim is too vague to meet his burden of specificity under Rule 9(b) because there are no allegations suggesting that Johnson relied on Arnold's misrepresentation in connection with Johnson's decision to purchase the Policy. Johnson argues that whether Arnold actually made misrepresentations, whether the Policy actually did include windstorm and hail coverage, and whether he might actually recover from Arnold are all immaterial questions. Dkt. 5 at 6 (citing to Sanders v. Sentry Insurance a Mutual Insurance Co., No. 5:16-CV-00164-C (N.D. Tex. Aug. 23, 2016)). In Sanders, another insurance case that joined an insurance agent for misrepresentation, the court granted an motion to to remand. Dkt. 5, Ex. C. However, in Sanders, the plaintiff alleged that but for the insurance agent's misrepresentation about the scope of the insurance policy, the plaintiff would not have purchased the policy. Id.; see Dkt. 5-3 at 5 (emphasis added). A but-for allegation connecting the defendant's deceptive conduct with the consumer transaction is absent in Johnson's complaint. Dkt. 1-1. The bare allegation that Arnold misrepresented the scope of Johnson's windstorm and hail coverage is not sufficient to show that the misrepresentation induced the purchase. See Tsao, 2017 WL 746451, at *9.
2. Justifiable Reliance
Furthermore, under Texas Law, the claimant must show his reliance on the alleged misrepresentation was justifiable. Lewis v. Bank of Am. NA, 343 F.3d 540, 546 (5th Cir. 2003)). "A fraud plaintiff `cannot recover if he blindly relies upon a misrepresentation the falsity of which would be patent to him if he had utilized his opportunity to make a cursory examination or investigation.'" Lewis, 343 F.3d at 546 (quoting Field v. Mans, 516 U.S. 59, 70-71, 116 S.Ct. 437 (1995)). Therefore, reliance "upon an oral representation that is directly contradicted by the express, unambiguous terms of a written agreement between the parties is not justified as a matter of law." Mae v. U.S. Prop. Sols., LLC, No. CIV.A. H-08-3588, 2011 WL 66161, at *6 (S.D. Tex. Jan. 10, 2011) (Miller, J.) (quoting DRC Parts & Accessories, L.L.C. v. VM Motori, S.P.A., 112 S.W.3d 854, 858 (Tex. App-Houston [14th Dist.] 2002, pet. denied) (internal quotations omitted)).
Defendants argue that because Johnson's policy expressly covers windstorm and hail damage (though with an exclusion for interior damage that is not the result of a storm-created opening) that Johnson's reliance on Arnold alleged representation is barred. Dkt. 10 at 7. Indeed, Johnson makes no allegation that Arnold made an affirmative misrepresentation about the meaning of the Policy's windstorm and hail exclusion. See Wyly v. Integrity Ins. Sols., 502 S.W.3d at 909, 912 (Tex.App.-Houston [14th Dist.] 2016, no pet.) (holding that an insured is deemed to know the contents of the insured's insurance policy unless the insured alleges an affirmative misrepresentation that would conflict with those terms). Therefore, because there is no alleged misrepresentation about the meaning of the Policy's windstorm and hail exclusion and the terms of the Policy expressly cover windstorm and hail damage, Johnson's reliance on Arnold's misrepresentation is unjustifiable.
Defendants also cite the "mistaken belief" rule to argue Johnson's reliance on Arnold's alleged misrepresentation are unactionable. Dkt. 10. "In the absence of some specific misrepresentation . . . a policyholder's mistaken belief about the scope or availability of coverage is not generally actionable under the DTPA." Moore v. Whitney-Vaky, 966 S.W.2d 690, 692 (Tex.App.-San Antonio 1998, no pet.). Johnson does not allege any specific facts about why Arnold's misrepresentation warped his understanding of the express terms of the policy or of the exclusion to windstorm and hail coverage. Dkt. 1-1.
In sum, Johnson's allegations feature more details than a general allegation of misrepresentation. Yet, Johnson's misrepresentation allegations are not actionable because: (1) the bare allegation that Arnold misrepresented the scope of Johnson's windstorm and hail coverage is not sufficient to show that Arnold's misrepresentation induced the purchase, and (2) because there is no alleged misrepresentation about the meaning of the Policy's windstorm and hail exclusion and the terms of the Policy expressly cover windstorm and hail damage. Therefore, Johnson's reliance on Arnold's alleged misrepresentation is unjustifiable. Therefore, as currently pled, Johnson's original petition fails to state any actionable claims for common-law fraud, misrepresentation under the DTPA, or misrepresentation under the Texas Insurance Code against Arnold.
Accordingly, the court finds that Defendants have met their heavy burden to show that Arnold was improperly joined because Johnson fails to state a claim against Arnold. Therefore, the court has "no reasonable basis to predict" that Johnson might be able to recover against Arnold. Smallwood, 385 F.3d 573. Johnson's claims against Arnold are DISMISSED WITHOUT PREJUDICE. Because there is complete diversity between Arnold and defendants Allstate and Burt, Johnson's motion to remand is DENIED.
Based on the foregoing, Johnson's motion to remand (Dkt. 5) is DENIED and Johnson's claims against Arnold are DISMISSED WITHOUT PREJUDICE.