FIFTH CIRCUIT REVERSES TRIAL COURT AND ORDERS REMAND BASED ON REMOVAL BY WRONG ALLSTATE ENTITY

October 6, 2020

Last Friday The Fifth Circuit reversed a trial court on a motion to remand because the remand was filed in the name of a non-party entity. In Perfecto Valencia v. Allstate Texas Lloyds, No. 20-20193, 2020 WL 5867526 (5th Cir., Oct. 2, 2020) an interlocutory appeal arose from the district court's denial of a motion to remand. Valencia filed suit against Allstate Texas Lloyd's, Inc. (“Allstate Texas”) in the District Court of Harris County, Texas. Valencia alleged that Allstate Texas failed to pay for damage that was covered under a property policy.  Allstate Texas Lloyds (“Allstate Illinois”) rather than Allstate Texas, answered the petition and removed the case to federal court on the basis of diversity jurisdiction Allstate Illinois alleged that it was a citizen of Illinois for jurisdictional purposes.

Valencia filed a motion to remand the matter, contending that removal was improperly effectuated by a non-party to the case. Valencia argued  Allstate Illinois never claimed that it was misnamed or misidentified as Allstate Texas and never sought to join the case as a defendant, but rather unilaterally “changed the case caption without notifying the parties or the court” of its intention to defend the case. The motion was denied by the district court. The district court subsequently denied Valencia's motion for reconsideration but certified the issue for interlocutory appeal. Valencia timely appealed.

The court agreed with Valencia, finding that at the time of removal, the only defendant in the case was Allstate Texas. Allstate Illinois never sought to intervene in the case or to be joined as a defendant. As a non-party, Allstate Illinois did not have the right to remove the case to federal court. The court reversed and remanded with instruction to remand to state court.