SOUTHERN DISTRICT OF TEXAS REFUSES TO REMAND CASE REGARDING A RULE 11 AGREEMENT ENTERED INTO BETWEEN THE MOSTYN LAW FIRM AND STATE FARM

This past Tuesday, a Federal District Court Judge in the Southern District of Texas denied a plaintiffs’ Motion to Remand because diversity allegedly existed in a putative class action suit.  The legal issues involved a Rule 11 agreement regarding State Farm’s agreement from several years ago not remove some cases to federal court that were filed by the Mostyn Law Firm which State Farm argued did not apply to this class action law suit because the plaintiff’s claims did not involve exclusively Hurricane Ike claims.

In Boles v. State Farm Lloyds, CIV.A. H-13-286, 2013 WL 3820978 (S.D. Tex. July 23, 2013), Plaintiff filed an original petition against State Farm in a Galveston state district court. Plaintiff alleged State Farm intentionally underpaid his insurance claim relating to the damage to his home by Hurricane Ike.  Based on the nature of his claim, plaintiff’s action was transferred by State Farm to the multi-district litigation panel created to handle the pretrial management of Hurricane Ike-related claims.

Following the transfer, the plaintiff significantly amended his petition to include additional individual claims and claims allegedly on behalf of other similarly situated class members specifically described as “Texas policyholders who were State Farm’s policyholders prior to January 2009 and: (1) suffered a covered loss which included roof damage; and (2) were improperly paid a “bundled” or “turnkey” price as settlement for their roof claims.”

State Farm removed the case to federal court and Plaintiff’s counsel attempted to uphold a Rule 11 agreement from several years earlier between State Farm and the Mostyn Law Firm wherein State Farm agreed not to remove certain Hurricane Ike cases filed by the Mostyn Law Firm.  The Court carefully analyzed the agreement and concluded State Farm was not prohibited from removing cases that do not stem exclusively from Hurricane Ike claims, and the Court’s review of Plaintiff’s Amended Petition revealed that the basis of his lawsuit was not exclusively tied to Hurricane Ike claims practices and damages.  Instead, the putative class included all Texas policyholders who were allegedly improperly paid for any covered roof damages for any type of loss prior to January 2009.

The Court therefore concluded that the case involved many potential plaintiffs whose homes were not touched by Hurricane Ike and State Farm was not precluded from removing the case to federal court under the terms of the Rule 11 agreement.  Further, because State Farm and Boles were diverse parties, the Court concluded diversity jurisdiction was present and denied Plaintiff’s Motion to Remand.