Willingham et al v. Allstate Vehicle & Property Insurance Company

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
MCALLEN DIVISION
JUAN WILLINGHAM and §
MARIA WILLINGHAM, §
§
Plaintiffs, §
§
v. § Civil Action No. 7:26-CV-00010
§
ALLSTATE VEHICLE AND PROPERTY §
INSURANCE CO., §
§
Defendant. §
MEMORANDUM OPINION AND ORDER
Plaintiffs Juan and Maria Willingham own property in Pharr, Texas, that sustained
storm damage in April 2023. (Dkt. No. 1-2 at 3). Defendant Allstate Vehicle and Property
Insurance Company (“Allstate”) insured the home. (Id.). The Parties dispute the amount
of loss covered by the insurance policy. Plaintiffs filed suit in Texas state court against
Allstate and Dustin Cloud, an Allstate adjuster. Allstate removed the case to federal
court.
Pending before the Court is Plaintiffs’ Motion to Remand. (Dkt. No. 5). For the
following reasons, the Court DENIES the Motion and DISMISSES Defendant Cloud as
improperly joined.
I. BACKGROUND
In April 2023, Plaintiffs’ property was damaged by a storm, so they made a claim
to Allstate for damages and repairs in the amount of $176,546.67. (Dkt. No. 1-2 at 4).
Allstate sent Dustin Cloud to inspect the property. (Id.). Cloud found that the damage
United States District Court
Southern District of Texas
ENTERED
June 24, 2026
Nathan Ochsner, Clerk
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suffered was caused completely by “an unknown peril” and that there was no covered
storm damage. (Id.).
On November 3, 2025, Plaintiffs sued Allstate in state court in Hidalgo County for
breach of contract, Texas Insurance Code violations, breach of the duty of good faith and
fair dealing, and Texas Deceptive Trade Practice Act violations. (Dkt. No. 1-2 at 7–18).
On December 9, 2025, Allstate filed its Original Answer, (Dkt. No. 1-3), and filed an
Amended Answer the next day, (Dkt. No. 1-4). On December 11, 2025, Allstate elected
under Chapter 542A of the Texas Insurance Code to take legal responsibility and accept
whatever liability Cloud might have to Plaintiffs related to their claims. (Dkt. No. 1-5).
The state court dismissed Cloud with prejudice as a result on December 15, 2025. (Dkt.
No. 1-6). Allstate then removed the case to this Court based on diversity jurisdiction on
January 9, 2026. (Dkt. No. 1).
Plaintiffs filed a Motion to Remand on February 5, 2026. (Dkt. No. 5). Allstate did
not respond to the Motion.
II. LEGAL STANDARD
“Federal courts are courts of limited jurisdiction,” Kokkonen v. Guardian Life Ins. of
Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 1675, 128 L.Ed.2d 391 (1994), and may only hear
cases that present a federal question or satisfy the requirements for diversity jurisdiction,
see 28 U.S.C. §§ 1331, 1332. If a case meets one of these two requirements for federal
subject-matter jurisdiction, the defendant (or defendants) may remove the action from
state to federal court. See 28 U.S.C. § 1441(a); Manguno v. Prudential Prop. & Cas. Ins., 276
F.3d 720, 723 (5th Cir. 2002).
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To determine whether federal subject-matter jurisdiction exists, courts examine
the plaintiff’s state-court petition as it stood at the time of removal. Manguno, 276 F.3d at
723. Therefore, to remove a case on diversity-jurisdiction grounds—as Allstate has done
here, (Dkt. No. 1 at 2)—two conditions must be met at the time of removal: (1) there must
be complete diversity of citizenship between the parties, and (2) the amount in
controversy must exceed $75,000, exclusive of interest and costs, 28 U.S.C. § 1332(a).
The removing party bears the burden of establishing that subject-matter
jurisdiction exists and that removal is proper. Manguno, 276 F.3d at 723. Notice of
removal must be filed within 30 days of a defendant’s receipt of the initial pleadings. 28
U.S.C. § 1446(b)(1). If, however, the initial pleadings do not state a removable case then
a notice of removal may be filed within 30 days of defendant’s receipt of “a copy of an
amending pleading, motion, order or other paper from which it may first be ascertained
that the case is” removable. Id. at (b)(3). The removal statute is strictly construed, and
any doubts about the propriety of removal must be resolved in favor of remand.
Manguno, 276 F.3d at 723; see also Afr. Methodist Episcopal Church v. Lucien, 756 F.3d 788,
793 (5th Cir. 2014).
III. DISCUSSION
A. DIVERSITY
The Court begins, as is required, by considering whether diversity jurisdiction
existed on January 9, 2026—the date Allstate removed the case. Manguno, 276 F.3d at 723.
Neither party disputes that the amount-in-controversy requirement was met. (Dkt. No.
5 at 3); (Dkt. No. 1 at 4–6). The issue is whether complete diversity existed. While
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Plaintiffs, Texas citizens, are diverse from Allstate, an Illinois citizen, (see Dkt. Nos. 12,
13), the defendant dismissed by the state court, Cloud, is a Texas citizen that would
destroy diversity if included, (see Dkt. No. 1-2 at 2). That the state court dismissed Cloud
does not mean that he is terminated as a party to the case. See Davis v. Allstate Vehicle &
Prop. Ins. Co., 622 F.Supp.3d 333, 336 (N.D. Tex. 2022) (“[E]ven if the motion to dismiss
[the non-diverse defendant] was granted by the state court, such an order is only
interlocutory under Texas law and thus does ‘not terminate [a defendant’s] status as a
party to the case.’”) (quoting Madison v. Williamson, 241 S.W.3d 145, 156 (Tex. App.—
Houston [1st Dist.] 2007, pet. denied)). The Court therefore considers whether Allstate’s
election under Section 542A.006 renders Cloud an improperly-joined defendant at the
time of removal.
The Fifth Circuit notes that “a district court must disregard, for diversity
jurisdiction purposes, the citizenship of an improperly joined defendant.” Waste Mgmt.,
Inc. v. AIG Specialty Ins. Co., 974 F.3d 528, 533 (5th Cir. 2020). In Smallwood v. Ill. Cent. R.R.
Co., the Fifth Circuit articulated two ways to establish improper joinder: “(1) actual fraud
in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of
action against the non-diverse party in state court.” 385 F.3d 568, 573 (5th Cir. 2004) (en
banc). The Fifth Circuit further noted that “[t]he party seeking removal bears a heavy
burden of proving that the joinder of the in-state party was improper.” Id. at 574.
Because Allstate does not argue that Plaintiffs’ pleadings fraudulently state
jurisdictional facts, only the second Smallwood prong applies. To meet this prong, there
must be “no reasonable basis for the district court to predict that [Plaintiffs] might be able
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to recover against [Cloud].” Id. at 573. A court may make this determination in one of
two ways: (1) by conducting a “Rule 12(b)(6)-type analysis” that involves “looking
initially at the allegations of the complaint” to determine whether it alleges a state-law
claim against the in-state defendant, or (2) by piercing the pleadings and conducting a
summary inquiry. Id.
While the latter approach is within a court’s discretion, the motive of the joinder
is irrelevant, and the court should avoid the “heavy risk of moving . . . beyond
jurisdiction and into a resolution of the merits.” Id. at 574. “Indeed, the inability to make
the requisite decision in a summary manner itself points to an inability of the removing
party to carry its burden.” Id.
In this case, the Court addresses the issue under the “Rule 12(b)(6)-type analysis.”
Plaintiffs cannot state a cause of action against Cloud because of Allstate’s election to
accept liability on his behalf. Texas Insurance Code § 542A.006(a) states that an insurer
may “accept whatever liability an agent might have to the claimant for the agent’s acts or
omissions related to the claim by providing written notice to the claimant.” If the insurer
makes this election after the claimant has filed suit, “the court shall dismiss the action
against the agent with prejudice.” Tex. Ins. Code Ann. § 542A.006(c). Not only did
Allstate make an election to shoulder Cloud’s potential liability, the state court ordered
the dismissal of Cloud from the case entirely. After these events, no possibility of
recovery by Plaintiffs against Cloud existed. See Adv. Indicator & Manuf., Inc. v. Acadia
Ins. Co., 50 F.4th 469, 472 (5th Cir. 2022) (per curiam). As a result, Cloud is improperly
joined.
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The voluntary-involuntary rule does not prevent removal here. Under that rule,
“an action nonremovable when commenced may become removable thereafter only by
the voluntary act of the plaintiff.” Weems v. Louis Dreyfus Corp., 380 F.2d 545, 547 (5th Cir.
1967). Because Allstate’s Section 542A.006 election was an action of a defendant, it at first
appears that it cannot make the case removable. However, the Fifth Circuit has held that
“the voluntary-involuntary rule is inapplicable if the agent is improperly joined at the
time of removal,” including when a defendant is improperly joined following a
Section 542A.006 election. Adv. Indicator & Manuf., Inc., 50 F.4th at 474. Thus, even
assuming Cloud was properly joined when Plaintiffs first commenced the suit before
Allstate’s election, the election rendered him improperly joined at the time of removal,
which, again, is the relevant time period. Id. at 474–75; Manguno, 276 F.3d at 723. The
Court therefore disregards Cloud’s citizenship and finds that complete diversity existed
at the time of removal.
B. TIMELINESS
The Court next determines whether the removal was timely. In their Motion to
Remand, Plaintiffs argue that Allstate’s removal was untimely because it was filed more
than 30 days after Allstate was served with Plaintiffs’ original petition. (Dkt. No. 5).
According to Plaintiffs, because Allstate was served with the original petition on
November 10, 2025, the deadline to remove the case was December 10, 2025, making their
January 9, 2026, removal late. (Id.).
Allstate has not responded to the Motion to Remand. However, in its Notice of
Removal, Allstate states that the case was not removable based on the original petition
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because it joined Dustin Cloud, a non-diverse defendant. (Dkt. No. 1 at 3–4). It was only
after Allstate’s election, (Dkt. No. 1-5), and the state court’s dismissal of Cloud as a
defendant, (Dkt. No. 1-6), that the case became removable, (Dkt. No. 1 at 3–4). Because
Allstate filed its Notice of Removal within 30 days of both of these events, it asserts that
removal was timely. (Id. at 6).
Allstate is correct that the case was not removable when it was first served with
Plaintiff’s original petition because of Cloud’s proper joinder as a defendant. It was only
after Allstate filed its written election under Section 542A.006 on December 11, 2025, that
Cloud’s joinder became improper and made removal possible. (Dkt. No. 1-5); see also
Adv. Indicator & Manuf., Inc., 50 F.4th at 474–75. Therefore, the deadline to remove the
case was January 12, 2026.1 Allstate filed its Notice of Removal on January 9, 2026,
making the removal timely. (Dkt. No. 1). As a result, Plaintiffs’ Motion to Remand must
be denied.
IV. CONCLUSION
For the foregoing reasons, Plaintiffs’ Motion to Remand, (Dkt. No. 5), is DENIED.
Dustin Cloud is DISMISSED for improper joinder.
It is SO ORDERED.
1 The 30-day deadline fell on Saturday, January 10, 2026, so the deadline is extended to
the following Monday. See Fed. R. Civ. P. 6(a)(1)(C).
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Signed on June 23, 2026.
___________________________________
DREW B. TIPTON
UNITED STATES DISTRICT JUDGE
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