Berry, et al v. Hardwick, et al

* Pursuant to 5th Cir. R. 47.5, the Court has determined that this opinion should
not be published and is not precedent except under the limited circumstances set forth
in 5th Cir. R. 47.5.4.
United States Court of Appeals
Fifth Circuit
F I L E D
October 18, 2005
Charles R. Fulbruge III
Clerk
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
__________________________
No. 05-60038
Summary Calendar
__________________________
TRACY BERRY AND CRAIG BERRY,
Plaintiffs-Appellants,
versus
ANGELA HARDWICK, ET AL.,
Defendants,
DAVID PREHN AND DAN PAYNE
Defendants-Appellees.
___________________________________________________
Appeal from the United States District Court
For the Northern District of Mississippi
(No. 1:04cv245-D-D)
___________________________________________________
Before BARKSDALE, STEWART, and CLEMENT, Circuit Judges.
PER CURIAM:*
Tracy and Craig Berry appeal the district court’s dismissal of their claim against
David Prehn and Dan Payne. Finding no error, we affirm.

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1 After eleven months, in October 2003, the claim in the amount of $14,672.20
was paid to the bank that financed the car.
2
I. FACTS AND PROCEEDINGS
Tracy and Craig Berry are citizens of Mississippi. They owned a 2001 Chevrolet
Malibu which was insured by Safeco Insurance Company of America (“Safeco”). Safeco
is a corporation organized and existing under the laws of Washington and has its principal
place of business in Washington. On November 27, 2001, the Berrys’ car was stolen from
the parking lot of a retail store and destroyed by fire. They reported the loss to their local
Safeco insurance agent, Dan Payne, a citizen of Mississippi. Payne allegedly advised the
Berrys to stop making payments against their car loan in order to expedite the claim.
Payne also allegedly told the Berrys not to file a claim for personal effects in the car as
Safeco would likely cancel their policy if they filed an additional claim. The Berrys
followed Payne’s alleged advice. Before receiving any proceeds of their Safeco policy, they
purchased a new car for which they purchased a more expensive policy from another
insurer.
Safeco investigator David Prehn, also a Mississippi citizen, investigated the claim,
a process which lasted almost a year.1 The Berrys allege that over this time period, efforts
to contact Prehn, Payne, and Safeco adjuster Angela Hardwick were unsuccessful. The
Berrys also allege that Safeco agents, while investigating the claim, intimated to
acquaintances of the Berrys that the Berrys may have been involved with the theft.
On June 21, 2004, the Berrys filed suit in the Circuit Court of Lee County,

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2 While Payne and Prehn moved in the alternative for summary judgment, the
district court treated the motion as a motion to dismiss and did not consider matters
outside the pleadings.
3
Mississippi, seeking compensatory and punitive damages arising from Safeco and its
agents’ handling of the claim. The defendants timely removed the action to federal court
on August 12, 2004, arguing that since Payne and Prehn, the in-state defendants, had been
fraudulently joined, there was complete diversity. The Berrys neither contested the
petition for removal nor filed a motion to remand. Payne and Prehn then moved for
dismissal or, in the alternative, for summary judgment.
On November 22, 2004, the district court granted the motion to dismiss Payne and
Prehn from the suit pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.2
Citing Travis v. Irby, 326 F.3d 644, 647–49 (5th Cir. 2003), the court explained that in order
to prove that a plaintiff seeking to defeat diversity jurisdiction has fraudulently joined a
non-diverse party, a removing party must prove outright fraud in the pleading of
jurisdictional facts or that there is no reasonable possibility that the plaintiff will be able
to establish a cause of action against the in-state defendant in state court. Because the
defendants did not allege fraud in the pleading, the court analyzed whether there was a
reasonable possibility that the Berrys could sustain a cause of action against Payne and
Prehn in state court.
The Berrys’ complaint claimed that Payne and Prehn were liable for the torts of bad
faith through delay and refusing to explain reasons for delay, negligent infliction of
emotional distress, negligent delay in processing of a claim, and negligent investigation

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3 The Berrys also included a defamation claim, but later conceded that it was
barred by statute of limitations.
4
of a claim.3 The district court relied on the Mississippi Supreme Court’s recent opinion in
Gallagher Bassett Servs. v. Jeffcoat, 887 So. 2d 777 (Miss. 2004), holding that “an insurance
adjuster, agent or other similar entity may not be held independently liable for simple
negligence in connection [with] its work on a claim.” Id. at 783. Jeffcoat further held that
“[s]uch an entity may be held independently liable for its work on a claim if and only if
its acts amount to any one of the following familiar types of conduct: gross negligence,
malice, or reckless disregard for the rights of the insured.” Id.
The district court concluded that because Payne and Prehn were acting within the
scope of their authority as agents of Safeco and the Berrys had failed to allege facts
supporting gross negligence, Payne and Prehn were fraudulently joined. The court
accordingly granted the motion dismissing the charges against Payne and Prehn. The
court also denied the Berry’s motion for a continuance to permit additional discovery
pursuant to Rule 56(f) of the Federal Rules of Civil Procedure. The court reasoned that the
discovery sought would show only ordinary negligence, not the gross negligence required
to sustain a claim against Payne and Prehn.
On December 20, 2004, the court granted the defendants’ motion to amend its order
pursuant to Rule 54(b) of the Federal Rules of Civil Procedure to enter final judgment
dismissing, with prejudice, the claims against Prehn and Payne. The Berrys timely
appealed.

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II. STANDARD OF REVIEW
The district court’s dismissal of the claims against Payne and Prehn pursuant to Fed.
R. Civ. P. 12(b)(6) was based on its determination that the Berrys lack a reasonable
probability of recovery under state law. We review this question of law de novo. Gray ex
rel. Rudd v. Beverly Enters.-Miss., Inc., 390 F.3d 400, 405 (5th Cir. 2004).
III. DISCUSSION
The Berrys submit that the record contains evidence, Tracy Berry’s affidavit, from
which a jury could find that the actions of Payne and Prehn constituted gross negligence.
They argue that the district court erred in not considering the affidavit, citing Gray’s
holding that in deciding, for purposes of a motion to remand, whether a plaintiff can
establish a cause of action against the non-diverse defendant in state court, “the court may
‘pierce the pleadings’ and consider summary judgment-type evidence to determine
whether the plaintiff truly has a reasonable possibility of recovery in state court.” 390 F.3d
at 405 (citing Travis v. Irby, 326 F.3d 644, 648–49 (5th Cir. 2003)).
This argument is unavailing for two reasons. First, before us is an appeal not from
a decision on a motion to remand that was opposed based on fraudulent joinder, but from
a decision on a motion to dismiss pursuant to FED. R. CIV. P. 12(b)(6). Gray’s holding
regarding the proper scope of inquiry for a motion to remand is therefore inapposite. “For
Rule 12(b)(6) motions, a district court may only consider the allegations in the complaint
and any attachments.” Travis, 326 F.3d at 648 (citing Great Plains Trust Co. v. Morgan
Stanley Dean Witter & Co., 313 F.3d 305, 313 (5th Cir. 2002)).

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Second, the portion of Gray cited by the Berrys is taken out of context. In Gray, the
plaintiffs moved to remand and the defendants opposed on grounds of fraudulent joinder.
This Court held that in arguing that joinder was not fraudulent, “the plaintiffs may not
rely solely on the allegations in the complaint [to show that joinder was not fraudulent];
the court may ‘pierce the pleadings’ and consider summary judgment-type evidence to
determine whether the plaintiff truly has a reasonable possibility of recovery in state
court.” 390 F.3d at 400. Gray does not stand for the proposition urged by the Berrys, that
a district court should consider summary judgment-type evidence in deciding whether the
plaintiffs have stated a state law claim against the in-state defendants.
In Smallwood v. Illinois Central Railroad, which was filed two months before Gray,
this Court articulated the method for predicting whether a plaintiff has a reasonable basis
of recovery under state law for purposes of fraudulent joinder analysis.
A court may resolve the issue in one of two ways. The court may conduct
a Rule 12(b)(6)-type analysis, looking initially at the allegations of the
complaint to determine whether the complaint states a claim under state law
against the in-state defendant. Ordinarily, if a plaintiff can survive a Rule
12(b)(6) challenge, there is no improper joinder. That said, there are cases,
hopefully few in number, in which a plaintiff has stated a claim, but has
misstated or omitted discrete facts that would determine the propriety of
joinder. In such cases, the district court may, in its discretion, pierce the
pleadings and conduct a summary inquiry.
Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc). Even if the
district court had decided the motion to dismiss the in-state defendants as if it were
considering a fraudulent joinder opposition to a motion to remand, it would have been
proper, based on Smallwood, to first consider only the allegations in the complaint. Only

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4 The Berrys argue that the question of whether the acts alleged amounted to
gross negligence or simple negligence is a fact question for the jury and that dismissal
pursuant to Rule 12(b)(6) is therefore inappropriate. This argument is without merit.
“The central issue [in reviewing a motion to dismiss] is whether, in the light most
favorable to the plaintiff, the complaint states a valid claim for relief.” St. Paul Mercury
Ins. Co. v. Williamson, 224 F.3d 425, 440 n.8 (5th Cir. 2000). Because the Berry’s
complaint fails to state a valid claim of gross negligence, dismissal is appropriate.
7
if the plaintiff had survived the Rule 12(b)(6)-type challenge should the court have
considered evidence outside the pleadings.
For these reasons, we hold that the district court did not err in looking only to the
allegations of the complaint in deciding whether the Berrys had stated a claim under state
law against Payne and Prehn.
We agree with the district court’s conclusion that, based on the complaint, there is
no reasonable basis for predicting that Mississippi state law would allow the Berrys to
recover against Payne and Prehn. It is not disputed that under Jeffcoat, insurance agents
such as Payne and Prehn may not be held liable under Mississippi law for improper acts
in adjusting a claim unless the plaintiff demonstrates that those acts amount to “gross
negligence, malice, or reckless disregard for the rights of the insured.” 887 So. 2d at 783.
This Court has reviewed the complaint, accepting all well-pleaded facts as true and
viewing the facts in the light most favorable to the Berrys. Baker v. Putnal, 75 F.3d 190, 196
(5th Cir. 1996) (citing McCartney v. First City Bank, 970 F.2d 45, 47 (5th Cir. 1992)). We
agree with the district court that on the face of their complaint, the Berrys do not allege a
gross negligence claim against Payne or Prehn.4
In addition to the fact that the complaint on its face fails to allege gross negligence,

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the Mississippi Supreme Court has held that similar factual claims did not constitute gross
negligence. The Jeffcoat court concluded that the insurance adjuster’s ten-month delay in
payment of benefits was “at the most, negligent.” 887 So. 2d at 783.
Because the Berrys lack a reasonable probability of recovering against Payne and
Prehn under Mississippi law, the district court did not err in granting the motion to
dismiss the claims against Payne and Prehn.
IV. CONCLUSION
The decision of the district court is AFFIRMED.

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