A and C Construction and Remodeling LLC v. Pacific Life Insurance Company et al

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
A&C CONSTRUCTION AND 	§
REMODELING, LLC, 	§
§
Plaintiff, 	§
§
V. 	§ 	No. 3:25-cv-3146-E-BN
§
PACIFIC LIFE INSURANCE 	§
COMPANY and SERVIS ONE, INC. 	§
d/b/a BSI FINANCIAL SERVICES, 	§
§
Defendants. 	§
FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE
UNITED STATES MAGISTRATE JUDGE
Plaintiff A&C Construction and Remodeling, LLC (“A&C”) filed a verified
petition for breach of contract and application for a temporary restraining order
against Defendants Pacific Life Insurance Company and Servis One, Inc. d/b/a BSI
Financial Services in a Dallas County, Texas state court on November 3, 2025; A&C
obtained a temporary restraining order the next day, with the state court setting a
temporary 	injunction 	hearing 	for 	November 	18, 	2025; 	and, 	on 	November 	18,
Defendants 	removed, 	asserting 	that 	the 	Court 	has 	diversity 	subject-matter
jurisdiction. See Dkt. No. 1.
United States District Judge Ada Brown referred the removed lawsuit to the
undersigned United States magistrate judge for pretrial management under 28
U.S.C. § 636(b) and a standing order of reference.
Considering Defendants’ notice of removal, the undersigned recommends that
the Court sua sponte remand this lawsuit for lack of subject matter jurisdiction but
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retain jurisdiction to determine whether sanctions should be imposed based on this
removal.
Legal Standards
A defendant may remove an action filed in state court to federal court if the
action is one that could have originally been filed in federal court. See 28 U.S.C. §
1441(a).
But the federal courts’ jurisdiction is limited, so they generally may only hear
a case of this nature if it involves a question of federal law or where diversity of
citizenship exists between the parties. See 28 U.S.C. §§ 1331 & 1332.
Applicable here, Section 1332 requires that each plaintiff’s citizenship must be
diverse from each defendant’s citizenship, and the amount in controversy must
exceed $75,000. See 28 U.S.C. § 1332(a), (b). So the Court may “exercise diversity
jurisdiction only when there is ‘complete diversity’ between the litigants.” Gilmore-
Webster v. Bayou City Homebuyers, Inc., 845 F. App’x 329, 332 (5th Cir. 2021) (per
curiam) 	(quoting 	Carden 	v. 	Arkoma 	Assocs., 	494 	U.S. 	185, 	187 	(1990) 	(citing
Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806))). That means that “no party on
one side [is] a citizen of the same State as any party on the other side.” Mas v. Perry,
489 F.2d 1396, 1399 (5th Cir. 1974).
And, because Defendants chose to remove this lawsuit to federal court, they
undertook the burden to establish federal jurisdiction. See St. Paul Reinsurance Co.
v. Greenberg, 134 F.3d 1250, 1253 (5th Cir. 1998) (“The burden of establishing subject
matter jurisdiction in federal court rests on the party seeking to invoke it.” (cleaned
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up)).
And, “[i]f at any time before final judgment it appears that the district court
lacks subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c);
accord Int’l Primate Prot. League v. Adm’rs of Tulane Educ. Fund, 500 U.S. 72, 89
(1991).
Analysis
A&C filed this lawsuit against two defendants: Pacific Life and Servis One. See
Dkt. No. 1 at 10-58. And the notice of removal provides that both Pacific Life and
Servis One are removing A&C’s lawsuit to federal court. See Dkt. No. 1 at 1.
But Defendants then only allege that there is complete diversity of citizenship
based on the citizenships of A&C and Pacific Life. See id. at 2.
Starting with A&C, Defendants assert that it is a Texas limited liability
company with one member, alleged to be “an individual who is a resident of and
domiciled in the State of Texas.” Id. That allegation is deficient.
“For limited liability companies, § 1332 citizenship is determined by the
citizenship of all of its members. To establish diversity jurisdiction in a suit by or
against an LLC, a party must specifically allege the citizenship of every member of
every LLC.” SXSW v. Fed. Ins. Co., 83 F.4th 405, 407-08 (5th Cir. 2023) (cleaned up)).
And where the sole member is an individual, an allegation of that individual’s
residency without more does not plausibly allege the citizenship of that individual or
the LLC.
Instead, “[f]or natural persons, § 1332 citizenship is determined by domicile,
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which requires residency plus an intent to make the place of residency one’s
permanent home.” SXSW, 83 F.4th at 407.
And, while the party invoking subject-matter jurisdiction is not required to
prove an intent to make the place of residency a party’s permanent home,
[i]n determining a litigant’s domicile, the court must address a variety
of factors. No single factor is determinative. The court should look to all
evidence shedding light on the litigant’s intention to establish domicile.
The factors may include the places where the litigant exercises civil and
political rights, pays taxes, owns real and personal property, has driver’s
and other licenses, maintains bank accounts, belongs to clubs and
churches, has places of business or employment, and maintains a home
for his family.
Coury v. Prot, 85 F.3d 244, 251 (5th Cir. 1996) (citations omitted).
So, where the party invoking subject-matter jurisdiction under Section 1332
(1) merely concludes that a party is domiciled where he or she is alleged to currently
reside and (2) fails to meaningfully address any Coury factor as to any party, a court
cannot find that a party’s domicile has been plausibly alleged and that complete
diversity supports subject-matter jurisdiction under Section 1332. See Union Pac.
R.R. Co. v. Nuefuel TX LLC, No. 3:23-cv-1206-L, 2024 WL 2970013, at *1 (N.D. Tex.
June 11, 2024) (“An allegation of residency alone ‘does not satisfy the requirement of
an allegation of citizenship.’” (quoting Strain v. Harrelson Rubber Co., 742 F.2d 888,
889 (5th Cir. 1984) (per curiam))); accord J.A. Maters Invs. v. Beltramini, 117 F.4th
321, 322 (5th Cir. 2024) (per curiam).
What’s more troubling, the notice of removal ignores the citizenship of Servis
One, which A&C’s verified petition alleges “is a Texas corporation.” Dkt. No. 1 at 10.
And, while the notice of removal is purportedly filed by both Defendants, even
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if Pacific Life was removing this lawsuit prior to service on Servis One, the Court
cannot “disregard the citizenship of unserved defendants when determining whether
complete diversity exists.” Salvador v. Circle K Stores, Inc., No. 3:25-cv-1531-S-BN,
2025 WL 2025003, at *3 (N.D. Tex. June 23, 2025) (cleaned up), rec. accepted, 2025
WL 2023458 (N.D. Tex. July 17, 2025); accord Beechum v. Anointed Touch, Inc., No.
6:21-CV-00370-JDK, 2022 WL 538968, at *1 (E.D. Tex. Jan. 18, 2022) (“Although a
defendant may remove a case before all the defendants are served, the Court may not
disregard 	the 	citizenship 	of 	unserved 	defendants 	in 	determining 	diversity
jurisdiction. And because the unserved defendant here is a citizen of Texas, the Court
lacks subject matter jurisdiction under § 1332.”).
And Defendants make no attempt to argue – much less carry the burden to
demonstrate – as an exception to the complete-diversity requirement that A&C
improperly joined Servis One to prevent removal to federal court.
And, even if they had, a defendant alleging that a non-diverse defendant is
improperly joined has the heavy burden of “demonstrating either ‘(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.’” Crockett v. R.J. Reynolds
Tobacco Co., 436 F.3d 529, 532 (5th Cir. 2006) (quoting Travis v. Irby, 326 F.3d 644,
646-47 (5th Cir. 2003)).
And, only if the removing defendant makes one of those two showings may the
Court “disregard the citizenship of [the non-diverse] defendant, dismiss the non-
diverse defendant from the case, and exercise subject matter jurisdiction over the
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remaining diverse defendant.” Flagg v. Stryker Corp., 819 F.3d 132, 136 (5th Cir.
2016).
But, under the first method, it would be hard for Defendants to argue that A&C
fraudulently pleaded the jurisdictional facts as to Servis One where Defendants
ignore those facts in their notice of removal.
And “[a] defendant establishes the second method by ‘demonstrating that there
is no possibility of recovery by the plaintiff against an in-state defendant, which
stated differently means 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.’”
Priester v. Deutsche Bank Nat’l Tr. Co., 832 F. App’x 240, 244 (5th Cir. 2020) (per
curiam) (quoting Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004)
(en banc)).
The Court conducts the “improper joinder analysis on the basis of claims in the
state court complaint as it exists at the time of removal” and “will not entertain new
theories not raised in state court.” Palmquist v. Hain Celestial Grp., Inc., 103 F.4th
294, 301 (5th Cir. 2024) (cleaned up).
And the United States Court of Appeals for the Fifth Circuit has clarified that
the 	federal 	pleading 	standard, 	not 	a 	state 	pleading 	standard, 	applies 	when
determining whether a nondiverse defendant has been improperly joined. See Int’l
Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 200-01 (5th
Cir. 2016). The Federal Rule of Civil Procedure “12(b)(6)-type analysis ... is shorthand
for the federal pleading standard itself ... promulgated by the Supreme Court in the
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Bell v. Twombly and Ashcroft v. Iqbal opinions.” Id. at 203.
Under that standard, “[a] complaint must have contained enough facts to state
a claim to relief that is plausible on its face.” Id. at 200, 208 (cleaned up). And “a court
must accept as true all of the allegations contained in a complaint is inapplicable to
legal conclusions,” but “[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice,” and, “where the well-
pleaded facts do not permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged – but it has not shown – that the pleader is
entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009)
In making the improper-joinder determination, the Court will “evaluate all of
the factual allegations in the plaintiff’s state court pleadings in the light most
favorable to the plaintiff, resolving all contested issues of substantive fact in favor of
the plaintiff” and “any ambiguities of state law in the plaintiff’s favor,” and “then
examine relevant state law and resolve all uncertainties in favor of the nonremoving
party.” Davidson v. Georgia-Pac., L.L.C., 819 F.3d 758, 765 (5th Cir. 2016) (cleaned
up); Cavallini v. State Farm Mut. Auto. Ins. Co., 44 F.3d 256, 260 n.8, 264 (5th Cir.
1995) (cleaned up).
Under 	these 	standards, 	the 	undersigned 	has 	reviewed 	A&C’s 	factual
allegations as to Servis One in support of the breach of contract claim and cannot find
that – had Defendants raised improper joinder – Defendants would have successfully
shown that the Court should disregard Servis One’s citizenship.
And, so, Defendants, as the parties invoking the Court’s subject-matter
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jurisdiction through removal, have not shown – contrary to their conclusion otherwise
– that “[t]here is complete diversity as to the parties and this removal is authorized
under Federal Law pursuant to 28 U.S.C. § 1332.” Dkt. No. 1 at 2.
The Court should therefore remand this lawsuit.
And, if the Court agrees with this recommendation, it retains jurisdiction to
impose sanctions based on what appears to be at least an improper – if not also a
frivolous – removal.
Take first 28 U.S.C. § 1447(c), which “permits a district court to award just
costs and any actual expenses, including attorney’s fees that are incurred as a result
of the removal.” Howard v. St. Germain, 599 F.3d 455, 457 (5th Cir. 2010) (cleaned
up); see Coward v. AC & S, Inc., 91 F. App’x 919, 921-22 (5th Cir. 2004) (per curiam)
(holding “that a district court is not divested of jurisdiction to award attorney fees
and costs pursuant to § 1447(c) after a remand has been certified” (citing Cooter v.
Hartmarx Corp., 496 U.S. 384, 396 (1990); citations omitted)); see also, e.g., Schwarz
v. Bowles, No. H-07-CV-0410, 2007 WL 9735986, at *1 (S.D. Tex. Apr. 11, 2007)
(“Because Defendants’ removal was not only improper but patently frivolous, this
Court, in its discretion, awards Plaintiffs attorney’s fees in the amount of $6,300….
Defendants and their counsel … shall be jointly and severally liable for these fees.”).
The 	undersigned 	also 	observes 	that, 	after 	remand, 	the 	Court 	retains
jurisdiction to impose sanctions under Federal Rule of Civil Procedure 11. See, e.g.,
Park Nat’l Bank of Hous. v. Kaminetzky, 976 F. Supp. 571, 573 n.2 (S.D. Tex. 1996)
(“Although this Court does not have jurisdiction over the merits of the remanded
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action, the Court retained jurisdiction to impose sanctions, costs, and fees.” (citing
FED . R. CIV. P. 11(c)(2)(B); citations omitted); see also BP P.L.C. v. Mayor & City
Council of Baltimore, 593 U.S. 230, 141 S. Ct. 1532, 1542-43 (2021) (“[T]hanks to §
1447(c) a district court may order a defendant to pay the plaintiff’s costs and expenses
(including 	attorney’s 	fees) 	if 	it 	frivolously 	removes 	a 	case 	from 	state 	court.
Additionally, the Federal Rules of Civil Procedure allow courts to sanction frivolous
arguments made in virtually any context. Rules 11(b)-(c).”).
And, so, while this case should be immediately remanded to state court, the
Court retains jurisdiction – and this case should remain referred to the undersigned
to make findings and conclusions – to determine whether sanctions should be
imposed based on this removal.
Recommendation
On its own motion, the Court should remand this action to the state court from
which it was removed and retain jurisdiction to determine whether sanctions should
be imposed based on this removal.
A copy of these findings, conclusions, and recommendation shall be served on
all parties in the manner provided by law. Any party who objects to any part of these
findings, conclusions, and recommendation must file specific written objections
within 14 days after being served with a copy. See 28 U.S.C. § 636(b)(1); FED . R. CIV.
P. 72(b). In order to be specific, an objection must identify the specific finding or
recommendation to which objection is made, state the basis for the objection, and
specify the place in the magistrate judge’s findings, conclusions, and recommendation
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where the disputed determination is found. An objection that merely incorporates by
reference or refers to the briefing before the magistrate judge is not specific. Failure
to file specific written objections will bar the aggrieved party from appealing the
factual findings and legal conclusions of the magistrate judge that are accepted or
adopted by the district court, except upon grounds of plain error. See Douglass v.
United Servs. Auto. Ass’n, 79 F.3d 1415, 1417 (5th Cir. 1996).
DATED: November 19, 2025
_________________________________________
DAVID L. HORAN
UNITED STATES MAGISTRATE JUDGE
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