One test of whether Diversity Jurisdiction exists as a matter of law in a Federal Case, is whether the co-Defendant alleging the absence of true diversity can demonstrate that there is no possibility of recovery by the Plaintiff against the Defendant which is a citizen of the same State as the Plaintiff. In Archway Rubicon, LLC v. Lawyers Title Insurance Corp., Download Archway Rubicon, LLC v. Lawyers Title Insurance Corp. (S.D. Tex. Case No.. H.10.1919, Memoranum and Order Filed July 26, 2010) PUBLIC ACCESS also published as 2010 WL 2991091 (S.D. Tex. July 26, 2010)(Westlaw subscription required to access Westlaw), one Austin Title Company sold a Title Insurance Policy to the Plaintiff, which sued both Austin Title and the Title Insurance Company which issued the Policy, Lawyers Title, for alleged violations of the Texas Insurance Code.
Lawyers Title removed the lawsuit to Federal Court and claimed that Austin Title's Texas citizenship should be ignored for purposes of Federal Diversity Jurisdiction even though the Plaintiff is a Texas corporation.
The Federal Court in that case disagreed with Lawyers Title's position and granted Plaintiff's Motion to Remand. The Federal Court reasoned: "It is well-established and undisputed that Texas law allows a plaintiff to maintain a cause of action for violations of the Texas Insurance Code against individuals other than the insurer, including the insurance agent." Archway Rubcon, 2010 WL 2991091 at *2.
Lawyers Title, the co-Defendant which argued in favor of disregarding the other Defendant's citizenship in that case, failed to meet its burden under both Federal and Texas law, in essence, that there was no possibility that Archway Rubicon could recover on its Claims against Austin Title for alleged violations of the Texas Insurance Code.
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