HOUSTON — A federal judge on Dec. 2 ordered sanctions against an
insurer for improperly removing a bad faith action filed in Texas state
court (Hicks, Thomas & Lillienstern, LLP v. Valley Forge Insurance
Co., et al., No. H-02-3458, S.D. Texas, Houston Div.).
(Order granting remand, sanctions available. Document #51-030227-007R.)
U.S. Judge Kenneth M. Hoyt of the Southern District of Texas, Houston Division,
granted Hicks, Thomas & Lillienstern’s motion for remand and
ordered that Valley Forge Insurance Co. be sanctioned for improperly removing
a bad faith action filed against it in the Harris County District Court.
“This court is of the . . . opinion that defendant Valley Forge knew
that this lawsuit was not removable at the time it filed notice of removal
particularly in light of Texas law, and that such removal was, therefore,
untaken in bad faith,” Judge Hoyt wrote.
After the order, Hicks Thomas filed a motion with the federal court seeking
$37,000 in sanctions to cover plaintiff’s fees and expenses. Judge’s
Hoyt’s ruling on the plaintiff’s motion remains pending.
Hicks Thomas is a law firm in the Bank of America building in Houston.
On June 9, 2001, water from Hurricane Allison entered an unoccupied lower
portion of the Albert Thomas Convention Center through openings on an
outside wall. The water broke through an interior basement cinder block
wall, gaining access to the City of Houston downtown parking garage, from
which it flowed underground through a pedestrian tunnel and gained access
to the Bank of America building.
Once in the parking garage of the Bank of America building, the water eventually
damaged and destroyed the building’s electrical power distribution
equipment, thereby rendering the building uninhabitable and denying and
preventing access by Hicks Thomas to its offices on the building’s
The building remained closed until July 2, 2001, when Hicks Thomas reoccupied
its offices. During the period of closure, the firm was required to relocate
to temporary facilities, resulting in out-of-pocket expenses of $22,263.07
and loss of income and other damages totaling $373,074.47.
Valley Forge denied coverage on the basis that the damage was the result
of flooding, which is not covered under the terms of the policy. Hicks
Thomas filed suit in Harris County District Court, alleging breach of
contract and breach of common law duty of good faith and fair dealing.
On Aug. 5, 2002, Harris County District Judge Sharolyn Wood granted Hicks
Thomas partial summary judgment, finding that coverage exists under the
terms of the policy. Hicks Thomas was awarded $395,337.54 on its claim.
Subsequent to Judge Wood’s summary judgment order, Valley Forge filed
for removal of the case to federal court.
On Aug. 22, 2002, Hicks Thomas filed a second motion for partial summary
judgment, claiming that Valley Forge knowingly breached its contract with
the policyholder pursuant to Article 21.21 of the Texas Insurance Code
and that under Article 21.55, Section 6, of the Texas Insurance Code,
the law firm is entitled to exemplary damages amounting to 18 percent
of the amount of its claim.
(Plaintiff’s Second Summary Judgment Motion in Section A. Document
The hearing on the Aug. 22 summary judgment motion was postponed as a result
of the defendant’s removal of the case to federal court. As a result
of the federal court’s remand motion, the issue is once again before
A hearing on the matter had not been scheduled at press time.
John B. Thomas, Fred Knapp Jr. and Marcus L. Thompson of Hicks Thomas represent
the firm. Russell J. Bowman of Scott, Bowman & Stella in Dallas represents
Valley Forge Insurance Co.
(Other documents available: Plaintiff’s first amended petition. Document
#51-030227- 003C. Plaintiff’s first summary judgment motion. Document
#51-030227-004M. Plaintiff’s second summary judgment motion. Document
#51-030227-005M. Summary judgment order. Document #51-030227-006R. Joint
stipulation of fact. Document #51-030227- 008X.)