Reported / Citable
Background
Plaintiffs Edgar Berrios, individually and on behalf of a minor, Cesar Berrios, and Estela A. Quintos Lopez sued Keller North America, Inc. and others in Texas state court in 2022. Keller removed the case in July 2025 after learning that the plaintiffs had settled with Diversified Machining, Inc., the only defendant sharing Texas citizenship with the plaintiffs.
The plaintiffs later moved to enforce the parties’ settlement agreement. Senior District Judge A. Joe Fish referred that motion to Magistrate Judge David L. Horan, who first examined whether the federal court had subject-matter jurisdiction. Keller argued that the settlement with Diversified created complete diversity and that removal more than one year after the action began was permissible because the plaintiffs had acted in bad faith to prevent removal.
The Court’s Holding
The magistrate judge recommended finding that Keller failed to establish diversity jurisdiction at the time of removal. Under Fifth Circuit precedent applying Texas law, a settlement eliminates a nondiverse defendant for removal purposes only when the agreement is enforceable and effectively removes that defendant from the litigation. Texas Rule of Civil Procedure 11 requires such an agreement to be in writing, signed, and filed as part of the court record.
The materials supporting removal showed only correspondence announcing that Diversified had settled and a state-court notice stating that dismissal documents would be filed later. The record did not establish that any settlement with Diversified satisfied Rule 11’s requirements. Diversified therefore remained a party when Keller removed the case, complete diversity was absent, and the federal court lacked subject-matter jurisdiction. The magistrate judge recommended denying the motion to enforce for lack of jurisdiction and remanding the action to state court.
Key Takeaways
- A settlement announcement alone does not necessarily eliminate a nondiverse defendant for purposes of federal removal jurisdiction.
- In a Texas case, the removing party must show that the settlement effectively removing the nondiverse defendant satisfies the applicable Rule 11 requirements, including filing in the court record.
- Because complete diversity was absent when Keller removed the case, the magistrate judge recommended remand without reaching the merits of the settlement-enforcement motion.
Why It Matters
The recommendation underscores that diversity must exist when removal occurs and that the removing defendant bears the burden of establishing it. Parties cannot treat a nondiverse defendant as eliminated merely because a settlement has been announced when the documents needed to make that settlement enforceable and effective have not been filed.
The decision also illustrates why removal timing should be assessed against the settlement’s procedural status, not simply the date on which the parties report reaching an agreement.