Webb v. B.C. Rogers Poultry, Inc.

Citation174 F.3d 697
Decision Date21 May 1999
Docket NumberNo. 98-50527,98-50527
PartiesJack M. WEBB, Special Deputy Receiver for Employers National Insurance Company in Receivership, Plaintiff-Appellee, v. B.C. ROGERS POULTRY, INC., and B.C. Rogers Processors, Inc., Defendants-Appellants.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Christopher Holton Fuller, Roselyn Paige Arnette, Scott, Douglass & McConnico, Austin, TX, for Plaintiff-Appellee.

Robert D. Allen, Douglas R. Hafer, Baker & McKenzie, Dallas, TX, for Defendants-Appellants.

Appeal from the United States District Court for the Western District of Texas.

Before REAVLEY, POLITZ and SMITH, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

B.C. Rogers Poultry, Inc., and B.C. Rogers Processors, Inc. (collectively, "B.C.Rogers"), appeal a remand to state court ordered pursuant to the Burford abstention doctrine. Concluding that the court acted without the doctrine's strictures as defined by the Supreme Court, we reverse.

I.

The State of Texas brought Employers National Insurance Company ("ENIC"), an insurance company regulated under Texas law, into state court, where it was declared insolvent and placed in receivership. Pursuant to the Texas Insurance Code, the state obtained a permanent injunction and order, appointing Jack Webb as Special Deputy Receiver ("SDR") for ENIC and enjoining any person from interfering with the state receivership court proceedings or the lawful acts of the SDR and from taking any action involving the SDR outside of the state receivership court.

Webb, carrying out his duties as SDR, brought suit in state court against B.C. Rogers, as ENIC policyholders, to collect assets--unpaid workers' compensation premiums--allegedly belonging to ENIC. Webb asserts three alternative causes of action: (1) breach of contract, (2) quantum meruit, and (3) suit on sworn account. He seeks $674,335 in damages, plus interest and attorney's fees.

B.C. Rogers removed to federal court pursuant to 28 U.S.C. § 1441, alleging original jurisdiction based on diversity of citizenship. See 28 U.S.C. § 1332. Webb sought remand, advancing three grounds: (1) B.C. Rogers had failed to comply with the removal statute, (2) the permanent injunction enjoined B.C. Rogers from litigating the dispute in a forum other than the receivership court, and (3) under the Burford abstention doctrine, the district court should refrain from exercising jurisdiction. 1 The district court summarily rejected the first two bases but elected Burford abstention and remanded, holding that

[a]bstention is appropriate in this case, for if this Court were to exercise federal jurisdiction, it could well interfere with the State of Texas' efforts to effect a coherent policy on a matter of public concern, that is, the collection of assets of an insolvent insurer through a state district court receivership proceeding wherein the state district court retains continuing jurisdiction over the liquidation proceedings.

II.

We always must be certain that our limited jurisdiction encompasses the appeal before us. See Castaneda v. Falcon, 166 F.3d 799, 801 (5th Cir.1999); Jones v. Collins, 132 F.3d 1048, 1051 (5th Cir.1998). We sua sponte requested briefing on the issue and now clarify our jurisdiction.

The order abstaining under Burford and remanding is a final order disposing of all issues. We have jurisdiction, therefore, pursuant to 28 U.S.C. § 1291. See Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 715, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996); Munich Am. Reinsurance Co. v. Crawford, 141 F.3d 585, 589 (5th Cir.1998), cert. denied, --- U.S. ----, 119 S.Ct. 539, 142 L.Ed.2d 448 (1998).

In 28 U.S.C. § 1334(d), Congress has denied us jurisdiction over an appeal from a decision to abstain under § 1334(c) (allowing abstention, in the interest of comity or respect for state law, from state law causes of action arising under, or related to, title 11). Here, the receivership proceedings in state court arose under the Texas Insurance Code, not the Bankruptcy Code. See Clark v. Fitzgibbons, 105 F.3d 1049, 1051 (5th Cir.1997) ("Insurance companies are ineligible for the protections afforded by the federal Bankruptcy Code. 11 U.S.C. § 109."). The district court, therefore, did not exercise jurisdiction over the removed action under 28 U.S.C. § 1452(a) (providing for removal of any action over which the court has jurisdiction under 28 U.S.C. § 1334) and 28 U.S.C. § 1334(b) (providing for original jurisdiction in the district courts "of all civil proceedings arising under title 11, or arising in or related to cases under title 11."). Rather, it based its jurisdiction on diversity of citizenship, found in 28 U.S.C. § 1332. The court's decision to abstain, then, did not fall within 28 U.S.C. § 1334(c), so § 1334(d) is inapposite.

Similarly, in 28 U.S.C. § 1447(d), Congress denied us jurisdiction over remands pursuant to 28 U.S.C. § 1447(c), which requires a district court to remand if it lacks subject matter jurisdiction or if the removal was defective; conversely, § 1447(d) does not preclude review of remands on other grounds. 2 Neither party argues that the district court lacked subject matter jurisdiction. Rather, they dispute whether the court abused its discretion in abstaining from exercising its jurisdiction. Section 1447(d), therefore, is also inapposite, and we have jurisdiction to consider the appeal.

III.

The Burford doctrine allows a federal court to abstain from exercising its jurisdiction in deference to complex state administrative procedures. The Supreme Court has described the Burford doctrine as follows:

Where timely and adequate state-court review is available, a federal court sitting in equity must decline to interfere with the proceedings or orders of state administrative agencies: (1) when there are "difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar"; or (2) where the "exercise of federal review of the question in a case and in similar cases would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern."

New Orleans Pub. Serv., Inc. v. Council of New Orleans ("NOPSI" ), 491 U.S. 350, 361, 109 S.Ct. 2506, 105 L.Ed.2d 298 (1989) (quoting Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 814, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976)). 3 Essentially, Burford instructs a district court to weigh the federal interests in retaining jurisdiction over the dispute against the state's interests in independent action to uniformly address a matter of state concern, and to abstain when the balance tips in favor of the latter. See Quackenbush, 517 U.S. at 728, 116 S.Ct. 1712; NOPSI, 491 U.S. at 363, 109 S.Ct. 2506; Burford, 319 U.S. at 334, 63 S.Ct. 1098. But this "balance only rarely favors abstention." Quackenbush, 517 U.S. at 728, 116 S.Ct. 1712. Typically, "federal courts have a virtually unflagging obligation ... to exercise the jurisdiction given them." Colorado River, 424 U.S. at 821, 96 S.Ct. 1236 (quotation omitted).

In Quackenbush, the Court determined that an action seeking damages never warrants abstention. The Court examined the foundation and history of abstention doctrines, and Burford abstention in particular, finding that the power to abstain originated in "the discretion federal courts have traditionally exercised in deciding whether to provide equitable or discretionary relief." Quackenbush, 517 U.S. at 730, 116 S.Ct. 1712. The Court disagreed with the Ninth Circuit's limitation of abstention to equitable cases, instead extending the doctrine "to all cases in which a federal court is asked to provide some form of discretionary relief." Id. 4 A damages action, however, allows the court no discretion and may not be remanded. Id. at 731, 116 S.Ct. 1712. 5

A.

We review an abstention for abuse of discretion. See Clark, 105 F.3d at 1051; see also Burford, 319 U.S. at 318, 63 S.Ct. 1098 (describing court's choice of whether to abstain as a matter of discretion). The exercise of discretion must "fit[ ] within the narrow and specific limits prescribed by the particular abstention doctrine involved." Clark, 105 F.3d at 1051 (quotation omitted). A court necessarily abuses its discretion when it abstains outside of the doctrine's strictures.

B.

B.C. Rogers presents a simple argument for reversal: Under Quackenbush, a court may not remand pursuant to Burford abstention if the plaintiff seeks damages. Webb seeks damages, so a Burford abstention remand is not permitted.

Webb counters with three ultimately unsuccessful arguments. First, he cites precedent no longer applicable after Quackenbush and argues to support an exercise of discretion where no discretion exists. He next incorrectly avers that the Quackenbush rule on which B.C. Rogers relies is not ironclad. He finally contends that, because one of his causes of action sounds in the equitable doctrine of quantum meruit, Burford abstention is appropriate within Quackenbush 's limitations. 6 We conclude that, because Quackenbush denies the legal authority to remand, the district court abused its discretion.

1.

Webb vigorously argues that the usual Burford considerations support remand. The McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015, assigns primary responsibility for regulating the insurance industry to the states. Texas has enacted an extensive regulatory scheme for dealing with insolvent insurers and has an interest in applying its law to marshal efficiently all the assets of such insurers in a uniform manner. Webb contends that the federal government, on the other hand, has a "complete absence" of interest in this dispute. The causes of action sound solely in state law; no federal statutes or interests are involved.

Webb buttresses this argument by citing several of our decisions in which we have affirmed abstention and have mentioned the strong interests states have in...

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