524 F.3d 700 (5th Cir. 2008), 08-30145, In re Katrina Canal Litigation Breaches

Docket Nº:08-30145
Citation:524 F.3d 700
Party Name:In Re: KATRINA CANAL LITIGATION BREACHES. State of Louisiana; etc., et al., Plaintiffs-Appellants, v. AAA Insurance; et al., Defendants-Appellees.
Case Date:April 11, 2008
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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524 F.3d 700 (5th Cir. 2008)

In Re: KATRINA CANAL LITIGATION BREACHES.

State of Louisiana; etc., et al., Plaintiffs-Appellants,

v.

AAA Insurance; et al., Defendants-Appellees.

No. 08-30145

United States Court of Appeals, Fifth Circuit.

April 11, 2008

Page 701

Calvin Clifford Fayard, Jr., Denham Springs, LA, Isabel B. Wingerter, Baton Rouge, LA, for Plaintiffs-Appellants.

Samuel Issacharoff (argued), New York University School of Law, New York City, for State of LA.

Alan J. Yacoubian, Neal J. Favret, Rachael Patton Catalanotto, Johnson, Johnson, Barrios & Yacoubian, Judy Y. Barrasso, Susan M. Rogge, H. Minor Pipes, III, Stephen L. Miles, Barrasso, Usdin, Kupperman, Freeman & Sarver, Ralph S. Hubbard, III, Seth Andrew Schmeeckle, Lugenbuhl, Wheaton, Peck, Rankin & Hubbard, Richard Edward King, Matthew Joseph Lindsay, Galloway, Johnson, Tompkins, Burr & Smith, Wayne J. Lee, Stephen G. Bullock, Mary Lue Dumestre, Andrea Leigh Fannin, Stone, Pigman, Walther & Wittmann, Maura Z. Pelleteri, Amy S. Malish, Krebs, Farley & Pelleteri, Gordon Paul Serou, Jr., Law Offices of Gordon P. Serou, Jr., New Orleans, LA, Walter D. Willson, Wells, Marble & Hurst, Ridgeland, MS, Neil C. Abramson, Jacqueline M. Brettner, Harry A. Rosenberg, Phelps Dunbar, Patrick D. Derouen, Laurie L. Dearmond, Porteous, Hainkel & Johnson, Julia A. Dietz, Degan, Blanchard & Nash, Wendy Hickok Robinson, Gordon, Arata, McCollam, Duplantis & Eagan, Gerard E. Wimberly, Jr., Daniel T. Plunkett, McGlinchey Stafford, Ethan N. Penn, Musgrave, McLachlan & Penn, LLC, Edward J. Lilly, Crull, Castaing & Lilly, Deborah B. Rouen, Adams & Reese, John W. Waters, Jr., Bienvenu, Foster, Ryan & O'Bannon, LLC, Nancy Scott Degan, Paul Lee Peyronnin, Kent Andrew Lambert, Baker, Donelson, Bearman, Caldwell & Berkowitz, Thomas R. Blum, Simon, Peragine, Smith & Redfearn, New Orleans, LA, Richard Joseph Doren, Gibson, Dunn & Crutcher, Los Angeles, CA, Daniel Wintrop Nelson, Gibson, Dunn & Crutcher, Washington, DC, Richard L. Fenton (argued), Steven M. Levy, Alan S. Gilbert, Sonnenschein, Nath & Rosenthal, Chicago,

Page 702

IL, Katherine B. Armstrong, Sheila L. Birnbaum, Skadden, Arps, Slate, Meagher & Flom, New York City, Charles Louis Chassaignac, IV, Porteous, Hainkel & Johnson, John Powers Wolff, III, Christopher Keith Jones, Keogh, Cox & Wilson, Ltd., Anthony Joseph Rollo, Jr., McGlinchey Stafford, Marshall M. Redmon, Phelps Dunbar, Baton Rouge, LA, Walter D. Willson, Wells, Marble & Hurst, Ridgeland, MS, Thomas Hebert Huval, Huval, Veazey, Felder & Aertker, Covington, LA, John E. Unsworth, Jr., William Glenn Burns, Lauren E. Brisbi, Dominic J. Ovella, Sean Patrick Mount, Anne Elizabeth Medo, Daniel Michael Redmann, John Christopher Dippel, Hailey, McNamara, Hall, Larmann & Papale, Lawrence J. Duplass, C. Michael Pfister, Kelly C. Bogart, Jaime Michele Cambre, Duplass, Zwain, Bourgeois & Morton, Howard Bruce Kaplan, Bernard, Cassaissa, Elliott & Davis, John R. Walker, Allen & Gooch, Christopher Raymond Pennison, Jay M. Lonero, Larzelere, Picou, Wells, Simpson, Lonero, Metairie, LA, Anne D. LeJeune, McGlinchey, Stafford, Youngblood & Bendalin, Dallas, TX, Ben Louis Mayeaux, James L. Pate, Laborde & Neuner, Lafayette, LA, Levon G. Hovnatanian, Christopher Weldon Martin, Martin R. Sadler, Martin, Disiere, Jefferson & Wisdom, Houston, TX, Stephen E. Goldman (argued), Wystan Michael Ackerman, Robinson & Cole, Hartford, CT, for Defendants-Appellees.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before HIGGINBOTHAM, STEWART and ELROD, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge.

The Attorney General of Louisiana filed a class action, naming the State and numerous Louisiana citizens as Plaintiffs. The class action alleged that the Defendant insurance companies failed to pay covered insurance claims following Hurricanes Katrina and Rita and as a result breached the insurance contracts to which the State is a partial assignee. It requested damages and declaratory and injunctive relief, all under state law. At several Defendants' request, the case was removed to federal district court under the Class Action Fairness Act ("CAFA").1 Louisiana moved to remand to state court, arguing that CAFA did not apply and that Louisiana enjoyed sovereign immunity from involuntary removal to federal court in that it was suing in its state court to enforce state law. The district court denied remand. Louisiana petitioned this court for permission to appeal the interlocutory order under CAFA, which we granted.

I

Louisiana administers the Road Home Program, which advances money to Louisiana homeowners for reconstructing homes damaged or destroyed by Hurricanes Rita and Katrina. Any homeowner could receive up to $150,000 from Louisiana with a written assignment to the State of the owner's claim against his insurer in the amount of the payment received from the State. Only an owner's claim for damage to his dwelling was assigned. These assignments,

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functionally subrogation agreements, read in part:

Notwithstanding anything to the contrary contained herein, this is a limited subrogation and assignment, and is limited to an amount not to exceed the amount of the grant received by the undersigned [insured] under the Program, to which the State has not been reimbursed from other sources.

While an owner's assignment was partial in that the owner retained his claim against his insurer for amounts exceeding the sum advanced by the State, the assignment also granted Louisiana the right to sue his insurer in the owner's name for the owner's insured losses.2

Under a Louisiana statute, all insurance claims relating to damages from Hurricane Katrina had to be filed by September 1, 2007.3 On August 23, 2007, Louisiana filed this suit in Orleans Parish against more than 200 insurance companies. By an amended petition filed five days later, Louisiana added a class action against the same defendants under Louisiana Code of Civil Procedure, Article 591.4 It was filed on behalf of "The State of Louisiana, individually and on behalf of" the state agency administering the program. The asserted class consisted of:

[a]ll current and former citizens of the State of Louisiana who have applied for and received or will receive funds through the Road Home Program, and who have executed or will execute a subrogation or assignment agreement in favor of the State, and to whom insurance proceeds are due and/or owed for damages sustained to any such recipient's residence as result of any natural or man-made occurrence associated with Hurricanes Katrina and/or Rita under any policy of insurance, as plead herein, and for which the State has been or will be granted or be entitled to recover as repayment or reimbursement of funds provided to any such recipient through the Road Home Program.

The amended petition5 requested injunctive relief, declaratory judgment, damages, and "an order finding the Insurance Company Defendants liable to the State and the recipients (members of the class), as plead herein," "[f]or an injunctive order directing that the Insurance Company Defendants pay all coverage afforded under

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the terms of the recipients' policies, and where a total loss is found, an injunctive order directing the payment of the full value placed on the recipients' residence . . . with full reimbursement or repayment of any funds to which the State is entitled to as a result of any grant issued under The Road Home Program," "[f]or a declaration of the State's and the recipient's [sic] rights under Louisiana law, and . . . a declaration of the Insurance Company Defendants' responsibilities to the State and the recipients, as plead herein," "for an injunction prohibiting the Insurance Company Defendants from committing further breaches of their duties owed to the State and members of the class, and . . . forbidding . . . Defendants from failing to honor the coverage provided by the All Risk policies . . . issued to the recipients," and "[f]or any and all monetary, general and equitable relief or injunctive relief as this Court deems just and appropriate under Louisiana law, whether plead herein or otherwise."

The amended petition alleged breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty, asserting inter alia that "repeated demands were made by recipients to the . . . Defendants which refused to meet their obligations under the All Risk policies and refused to pay the full damages for recipients' homes being destroyed or damaged," that the insurance companies had "by failing . . . to pay the recipients all of the benefits due and owing them . . . violated the duties of good faith and fair dealing owed to recipients," and that "Defendants' failure to fully disclose and properly advise the recipients . . . breached the fiduciary duties owed to them as their policyholders." The amended petition also requested a declaratory judgment that "under Louisiana's Valued Policy Law, La. R.S. § 22:695, et seq., recipients are entitled to recover the full value placed on their residences by the Insurance Company Defendants without deduction or offset, especially without any deduction or offset for funds received under The Road Home Program."

On the filing of the amended petition with its class action allegation, several Defendants filed a notice of removal in which others joined and consented. Louisiana moved to remand to state court, arguing that CAFA did not apply and that exercise of federal jurisdiction over the suit offended its sovereign immunity. Following a hearing, the district court refused to remand. At the hearing, the insurance companies argued that removal was proper under CAFA and the Multiparty Multiform Trial...

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