Hollinger v. Home State Mut. Ins. Co.

• Citation: 654 F.3d 564
• Decision Date: 06 September 2011
• Docket Number: No. 10–40820.,10–40820.
• Parties: Toni HOLLINGER; Bertha Johnson; Fernando Deluna; Norma Holder; Sandra Duplant; Patricia Randolph; Plaintiff Class; All Plaintiffs, Plaintiffs–Appellants,v.HOME STATE MUTUAL INSURANCE COMPANY; Old American County Mutual Fire Insurance Company; Consumers County Mutual Insurance Company; Southern County Mutual Insurance Company; Affirmative Insurance Company; American Century Casualty Company; American Hallmark Insurance Company of Texas; American International Insurance Company; Direct General Insurance Company; Dorinco Re–Insurance Company; First Acceptance Insurance Company; General Insurance Company of America; Imperial Fire and Casualty Insurance Company; Integon National Insurance Company; Mendota Insurance Company; Middle States Insurance Company; National General Insurance Company; Republic Underwriters Insurance Company; Titan Indemnity Company; Transatlantic Re–Insurance Company; United Automobile Insurance Company; Young America Insurance Company, Defendants–Appellees,Odyssey America Reinsurance Corporation, Defendant–Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

654 F.3d 564

Toni HOLLINGER; Bertha Johnson; Fernando Deluna; Norma Holder; Sandra Duplant; Patricia Randolph; Plaintiff Class; All Plaintiffs, Plaintiffs–Appellants,

v.HOME STATE MUTUAL INSURANCE COMPANY; Old American County Mutual Fire Insurance Company; Consumers County Mutual Insurance Company; Southern County Mutual Insurance Company; Affirmative Insurance Company; American Century Casualty Company; American Hallmark Insurance Company of Texas; American International Insurance Company; Direct General Insurance Company; Dorinco Re–Insurance Company; First Acceptance Insurance Company; General Insurance Company of America; Imperial Fire and Casualty Insurance Company; Integon National Insurance Company; Mendota Insurance Company; Middle States Insurance Company; National General Insurance Company; Republic Underwriters Insurance Company; Titan Indemnity Company; Transatlantic Re–Insurance Company; United Automobile Insurance Company; Young America Insurance Company, Defendants–Appellees,Odyssey America Reinsurance Corporation, Defendant–Appellee.

No. 10–40820.

United States Court of Appeals, Fifth Circuit.

Sept. 6, 2011.

Alan B. Rich, Law Office of Alan B. Rich, Dallas, TX, Scott M. Clearman, ClearmanPrebeg, L.L.P., Houston, TX, for Plaintiffs–Appellants.Larry Parks, Mitchell, Williams, Selig, Gates & Woodyard, Thomas Thorn Rogers, Marilyn M. Montano, Jackson Walker, L.L.P., Jennifer Barrett Poppe, Vinson & Elkins, L.L.P., Austin, TX, Nicholas H. Patton, Patton, Tidwell & Schroeder, L.L.P., Texarkana, TX, Frederick Bartlett Wulff, Sr., Shackelford, Melton & McKinley, L.L.P., George E. Bowles, Bryce Christian Quine, Locke, Lord, Bissell & Liddell, L.L.P., Roger D. Higgins, James Logan Sowder, Thompson, Coe, Cousins & Irons, L.L.P., David Joe Schubert, Blake S. Evans, Schubert & Evans, P.C., George W. Bramblett, Jr., Haynes & Boone, L.L.P., Russell Ray Yager, Vinson & Elkins, L.L.P., Meloney Cargil Perry, Meckler, Bulger, Tilson, Marick & Pearson, L.L.P., Randy D. Gordon, Robert M. Hoffman, Gardere Wynne Swell, L.L.P., Dallas, TX, Deron Ray Dacus, Ramey & Flock, P.C., Tyler, TX, Peter Alexander McLauchlan, Atty., Gardere Wynne Swell, L.L.P., Houston, TX, for Defendants–Appellees.Stacy R. Obenhaus, Gardere Wynne Swell, L.L.P., Dallas, TX, for Defendant–Appellee Odyssey America Reinsurance Corporation.Appeal from the United States District Court for the Eastern District of Texas.Before REAVLEY, GARZA and GRAVES, Circuit Judges.PER CURIAM:

Plaintiffs, appellants and cross appellees Toni Hollinger, Bertha Johnson, Fernando Deluna, Norma Holder, Sandra Duplant, and Patricia Randolph, as class representatives (collectively “the Insured”), filed this class action case alleging violations of the Texas Insurance Code. The Insured allege insurance discrimination in the non-standard insurance market, which serves lower income individuals and those drivers with less than ideal driving records.

The defendants and appellees are Home State County Mutual Insurance Company (misnamed as “Home State Mutual Insurance Company” in the district court), Old American County Mutual Fire Insurance Company, Consumers County Mutual Insurance Company, Southern County Mutual Insurance Company, Affirmative Insurance Company, American Century Casualty Company, American Hallmark Insurance Company of Texas, American International Insurance Company, Direct General Insurance Company, Dorinco Re-insurance Company, First Acceptance Insurance Company, General Insurance Company of America, Imperial Fire and Casualty Insurance Company, Integon National Insurance Company, Mendota Insurance Company, Middle States Insurance Company, National General Insurance Company, Republic Underwriters Insurance Company, Titan Indemnity Company, Transatlantic Re–Insurance Company, United Automobile Insurance Company and Young America Insurance Company, as well as defendant, appellee and cross appellant ¹ Odyssey America Reinsurance Company (collectively “the Insurance Companies”).

The jurisdictional basis for the district court's original jurisdiction was diversity of citizenship pursuant to the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d). The Insurance Companies each moved to dismiss the case based on the “local controversy” and “home state” mandatory abstention provisions of CAFA, 28 U.S.C. § 1332(d)(4).

The litigants have asked this court to consider the following issues:

I. Whether the district court erred when it found that the Insurance Companies proved, by a preponderance of the evidence, that at the time the lawsuit was filed on August 17, 2009, more than two-thirds of the members of the Insured classes were citizens of the United States or permanent aliens, for purposes of determining mandatory abstention pursuant to CAFA, 28 U.S.C. § 1332(d)(4).

II. Whether the district court erred when it found that the Insurance Companies proved, by a preponderance of the evidence, that at the time the lawsuit was filed on August 17, 2009, more than two-thirds of the members of the Insured classes were domiciled in and citizens of Texas, for the purposes of determining mandatory abstention pursuant to CAFA, 28 U.S.C. § 1332(d)(4).

This court finds no reversible error. We AFFIRM.

I. ESSENTIAL BACKGROUND

The Insured's operative complaint defines their proposed class as:

All persons who purchased an automobile insurance policy in Texas of [one of the County Mutual² insurance companies] and whose policies were in effect on or after August 17, 2007 up to the date of judgment, specifically excluding all federal district and magistrate judges of the Eastern District of Texas and members of their immediate families, Class Counsel and the directors, officers, and the employees of the defendants ...

The Insured allege that various County Mutuals have violated the anti-discrimination provisions of Section 544.052 of the Texas Insurance Code , by charging certain consumers higher policy fees on their automobile insurance than they charged other consumers, when those consumers were of the same class and hazard. The Insured also allege that the Reinsurers³, which the Insured define as the Insurance Companies other than the County Mutuals, have participated in and permitted such violations of the Texas Insurance Code. The Insured assert diversity subject matter jurisdiction pursuant to CAFA, 28 U.S.C. § 1332(d)(2). The Insurance Companies prevailed at the trial court on motions to dismiss on the grounds that CAFA's “local controversy” and “home state” exceptions required the district court to abstain from jurisdiction pursuant to 28 U.S.C. § 1332(d)(4), which is the crux of this case.⁴

II. STANDARD OF REVIEW

“This court reviews legal issues de novo.” Harris v. Trustmark Nat'l Bank, 287 Fed.Appx. 283, 293 (5th Cir.2008). This court reviews the district court's factual findings as to the citizenship of parties for clear error. Preston v. Tenet Healthsystem Memorial Medical Center, Inc. (“ Preston I ”), 485 F.3d 793, 795 (2007) (citing Coury v. Prot, 85 F.3d 244, 249 (5th Cir.1996)). The standard of review is whether the district court clearly erred in making its decisions with respect to the citizenship of the members of the plaintiff class. Preston, supra, 485 F.3d at 796. Clear error exists when “although there may be evidence to support it, the reviewing court on the entire [record] is left with the definite and firm conviction that a mistake has been committed.” Id. at 796–97; Campos v. City of Baytown, Tex., 840 F.2d 1240, 1243 (5th Cir.1988) (citing Anderson v. City of Bessemer, N.C., 470 U.S. 564, 573, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985)); see also Sheffield v. Itawamba County Bd. of Supervisors, 439 F.2d 35 (5th Cir.1971) (motion to dismiss class action). This court also recognizes “the inherent power of the court to protect its jurisdiction and judgments and to control its docket.” Farguson v. MBank Houston, N.A., 808 F.2d 358, 360 (5th Cir.1986).

III. ANALYSIS

A. Class Action Fairness Act

CAFA greatly expands federal ⁵ jurisdiction over interstate class action lawsuits. In re Katrina Canal Litig. Breaches, 524 F.3d 700, 711 n. 47 (5th Cir.2008); Preston v. Tenet Healthsys. Mem'l Med. Ctr., Inc. (“ Preston II ”), 485 F.3d 804, 810 (5th Cir.2007); Werner v. KPMG, L.L.P., 415 F.Supp.2d 688, 691 (S.D.Tex.2006). CAFA accords subject matter jurisdiction for certain cases with at least minimal diversity of citizenship:

(2) The district courts shall have original jurisdiction of any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which—

(A) any member of a class of plaintiffs is a citizen of a State different from any defendant;

(B) any member of a class of plaintiffs is a foreign state or a citizen or subject of a foreign state and any defendant is a citizen of a State; or

(C) any member of a class of plaintiffs is a citizen of a State and any defendant is a foreign state or a citizen or subject of a foreign state. 28 U.S.C. § 1332(d)(2).

Accordingly, CAFA grants the federal courts original jurisdiction to hear interstate class actions where: (1) the proposed class contains more than 100 members; (2) minimal diversity exists between the parties ( i.e., at least one plaintiff and one defendant are from different states); (3) the amount in controversy exceeds $5,000,000; and (4) the primary defendants are not states, state officials, or other governmental entities. 28 U.S.C. § 1332(d)(2), (5); see also In re Katrina Canal Litig. Breaches, supra, 524 F.3d at 706; Preston II, supra, 485 F.3d at 810; Werner, supra, 415 F.Supp.2d at 691.

B. “Local Controversy” and “Home State” Exceptions to CAFA

Indeed, the law is not complete without its exceptions. CAFA requires federal courts to decline jurisdiction over a proposed class action if either of the following narrow exceptions is proven by a preponderance of the evidence: (1) the local controversy exception, ...