Admiral Ins. Co. v. Abshire

• Decision Date: 02 July 2009
• Docket Number: No. 09-30121.,09-30121.
• Parties: ADMIRAL INSURANCE CO., Plaintiff-Appellant Cross-Appellee, v. Donald W. ABSHIRE; Betty Joan Nix Buzzanca; Jesse Charles Adams; Gesele Diamond Adams; Darrow A. Adams, et al., Plaintiffs-Appellees Cross-Appellants, v. State of Louisiana, Through the Office of Financial Institutions; State of Louisiana, Through the Office of Risk Management, Defendants-Appellants Cross-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

574 F.3d 267

ADMIRAL INSURANCE CO., Plaintiff-Appellant Cross-Appellee, v. Donald W. ABSHIRE; Betty Joan Nix Buzzanca; Jesse Charles Adams; Gesele Diamond Adams; Darrow A. Adams, et al., Plaintiffs-Appellees Cross-Appellants, v. State of Louisiana, Through the Office of Financial Institutions; State of Louisiana, Through the Office of Risk Management, Defendants-Appellants Cross-Appellees.

No. 09-30121.

United States Court of Appeals, Fifth Circuit.

July 2, 2009.

Joseph Leroy Spilman, III, David Charles Bach, Hailey, McNamara, Hall, Larmann & Papale, Metairie, LA, for Admiral Ins. Co.

David Coleman Raphael, Jr. (argued), David P. Smith, Elisa E. Tubbs, Smith Foote Law Firm, Alexandria, LA, Charles Ferrier Zimmer, John Alden Meade, Law offices of Odom & Des Roches, LLP, New Orleans, LA, for Abshire, Jesse Adams, Gesele Adams, Darrow Adams, Buzzanca.

David M. Latham (argued), Keary L. Everitt, Marie G. Everitt, Everitt, Pratt, Latham & Donovan, New Orleans, LA, for State of Louisiana, ex rel. Office of Financial Institutions.

John B. Dunlap, III (argued), Martin Stewart Bohman, Victor Roy Loraso, III, Carleton, Dunlap, Olinde, Moore & Bohman, LLC, Baton Rouge, LA, for State of louisiana, ex rel. Office of Risk Management.

Appeal from the United States District Court for the Middle District of Louisiana.

Before WIENER, STEWART, and CLEMENT, Circuit Judges.

WIENER, Circuit Judge:

Plaintiff-Appellant Admiral Insurance Company ("Admiral") and Defendant-Appellant State of Louisiana, through the Office of Financial Institutions and through the Office of Risk Management (collectively, "Louisiana") appeal from the order of the district court remanding this case to state court. Louisiana claims that the Plaintiffs-Appellees (collectively, "Abshire et al.") commenced this putative class action—in which the proposed class includes at least 100 plaintiffs, the parties are minimally diverse, and the amount in controversy exceeds $5,000,000 exclusive of interest and costs—after the effective date of the Class Action Fairness Act of 2005 ("CAFA"),¹ entitling Louisiana to removal. Abshire et al. disagree, contending that they commenced this suit long before CAFA's effective date. They also cross-appeal the district court's denial of fees and costs associated with seeking remand. We affirm the district court's remand of the case to state court and its denial of fees and costs to Abshire et al.

I. FACTS AND PROCEEDINGS

Abshire and the other plaintiffs purchased life insurance policies, annuities, and corporate notes from three Louisiana companies: Public Investors Life Insurance Co. ("PILCO"), Public Investors, Inc. ("PI"), and Midwest Life Insurance Co. ("MLI"). After all three companies failed, Abshire et al. sued Louisiana, alleging negligent, intentional, and criminal acts (regulatory and otherwise) that they claim contributed to these failures. A total of 1,383 plaintiffs were named as parties in three petitions² filed during the early 1990s in two different Louisiana courts. These actions were ultimately consolidated in Louisiana's 19th Judicial District Court for the Parish of East Baton Rouge (the "19th JDC").

After prolonged discovery and writ applications, and an earlier effort by Louisiana to remove to federal court, Abshire et al. filed an eighth amended complaint on March 24, 2003, which added claims against Louisiana's excess insurance carriers —like Admiral—and repleaded several claims. Then, as the most recent trial date approached in 2007, an advisory opinion from the Ethics Advisory Service Committee of the Louisiana State Bar Association determined that Abshire et al.'s attorneys would violate the Rules of Professional Conduct if they tried or settled the claims of plaintiffs with whom they had lost contact, using only the powers of attorney that these plaintiffs had executed at the time of retainer. Abshire et al.'s attorneys therefore filed motions to withdraw as to the 243 plaintiffs with whom they had lost contact.

These ethics and communication issues were hampering efforts to settle, so the 19th JDC, which believed that the parties could benefit from mediation, granted Abshire et al. leave to amend their complaint a ninth time to seek class certification. That court concluded, and Abshire et al.'s attorneys apparently agreed, that only class certification could give the attorneys the authority needed to participate in mediation and to settle the case if possible.³

Abshire et al. filed the ninth amended complaint on May 30, 2008. It defined the proposed class as:

All persons or entities in the United States who filed suit against the State of Louisiana and/or its Department of Insurance or Office of Financial Institutions for damages caused by the State's conduct in connection with the failure of [the three companies], and whose claim was consolidated into Civil Action No. 377,713 or No. 412,265.

....

... Excluded from the Class are any persons or entities to the extent their claims in Civil Action No. 377,713 or No. 412,265 have been resolved by a final, unappealable judgment, including those claims dismissed as a result of the rulings of the United States District Court, Western District of Louisiana, No. 06-1368.

In the ninth amended complaint, Abshire et al. also sought to recoup their "costs of suit, including reasonable attorneys' fees as provided by law." The eighth amended complaint had requested "[j]udgment against the Defendants jointly, severally, and in solido for attorneys' fees, judicial interest, costs, and all expenses of these proceedings and for any and all other general equitable relief."

Other case management problems inherent in such lengthy litigation arose during the 17 years that this suit has been pending in state court. For example, a number of plaintiffs have died. The 19th JDC allowed ex parte substitutions of survivors until Louisiana objected. That court then entered an order in 2004 conditionally dismissing the claims of the deceased plaintiffs unless counsel for Abshire et al. made proper substitution requests. Although the record is unclear on the point, it appears that at least five of the deceased plaintiffs had no survivor who could be substituted in 2004, so their claims presumably were dismissed. Louisiana claims that the same held true for at least 16 deceased plaintiffs at that time.

In addition to hearing the motions practice regarding substitutions for deceased plaintiffs, the 19th JDC dismissed the claims of all 281 plaintiffs who were only insureds or beneficiaries of a PILCO, PI, or MLI life insurance policy or annuity. These dismissals, as Louisiana concedes, are final and unappealable. The same order also held that "[a]ll rights possessed by any plaintiff in this litigation are preserved, and shall not in any way be affected by this order, save for those rights a plaintiff may possess as an insured or beneficiary under a life insurance policy or annuity." Louisiana contends that this portion of the order related to 219 "dual-capacity plaintiffs," each of whom was both (1) an insured or a beneficiary and (2) owned an investment at issue, the claims relating to which were not dismissed. Louisiana argues that the order is not final and unappealable as to those 219 dual-capacity plaintiffs because (1) those plaintiffs were not fully dismissed and (2) the order was not certified as a final judgment pursuant to Article 1915(B)(1) of the Louisiana Code of Civil Procedure for purposes of an appeal. These two additional management issues—the substitution problems arising out of the deaths of some of the plaintiffs and the management of the "dual-capacity" plaintiffs' claims—are part of Louisiana's argument that, by seeking class certification for the first time, the ninth amended complaint commenced a new suit for purposes of CAFA.

Immediately after Abshire et al. filed the ninth amended complaint, Louisiana again removed the action to federal court, this time claiming that, under CAFA, subject-matter jurisdiction exists over Abshire et al.'s putative class action. Abshire et al. do not contest that if CAFA applies, the case satisfies CAFA's minimum-diversity and amount-in-controversy requirements. Instead, Abshire et al. sought remand on grounds that (1) this action was not "commenced" after CAFA's effective date (February 18, 2005), so CAFA is inapplicable, and (2) if CAFA applies, at least one mandatory exception to federal jurisdiction under CAFA requires remand. The magistrate judge concluded that the instant action commenced prior to CAFA's effective date and recommended that the case be remanded to state court. Because of that conclusion, the magistrate judge's report and recommendations did not address the two CAFA exceptions to jurisdiction that are presented in this appeal, namely, the "local controversy" and "primary state actor" exceptions.

Abshire et al. also requested that, pursuant to 28 U.S.C. § 1447(c), attorneys' fees and costs associated with seeking remand be awarded, arguing that Louisiana's attempt to remove the case was "objectively unreasonable." The magistrate judge determined that even though Abshire et al. prevailed on their motion to remand, Louisiana had not acted unreasonably because case law in the area was unsettled at the time of removal. The district court adopted the magistrate judge's report and recommendations in full and remanded the case to state court.

Both Louisiana's notice of appeal of the district court's remand order and Abshire et al.'s notice of appeal of the denial of attorneys' fees and costs were timely filed pursuant to 28 U.S.C. § 1453(c)(1).⁴ We granted permission to appeal and cross-appeal. As permitted by § 1453(c)(3)(A), all the parties agreed to a 120-day extension of 28 U.S.C. § 1453(c)(2)'s sixty-day time limit to "complete all action on [the] appeal."

II. ANALYSIS

A. The Remand Order

1. Standard of Review

We review de novo a district court's order remanding a case to state...