Attorneys' Liability Assur. Society v. Fitzgerald, 5:01-CV-14.
| Decision Date | 28 November 2001 |
| Docket Number | No. 5:01-CV-14.,5:01-CV-14. |
| Parties | ATTORNEYS' LIABILITY ASSURANCE SOCIETY, INC., a Risk Retention Group, and Housing Authority Risk Retention Group, Inc. a Risk Retention Group, Plaintiffs, v. Frank M. FITZGERALD, in his official capacity as Commissioner of the Office of Financial and Insurance Services for the State of Michigan, Defendant. |
| Court | U.S. District Court — Western District of Michigan |
Lori M. Silsbury, Dykema Gossett, Lansing, MI, Lee Philip Reno, Reno & Cavanaugh, PLLC, Washington, DC, for Attorneys' Liability Assurance Society, Inc., Housing Authority Risk Retention Group, Inc., plaintiffs
William A. Chenoweth, Department of Attorney General, Insurance & Banking Division, Lansing, MI, Philip C. Olsson, Olsson, Frank & Weeda, PC, Washington, DC, for Frank M. Fitzgerald, in his official capacity as Commissioner of the Office of Financial and Insurance Services for the State of Michigan, defendants.
This matter is before the Court on Plaintiffs' and Defendant's cross-motions for summary judgment. The Court will deny Defendant's Motion and will grant Plaintiffs' Motion.
Review of a motion for summary judgment requires the Court to determine if the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact such that the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c). It is the function of the Court to decide "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The only controversies in this matter are questions of law.
The essential facts in this matter are undisputed. Plaintiffs are Attorneys' Liability Assurance Society, Inc., (ALAS) and Housing Authority Risk Retention Group (HARRG), two entities providing insurance coverage to their members and asserting that they qualify as "risk retention groups." Plaintiffs have been assessed a regulatory fee by the State of Michigan, pursuant to Mich. Comp. Laws § 500.1813. Plaintiffs allege that this fee assessment has been preempted by a federal statute, the Liability Risk Retention Act of 1986, 15 U.S.C. § 3901 et seq. (LRRA). Plaintiffs seek declaratory and injunctive relief on the basis of preemption in Count I of their First Amended Complaint, and declaratory and injunctive relief under 42 U.S.C. § 1983 and an award of attorney fees under 42 U.S.C. § 1988 in Count II. (See Dkt. No. 12.)
Defendant is Commissioner of the Michigan Office of Financial and Insurance Services (OFIS). He asserts that Plaintiffs do not qualify as "risk retention groups" because they offer types of liability insurance beyond that which such entities may offer, and as such, the State's assessment of the fee as to these Plaintiffs is congruent with the LRRA. He also asserts that Plaintiff ALAS is composed in such a manner as to make it ineligible for risk retention group status, again making the State's assessment of the fee as to Plaintiff ALAS congruent with the LRRA. Second, Defendant argues, even if Plaintiffs qualify as "risk retention groups," Michigan's fee is not preempted by the LRRA. Finally, Defendant asserts that this Court does not have jurisdiction in this matter because of the Tax Injunction Act, or in the alternative, principles of comity and federalism underlying that Act counsel in favor of abstaining from exercise of jurisdiction.
Originally, in the Product Liability Risk Retention Act of 1981 (PLRRA), Congress authorized creation of "risk retention groups," defined as interstate, industry-wide insurance groups insuring their members against product liability and completed operations claims. 15 U.S.C. §§ 3901-3906. This self-insurance was created because of concern over the availability and affordability of product liability insurance. National Risk Ret. Ass'n v. Brown, 927 F.Supp. 195, 197 (M.D.La.1996), affirmed without opinion, 114 F.3d 1183 (5th Cir. 1997) (citation omitted). The PLRRA provided that risk retention groups that were approved by the insurance authority of any one state could act as a risk retention group nationwide, and it expressly preempted regulation of these groups by any state other than the one which chartered the risk retention group originally. 15 U.S.C. § 3902(a)(1), Brown, 927 F.Supp. at 197 (citation omitted). Both Plaintiffs assert that they qualify as "risk retention groups," and they were both chartered by the State of Vermont.
The LRRA amended the PLRRA in 1986 to expand the scope of coverage which could be provided by risk retention groups, which now includes all types of liability coverage with a few exceptions. 15 U.S.C. §§ 3901-3906; Brown, 927 F.Supp. at 197 (citation omitted). "Liability" insurance does not include "personal risk liability and an employer's liability with respect to its employees other than legal liability under the Federal Employers' Liability Act (45 U.S.C. 51 et seq.)." 15 U.S.C. § 3901(a)(2)(B).
The LRRA continued to generally and expressly exempt risk retention groups from regulation by non-chartering states: "Except as provided in this section, a risk retention group is exempt from any State law, rule, regulation, or order to the extent that such law, rule, regulation, or order would — (1) make unlawful, or regulate, directly or indirectly, the operation of a risk retention group ...." 15 U.S.C. § 3902(a)(1). Congress, however, gave non-chartering states some limited regulatory power over risk retention groups in the LRRA because of the expansion of the types of coverage they could offer. See id., Brown, 927 F.Supp. at 197-98 (citation omitted).
Non-chartering states may regulate risk retention groups chartered in other states in a few ways designed to protect the citizens of the non-chartering states. Brown, 927 F.Supp. at 199. The exceptions to the preemption of regulation are contained in 15 U.S.C. § 3902(a)(1)(A)-(I). "The intent of these amendments was to create a scheme which exempts risk-retention groups from regulation by non-chartering states in which they do business, but which also gives the insurance commissioners in those states certain important rights." Id. (citing Florida, Dept. of Ins. v. National Amusement Purchasing Group, Inc., 905 F.2d 361, 363-64 (11th Cir.1990)).
Michigan requires that non-resident risk retention groups pay an additional regulatory fee of one-half percent on direct business for a risk located within Michigan. Mich. Comp. Laws § 500.1813. Risk retention groups pay two percent premium taxes in addition to this regulatory fee. Defendant argues that this regulatory fee is permitted, despite the LRRA's general preemption of non-chartering state regulation, by an exception to preemption that allows a non-chartering state to require a risk retention group to "pay, on a nondiscriminatory basis, applicable premium and other taxes which are levied on admitted insurers and surplus lines insurers, brokers, or policyholders under the laws of the State...." 15 U.S.C. § 3902(a)(1)(B). Plaintiffs argue that Michigan's regulatory fee is not saved by this exception to general preemption and that the fee constitutes an attempt at regulating non-resident risk retention groups.
In addition to their cross-motions for summary judgment, Plaintiffs and Defendant have also filed Oppositions to the motions for summary judgment and Replies to the Oppositions. Moreover, the Court has reviewed a brief submitted by the National Risk Retention Association (NRRA), an organization representing risk retention groups which was granted leave to file an amicus curiae brief. After reviewing the pleadings and briefing, the Court believes that oral argument is not necessary.
Defendant argues that the Court does not have subject matter jurisdiction in this matter because it is barred by the Tax Injunction Act. The Tax Injunction Act (TIA) provides that "[t]he district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." 28 U.S.C. § 1341 (2001). The Court finds that the TIA does not apply to this case.
The parties agree that Hedgepeth v. Tennessee provides the applicable test to determine whether the regulatory fee at issue here is a "tax" and thus whether the TIA bars this Court's subject matter jurisdiction. See 215 F.3d 608, 612 (6th Cir.2000). A district court is to consider (1) what entity imposes the assessment, (2) the parties upon whom the assessment is imposed, and (3) whether the assessment is expended for general public purposes, or used for the regulation or benefit of the parties upon whom the assessment is imposed. Id. (citations omitted).
Additionally, if Fees can serve regulatory purposes as distinguished from general public purposes in two ways: either by discouraging particular conduct through the device of making it more costly, or by generating income ear marked to cover the cost of the regulation.
Id. (citations omitted). Finally, "the TIA `makes no exception for challenges to taxes which constitute a small portion of a state's revenue sources rather than a large portion.'" Id. (q...
To continue reading
Request your trial
-
Soyoola v. Oceanus Ins. Co.
...of one jurisdiction, rather than fifty-one jurisdictions. SeeH.R.Rep. No. 97–190, at 12; Attorneys' Liab. Assurance Soc'y, Inc. v. Fitzgerald, 174 F.Supp.2d 619, 635 (W.D.Mich.2001) (“However, the LRRA was designed not only to prevent discriminatory treatment of non-resident risk retention ......
-
Mora v. Lancet Indem. Risk Retention Grp., Inc.
...and subject risk retention groups to the regulation in one jurisdiction instead of several. See Attorneys' Liab. Assurance Soc'y, Inc. v. Fitzgerald, 174 F. Supp. 2d 619, 635 (W.D. Mich. 2001) ("However, the LRRA was designed not only to prevent discriminatory treatment of non-resident risk......
-
Hawaii Insurers Council v. Lingle
...Rico, 967 F.2d 683 (1st Cir.1992); Hexom v. Oregon Dep't of Transp., 177 F.3d 1134 (9th Cir.1999); Attorneys' Liab. Assurance Soc'y, Inc. v. Fitzgerald, 174 F.Supp.2d 619 (W.D.Mich.2001); Okeson v. City of Seattle, 150 Wash.2d 540, 78 P.3d 1279 Under the Medeiros test, the entire assessment......
-
Z&R Cab, LLC v. Phila. Parking Auth.
...on comity. Pac. Bell Tel. Co. v. City of Hawthorne, 188 F. Supp. 2d 1169, 1177 (C.D. Cal. 2001); Attorneys' Liab. Assurance Soc'y v. Fitzgerald, 174 F. Supp. 2d 619, 629 (W.D. Mich. 2001); Diginet, Inc. v. W. Union ATS, Inc., 845 F. Supp. 1237, 1242 (N.D. Ill. 1994).10 Appellees concede tha......
-
GAO Report On RRGs Seriously Flawed
...permissible. The GAO Report acknowledges the court findings in Brown and Attorneys' Liability Assurance Society, Inc. v. Fitzgerald, 174 F. Supp. 2d 619 (W.D. Mich. 2001) wherein fees assessed by non-domiciliary regulators were barred under the LRRA. Although the GAO Report attempts to narr......
-
Why Litigation Is A Poor Answer To RRG Disputes
...cost of continuing discovery and litigation was too great. In the case of Attorneys' Liability Assurance Society, Inc. v. Fitzgerald, 174 F.Supp. 2d 619 (W.D. Mich. 2001), the court awarded attorneys' fees to the plaintiff RRGs. The state regulator appealed, and the parties settled the case......