Bullard v. Southwest Crop Ins. Agency, Inc.

• Decision Date: 01 December 1997
• Docket Number: No. 3:97-CV-5.,3:97-CV-5.
• Parties: John Earl BULLARD, Plaintiff, v. SOUTHWEST CROP INSURANCE AGENCY, INC., Blakely Crop Hail, Inc., Farmers Alliance Mutual Insurance, Co., Defendant.
• Court: U.S. District Court — Eastern District of Texas

Page 531

984 F.Supp. 531

John Earl BULLARD, Plaintiff, v. SOUTHWEST CROP INSURANCE AGENCY, INC., Blakely Crop Hail, Inc., Farmers Alliance Mutual Insurance, Co., Defendant.

No. 3:97-CV-5.

United States District Court, E.D. Texas, Paris Division.

December 1, 1997.

Roger D. Sanders, Sanders O'Hanlon & Motley, Sherman, TX, for John Earl Bullard.

Richard Dan Meehan, Turner Meehan & Porter, Bonham, TX, for Southwest Crop Ins. Agency, Inc.

Brad Gahm, Cozen & O'Connor, Dallas, TX, for Blakely Crop Hail, Inc., Farmers Alliance Mut. Ins. Co.

MEMORANDUM OPINION AND ORDER DENYING DEFENDANTS BLAKELY CROP HAIL, INC.'S AND FARMERS ALLIANCE MUTUAL CO.'S MOTION FOR SUMMARY JUDGMENT AND GRANTING PLAINTIFF'S MOTION TO REMAND.

SCHELL, Chief Judge.

This matter is before the court on Defendants Blakely Crop Hail, Inc.'s ("Blakely") and Farmers Alliance Mutual Co.'s ("Farmers") (collectively "Defendants") Motion for Summary Judgment, filed on July 28, 1997. Plaintiff John Earl Bullard ("Bullard") filed a response to Defendants' Motion for Summary Judgment on August 20, 1997, and a Motion to Remand on the same day. Defendants filed a reply to Bullard's response to their motion for summary judgment, and a response to Bullard's motion to remand, on September 16, 1997. Upon consideration of the motions, responses, reply, and applicable law, the court is of the opinion that Defendants' Motion for Summary Judgment should be DENIED, and Plaintiff's Motion to Remand should be GRANTED.

I. BACKGROUND

1. The Federal Crop Insurance Act

Due to the inherent risks of insuring crops, insurance companies in the early 1900's refused to write multi-peril crop insurance policies. Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 383 n. 1, 68 S.Ct. 1, 3-4 n. 1, 92 L.Ed. 10 (1947). In an effort to remedy the problem, Congress passed the Federal Crop Insurance Act (FCIA) in 1938. 7 U.S.C. §§ 1501 et seq. Its purpose was to "promote the national welfare by improving the economic stability of agriculture through a sound system of crop insurance ...." 7 U.S.C. § 1502. To carry out this purpose, Congress created an agency within the Department of Agriculture known as the Federal Crop Insurance Corporation (FCIC). 7 U.S.C. § 1503. The FCIC assists in carrying out the goals of the FCIA by providing crop insurance to farmers in the following ways: (1) selling insurance through private insurance agents, (2) reinsuring private insurance companies that provide crop insurance, and (3) providing crop insurance directly to the farmer. Owen v. Crop Hail Management, 841 F.Supp. 297, 300 (W.D.Mo.1994) (citing 7 U.S.C. §§ 1507-08).

2. Procedurally Significant Facts

In this case, Bullard seeks benefits allegedly due under a multi-peril crop insurance policy (the "Policy") purchased from Defendant Southwest Crop Insurance Agency, Inc. ("Southwest") to cover Bullard's 1995 nursery crop. Pl.'s Resp. to Defs.' Mot. for Summ. J. and Mot. to Remand at 2. Farmers issued the Policy to Bullard through its managing general agent, Blakely. Id. The Policy was later reinsured by the FCIC under the provisions of the FCIA. Defs.' Mot. for Summ. J. Exhibit A1 at Endorsement 1988-CHIAA 776N.

In 1995, Bullard made a claim under the Policy for alleged losses to his 1995 nursery crop. Defs.' Mot. for Summ. J. at 2. Defendants refused to pay. Id. On or about December 19, 1996, Plaintiff filed this action in the 6th Judicial District Court of Fannin County, Texas, alleging the following state law causes of action: (1) breach of contract; (2) violations of the Texas Deceptive Trade Practices Act; (3) violations of the Texas Insurance Code; (4) negligence; (5) negligent misrepresentation; (6) breach of duty of good faith and fair dealing in settling an insured's claim for loss; (7) breach of duty of good faith and fair dealing in failing to timely adjust a claim; (8) conspiracy; and (9) declaratory judgment. Def.'s Mot. for Summ. J. at 2. Defendants timely removed the case to this court on January 31, 1997, alleging federal question jurisdiction pursuant to 28 U.S.C. § 1331. Defendants now move for summary judgment, contending that (1) the FCIA and its corresponding regulations completely preempt all state law causes of action against FCIC-reinsured entities, (2) Bullard's failure to plead a federal claim was a calculated effort to mask federal preemption, and (3) that the Policy specifically provides that all of its terms, rights, and responsibilities are subject to the FCIA and its corresponding regulations, which do not allow for the assertion of state law claims. Def.s' Mot. for Summ. J. at 3.

In response, Bullard asserts that the FCIA does not completely preempt his state law causes of action and, since he has pled no federal claim, this court lacks subject matter jurisdiction and should remand the case to state court. Pl.'s Resp. to Defs.' Mot. for Summ. J. and Mot. for Remand at 1. Thus, the ultimate question before the court is whether removal jurisdiction exists over Plaintiff's state law claims.

II. THE SUMMARY JUDGMENT STANDARD

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). A dispute about a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). The substantive law identifies which facts are material. Id. at 248, 106 S.Ct. at 2510. The party moving for summary judgment has the burden to show that there is no genuine issue of fact and that it is entitled to judgment as a matter of law. See id. at 247, 106 S.Ct. at 2509-10. Because Bullard bears the burden of proof at trial, Defendants are not required to produce evidence negating the existence of a material fact; rather Defendants' burden is only to point out the absence of evidence supporting the nonmovant's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553-54, 91 L.Ed.2d 265 (1986). If Defendants' motion demonstrates such an absence of evidence, "the nonmovant must come forward with evidence which would be sufficient to enable it to survive a motion for directed verdict at trial." Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 913 (5th Cir.) (citation and internal quotations omitted), cert. denied, 506 U.S. 832, 113 S.Ct. 98, 121 L.Ed.2d 59 (1992). The test is "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, 477 U.S. at 251-52, 106 S.Ct. at 2512.

III. DISCUSSION

A. The Well-Pleaded Complaint Rule

Bullard's complaint, filed in state court, alleges nine state law causes of action. Def.'s Mot. for Summ. J. at 2. Nowhere in this list of claims does Bullard mention or implicate the FCIA or any other federal law. However, Defendants removed this action from state court by alleging federal question jurisdiction in this court. Defs.' Mot. for Summ. J. at 3.

A defendant may remove a plaintiff's action from state court only if the case could have been originally filed in federal court. Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429, 96 L.Ed.2d 318 (1987). In the absence of diversity of citizenship, a defendant must establish federal question jurisdiction to effect proper removal. Id. (citing 28 U.S.C. § 1331). The "well-pleaded complaint rule" governs the issue of federal question jurisdiction. Id. This rule provides that federal jurisdiction exists only when a federal question is present on the face of a plaintiff's properly pleaded complaint. Id. The rule is designed to make the plaintiff the "master of his claim" such that he may avoid federal jurisdiction by relying exclusively on state law. Id. Consequently, a defendant may not normally remove a case to federal court by raising a federal question as a defense. Id. at 393, 107 S. Ct. at 2430; see also Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 14, 103 S.Ct. 2841, 2848, 77 L.Ed.2d 420 (1983) (stating that "a case may not be removed to federal court on the basis of a federal defense, including the defense of pre-emption, ... even if both parties admit that the defense is the only question truly at issue in the case."). Such a defense does not appear on the face of a well-pleaded complaint, and, therefore, cannot be used as the basis for removal to federal court. Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 107 S.Ct. 1542, 1546, 95 L.Ed.2d 55 (1987).

1. Complete Preemption

Under extraordinary circumstances, the United States Supreme Court has found an exception to the "well-pleaded complaint rule," commonly referred to as the "complete pre-emption doctrine." Williams, 482 U.S. at 393, 107 S.Ct. at 2430. Under this doctrine, a federal statute may completely preempt all state law claims if the statute so extensively regulates a particular area that it leaves no room for state law supplementation. Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65, 107 S.Ct. 1542, 1547, 95 L.Ed.2d 55 (1987). Once the Court has found that a statute regulates a particular area in such a pervasive manner, then any ordinary state common law complaint is converted into one stating a federal claim for purposes of the well-pleaded complaint rule. Id. As a result, subject matter jurisdiction is possible even when the defendant raises a federal question as a defense which does not appear on the face of the complaint. Williams, 482 U.S. at 393-99, 107 S.Ct. at 2430-33.¹

Once the court determines that federal law completely preempts state law in a certain area, it must be shown that the plaintiff's claim falls within the area completely preempted in order to...