Garamendi v. Allstate Ins. Co.

• Decision Date: 02 February 1995
• Docket Number: No. 91-55855,91-55855
• Citation: 47 F.3d 350
• Parties: John GARAMENDI, Insurance Commissioner of the State of California, in his capacity as Liquidator of Mission Insurance Company, Mission National Insurance Company, Enterprise Insurance Company, Holland-America Insurance Company and Mission Reinsurance Corporation, as successor to Roxani Gillespie, Insurance Commissioner of the State of California, in her capacity as Liquidator of Mission Insurance Company, Mission National Insurance Company, Enterprise Insurance Company, Holland-America Insurance Company and Mission Reinsurance Corporation, Plaintiff-Appellee, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellant, and Insurance Company of North America, Defendant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 350

47 F.3d 350

63 USLW 2494

John GARAMENDI, Insurance Commissioner of the State of California, in his capacity as Liquidator of Mission Insurance Company, Mission National Insurance Company Enterprise Insurance Company, Holland-America Insurance Company and Mission Reinsurance Corporation, as successor to Roxani Gillespie, Insurance Commissioner of the State of California, in her capacity as Liquidator of Mission Insurance Company, Mission National Insurance Company Enterprise Insurance Company, Holland-America Insurance Company and Mission Reinsurance Corporation, Plaintiff-Appellee, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellant and Insurance Company of North America, Defendant.

No. 91-55855.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Nov. 5, 1993.

Decided Feb. 2, 1995.

Joseph D. Lee, Munger, Tolles & Olson, Los Angeles, CA, for defendant-appellant.

Karl L. Rubinstein, Rubinstein & Perry, Los Angeles, CA, for plaintiff-appellee.

Appeal from the United States District Court for the Central District of California.

Before: FLETCHER, PREGERSON, and NORRIS, Circuit Judges.

WILLIAM A. NORRIS, Circuit Judge:

This case presents two questions: First, whether a remand order based on abstention is reviewable, and, if so, whether it can be reviewed on appeal, or only by a petition for a writ of mandamus. Second, and more importantly, we consider whether the Burford abstention doctrine allows a federal court to surrender jurisdiction to a state court in a case in which no equitable relief is sought.

The district court remanded this case to state court under the Burford abstention doctrine. Allstate filed a notice of appeal, which it requested be considered as a petition for a writ of mandamus if review by appeal was not available. Treating this action as an appeal, we reverse because abstention was inappropriate.

I

John Garamendi is the Insurance Commissioner (the "Commissioner") of the State of California and the statutorily designated trustee for insolvent insurance companies. ¹ This case arises out of the Commissioner's efforts to liquidate the Mission Group of Insurance companies and recover reinsurance proceeds from several reinsurers, including Allstate Insurance Company ("Allstate").

Between 1962 and 1985, Allstate and the Mission Insurance Group ² entered into numerous reinsurance agreements, pursuant to which each company reinsured the primary insurance obligations of the other. On October 31, 1985, the Commissioner filed an application in Los Angeles County Superior Court ("the Liquidation Court") requesting the appointment of a conservator for the company. ³ The Liquidation Court first ordered the Mission Insurance Group into conservatorship, and then, upon determining that it could not be rehabilitated, ordered that it be liquidated. In August, 1990, the Liquidation Court appointed the Commissioner as liquidator. Pursuant to the California Insurance Code, the Commissioner filed suit on December 22, 1986 against approximately 300 reinsurers of the Mission Insurance Group seeking to recover money due the Mission Insurance Group under various reinsurance agreements. That case was filed in Los Angeles Superior Court ("Gillespie I ") and subsequently consolidated with the liquidation proceedings.

In June, 1990, the Commissioner filed this action against Allstate and other insurance companies, alleging the same causes of action alleged in Gillespie I. ⁴ On August 2, 1990, Allstate sought removal of the action on diversity grounds to federal district court under 28 U.S.C. Sec. 1441(c). Once in district court, Allstate moved to compel arbitration, pursuant to an arbitration clause in the reinsurance agreement. Before entertaining the motion, the court heard the Commissioner's motion to remand the action to the state court, which it granted on July 1, 1991.

The district court pointed out that a critical issue in this case is the viability of Allstate's defense that it is entitled to a set-off for the amounts it claims Mission owes it from other reinsurance agreements. ⁵ Noting that Liquidation Court Judge Kurt Lewin had developed an "intimate familiarity" with the law in this area by presiding over Gillespie I, the district court accepted the Commissioner's argument that Burford abstention required it to remand the case to state court because exercising jurisdiction would interfere with a comprehensive state regulatory scheme. Allstate timely appealed to this court.

II

The Commissioner argues that the district court's abstention order is unreviewable, either by appeal or a writ of mandamus, citing 28 U.S.C. Sec. 1447(d), which states "[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise," with a single exception, not applicable to this case. This provision, however, applies only to cases remanded pursuant to Sec. 1447(c), when there is a "defect in removal procedure" or "the district court lack[ed] subject matter jurisdiction." Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 345-52, 96 S.Ct. 584, 590-93, 46 L.Ed.2d 542 (1976); see also Price v. PSA, Inc., 829 F.2d 871, 874 (9th Cir.1987), cert. denied, 486 U.S. 1006, 108 S.Ct. 1732, 100 L.Ed.2d 196 (1988) (noting that if an order of remand is "not a mandatory remand under Sec. 1447(c), it enjoys no immunity from review"). Here, the district court explicitly based its remand order on a decision to exercise its discretion to abstain from a case that might interfere with a state administrative proceeding, rather than on any ground specified in Sec. 1447(c). Therefore, review of the remand order in this case is not barred by Sec. 1447(d). The question, then, is whether it is appealable, or reviewable only by a writ of mandamus. ⁶

In Thermtron Products, the Supreme Court stated that "because an order remanding a removed action does not represent a final judgment reviewable by appeal, the remedy in such a case is by mandamus to compel action, and not by writ of error to review what has been done." 423 U.S. at 352-53, 96 S.Ct. at 593 (emphasis added). The Supreme Court subsequently noted, however, that some orders declining to exercise jurisdiction may be appealable under a narrow exception to the final judgment rule. See Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 11-13, 103 S.Ct. 927, 934-35, 74 L.Ed.2d 765 (1983). Describing the exception to finality rule as established in Cohen v. Beneficial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949), the Court held that an abstention order may be appealable as a final collateral order if it "conclusively determine[s] the disputed question, resolve[s] an important issue completely separate from the merits of the actions, and [is] effectively unreviewable on appeal from a final judgement." Id., 460 U.S. at 11-12, 103 S.Ct. at 934 (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 468, 98 S.Ct. 2454, 2458, 57 L.Ed.2d 351 (1978)). The Court held that an order staying a federal action pursuant to abstention under Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976) qualifies as an appealable final collateral order. Moses H. Cone, 460 U.S. at 11-13, 103 S.Ct. at 934-36. The question, then, is whether a remand order may also be appealable as a final collateral order when a district court declines to exercise jurisdiction pursuant to one of the doctrines of abstention.

In the wake of Moses H. Cone, we held that a remand order, like a stay, may be appealable as a final collateral order under Cohen. Pelleport Investors v. Budco Quality Theatres, 741 F.2d 273, 278 (9th Cir.1984). Thus, despite the general rule in Thermtron, a remand order may be appealed as a final collateral order if it is " 'based on a substantive determination on the merits apart from any jurisdictional decision.' " Lee v. City of Beaumont, 12 F.3d 936 (9th Cir.1993) (quoting Whitman v. Raley's Inc., 886 F.2d 1177, 1180 (9th Cir.1989)); see also Executive Software v. United States Dist. Ct., 24 F.3d 1545 (9th Cir.1994). Applying the Cohen test to the order in this case, we conclude that a remand order based on abstention is a final collateral order that is reviewable on appeal.

The order in this case satisfies each of the three criteria of the final collateral order test. First, the order conclusively determines a disputed question: whether the facts of the case warrant abstention under Burford v. Sun Oil, 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943). See Moses H. Cone, 460 U.S. at 12-13, 103 S.Ct. at 935-36 (concluding that stay based on abstention conclusively determines the applicability of the relevant abstention doctrine).

There can be no dispute that the decision also satisfies the second criterion of the final collateral order test. In Moses H. Cone, the Supreme Court held that an "order that amounts to a refusal to adjudicate the merits plainly presents an important issue separate from the merits." 460 U.S. at 12, 103 S.Ct. at 935. This holding was based on the understanding that the "completely separate from the merits" requirement is merely "a distillation of the principle that there should not be piecemeal review of 'steps towards final judgment in which they will merge.' " Id. at 12 n. 13, 103 S.Ct. at 935 n. 13 (quoting Cohen, 337 U.S. at 546, 69 S.Ct. at 1225). In this case, as in Moses H. Cone, "there is no step towards final judgment, but a refusal to proceed at all." Id. Moreover, in several cases we have concluded that determinations of whether a federal or state court should adjudicate the merits of a case constitute separate decisions apart from the merits for the purposes of the final collateral order test. See Pelleport, 741 F.2d at 278; Clorox v. United States District Court, 779 F.2d 517, 519-20 (9th Cir.1985). ⁷

Finally, a remand based on abstention would be effectively unreviewable on appeal after a determination of...