In re Amwest Sur. Ins. Co.

• Decision Date: 11 October 2002
• Docket Number: No. 4:02CV3161.,4:02CV3161.
• Citation: In re Amwest Sur. Ins. Co., 245 F.Supp.2d 1038 (D. Neb. 2002)
• Parties: In re: AMWEST SURETY INSURANCE COMPANY, in Liquidation, Debtor. State of Nebraska, ex rel. L. Tim Wagner, Director of Insurance of the State of Nebraska, Plaintiff, v. J.A. Jones Construction Company, f/k/a Metric Constructors, Inc., Defendant.
• Court: U.S. District Court — District of Nebraska

Page 1038

245 F.Supp.2d 1038

In re: AMWEST SURETY INSURANCE COMPANY, in Liquidation, Debtor State of Nebraska, ex rel. L. Tim Wagner, Director of Insurance of the State of Nebraska, Plaintiff, v. J.A. Jones Construction Company, f/k/a Metric Constructors, Inc., Defendant.

No. 4:02CV3161.

United States District Court, D. Nebraska.

October 11, 2002.

COPYRIGHT MATERIAL OMITTED

Trenten P. Bausch, Michael S. Degan, Blackwell, Sanders Law Firm-Nebraska, Omaha, NE, John H. Binning, Jane F. Langan, Robert L. Nefsky, Rembolt, Ludtke Law Firm, Lincoln, NE, Michael D. Fielding, Dopuglas J. Schmidt, Blackwell, Sanders Law Firm-Missouri, Kansas City, MO, for State of Nebraska.

Jay R. Bender, John Whittington, Bradley Arant Law Firm, Birmingham, AL, David S. Houghton, Lieben, Robert W. Mullin, Whitted Law Firm, Omaha, NE, for J.A. Jones Construction.

MEMORANDUM AND ORDER

KOPF, District Judge.

Pursuant to 28 U.S.C. § 636(b)(1)(A) and NELR 72.3, this matter is before the court on Defendant's appeal (filing 22) from the Magistrate Judge's order (filing 21) granting Plaintiffs motion to remand (filing 10) this action to the District Court for Lancaster County, Nebraska. This action was originally filed in the District Court for Lancaster County and was removed to this court pursuant to 28 U.S.C. §§ 1441(a) and 1446.

Defendant's appeal states only that it objects to the Magistrate Judge's conclusions that "the District Court of Lancaster County has exclusive jurisdiction over this action" and that "this matter is one in which the federal court should abstain from exercising jurisdiction, if any." (Filing 22.) Because the defendant has failed to submit a brief in support of its appeal, its appeal may be deemed abandoned and denied on that basis alone. NELR 72.3(b). Further, the court's review¹of the portions of the order to which Defendant has objected makes it clear that such objections should be denied because the Magistrate Judge's order remanding this case to the Lancaster County District Court for resolution is not "clearly erroneous or contrary to law" for the reasons thoroughly and clearly explained in the Magistrate Judge's order. 28 U.S.C. § 636(b)(1)(A); NELR 72.3.

Defendant has not argued that the Magistrate Judge's order remanding this case to state court was dispositive and therefore outside his authority, and that the Magistrate Judge should have issued a report and recommendation (which is entitled to a less deferential standard of review by the district judge) instead of an order (which is entitled to the "clearly erroneous" standard of review on appeal). 28 U.S.C. § 636(b)(1); NELR 72.3. However, if such an argument had been made, and if I construed the Magistrate Judge's order of remand as a report and recommendation, I would reach the same conclusion for the reasons stated by the Magistrate Judge. (Filing 21.)

Accordingly, I shall deny the defendant's appeal.

IT IS ORDERED:

1. The Magistrate Judge's order (filing 21) shall not be disturbed and is hereby sustained;

2. The appeal filed by Defendant (filing 22) from the Magistrate Judge's order is denied; and

3. Judgment remanding this ease to the District Court of Lancaster County, Nebraska, shall be entered by separate document.

MEMORANDUM AND ORDER

PIESTER, United States Magistrate Judge.

The above-referenced action was originally filed in the District Court of Lancaster County, Nebraska and was removed to this court pursuant to 28 U.S.C. §§ 1441(a) and 1446. Federal subject matter jurisdiction exists, if at all, on the basis of diversity. 28 U.S.C 1332(a)(1). See filing 1, Notice of Removal,¶¶ 4-8. The plaintiff, L. Tim Wagner, Director of Insurance of the State of Nebraska, in his statutory capacity as the liquidator of Amwest Surety Insurance Company ("Liquidator"), has timely moved for remand. Filing 10. The Liquidator argues that the District Court of Lancaster County has exclusive jurisdiction over this action or, in the alternative, that under the reasoning of Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943), the federal court should abstain from exercising jurisdiction.

The operative facts for assessing jurisdiction are set forth in the pleadings, which in this case include the petition filed in the District Court of Lancaster County and the notice of removal. For the purpose of this motion, the facts alleged in those pleadings are presumed to be true.

Sisco, Inc. of Greensboro, North Carolina had agreed to perform construction services for the defendant, J.A. Jones Construction Company, formerly known as Metric Constructors Inc, ("Metric"), for the building of two North Carolina motels. Amwest Surety Insurance Agency ("Amwest") issued payment and performance bonds to Metric to guarantee Sisco's performance. Filing 1, attached petition ¶¶ 9-10. Sisco defaulted on the contracts and Metro asserted claims on the bonds to recover its damages. On March 6, 2001, Amwest paid Metric $475,000 in settlement of these claims. Id. at ¶13, 14, and 17.

Less than four months later, on June 7, 2001, the Lancaster County District Court ruled that Amwest was insolvent and ordered the company liquidated pursuant to the Nebraska Insurers Supervision, Rehabilitation, and Liquidation Act, Neb. Rev. Stat. §§ 44^801 to-44-4862. Filing 1, attached petition ¶¶3, 6.¹ The Liquidator filed this suit to recover the $475,000 Metric received from Amwest, and claims this payment was an invalid preferential transfer under Neb.Rev.Stal § § 44-4821(u) and 44-4828(1)(b). The Liquidator seeks to recoup this money to assure that Metric does not obtain recovery from Amwest in a percentage greater than that recovered by other creditors of this failed insurance company. Id. at ¶¶ 18-19.

The Nebraska Insurers Supervision, Rehabilitation, and Liquidation Act provides that the director of insurance "may petition the district court of Lancaster County for an order directing him or her to liquidate a domestic insurer ... on the basis ... that the insurer is insolvent; or ... is in such condition that the further transaction of business would be hazardous, financially or otherwise, to its insureds or creditors or the public." Neb.Rev.Stat. § 44-4817. An order to liquidate the insurance company shall appoint the director as liquidator and shall direct the liquidator to take possession of the insurers' assets and administer them under the court's general supervision. Neb.Rev.Stat. § 44^818(1). Upon entry of a liquidation order, the liquidator "shall be vested by operation of law with the title to all of the property, contracts, and rights of action and all of the books and records of the insurer ordered liquidated, wherever located ...." Id. In the case of an insolvent insurer, the purpose of the act is to provide "a comprehensive scheme for the supervision, rehabilitation, and liquidation of insurers" that will "protect the interests of insureds, claimants, creditors, and the public" through "[e]nhanced efficiency and economy of liquidation," "clarification of the law," and "minimiz[ing] legal uncertainty and litigation." Neb.Rev.Stat. § 44-4801(3) and (7). The Nebraska legislation emphasizes:

Proceedings in cases of insurer insolvency and delinquency are deemed an integral aspect of the business of insurance and are of vital public interest and concern. The act shall be liberally construed to effect the purposes enumerated in this section and shall not be interpreted to limit the powers granted the director by other provisions of the law.

Neb.Rev.Stat. § 44-4801(7).

"All actions authorized by the act shall be brought in the district court of Lancaster County." Neb.Rev.Stat. § 44-4804. Among the many enumerated powers of the liquidator is the authority to pursue actions to recover preferences, meaning property transferred by the insurer to a creditor to pay an antecedent debt within one year before the filing of a successful petition for liquidation. Id. at § 44-4821(u) and 44-4828(1)(a). "The district court of Lancaster County shall have summary jurisdiction" over such claims. Id. at § 44-4828(7).

This statutory scheme provides the backdrop for the central question presented by the Liquidator's motion for remand. Specifically, does the federal district court have, and should it exercise, subject matter jurisdiction to determine if the defendant is entitled to retain the money it received in March 2001 from Amwest, an insurer being liquidated under the supervision of the Lancaster County district court? I conclude that subject matter jurisdiction for this action lies in the district court of Lancaster County, the forum designated by Nebraska legislation for proceedings to liquidate insolvent insurers, and the jurisdiction which, before this case was remanded to federal court, obtained jurisdiction over all the assets of Amwest. The case must therefore be remanded to that court. I further conclude that, even if this court had subject matter jurisdiction, it should abstain from exercising that jurisdiction in this case.

Prior to the 1944 Supreme Court decision in United States v. South-Eastern Underwriters Assn., 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440 (1944), `"the States enjoyed a virtually exclusive domain over the insurance industry.'" U.S. Dept. of Treasury v. Fabe, 508 U.S. 491, 499, 113 S.Ct. 2202, 124 L.Ed.2d 449 (1993)(quoting St. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531, 539, 98 S.Ct. 2923, 57 L.Ed.2d 932 (1978)). However, South-Eastern Underwriters reversed this longstanding jurisprudence and held that interstate insurance business was commerce within the meaning of the Commerce Clause and therefore subject to the provisions of the Sherman Antitrust Act. South-Eastern Underwriters Assn., 322 U.S. at 553, 64 S.Ct. 1162. Congress promptly responded to South-Eastern Underwriters by enacting the McCarran-Ferguson Act, 15 U.S.C. § 1012, which "restored] the supremacy of the States in the realm of insurance regulation." Fabe, 508...