Jamal v. Travelers Lloyds of Texas Ins. Co., CIV.A. H-99-4369.

Citation97 F.Supp.2d 800
Decision Date30 May 2000
Docket NumberNo. CIV.A. H-99-4369.,CIV.A. H-99-4369.
PartiesAshraf A. JAMAL, Plaintiff, v. TRAVELERS LLOYDS OF TEXAS INSURANCE COMPANY and Travelers Property And Casualty Insurance Company, Defendants.
CourtUnited States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas

Allan G. Levine, Allan G. Levine and Associates, Houston, TX, for Ashraf A. Jamal, plaintiff.

Nicholas E. Zito, Markle Ramos et al., Houston, Laurence E. Boyd, Gilbert, Gilbert & Boyd, Angleton, Gerald J. Nielsen, Nielson Law Firm, Metarie, LA, for Travelers Lloyds of Texas Insurance Company, Travelers Property and Casualty Insurance Company, defendants.

MEMORANDUM AND ORDER

CRONE, United States Magistrate Judge.

I. Introduction

Pending before the court is Plaintiff Ashraf A. Jamal's ("Jamal") Motion to Remand (# 10). Having reviewed the pending motion, the submissions of the parties, the pleadings, and the applicable law, the court is of the opinion that Jamal's position is without merit.

II. Background

On October 29, 1999, Jamal brought suit in the 113th Judicial District Court of Harris County, Texas, against Defendants Travelers Lloyds of Texas Insurance Company ("Lloyds") and Travelers Property and Casualty Insurance Company ("TPCIC") for property damages allegedly sustained as a result of rainstorms and flooding during Tropical Storm Frances on September 10 and 11, 1998. Jamal asserts claims for breach of contract, breach of the duty of good faith and fair dealing, and violation of Articles 21.21 and 21.55 of the Texas Insurance Code based on homeowners' and flood insurance policies issued through Defendants' purported agent, Holt & Hochman Insurance Agency. On December 15, 1999, TPCIC, with Lloyd's consent, removed the case to federal court on the basis of federal question jurisdiction, contending that Jamal's action includes a separate and independent claim for federal funds for damages resulting from flood, pursuant to a Standard Flood Insurance Policy ("SFIP") issued to Jamal by TPCIC as a participant in the National Flood Insurance Program ("NFIP"). TPCIC maintains that Jamal's claims under the SFIP are governed by the National Flood Insurance Act ("NFIA"), 42 U.S.C. §§ 4001-4129, and that, pursuant to 42 U.S.C. § 4072, this court has original exclusive jurisdiction over these claims. On January 14, 2000, Jamal filed a motion to remand the case to state court, claiming that, on the face of the complaint, he has made no allegations regarding the NFIA, and that, even if such allegations were properly before the court, the NFIA does not preempt state law claims and any interpretation of the NFIA is, at best, tangential to the outcome of this case.

III. Analysis

In a removal action, a district court is required to remand a case to state court if, at any time before final judgment, it determines that it lacks subject matter jurisdiction. See 28 U.S.C. § 1447(c). When the jurisdiction of the court is challenged, the party seeking to invoke federal jurisdiction has the burden of establishing the existence of subject matter jurisdiction. See Estate of Martineau v. ARCO Chem. Co., 203 F.3d 904, 910 (5th Cir. 2000); Stockman v. Federal Election Comm'n, 138 F.3d 144, 151 (5th Cir.1998); St. Paul Reinsurance Co., Ltd. v. Greenberg, 134 F.3d 1250, 1253 (5th Cir.1998); Frank v. Bear Stearns & Co., 128 F.3d 919, 921-22 (5th Cir.1997); Asociacion Nacional de Pescadores v. Dow Quimica, 988 F.2d 559, 563 (5th Cir.1993), cert. denied, 510 U.S. 1041, 114 S.Ct. 685, 126 L.Ed.2d 653 (1994). "The federal removal statute ... is subject to strict construction because a defendant's use of that statute deprives a state court of a case properly before it and thereby implicates important federalism concerns." Frank, 128 F.3d at 922; see 28 U.S.C. § 1441. "The removal statute ties the propriety of removal to the original jurisdiction of the federal district courts." Frank, 128 F.3d at 922. "Absent diversity of citizenship, removal is appropriate only for those claims within the federal question jurisdiction of the district courts." Id.; see 28 U.S.C. § 1331. "Federal question jurisdiction extends to `all civil actions arising under the Constitution, laws, or treaties of the United States.'" Frank, 128 F.3d at 922 (quoting 28 U.S.C. § 1331).

"Under the `well pleaded complaint' rule, ... a movant may not remove a case to federal court unless the plaintiff's complaint establishes that the cause of action arises under federal law." Id.; see Newton v. Capital Assur. Co., 209 F.3d 1302, 1304 (11th Cir.2000). "Courts will, however, typically look beyond the face of the complaint to determine whether removal is proper." Frank, 128 F.3d at 922 (citing Villarreal v. Brown Express, Inc., 529 F.2d 1219, 1221 (5th Cir.1976)); see Aquafaith Shipping, Ltd. v. Jarillas, 963 F.2d 806, 808 (5th Cir.), cert. denied, 506 U.S. 955, 113 S.Ct. 413, 121 L.Ed.2d 337 (1992). "A federal court may find that a plaintiff's claims arise under federal law even though the plaintiff has not characterized them as federal claims." Frank, 128 F.3d at 922 (citing Aquafaith Shipping, Ltd., 963 F.2d at 808; Uncle Ben's Int'l Div. of Uncle Ben's, Inc. v. Hapag-Lloyd Aktiengesellschaft, 855 F.2d 215, 217 (5th Cir.1988)). "Federal question jurisdiction under section 1331 extends to cases in which a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law." Id. (citing Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 27-28, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)); accord Newton, 209 F.3d at 1304.

Here, Jamal has alleged claims arising out of a flood insurance policy issued by TPCIC. "The National Flood Insurance Act of 1968 established a national flood insurance program that enables property owners to purchase insurance against flood risks at reasonable rates." Hanover Bldg. Materials, Inc. v. Guiffrida, 748 F.2d 1011, 1012 (5th Cir.1984); see 42 U.S.C. §§ 4001(a), (c), 4002(b); Flick v. Liberty Mut. Fire Ins. Co., 205 F.3d 386, 387 (9th Cir.2000); Van Holt v. Liberty Mut. Fire Ins. Co., 163 F.3d 161, 165 (3d Cir.1998); Gowland v. Aetna, 143 F.3d 951, 953 (5th Cir.1998); Till v. Unifirst Fed. Sav. & Loan Ass'n, 653 F.2d 152, 156 (5th Cir. 1981); West v. Harris, 573 F.2d 873, 880 (5th Cir.1978), cert. denied, 440 U.S. 946, 99 S.Ct. 1424, 59 L.Ed.2d 635 (1979). The program is currently operated by the Federal Emergency Management Agency ("FEMA"), which is authorized by statute to control the payment or disallowance of all flood insurance claims. See Flick, 205 F.3d at 389; Van Holt, 163 F.3d at 165; Gowland, 143 F.3d at 953; Berger v. Pierce, 933 F.2d 393, 395 (6th Cir.1991); Sandia Oil Co. v. Beckton, 889 F.2d 258, 259 (10th Cir.1989); Gibson v. American Bankers Ins. Co., 91 F.Supp.2d 1037, 1041 (E.D.Ky.2000). "The Act authorizes the Director of [FEMA] to `provide by regulation for general terms and conditions of insurability which shall be applicable to property owners eligible for flood insurance coverage under [the Act].'" Hanover Bldg. Materials, Inc., 748 F.2d at 1012 (quoting 42 U.S.C. § 4013(a)). FEMA, by regulation, promulgated the SFIP and provided for marketing and claims adjustment by private insurers operating as "Write-Your-Own" ("WYO") companies, which issue SFIPs in their own names. See Flick, 205 F.3d at 389; Gowland, 143 F.3d at 953; Gibson, 91 F.Supp.2d at 1041; Masoner v. First Community Ins. Co., 81 F.Supp.2d 1052, 1055 (D.Idaho 2000); 3608 Sounds Ave. Condominium Ass'n v. South Carolina Ins. Co., 58 F.Supp.2d 499, 502 (D.N.J.1999); Parsons Footwear, Inc. v. Omaha Property & Cas. Co., 19 F.Supp.2d 588, 589 (N.D.W.Va.1998); see also 44 C.F.R. §§ 61.13(f), 62.23(a).

As stated in the affidavit of Ken Montague ("Montague"), the claims manager for Electronic Data Systems, the company which oversees the operations of and processes all claims on TPCIC-issued SFIPs, TPCIC is a WYO carrier participating in the NFIP pursuant to the NFIA. The WYO program was created by FEMA in accordance with its authorization by the NFIA to "undertake any necessary arrangements to carry out the program of flood insurance" and to utilize private insurance companies to assist in marketing flood insurance coverage. 42 U.S.C. § 4071(a); see 44 C.F.R. §§ 61.13(f), 62.23; Newton, 209 F.3d at 1303; Flick, 205 F.3d at 389; Van Holt, 163 F.3d at 165; Masoner, 81 F.Supp.2d at 1055; Parsons Footwear, Inc., 19 F.Supp.2d at 589. While WYO carriers may issue SFIPs in their own names, they may not alter any substantive provisions of the SFIP without the written consent of the Federal Insurance Administrator. See 44 C.F.R § 62.23(c); Flick, 205 F.3d at 389; Van Holt, 163 F.3d at 165-66; Gowland, 143 F.3d at 953; Spence v. Omaha Indem. Ins. Co., 996 F.2d 793, 795 (5th Cir.1993); Gibson, 91 F.Supp.2d at 1041; Parsons Footwear, Inc., 19 F.Supp.2d at 590. "By statute, these [WYO] companies are fiscal agents of the United States." Gowland, 143 F.3d at 953; see 42 U.S.C. § 4071; Van Holt, 163 F.3d at 165; Masoner, 81 F.Supp.2d at 1055; 3608 Sounds Ave. Condominium Ass'n, 58 F.Supp.2d at 502. Payments made by a WYO carrier under a SFIP are a direct charge on the United States Treasury. See 42 U.S.C. § 4017(d); 44 C.F.R. Pt. 62, App. A., Art. IV(A), VII(B); Flick, 205 F.3d at 391-92; Van Holt, 163 F.3d at 165; Gowland, 143 F.3d at 953; Masoner, 81 F.Supp.2d at 1055; 3608 Sounds Ave. Condominium Ass'n, 58 F.Supp.2d at 502; Parsons Footwear, Inc., 19 F.Supp.2d at 590.

Montague's affidavit confirms that the flood insurance policy issued by TPCIC to Jamal is the standard SFIP promulgated under the NFIA. It is well recognized that "[f]ederal law governs disputes over coverage arising under the National Flood Insurance Act of 1968." Hanover Bldg. Materials, Inc., 748 F.2d at 1013; see Newton, 209 F.3d at 1304-05; Flick, 205 F.3d at 390; McHugh v. United Servs. Auto. Ass'n, ...

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