KCOM, Inc. v. Emp'rs Mut. Cas. Co.

• Decision Date: 19 July 2016
• Docket Number: No. 15-1218,15-1218
• Parties: KCOM, Inc., a Colorado corporation d/b/a Airport Value Inn & Suites, Plaintiff–Appellee, v. Employers Mutual Casualty Company, an Iowa corporation, Defendant–Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

829 F.3d 1192

KCOM, Inc., a Colorado corporation d/b/a Airport Value Inn & Suites, Plaintiff–Appellee

v.Employers Mutual Casualty Company, an Iowa corporation, Defendant–Appellant.

No. 15-1218

United States Court of Appeals, Tenth Circuit.

FILED July 19, 2016

L. Kathleen Chaney (Max S. Gad with her on the briefs), Lambdin & Chaney, LLP, Denver, Colorado, for Defendant–Appellant.

George A. Vaka, Vaka Law Group, Tampa Florida (Nancy A. Lauten, Vaka Law Group, Tampa, Florida, and William C. Harris and Brandee B. Bower, Merlin Law Group, P.A., Denver, Colorado, with him on the brief), for Plaintiff–Appellee.

Before BRISCOE, McKAY, and BALDOCK, Circuit Judges.

BALDOCK

, Circuit Judge.

The threshold question presented in this state law diversity action is whether we have appellate jurisdiction over the district court's non-final order denying confirmation of a property loss appraisal. We do not, and dismiss the appeal.

I.

In June 2012, a hailstorm damaged Plaintiff KCOM's motel. Soon a dispute arose between KCOM, the insured, and Defendant Employers Mutual Casualty (EMC), the insurer, over the extent of the damage. In October 2012, following receipt of an inspection report, KCOM submitted a proof of loss of $631,726.87. EMC admitted coverage but not the amount of loss. Dissatisfied, KCOM invoked the insurance contract's appraisal provision:

If we [EMC] and you [KCOM] disagree on the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. ... The appraisers will state separately the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:

a. Pay its chosen appraiser; and

b. Bear the other expenses of the appraisal and umpire equally.

If there is an appraisal, we [EMC] will still retain our right to deny the claim.

Aplt's App. at 45.

During the appraisal process, which according to KCOM had gone awry (here the details are unimportant), KCOM sued EMC in Colorado state court seeking damages arising from EMC's allegedly unreasonable delay in failing to pay the full amount due under the policy. Count I of KCOM's complaint alleged EMC's breach of contract, Count II alleged unreasonable delay and denial of benefits, and Count III alleged bad faith breach of an insurance contract. EMC removed the suit to federal district court on the basis of diversity jurisdiction. The district court stayed the matter pending completion of the appraisal process.

In October 2014, the umpire and EMC's appraiser (recall EMC had retained the latter pursuant to the policy's appraisal provision) agreed to an appraisal award of $208,445.57. KCOM objected to the award and refused EMC's tender. When KCOM refused to dismiss its lawsuit, EMC filed a motion to confirm the appraisal award in the district court. In its motion, EMC posited that the appraisal award was subject to the provisions of the Colorado Uniform Arbitration Act (CUAA), and therefore asked the court to confirm the award pursuant to Colo. Rev. Stat. § 13–22–222

. KCOM opposed EMC's motion, and in its own motion for partial summary judgment asked the court to hold the CUAA inapplicable to the appraisal process and declare the appraisal award invalid due to procedural improprieties. In the alternative, KCOM moved to vacate the appraisal award pursuant to CUAA § 13–22–223. In an oral ruling delivered in June 2015, the district court summarily denied both parties' motions.

My ruling is that ...Colorado's Uniform Arbitration Act does not apply and that this [the policy's appraisal clause] is a contractual provision and it is a part of the overall dispute between the parties concerning the effects of the storm, the original hail storm, and then subsequent events.

* * *

[I]n this case in particular there are issues about what happened ... in the course of the appraisal. And—so the motion to confirm the award is denied.

* * *

And ... this partial summary judgment I'm denying that, I mean that's simply in part a response to the motion to confirm the award. ... [M]y view is that we are talking about a contract; it has an appraisal provision in it. Whether that contract provision affects the amount of recovery in this case is a matter to be decided.

And the issues concerning what happened during the appraisal process are factual questions that a jury will decide and not this Court.

Aplt's App. at 213–14.

A week later EMC filed a notice of appeal from the denial of its motion to confirm the appraisal award. Surprisingly, EMC cited the CUAA as the basis for federal appellate jurisdiction, telling us that “[p]ursuant to C.R.S. § 13–22–228

, an order denying confirmation of an award is immediately appealable.” EMC told us the same thing in its docketing statement. As a result, the Clerk of this Court, prior to briefing, entered an order directing EMC to “explain [ ] any federal law or rules that would permit the Court to exercise jurisdiction over this attempted appeal.” EMC responded that because the appraisal process outlined in the insurance policy sufficiently resembled classic arbitration, the process fell within the purview of the Federal Arbitration Act (FAA). And the FAA, specifically 9 U.S.C. § 16(a)(1)(D), provides for an interlocutory appeal from the denial of a motion to confirm an arbitration award. The Clerk referred the jurisdictional question to this panel.

II.

Apparently having learned little from the Clerk's jurisdictional inquiry, EMC in its opening brief falls back into the error of its old ways and claims CUAA § 13–22–228

provides us with jurisdiction over its interlocutory appeal. EMC's jurisdictional statement makes no reference to the FAA or other federal law. Instead, it reads: “This Court has jurisdiction over this appeal because appraisals pursuant to an insurance policy are arbitration pursuant to the [CUAA]. Consistent with the CUAA, EMC filed a motion to confirm the appraisal award, which was denied. The denial of a motion to confirm award is immediately appealable pursuant to C.R.S. § 13–22–228(1)(c).” Aplt's Br. at 2. Later, EMC reaffirms its view in the argument section of its brief: “The CUAA, rather than the FAA, is the applicable statute to rely on because, from the outset, this has been a diversity action.” Id. at 43. Only in the final paragraph of its argument does EMC provide lip service to the FAA: “[T]he analysis under the FAA is the same as under the CUAA. That is, if the FAA only applies, that statute, too, states that an appeal may be taken from an order denying confirmation of an award.” Id. at 44.

Let us begin our critique of EMC's faulty jurisdictional analysis by pointing out the obvious. As an inferior federal court established by Congress pursuant to Article III of the United States Constitution, we exercise limited subject matter jurisdiction. This is axiomatic. Inferior Article III courts “may only hear cases when empowered to do so by the Constitution and by act of Congress.” Lindstrom v. United States , 510 F.3d 1191, 1193 (10th Cir. 2007)

(emphasis added) (quoting Radil v. Sanborn Western Camps, Inc. , 384 F.3d 1220, 1225 (10th Cir. 2004) ); see also Mohawk Indus., Inc. v. Carpenter , 558 U.S. 100, 115, 130 S.Ct. 599, 175 L.Ed.2d 458 (2009) (Thomas, J., concurring in part) (“The scope of federal appellate jurisdiction is a matter the Constitution expressly commits to Congress, see Art. I, § 8, cl. 9 ....”). Simply put, a state legislature has no authority to prescribe federal court jurisdiction in diversity matters or otherwise. In Aspen Orthopaedics & Sports Med., LLC v. Aspen Valley Hosp. Dist. , 353 F.3d 832, 837 (10th Cir. 2003), we explained that where the underlying substantive claim is based on state law, a proper Erie analysis establishes that federal rather than state law controls the appealability of the district court's order.¹ Most assuredly, EMC's argument that Colorado state law provides this Federal Court with jurisdiction over its interlocutory appeal is a losing one.

We may exercise jurisdiction over EMC's present appeal only if federal law empowers us to do so. This was the entire point of the Clerk's inquiry. But apart from telling us the FAA can save the day because it is effectively the same law as the CUAA, EMC's jurisdictional argument is devoid of any substantive analysis. EMC's analysis amounts to little more than the claim that the appraisal process in this case is the same thing as classic arbitration, followed by its claim that the district court's order denying confirmation of the appraisal award is immediately appealable whatever the source of our jurisdiction because federal and state law are interchangeable. We disagree with the latter claim and express no opinion on the former. At this point, EMC is spared a summary dismissal only because we have an independent obligation to examine our own subject matter jurisdiction “even if the defendant has made no efforts—or very poor ones—to convince us.” Brown v. Buhman , 822 F.3d 1151, 1167 n. 17 (10th Cir. 2016)

; see also Ashcroft v. Iqbal , 556 U.S. 662, 671, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (“Subject matter jurisdiction cannot be forfeited or waived and should be considered when fairly in doubt.”).

III.CUAA § 13–22–222

, under which EMC brought its motion to confirm, reads in its entirety:

After a party to an arbitration proceeding receives notice of an award, the party may make a motion to the court for an order confirming the award at which time the court shall issue a confirming order unless the award is modified or corrected pursuant to § 13–22–220 or § 13–22–224 or is vacated pursuant to § 13–22–223.

Colo. Rev. Stat. § 13–22–222

(emphasis added). By comparison, FAA § 9 provides for confirmation of an arbitration award under much narrower circumstances:

If the parties in their agreement have agreed that a judgment of the court shall be entered upon the

...