Melahn v. Pennock Ins., Inc.

• Decision Date: 05 June 1992
• Docket Number: No. 91-2316,91-2316
• Citation: 965 F.2d 1497
• Parties: Lewis E. MELAHN, Director of the Missouri Division of Insurance and Receiver of Transit Casualty Company, Appellee, v. PENNOCK INSURANCE, INC., Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1497

965 F.2d 1497

Lewis E. MELAHN, Director of the Missouri Division of Insurance and Receiver of Transit Casualty Company, Appellee, v. PENNOCK INSURANCE, INC., Appellant.

No. 91-2316.

United States Court of Appeals Eighth Circuit.

Submitted Jan. 9, 1992.

Decided June 5, 1992.

Bonnie Brigance Leadbetter (argued), Philadelphia, Pa. (Nicholas M. Monaco and Keith A. Wenzel, Jefferson City, Mo., on the brief), for appellant.

James C. Owen (argued), Chesterfield, Mo. (Todd A. Massa, Richard H. Ralston, Thomas M. Franklin, and Diane P. Duvall, on the brief), for appellee.

Before ARNOLD, Chief Judge, and McMILLIAN, Circuit Judge; and WELLFORD, ^* Senior Circuit Judge.

WELLFORD, Senior Circuit Judge.

The plaintiff, Lewis E. Melahn, as receiver of Transit Casualty Co. (Transit), filed a motion in the Circuit Court of Cole County, Missouri, on November 7, 1990, to show cause why defendant, Pennock Insurance, Inc. (Pennock), had not filed a response to his demand for $362,763.00, which he claimed to be due. Transit is an insolvent insurance company placed in receivership by the state of Missouri under its system of laws governing insurance company failures. The Missouri court, on November 9, 1990, entered a show cause order as requested and presumed jurisdiction based on statements by plaintiff's counsel. ¹ There is a serious question of jurisdiction over Pennock under Missouri's long arm statute.

The receiver alleged that Pennock owed Transit unearned commissions on premiums due but not collected and on premiums collected but not remitted. In response to this complaint, Pennock removed the case, on November 23, 1990, to federal court pursuant to 28 U.S.C. § 1441(a) and then moved, on December 4, to dismiss for lack of personal jurisdiction. ² Some eighty days after notice of removal, the plaintiff moved to remand the case to state court on the basis of abstention under Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943), claiming that the special administrative system established under Missouri law for the liquidation of defunct insurers, such as Transit, would be frustrated by the exercise of federal jurisdiction. The district court granted the plaintiff's motion to remand without ruling on the defendant's motion to dismiss for lack of personal jurisdiction, bringing about defendant's appeal.

After removal to federal court and before seeking a remand based on abstention, plaintiff pursued a similar cause of action, on December 3, 1990, in Pennsylvania state court against Pennock. Plaintiff initiated this state court action shortly before Pennock moved to dismiss for lack of personal jurisdiction in Missouri based on a showing that it was not licensed to do business in Missouri and that it had operated no business there. Plaintiff claimed, however, that "Pennock was engaged in the business of acting as insurance agent for Transit." Pennock maintained that the attempted exercise of jurisdiction in Missouri would violate its due process rights under International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), and its progeny. In a supplemental memorandum to the district court, Pennock noted that the plaintiff filed "an identical action" in Pennsylvania which it asserted should estop plaintiff from proceeding further in Missouri.

Melahn's "equity" action against Pennock in the Delaware County, Pennsylvania state court claimed that Pennock had collected premiums on Transit insurance policies and that Pennock was "obligated to account for and pay over such amount to the Receiver[ ]." Melahn sought a monetary judgment of $140,000 in premiums and unearned commissions, plus costs, expenses, "statutory interest which has accrued," and an accounting. ³ Plaintiff also sought an injunction and extraordinary relief in Pennsylvania. He made no reference, however, to any criminal penalty. In March of 1991, Melahn filed extensive interrogatories and requests for production of documents seeking substantial discovery about transactions between the parties in Pennsylvania, including "the total amount claimed by Pennock to be owing." This was after the receiver's motion to remand to the Missouri state court.

The district court granted, on May 9, 1991, plaintiff's motion for remand, but did not rule on defendant's motion to dismiss for lack of personal jurisdiction. In granting the motion to remand, the court acknowledged that "[a]bstention, although discretionary, should be applied only in rare circumstances." (Citing Bilden v. United Equitable Ins. Co., 921 F.2d 822, 826-27 (8th Cir.1990)). Nevertheless, the court based its decision to abstain on two of the four relevant factors set out in Grimes v. Crown Life Ins. Co., 857 F.2d 699 (10th Cir.1988), cert. denied, 489 U.S 1096, 109 S.Ct. 1568, 103 L.Ed.2d 934 (1989):

(1) the action was "based entirely on a complex area of state law; [and] the sole basis for removal rest[ed] in diversity jurisdiction."

(2) "the state[ ] [had an] interest in supervising a single action within a state forum to regulate insurance practice." (Citing Mo.Ann.Stat. § 375.720 which provides criminal penalties for "neglect or refusal to deliver property belonging to an insolvent insurer.") ⁴

On our own motion, we ordered the parties to file additional letter briefs regarding appellate jurisdiction and whether 28 U.S.C. § 1447(d) applies to this case. We consider these jurisdictional issues in conjunction with the merits of abstention in the appeal.

I. APPELLATE JURISDICTION

Pennock argues that appellate review is proper under the collateral order doctrine. See Foster v. Chesapeake Ins. Co., Ltd., 933 F.2d 1207 (3d Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 302, 116 L.Ed.2d 245 (1991); Pelleport Investors, Inc. v. Budco Quality Theatres, Inc., 741 F.2d 273, 276-78 (9th Cir.1984). In the alternative, Pennock asks the court to treat its notice of appeal as a petition for mandamus under Fed.R.Civ.P. 21. ⁵ Plaintiff counters that direct appeal is improper and that although mandamus may be the only means by which the case may proceed, it should not be applied in this case.

Whether appellate jurisdiction is present in this case under § 1447(d) depends, in part, upon interpretation of 28 U.S.C. § 1447(c), which provides:

A Motion to Remand the case on the basis of any defect in removal procedure must be made within thirty (30) days after the filing of the Notice of Removal under section 1446(a). If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.

The Supreme Court discussed the nature and circumstances of a grant of mandamus:

A "traditional use of the writ in aid of appellate jurisdiction both at common law and in the federal courts has been to confine an inferior court to a lawful exercise of its prescribed jurisdiction or to compel it to exercise its authority when it is its duty to do so." Roche v. Evaporated Milk Assn., 319 U.S. 21, 26 [63 S.Ct. 938, 941, 87 L.Ed. 1185] (1943); Ex parte Peru, 318 U.S. 578, 584 [63 S.Ct. 793, 797, 87 L.Ed. 1014] (1943); Bankers Life & Cas. Co. v. Holland, 346 U.S. 379, 382 [74 S.Ct. 145, 147, 98 L.Ed. 106] (1953). "Repeated decisions of this court have established the rule ... that the writ will lie in a proper case to direct a subordinate Federal court to decide a pending cause," Insurance Co. v. Comstock, 16 Wall. 258, 270 (1873), or to require "a Federal court of inferior jurisdiction to reinstate a case, and to proceed to try and adjudicate the same." McClellan v. Carland, 217 U.S. , at 280 [30 S.Ct. 501, 504, 54 L.Ed. 762 (1910) ].

In accordance with the foregoing cases, this Court has declared that because an order remanding a removed action does not represent a final judgment reviewable by appeal, "[t]he remedy in such a case is by mandamus to compel action, and not by writ of error to review what has been done." Railroad Co. v. Wiswall, 23 Wall. , at 508 [23 L.Ed. 103 (1874) ]. Absent statutory prohibitions, when a remand order is challenged by a petition for mandamus in an appellate court, "the power of the court to issue the mandamus would be undoubted." In re Pennsylvania Co., 137 U.S. , at 453 [11 S.Ct. 141, 141, 34 L.Ed. 738 (1890) ]. There is nothing in our later cases dealing with the extraordinary writs that leads us to question the availability of mandamus in circumstances where the district court has refused to adjudicate a case, and has remanded it on grounds not authorized by the removal statutes.

Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S. 336, 352-53, 96 S.Ct. 584, 593-94, 46 L.Ed.2d 542 (1976).

We have recognized that mandamus is a "drastic" remedy "to be invoked only in extraordinary situations." In re Life Ins. Co. of North America, 857 F.2d 1190, 1192 (8th Cir.1988) (quoting Allied Chemical Corp. v. Daiflon, Inc., 449 U.S. 33, 34, 101 S.Ct. 188, 190, 66 L.Ed.2d 193 (1980) (per curiam)). We granted mandamus in that case, however, where the district court had erroneously remanded a pre-empted cause of action to a Missouri state court. We observed that "the remand order issued for a reason other than those set forth in § 1447(c) under Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 108 S.Ct. 614, 98 L.Ed.2d 720 (1988). Accordingly, we are not barred from review by mandamus under Thermtron or § 1447(d)." Id. at 1193 n. 1. As in Life Ins. Co. of North America, we deem that Pennock has demonstrated "that mandamus is the only adequate means to attain the relief it seeks." Id. at 1193 (footnote omitted).

[O]nly remand orders issued under § 1447(c) and invoking the grounds specified therein--that removal was improvident and without jurisdiction--are immune from review under § 1447(d). ⁶

Thermtron, 423 U.S. at 346, 96 S.Ct. at 590.

There is authority for the proposition that this type of case may proceed if treated as a petition for mandamus. See e.g., Cohill, 484 U.S. at 343, 108 S.Ct. at 614; The...