Melder v. Allstate Corp.

• Decision Date: 16 March 2005
• Docket Number: No. 04-30085.,04-30085.
• Citation: 404 F.3d 328
• Parties: Marylyn MELDER; Anginette Williams, wife of/and; Robert Williams; Trina Merridy; Iris Williams, wife of/and; Eric Williams; Leslie Faye Sanders; Willie J. Neapollioun, Jr.; Diana Barnes, wife of/and; Eugene Barnes; Kimberly Sanders, wife of/and; Dale J. Sanders; Nicole Lewis, wife of/and; Kendall Lewis; Gloria Jackson, wife of/and; Vincent Jackson; Laverne McGill; Tamica Cryer, wife of/and; Lionel Cryer; Lillie Bunch, individually and on behalf of all those individuals similarly situated, Plaintiffs-Appellants, v. ALLSTATE CORP.; Allstate Insurance Co.; Allstate Indemnity Co.; Allstate Life Insurance Co.; State Farm Mutual Automobile Insurance Co.; State of Louisiana, through the Louisiana Insurance Rating Commission, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

404 F.3d 328

Marylyn MELDER; Anginette Williams, wife of/and; Robert Williams; Trina Merridy; Iris Williams, wife of/and; Eric Williams; Leslie Faye Sanders; Willie J. Neapollioun, Jr.; Diana Barnes, wife of/and; Eugene Barnes; Kimberly Sanders, wife of/and; Dale J. Sanders; Nicole Lewis, wife of/and; Kendall Lewis; Gloria Jackson, wife of/and; Vincent Jackson; Laverne McGill; Tamica Cryer, wife of/and; Lionel Cryer; Lillie Bunch, individually and on behalf of all those individuals similarly situated, Plaintiffs-Appellants, v. ALLSTATE CORP.; Allstate Insurance Co.; Allstate Indemnity Co.; Allstate Life Insurance Co.; State Farm Mutual Automobile Insurance Co.; State of Louisiana, through the Louisiana Insurance Rating Commission, Defendants-Appellees.

No. 04-30085.

United States Court of Appeals, Fifth Circuit.

March 16, 2005.

Tom W. Thornhill (argued), Thornhill Law Firm, Slidell, LA, Kenneth M. Carter, Carter & Cates, New Orleans, LA, Michael C. Palmintier, deGravelles, Palmintier, Holthaus & Fruge, Cleo Fields, The Fields Law Firm, Baton Rouge, LA, for Plaintiffs-Appellants.

Judy Y. Barrasso (argued), Celeste Ruth Coco-Ewing, Barrasso, Usdin, Kupperman, Freeman & Sarver, New Orleans, LA, for Allstate Corp., Allstate Ins. Co., Allstate Indem. Co. and Allstate Life Ins. Co.

Wayne J. Lee (argued), Rachel Wendt Wisdom, Samantha Paula Griffin, Stone, Pigman, Walther & Wittmann, New Orleans, LA, for State Farm Mut. Auto. Ins. Co.

Faye Dysart Morrison, Simoneaux, Carleton, Dunlap & Olinde, Baton Rouge, LA, for State of LA.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before BARKSDALE, GARZA and DeMOSS, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

For this 28 U.S.C. § 1292(b) interlocutory appeal from a remand-denial, where diversity-jurisdiction removal was premised on claimed fraudulent joinder, at issue is whether there is any reasonable basis for predicting the non-diverse defendant could be liable under Louisiana law and, therefore, not fraudulently joined. (Our court now refers to "fraudulent joinder" as "improper joinder". See Smallwood v. Illinois Central Railroad Co., 385 F.3d 568 n. 1 (5th Cir.2004)(en banc).) AFFIRMED and REMANDED.

I.

Plaintiffs, all Louisiana residents, individually and on behalf of a putative class of homeowner and automobile policyholders, filed this action in Louisiana state court, primarily claiming: non-resident defendants State Farm and Allstate violated Louisiana law and the Louisiana Constitution in setting insurance rates using credit-scoring formulas that had a discriminatory impact based on race and/or the economic condition of the area in which the property to be insured is located; and resident defendant Louisiana Insurance Rating Commission (LIRC) failed in its duty to regulate insurance rates by allowing State Farm and Allstate to use those formulas. Allstate and State Farm removed this action to federal court under 28 U.S.C. § 1441, claiming complete diversity pursuant to 28 U.S.C. § 1332 because the sole non-diverse defendant, LIRC, is improperly joined. Plaintiffs moved for remand to state court, claiming lack of subject matter jurisdiction. Following a hearing, the district court denied the motion, ruling Plaintiffs did not establish the requisite possibility of liability for LIRC.

II.

For this 28 U.S.C. § 1292(b) appeal, we review de novo the remand-denial. E.g., S.W.S. Erectors, Inc. v. Infax, Inc., 72 F.3d 489, 492 (5th Cir.1996). The removing party has the burden of establishing improper joinder by showing: Plaintiffs' inability to establish a claim under state law against the non-diverse defendant; or actual fraud in pleading jurisdictional facts. Smallwood, 385 F.3d at 573 (citing Travis v. Irby, 326 F.3d 644, 646-47 (5th Cir.2003)). Defendants do not claim the latter. Therefore, at issue is whether Defendants have established there is no reasonable basis Plaintiffs might be able to recover under Louisiana state law against the non-diverse defendant, LIRC. See id. (Contrary to the dissent, in making this determination for the claim against LIRC, we do not consider the Eleventh Amendment or questions of jurisdiction that do not bear on whether a claim can be established under state law against LIRC. Obviously, to do otherwise would fly in the face of the purpose, and controlling law, for not allowing improper joinder to defeat federal jurisdiction. See 28 U.S.C. § 1441(b) (removal permitted if "none of the parties in interest properly joined... is a citizen of the State in which such action is brought"; emphasis added). As discussed below, only Allstate and State Farm were "properly joined".)

For this issue, two points bear on Plaintiffs' possible recovery: whether, as required, they exhausted their administrative remedies provided by the Louisiana Insurance Code; and whether LIRC is entitled to state law immunity for discretionary acts for the rate setting functions at issue here. (For the latter point, Plaintiffs assert that, even if LIRC is entitled to immunity on damages, the immunity statute does not apply to claims for injunctive and declaratory relief. A review of the pleadings, however, reveals Plaintiffs did not request injunctive or declaratory relief against LIRC. In any event, for the reasons that follow, we need not decide whether LIRC is entitled to immunity. The failure-to-exhaust issue was properly raised (obviously, contrary to the dissent, it was not necessary to assert it pre-removal in state court) and is the most definite basis for determining improper joinder.)

"For reasons stated on the record", the district court relied on discretionary immunity in denying Plaintiffs' remand motion. Melder v. Allstate, No. 03-2499 (E.D. La. 11 December 2003). Oral argument on the remand motion also included inter alia, failure to exhaust administrative remedies. (Allstate also raised it in its Rule 12(b)(6) motion to dismiss.) Neither the district court's certification for interlocutory appeal nor our court's order granting it specify a controlling question. The failure to do so does not restrict the scope of our review, however, of the remand-denial order. For an appeal under 28 U.S.C. § 1292(b), we may "address any issue fairly included within the certified order because it is the order that is appealable, and not the controlling question identified by the district court". Yamaha Motor Corp., U.S.A. v. Calhoun, 516 U.S. 199, 205, 116 S.Ct. 619, 133 L.Ed.2d 578 (1996)(internal quotation omitted)(first emphasis added; second emphasis in original). Therefore, because exhaustion of administrative remedies was raised in district court and State Farm and Allstate presented the point in their briefs here, we may consider it.

The Louisiana Constitution vests the Louisiana Commissioner of Insurance with authority to regulate the business of insurance. LA. CONST. art. IV. Authority over insurance rates, regulations, and all other insurance matters is vested in the Department of Insurance under the Commissioner. See LA. REV. STAT. § 36:381 et seq. The Commissioner is charged with "protection of the public interest in the realm of insurance". Doerr v. Mobil Oil Corp., 774 So.2d 119, 134 (La.2000) (citing LA. CONST. art. IV; LA. REV. STAT. § 22:2).

The Louisiana Administrative Code provides a detailed administrative process through which parties may seek relief for violations of Louisiana insurance statutes and regulations. See LA. ADMIN. CODE tit. 37, § 1101 et. seq. The practice and procedure rules, for example, provide for a hearing before the Commissioner, following a written petition or complaint, § 1103; at the hearing, parties may be represented by counsel, present evidence, and examine witnesses, §§ 1125-1133; the Commissioner has the power to issue subpoenas to obtain witnesses or documentary evidence necessary for the hearing, § 1121; within 30 days following the hearing, the Commissioner is to enter a written decision and order, § 1139; and that decision is appealable to a designated state district court, § 1143. The Commissioner is also authorized, without petition or application by any insured, to investigate and punish unfair practices in the business of insurance, including unfair discrimination in setting rates. LA.REV.STAT. § 22:1214(7)(b).

The Louisiana legislature established LIRC, which is under the control and direction of the Commissioner, who serves as its ex officio chairperson. § 22:1401. LIRC was created "to promote the public welfare by regulating insurance rates to the end that they shall not be excessive, inadequate or unfairly discriminatory". § 22:1402 (emphasis added). (Insurance rates are discriminatory, of course, through risk factors such as age and gender. For example, it is common knowledge that, in general, automobile insurance rates for teenaged boys are higher than for middle-aged women. Accordingly, the statute mandates rates not being unfairly discriminatory.) Rates include the premium to be charged, including any related fees, or the elements and factors forming the basis for the determination of the premium. § 22:1404.

Insurers are required to file insurance rates with LIRC; it reviews them to determine whether they are reasonable and not unfairly discriminatory. Id. Insurers are prohibited from charging a rate other than one approved by the LIRC. § 22:1406(a). An insured may challenge a rate applicable to his home or automobile by filing a written complaint with the LIRC, requesting a hearing. § 22:1408(D). Further, consistent with the earlier description of the Commissioner's authority, the Commissioner may investigate rates at any time; his authority is not "circumscribed and limited to functions which do not affect rates. Rates are the function and concern of both the [LIRC] and the commissioner". Employers-Commercial Union Ins. Co. v. Bernard, 303 So.2d 728, 732-33 (La.1974).

Plaintiffs allege they were charged automobile and homeowners...