Owen v. Crop Hail Management

• Decision Date: 18 January 1994
• Docket Number: No. 92-0545-CV-W-1.,92-0545-CV-W-1.
• Citation: 841 F. Supp. 297
• Parties: William OWEN III, Plaintiff, v. CROP HAIL MANAGEMENT, Defendant.
• Court: U.S. District Court — Western District of Missouri

841 F. Supp. 297

William OWEN III, Plaintiff, v. CROP HAIL MANAGEMENT, Defendant.

No. 92-0545-CV-W-1.

United States District Court, W.D. Missouri, W.D.

January 18, 1994.

Dennis A. Rolf, Concordia, MO, for plaintiff.

Michael Steele, Sherman, Taff, Kansas City, MO, for defendant.

ORDER

WHIPPLE, District Judge.

The court, on September 22, 1992, referred the present case to Magistrate Robert Larsen. Judge Larsen asks this court to review its August 11, 1992 summary denial of plaintiff's Motion to Remand the case to state court. The court agrees that the Motion to Remand deserves more discussion and therefore amends its August 11, 1992 decision. The court will deny the Motion to Remand for the reasons stated below.

I. Background

Plaintiff William Owen III farms in Lafayette County, Missouri. Defendant Crop Hail Management is a Montana corporation which sells and services multiple peril crop insurance. Crop Hail Management's program is offered under a Standard Reinsurance Agreement between the Western National Mutual Insurance Company and the United States Department of Agriculture, Federal Crop Insurance Corporation (FCIC). Crop Hail Management serves as an agent for Western National Mutual Insurance Company and offers the multiple peril crop insurance policies that the FCIC reinsures.

In 1991, Owen applied for a multiple peril crop insurance policy with Crop Hail Management to cover Owen's corn and soybean crops for that year. Crop Hail Management issued and the FCIC reinsured the policy. Owen filed a claim for soybean losses after the harvest of his soybean crop, but Crop Hail Management denied the claim.

Owen filed a complaint against Crop Hail Management in the Associate Circuit Court of Lafayette County, Missouri, on May 22, 1992. Owen alleged that Crop Hail Management's refusal to pay him for losses under the insurance policy was vexatious therefore entitling Owen to punitive damages and reasonable attorney fees as well as compensatory damages. The dispute involves the interpretation of the insurance policy between Owen and Crop Hail Management. Crop Hail Management removed the case to this court on June 19, 1992, asserting subject matter jurisdiction under both federal question, 28 U.S.C. § 1331, and diversity jurisdiction, 28 U.S.C. § 1332. Crop Hail Management now concedes the court does not have diversity jurisdiction, but still asserts that a federal question exists. Owen asks this court to remand the case to state court.

II. Motion to Remand

A. Well-Pleaded Complaint Rule

If Owen could not originally file this case in federal court, then this court must remand the case to state court. 28 U.S.C. §§ 1441(a) & 1447(c). See also, Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429, 96 L.Ed.2d 318 (1987) ("Only state court actions that originally could have been filed in federal court may be removed to federal court by the defendant."). The court does not have diversity or supplemental jurisdiction over this case, 28 U.S.C.A. §§ 1332 & 1367, but this court does have federal question jurisdiction over cases originally filed in this court which involve the Federal Crop Insurance Act. 28 U.S.C. § 1331.

Crop Hail Management argues that the Federal Crop Insurance Act, 7 U.S.C. §§ 1501-1520, (the Act) preempts Owen's state law claims thus, Crop Hail Management is using the Act as a defense to Owen's claims. Such a tactic usually violates the well-pleaded complaint rule. The well-pleaded complaint rule requires plaintiff to raise a federal question in the complaint. When a defendant raises a federal question "as a defense, it does not appear on the face of a well-pleaded complaint, and, therefore, does not authorize removal to federal court." Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 107 S.Ct. 1542, 1546, 95 L.Ed.2d 55 (1987). A defense or anticipatory defense raising a federal question violates the well-pleaded complaint rule and thus, federal question jurisdiction is usually improper. Phillips Petroleum Co. v. Texaco, Inc., 415 U.S. 125, 128, 94 S.Ct. 1002, 1004, 39 L.Ed.2d 209 (1974). "The rule makes the plaintiff the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law." Caterpillar, 482 U.S. at 392, 107 S.Ct. at 2429.

One corollary to the well-pleaded complaint rule, however, is complete preemption. The United States Supreme Court holds that where a federal statute so extensively regulates an area that it does not leave any room for state law to supplement it, a defendant may properly remove a case from state court even though the federal question is raised as a defense. Id. at 393-99, 107 S.Ct. at 2430-33 (collective bargaining contracts, but not individual employment contracts under the Labor Management Relations Act); Metropolitan Life, 481 U.S. at 67, 107 S.Ct. at 1548 (issues under § 502(a) of the Employee Retirement Income Security Act). See also, Wisconsin Public Intervenor v. Mortier, ___ U.S. ___, 111 S.Ct. 2476, 2481, 115 L.Ed.2d 532, 542-43 (1991) (The Court defined complete preemption as regulating an area so pervasively that "Congress left no room for the States to supplement it.").

Various forms of preemption exist, but to meet the corollary to the well-pleaded complaint rule, the Act must completely preempt state law so that it occupies the entire field of regulation rather than simply preempting inconsistent state law. Mortier, ___ U.S. at ___, 111 S.Ct. at 2482, 115 L.Ed.2d at 543 ("Even when Congress has not chosen to occupy a particular field, pre-emption may occur to the extent that state and federal law actually conflict."). Unless the Act completely preempts state law thereby meeting the corollary to the well-pleaded complaint rule, the court will not have federal question jurisdiction over this case and must remand it to the Associate Circuit Court of Lafayette County, Missouri. 28 U.S.C. § 1447(c) ("If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded."). See also, Jader v. Principal Mut. Life Ins. Co., 925 F.2d 1075, 1077 (8th Cir.1991) ("Federal courts are courts of limited jurisdiction and the `threshold requirement in every federal case is jurisdiction.'") (citation omitted).

If the Act completely preempts state law then this court retains jurisdiction, but if not, the court must remand the case. Neither the United States Supreme Court nor the Eighth Circuit address the issue of whether the Act completely preempts state law, but both provide this court with some guidance.

B. Complete Preemption

The United States Supreme Court holds that this court must look to the intent of Congress in determining if the federal scheme so completely preempts state law to allow Crop Hail Management to remove the case. Metropolitan Life, 481 U.S. at 66, 107 S.Ct. at 1547-48. Specifically, the court must determine if "Congress has clearly manifested an intent to make causes of action ... removable to federal court." Id. The Eighth Circuit holds that courts must also determine if the federal scheme provides a civil enforcement provision under which a plaintiff can assert an action and must look to the history and purpose of the statute in determining if the federal scheme completely preempts state law. Deford v. Soo Line R.R. Co., 867 F.2d 1080, 1086 (8th Cir.), cert. denied, 492 U.S. 927, 109 S.Ct. 3265, 106 L.Ed.2d 610 (1989).

The United States Supreme Court has found complete preemption in only three areas: the Labor Management Relations Act, the Employee Retirement Income Security Act and some areas of American-Indian affairs. Caterpillar, 482 U.S. at 393-99, 107 S.Ct. at 2430-33 (collective bargaining contracts, but not individual employment contracts under the Labor Management Relations Act); Metropolitan Life, 481 U.S. at 67, 107 S.Ct. at 1548 (issues under § 502(a) of the Employee Retirement Income Security Act); Oneida Indian Nation v. County of Oneida, 414 U.S. 661, 675, 94 S.Ct. 772, 781, 39 L.Ed.2d 73 (1974) (possession of Indian tribal lands). The Eighth Circuit expands the list of federal schemes that completely preempt state laws only slightly.¹ At best then, the complete preemption standard is a difficult one to meet. Indeed, two Justices of the United States Supreme Court caution that:

our decision should not be interpreted as adopting a broad rule that any defense premised on congressional intent to preempt state law is sufficient to establish removal jurisdiction. The Court holds only that removal jurisdiction exists when, as here, "Congress has clearly manifested an intent to make causes of action ... removable to federal court." In future cases involving other statutes, the prudent course for a federal court that does not find a clear congressional intent to create removal jurisdiction will be to remand the case to state court.

Metropolitan Life, 481 U.S. at 67-68, 107 S.Ct. at 1548 (Brennan, J., concurring) (alteration in original) (citation omitted).

C. The Act Completely Preempts State Law

Reading the United States Supreme Court and the Eighth Circuit cases together, this court will apply the following three-part test to determine whether the Act completely preempts state law: (1) whether complete preemption is consistent with the history and purpose of the Act; (2) whether Congress clearly manifested an intent to make the Act removable to federal court and (3) whether the federal scheme provides a civil enforcement provision under which a plaintiff can assert an action. Given this test, the Act does completely preempt state law and defendant permissibly removed this case.

1. History or Purpose of the Act

Crop insurance was largely unavailable before Congress passed the Act because private insurance companies determined that issuing multiple peril crop insurance posed too much risk for them. Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 383 n. 1, 68 S.Ct. 1, 3 n. 1, 92 L.Ed. 10 (1947). To...