Skymont Farms v. North

• Decision Date: 22 March 2012
• Docket Number: No. 4:09–cv–77.,4:09–cv–77.
• Parties: SKYMONT FARMS, et al., Plaintiffs, v. Suzanne NORTH, individually and d/b/a Summitville Crop Insurance Agency, et al., Defendants.
• Court: U.S. District Court — Eastern District of Tennessee

862 F.Supp.2d 755

SKYMONT FARMS, et al., Plaintiffs,

v.Suzanne NORTH, individually and d/b/a Summitville Crop Insurance Agency, et al., Defendants.

No. 4:09–cv–77.

United States District Court, E.D. Tennessee.

March 22, 2012.

Gary Lionel Henry, Gearhiser, Peters, Cavett, Elliott & Cannon, PLLC, Chattanooga, TN, Stephen E. Neal, White Peck Carrington, LLP, Mt. Sterling, KY, for Plaintiffs.

Charles E. Moody, James E. Looper, Jr., Hall, Booth, Smith & Slover, PC, Gregory W. Callaway, Howell & Fisher PLLC, Nashville, TN, for Defendants.

MEMORANDUM AND ORDER

SUSAN K. LEE, United States Magistrate Judge.

The Court ordered the parties to brief the issue of its subject matter jurisdiction over this case [Doc. 56]. The parties filed initial briefs [Docs. 57, 58, & 59], and chose not to file responsive briefs. After considering the parties' briefs and the applicable law, and for the reasons outlined below, the Court will ORDER this case be REMANDED to the Circuit Court for Grundy County, Tennessee.

I. BACKGROUND AND PROCEDURAL HISTORY

This action, asserting state law contract and tort claims against an insurance agencylocated in Tennessee and individual insurance agents residing in Tennessee, was removed to this Court from the Circuit Court for Grundy County, Tennessee on July 29, 2009. Defendants' Notice of Removal states that removal is proper pursuant to 28 U.S.C. § 1331, as the case arises under federal question jurisdiction by virtue of the Federal Crop Insurance Act (“FCIA”), 7 U.S.C. § 1501 et seq. [Doc. 1 at PageID# : 2]. Plaintiffs did not file a motion to remand the case to state court.

The claims asserted in this action arise from a crop insurance policy issued to Plaintiff Dusty Wanamaker to cover nursery crops at Skymont Farms [Doc. 1–1 at PageID# : 6]. The Complaint alleges that the policy was issued by NAU Country Insurance Company (“NAU”) in conjunction with the Federal Crop Insurance Corporation (“FCIC”) and the Risk Management Agency (“RMA”) whereby the insurance company had a reinsurance agreement with the FCIC [ id.]. The Defendants named in the Complaint, however, are Summitville Crop Insurance Agency, the insurance agency through which Plaintiffs conducted their crop insurance business, and the individual agents working for the agency—Suzanne North, Cindy Anderson, and Richard Mackie [ id.].¹

Plaintiffs allege in the Complaint that Defendants were aware of the ownership of various nurseries belonging to the Wanamaker family and held themselves out as being able to provide appropriate insurance coverage for the nurseries for the 2006 crop year; however, after a hail storm damaged the crops at Skymont Farms in April 2006, Plaintiff Dusty Wanamaker submitted a claim, and the RMA took over the adjustment of the claim and eventually denied it [ id. at PageID # : 6–7]. Plaintiffs allege Defendants were negligent in failing to properly obtain an insurance policy for Skymont Farms, were negligent in obtaining the proper information from Plaintiffs to secure appropriate coverage, made misrepresentations regarding the procurement of such coverage upon which Plaintiffs relied, and breached their duties and contractual obligations to Plaintiffs [ id. at PageID# : 7–8].

II. ANALYSIS

The Court is under a continuing obligation to ensure it has subject matter jurisdiction over the cases before it and can raise the issue of jurisdiction sua sponte at any time during the pendency of a case. See Answers in Genesis of Ky., Inc. v. Creation Ministries Intern., Ltd., 556 F.3d 459, 465 (6th Cir.2009); see also28 U.S.C. § 1447 (“[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.”). The Court became aware of a line of cases indicating that FCIA did not create federal question jurisdiction over cases asserting strictly state law claims against private reinsurers of crop insurance or insurance agencies. The Court listed those cases for the parties, along with two early cases reaching the opposite conclusion, Owen v. Crop Hail Mgmt., 841 F.Supp. 297 (W.D.Mo.1994) and Brown v. Crop Hail Mgmt., Inc., 813 F.Supp. 519 (S.D.Tex.1993), at the time it required the parties to brief the issue of its subject matter jurisdiction.

In compliance with the Court's order to address its subject matter jurisdiction, Defendant Mackie argued that Owen and Brown should be followed to find federal question jurisdiction in this case and noted that the case would not exist were it not for the existence of the FCIA [Doc. 57]. The remaining Defendants also argued in favor of the conclusion reached in Owen and Brown [Doc. 58]. Plaintiffs asserted that they did not seek remand because of the judicial economy of having all related cases pending before the same Court and argued against any suggestion by Defendants that the FCIA preempted their state law claims against the insurance agency and individual agents [Doc. 59].

As a preliminary matter, judicial economy does not create subject matter jurisdiction, and the parties cannot agree to federal question jurisdiction where it does not exist.²See Holman v. Laulo–Rowe Agency, 994 F.2d 666, 668 n. 1 (9th Cir.1993) (“The parties cannot ... create federal court subject matter jurisdiction by stipulation”). Instead, it is afforded by diversity jurisdiction, which is not claimed to exist in this case, or by “federal question” jurisdiction. For federal question jurisdiction, 28 U.S.C. § 1331 states “[t]he district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.” Removal of cases filed in state court to federal court is governed by 28 U.S.C. § 1441, which dictates that “state-court actions that originally could have been filed in federal court may be removed to federal court by the defendant.” Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). In conjunction with these statutes, the existence of federal question jurisdiction is governed by the “well-pleaded complaint rule,” which focuses on whether federal questions are asserted in the complaint without regard to any federal defenses. City of Warren v. City of Detroit, 495 F.3d 282, 286 (6th Cir.2007).

The United States Court of Appeals for the Sixth Circuit has identified four ways in which a complaint can “arise under” federal law to establish federal question jurisdiction: “it ... (1) states a federal cause of action; (2) includes state-law claims that necessarily depend on a substantial and disputed federal issue; (3) raises state-law claims that are completely preempted by federal law; or (4) artfully pleads state-law claims that amount to federal-law claims in disguise.” Ohio ex rel. Skaggs v. Brunner, 629 F.3d 527, 530 (6th Cir.2010) (citing Mikulski v. Centerior Energy Corp., 501 F.3d 555, 560 (6th Cir.2007)). Applying these ways in which a complaint may arise under federal law here, there is no federal cause of action asserted on the face of Plaintiffs' Complaint and the Court finds no basis to conclude that Plaintiffs have engaged in any “artful pleading” to disguise federal claims as state law claims. The Court has subject matter jurisdiction over Plaintiffs' Complaint, therefore, only if the state law claims asserted therein are completely preempted by federal law or the state law claims implicate a substantial question involving federal law.

The Court listed and allowed the parties an opportunity to review at least seven cases concluding that either the FCIA did not completely preempt the field of crop insurance to afford federal question jurisdiction over state law claims, did not give rise to a substantial question of federal law, or both. In fact, there are a dozen cases which have addressed these issues and reached similar conclusions, including cases from the United States Court of Appeals for the Fifth, Ninth, and Eleventh Circuits.³ Defendants' arguments appear to rely solely on the issue of complete preemption of state law claims, and the Court will discuss the preemption issue at length. In the absence of complete preemption, however, a substantial question of federal law is the only other ground upon which federal question jurisdiction might exist. Although Defendants made no argument that Plaintiffs' Complaint raises a substantial question of federal law, the Court will briefly address that alternative ground as well.

A. Complete Preemption

The complete preemption doctrine is a very narrow exception to the well-pleaded complaint rule and is intended to be used sparingly for only a few “extraordinary” statutes. Palkow v. CSX Transp., Inc., 431 F.3d 543, 553 (6th Cir.2005). It is important to note that complete preemption and simple, or defensive, preemption are different principles. While a plaintiff's individual state law claims may be preempted by federal law or regulation because the state law conflicts with federal law or regulation or the law explicitly invalidates certain types of state law claims, that does not equate to complete preemption, which is “designed to occupy the regulatory field with respect to a particular subject” and mandate that all claims asserted within that field, including state law claims, be addressed exclusively in federal court. Warner v. Ford Motor Co., 46 F.3d 531, 535 (6th Cir.1995), see Strong v. Telectronics Pacing Sys., Inc., 78 F.3d 256, 260 (6th Cir.1996). “[T]he doctrine of complete preemption makes removal available automatically in those extraordinary cases where a state law claim is completely preempted.” NGS Am., Inc. v. Jefferson, 218 F.3d 519, 527 (6th Cir.2000) (citing Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 64–67, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987)). Furthermore, the Sixth Circuit has recognized precedent that only Congress can effect complete preemption of a state law cause of action and that federal regulations promulgated by federal agencies do not carry equal...