Smith v. National Flood Ins. Program

• Decision Date: 04 August 1986
• Docket Number: No. 85-3582,85-3582
• Citation: 796 F.2d 90
• Parties: Johnny F. SMITH and Janice R. Smith, Plaintiffs-Appellees, v. NATIONAL FLOOD INSURANCE PROGRAM, Defendant-Appellee, v. Curtis E. MARTIN, Agent, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 90

796 F.2d 90

Johnny F. SMITH and Janice R. Smith, Plaintiffs-Appellees, v. NATIONAL FLOOD INSURANCE PROGRAM, Defendant-Appellee, v. Curtis E. MARTIN, Agent, Defendant-Appellant.

No. 85-3582.

United States Court of Appeals Fifth Circuit.

Aug. 4, 1986.

Arthur H. Leith, Henri Wolbrette, III, New Orleans, La., for defendant-appellant.

Garic K. Barranger, Covington, La., for Smith.

Glenn K. Schreiber, Asst. U.S. Atty., New Orleans, La., for National Flood Ins. Program.

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

Before CLARK, Chief Judge, E. GRADY JOLLY, and ROBERT M. HILL, Circuit Judges.

OPINION

PER CURIAM:

An insurance agent challenges the district court's holding that a federal agency was not liable for damages to the contents of the appellee's home under a policy of flood insurance, and that the agent was liable for this damage on negligence grounds. Because the district court did not err in assuming pendent jurisdiction over the claim against the agent or in finding the agent liable for negligence, we affirm.

I

The Federal Emergency Management Agency (the Agency) administers the National Flood Insurance Program (the Program). Johnny F. Smith and his wife (Smith) had a flood insurance policy in effect on their home in Slidell, Louisiana through the Program, but that policy did not cover the contents of the home. On March 31, 1983, Smith completed an application for additional coverage on the home and coverage of its contents. He delivered the application and a check for $477.00 to cover the additional premium to Curtis E. Martin, a local insurance agent. Martin signed the application and dated it March 31. The effective date stated on the application was April 1. Martin mailed Smith's application and check to the Program by regular mail service on March 31.

Flood waters damaged the Smith's home on Sunday, April 10. The Program covered the damage to the building, but denied Smith's claim for coverage of damage to the contents in the amount of $8,243.76.

Smith sued the Program and Martin in state court. The Agency, answering for the Program, removed to federal court and simultaneously moved for dismissal on the ground that United States district courts have exclusive jurisdiction over matters involving the Program. Smith refiled both claims in the United States District Court for the Eastern District of Louisiana. All parties moved for summary judgment.

The trial judge granted summary judgment for the Agency, and for Smith against Martin. The judge held that the Program did not receive Smith's application and check until Monday, April 11, more than ten days after the application date and the date that Martin sent these documents to the Program by regular mail service. Under 44 C.F.R. Sec. 61.11(e), the liability of the Program under the policy for flood damage to the contents of the Smith home did not take effect until April 12. The district judge also held that Martin was negligent in sending these items to the Program by regular rather than certified mail. According to the regulation, if Martin had sent them by certified mail within four days of the application date, coverage would have been effective on April 1 as the application he signed indicated.

Martin makes three arguments on appeal: (1) the district court erred in asserting pendent jurisdiction over Smith's claim against Martin; (2) the district court erred in granting summary judgment for Smith against Martin on the ground that Martin was negligent in using the regular mail service; (3) the district court erred in granting summary judgment for the Agency on the ground that the Program did not receive Smith's application and check until April 11.

II

We first address the threshold issue of whether the district court had pendent jurisdiction over Smith's negligence claim against Martin. An independent basis of jurisdiction must support a state law claim that arises out of the same nucleus of facts as a federal law claim when the plaintiff wishes to assert that state law claim against a pendent party in federal court. Aldinger v. Howard, 427 U.S. 1, 14-18, 96 S.Ct. 2413, 2420-22, 49 L.Ed.2d 276 (1976), overruled in part on other grounds, Monell v. Department of Social Services, 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978); Birmingham Fire Ins. Co. v. Winegardner and Hammons, Inc., 714 F.2d 548, 552-54 (5th Cir.1983) (citing cases). In Aldinger, however, the Supreme Court expressly refused to "lay down any sweeping pronouncement upon the existence or exercise" of pendent party jurisdiction, and noted a potential exception to this general disfavor against pendent party jurisdiction. "When the grant of jurisdiction to a federal court is exclusive, ... the argument of judicial economy and convenience can be coupled with the additional argument that only in a federal court may all of the claims be tried together." Aldinger, 427 U.S. at 18, 96 S.Ct. at 2422 (footnote omitted) (emphasis in original). In Boudreaux v. Puckett, 611 F.2d 1028 (5th Cir.1980), we relied on Aldinger to hold that pendent party jurisdiction existed where the federal statute in question did not negate the possibility of pendent parties, and where "[c]onsiderations of judicial economy and convenience strongly support[ed] litigating the claim against [the pendent party] along with the federal claims." Id. at 1031. We noted that Boudreaux did not present the strongest or most compelling case for asserting pendent jurisdiction since the federal claim in that case need not have been litigated in federal court. Id.

Although the district court had neither diversity, federal question, nor statutory jurisdiction over Smith's claim against Martin, the judge's assumption of pendent jurisdiction over that claim was proper under the Aldinger exception and our reasoning in Boudreaux. Jurisdiction over such claims against the Program is exclusively federal. See 42 U.S.C. Sec. 4072. The claim against Martin arose out of the same nucleus of operative facts as the claim against the Program. It was logical to try these claims together, especially since Martin claimed he could be held liable only if the Program was not. The provision under which Smith sued the Program, 42 U.S.C. Sec. 4072, provides for a cause of action in federal court only against the director of the Program. It does not, however, expressly negate the possibility of pendent parties. The exclusive federal jurisdiction over claims against the Program and the considerations of judicial economy and convenience provide appropriate support for the district court's assumption of pendent party jurisdiction.

Yonker v. Guifrida, 581 F.Supp. 1243 (D.W.Va.1984), on which Martin relies, does not require a contrary holding. The Yonker court dismissed the insurance agency defendants in a Sec. 4072 suit for lack of jurisdiction. Id. at 1245. The court did not discuss the application of pendent party jurisdiction in this context. Apparently, the plaintiffs did not allege state law claims against these defendants. Furthermore, Yonker was decided under an earlier version of Sec. 4072 that did not provide for exclusive federal jurisdiction over claims against the Program. See 42 U.S.C. Sec. 4072 note (A Nov. 30, 1983, amendment "added 'original exclusive' preceding 'jurisdiction'."); 581 F.Supp. at 1244 (Yonker was filed on June 21, 1983.).

Birmingham Fire Ins. Co. v. Winegardner and Hammons, Inc., 714 F.2d 548 (5th Cir.1983), where we affirmed the dismissal of a claim against a pendent party,...