St. Paul Ins. Co. v. Trejo

• Citation: 39 F.3d 585
• Decision Date: 29 November 1994
• Docket Number: No. 93-4902,93-4902
• Parties: The ST. PAUL INSURANCE COMPANY, Plaintiff-Appellant, v. Estanislado TREJO, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 585

39 F.3d 585

The ST. PAUL INSURANCE COMPANY, Plaintiff-Appellant, v. Estanislado TREJO, Defendant-Appellee.

No. 93-4902.

United States Court of Appeals, Fifth Circuit.

Nov. 29, 1994.

Cary D. Kirby, Paul Eugene White, Zeleskey, Cornelius, Hallmark, Borgfeld & Roper, Lufkin, TX, for appellant.

L. Brent Farney, Lufkin, TX, for appellee.

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

Before REAVLEY, GARWOOD and HIGGINBOTHAM, Circuit Judges.

GARWOOD, Circuit Judge:

Plaintiff-appellant St. Paul Insurance Company (St. Paul) appeals the district court's order dismissing its declaratory judgment action. St. Paul contends that the district court erred in dismissing the suit based on both 28 U.S.C. Sec. 1445(c) and federal abstention concerns. We reverse and remand.

Facts and Proceedings Below

In March 1990 defendant-appellee Estanislado Trejo (Trejo) was injured on the job in Texas. Consequently, Trejo received an award from the Texas Workers Compensation Commission against his employer and their worker's compensation carrier, St. Paul. Thereafter, St. Paul filed suit in the state district court in Angelina County, Texas, to set aside the award. The parties then entered into a court-approved settlement agreement (First Settlement) whereby St. Paul agreed to pay Trejo $45,000 plus all past and future medical expenses through October 31, 1995.

Trejo then filed suit in the same Angelina County state court against a third party, Moore Brothers Construction Company (Moore Brothers). Trejo alleged that Moore Brothers' negligence caused his work-related injury. St. Paul intervened in the lawsuit to obtain payment of its subrogation interests. Subsequently, Moore Brothers settled the lawsuit by agreeing to pay $195,000 for Trejo's injuries. St. Paul received $40,000 of the $195,000 in settlement of its subrogation interests and Trejo received the remaining $150,000.

After the settlement Trejo and St. Paul had a dispute about Trejo's medical expenses. The dispute concerned whether, pursuant to Tex.Rev.Civ.Stat. art. 8307, Sec. 6a(c), ¹ St. Paul had to pay medical expenses incurred by Trejo after settlement of the Moore Brothers case.

On November 2, 1992, St. Paul filed this action, based upon diversity of citizenship, against Trejo. St. Paul's lawsuit sought a declaratory judgment of its rights and responsibilities under both the First Settlement and article 8307 Sec. 6a(c). On March 4, 1993, Trejo filed suit against St. Paul in the Angelina County state court--the same court in which the two earlier suits had been filed--alleging St. Paul had breached its duty of good faith and fair dealing and requesting actual and punitive damages. On March 5, 1993, Trejo filed a motion to dismiss the instant federal lawsuit.

On May 7, 1993, the district court granted Trejo's motion to dismiss. The court ruled that the case should be dismissed for two reasons. First, the court held that the suit should be dismissed pursuant to 28 U.S.C. Sec. 1445(c) since it arose under the Texas worker's compensation laws. Second, the court determined that dismissal was appropriate on general federal abstention principles. St. Paul now appeals.

Discussion

I. 28 U.S.C. Sec. 1445(c)

28 U.S.C. Sec. 1445(c) provides that "[a] civil action in any State court arising under the workmen's compensation laws of such State may not be removed to any district court of the United States." St. Paul argues that the district court erred in deciding that section 1445(c) authorizes dismissal of its lawsuit. St. Paul contends that its action is not dismissible under section 1445(c) since it was properly filed in the federal court on the basis of diversity jurisdiction and was never subject to removal from a state court.

Although the district court acknowledged that St. Paul's lawsuit had not been removed, it nevertheless concluded that the federalism concerns underlying section 1445(c) allowed the lawsuit to be dismissed. The district court reasoned that since St. Paul's lawsuit involved a request for a declaration of rights under a worker's compensation agreement it was a lawsuit "arising under" the Texas worker's compensation laws. And it concluded that retaining jurisdiction of the case would thus thwart the congressional purpose behind section 1445(c).

The Supreme Court decision in Horton v. Liberty Mutual Ins. Co., 367 U.S. 348, 350-54, 81 S.Ct. 1570, 1572-73, 6 L.Ed.2d 890 (1961), speaks directly to this question. In Horton, Liberty Mutual filed a federal lawsuit, on the basis of diversity of citizenship, to set aside a worker's compensation award granted by a state administrative board. Thereafter, Horton filed his own action in state court and then moved for dismissal of the federal lawsuit on jurisdictional grounds. In Horton, the Supreme Court held that federal jurisdiction was not barred by the 1958 amendment to Title 28 (now section 1445(c)), which forbade the removal of state worker's compensation cases. The Court observed that while the purposes of the 1958 amendment, such as limiting federal court congestion and eliminating the burdens that worker's compensation claimants might suffer, militated against the exercise of jurisdiction, the amendment did not specifically prohibit jurisdiction in worker's compensation cases which were originally filed in federal court. Id. Further, the Court noted that "Congress used language specifically barring removal of such cases from state to federal courts [but] left unchanged the old language which ... specifically permits civil suits to be filed in federal courts in cases where there are both diversity of citizenship and the prescribed jurisdictional amount." Id. at 352, 81 S.Ct. at 1573 (emphasis added). The Horton Court concluded that "we must take the intent of Congress with regard to the filing of diversity cases in Federal District Courts to be that which its language clearly sets forth." Id.

In accordance with Horton, even though St. Paul's declaratory judgment action involved a state worker's compensation law, ² jurisdiction was still proper based on diversity of citizenship. We accordingly hold that the district court erred in dismissing St. Paul's suit on the basis of section 1445(c), or the supposed congressional purposes underlying it, or on the basis of any analogy to section 1445(c) or its purposes. See also Home Indemnity Company v. Moore, 499 F.2d 1202, 1204 (8th Cir.1974) (noting that section 1445(c) "cannot be extended to cases beyond the scope of the plain wording of the statute").

II. Abstention Concerns

The district court alternatively held that St. Paul's suit could also be dismissed under federal abstention principles. The court concluded that judicial abstention was proper under both the Burford and the Colorado River abstention doctrines. St. Paul contends that, in the instant case, neither of these doctrines is applicable.

A. Burford abstention

Pursuant to the Burford doctrine,

"[w]here timely and adequate state-court review is available, a federal court sitting in equity must decline to interfere with the proceedings or orders of state administrative agencies: (1) when there are 'difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar'; or (2) where the 'exercise of federal review of the question in a case and in similar cases would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern.' " New Orleans Public Serv. Inc. v. Council of New Orleans, 491 U.S. 350, 361, 109 S.Ct. 2506, 2514, 105 L.Ed.2d 298 (1989) (citing Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 813-814, 96 S.Ct. 1236, 1244, 47 L.Ed.2d 483 (1976)). ³

Although "Burford is concerned with protecting complex state administrative processes from undue federal interference, it does not require abstention whenever there exists such a process, or even in all cases where there is a 'potential for conflict' with state regulatory law or policy." New Orleans Pub. Serv., 491 U.S. at 362, 109 S.Ct. at 2515.

The concerns governing the Burford abstention doctrine are not present in the instant case. St. Paul's lawsuit does not involve a state administrative proceeding. Further, it does not seek to interfere with Texas' worker's compensation system. St. Paul's declaratory judgment action simply seeks interpretation of the First Settlement in light of a Texas statute. Thus, unlike the situations in which Burford-type abstention is appropriate, federal jurisdiction in this case would neither affect the state's system of reviewing worker's compensation awards nor be disruptive of the state's policies respecting worker's compensation. Hence, the district court erred in relying on the Burford doctrine to dismiss this case.

B. Colorado River abstention

Noting that abstention is warranted in order to avoid duplicative litigation and discourage forum shopping, the district court also concluded that it should abstain from jurisdiction in the "interests of wise administration." Abstention based on "wise judicial administration" is commonly recognized as Colorado River abstention. This abstention doctrine was developed by the Supreme Court to "govern in situations involving the contemporaneous exercise of concurrent jurisdictions either by federal courts or by state and federal courts." Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246.

In fashioning this abstention doctrine, the Supreme Court emphasized that as a general rule a federal court may not abstain from jurisdiction simply because there are parallel proceedings in a state court. Id. However, in spite of the federal court's "virtually unflagging obligation ... to exercise the jurisdiction given them," the Court determined that there were a few "exceptional circumstances" in which a federal court may abstain based on concurrent litigation. Id.

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