State v. Property

• Citation: 746 F.3d 633
• Decision Date: 26 March 2014
• Docket Number: Nos. 14–30071,14–30072.,s. 14–30071
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)
• Parties: State of LOUISIANA, on behalf of insured(s)/assignor(s)/subrogor(s), Plaintiff–Appellee v. AMERICAN NATIONAL PROPERTY & CASUALTY COMPANY; American National General Insurance Company; ANPAC Louisiana Insurance Company, Defendants–Appellants.

746 F.3d 633

State of LOUISIANA, on behalf of insured(s)/assignor(s)/subrogor(s), Plaintiff–Appellee

v.AMERICAN NATIONAL PROPERTY & CASUALTY COMPANY; American National General Insurance Company; ANPAC Louisiana Insurance Company, Defendants–Appellants.

Nos. 14–30071, 14–30072.

United States Court of Appeals, Fifth Circuit.

March 26, 2014.

Joseph M. Bruno (argued), Bruno & Bruno, L.L.P., New Orleans, LA, for Plaintiff–Appellee.

Jay M. Lonero (argued), Angie Arceneaux Akers, Christopher Raymond Pennison, Esq., Thomas H. Peyton, Larzelere Picou Wells Simpson Lonero, L.L.C., Metairie, LA, for Defendant–Appellant.

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

Before JOLLY, SMITH, and CLEMENT, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

In this Class Action Fairness Act (CAFA) case, having roots in Hurricane Katrina and arising from a state program to assist homeowner victims, the defendant, American National Property & Casualty Company (ANPAC), appeals the judgment of the district court holding that it lacked subject matter jurisdiction over the case. This case was initiated as a class action, in state court under state law, by the State of Louisiana (the State). The State brought the suit against several insurers, including ANPAC, to recover on the homeowner insurance policies purchased by individual Louisiana citizens but assigned by the respective policy holders to the State in return for State financial assistance in repairing and rebuilding their homes in the wake of the hurricanes. The defendant insurance companies removed the case to federal court, asserting jurisdiction under CAFA. The federal court certified a question relating to the legality of the assignment of the policies to the Supreme Court of Louisiana. After the Louisiana Supreme Court held that, under Louisiana law, the insurance policies at issue must be considered individually, the State dropped its class allegations and severed this individual action from the original class action case. Thus arose the question of federal jurisdiction over these individual cases, once part of the CAFA class action. Although an earlier opinion from this court had held that CAFA provided federal jurisdiction over the class, the district courts held that these severed individual actions must have their own independent federal jurisdictional basis and found none. Because they lacked an independent basis for federal jurisdiction, the district courts remanded the cases to state court.

We hold that the general rule regarding federal jurisdiction over a removed case controls here: Jurisdictional facts are determined at the time of removal, not by subsequent events. Because at the time of removal CAFA supplied federal subject matter jurisdiction over these cases—as a prior panel of this court explicitly had held—we hold that CAFA continues to provide jurisdiction over these individual cases notwithstanding their severance from the class. Accordingly, we REVERSE the judgments of the district courts and REMAND for further proceedings not inconsistent with this opinion.

I.

As a result of the damage inflicted on Louisiana by Hurricanes Katrina and Rita, the State of Louisiana—with funding from the Department of Housing and Urban Development—initiated the Louisiana Road Home program. Through this program, the State distributed funds to residents to assist efforts to rebuild homes damaged by the hurricanes. In return for these funds, and to avoid the homeowners recovering duplicate payments from multiple sources, citizens participating in the Road Home program were required to assign to the State the homeowner's rights against his insurer up to the amount received from the program.

In August 2007, the State initiated a class action lawsuit in Louisiana state court to recover on the insurance policies of its citizens. The suit was brought under Louisiana Code of Civil Procedure Article 591(A)—a state class action statute—and named several insurance companies as defendants. This Road Home Litigation has been ongoing ever since. We will only recount the relevant procedural steps that have brought the case before this panel.

After the Road Home Litigation was filed, the insurance company defendants removed the case to federal court. The State moved to remand arguing that the court lacked subject matter jurisdiction. The defendants argued, and the district court agreed, that because the case was brought under a state class action statute, more than $5,000,000 was in controversy, and minimal diversity existed, CAFA supplied federal subject matter jurisdiction. The State requested permission to appeal the district court's denial of its motion to remand. This court granted permission to appeal, and subsequently affirmed the judgment of the district court holding that CAFA supplied federal jurisdiction. In re Katrina Canal Litig. Breaches, 524 F.3d 700, 705–12 (5th Cir.2008).

Federal jurisdiction having been established, the case continued in the district court. The defendants next filed a motion to dismiss the State's claims arguing that, under Louisiana law, homeowners were forbidden to assign their recovery to the State under the anti-assignment clauses in the respective insurance policies. The State countered that these anti-assignment provisions did not apply to post-loss assignments.Again, this issue was litigated and appealed to this court. Recognizing that the issue was novel and dispositive, this court certified the question to the Louisiana Supreme Court. The Louisiana Supreme Court accepted the certified question and responded that applying anti-assignment clauses to post-loss assignments did not violate Louisiana public policy, but that it must be evaluated on a policy by policy basis. In re Katrina Canal Breaches Litig., 63 So.3d 955, 957 (La.2011). ¹

In reaction to this ruling, the district court handling the litigation ordered the claims on behalf of each individual severed from the collective action and directed the State to file a new amended complaint for each individual claim. Accordingly, the State filed 1,504 amended complaints, each encompassing its claim on behalf of each respective policy holder; each was given a new case number and randomly assigned to a district judge.

Following the severance, the district judges ordered ANPAC to show cause why, now severed from the alleged CAFA class action, these cases should not be remanded to state court. ANPAC responded that jurisdictional facts of a case removed from state court are assessed at the time of removal and are not affected by later events, and further, because this court unambiguously held that CAFA supplied jurisdiction at the time of removal, it was clear that post-removal events could not divest the court of jurisdiction. The district courts disagreed and held that they lacked jurisdiction. The district courts relied on Honeywell Int'l, Inc. v. Phillips Petroleum Co., in which this court stated that a severed action must have an independent jurisdictional basis. 415 F.3d 429, 431 (5th Cir.2005). The district courts held that once these cases were individually severed from their former home in the class action, CAFA did not supply jurisdiction; furthermore, the courts lacked diversity jurisdiction because the amount in controversy was less than $75,000. The district courts thus entered orders remanding the cases to state court.

Pursuant to 28 U.S.C. § 1453(c), ANPAC petitioned this court for permission to appeal the remand order. Because we recognized that this case presents an important CAFA-related question both for this case and for the other individual actions currently pending, and because the record before us was sufficiently developed, we granted permission to appeal. See, e.g., Coll. of Dental Surgeons of P.R. v. Conn. Gen. Life Ins. Co., 585 F.3d 33, 38–39 (1st Cir.2009) (discussing factors to consider in granting permission to appeal a district court's remand order in a CAFA case).

II.

A.

As presented to us, we have two competing principles that address federal jurisdiction in these removed cases. The first is a long-established general rule, holding that jurisdictional facts are determined at the time of removal, and consequently post-removal events do not affect that properly established jurisdiction. See Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 569–70, 124 S.Ct. 1920, 158 L.Ed.2d 866 (2004) (recognizing the general rule that, for purposes of determining the existence of diversity jurisdiction, the citizenship of the parties is to be determined with reference to the facts as they existed at the time of filing); Freeport–McMoRan, Inc. v. KN Energy, Inc., 498 U.S. 426, 428, 111 S.Ct. 858, 112 L.Ed.2d 951 (1991) (per curiam) (We have consistently held that if jurisdiction exists at the time an action is commenced, such jurisdiction may not be divested by subsequent events.); Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 264–65 (5th Cir.1995) (recognizing that removal jurisdiction is determined on the basis of the complaint at the time of removal).² The other rule at issue in this appeal constitutes an exception to the general rule and requires that an action severed from the original case must have an independent jurisdictional basis, which in turn calls for jurisdictional facts to be determined post-removal, at the time of severance. Honeywell, 415 F.3d at 431 ( [A] severed action must have an independent jurisdictional basis.). We start from the proposition that the general time-of-removal rule applies unless the Honeywell exception is applicable to these facts.

Reviewing the district court's remand order de novo, Admiral Ins. Co. v. Abshire, 574 F.3d 267, 272 (5th Cir.2009), we find that this exception relating to severed cases, announced in Honeywell, does not apply as broadly as the State suggests. We reach this conclusion based on several considerations that we now discuss.

B.

1.

We begin by considering the...