Louisiana State et al v. AAA Insurance et al
Filing
196
ORDER AND REASONS Oral argument was held on October 19, 2011, at which time the Court orally denied the State's Motion to Remand. Now the Court issues its written reasons. 145 MOTION to Remand to State Court filed by James D. Caldwell should be DENIED. Signed by Judge Carl Barbier on 10/28/2011.(clm, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
LOUISIANA STATE, ET AL
CIVIL ACTION
VERSUS
NO. 07-5528
AAA INSURANCE, ET AL
SECTION "J" (2)
ORDER AND REASONS
Before the Court is the State of Louisiana’s Motion to
Remand (Rec. Doc. 145), Defendant ANPAC Companies’ Memorandum in
Opposition
(Rec. Doc. 149), and a Memorandum in Opposition filed
collectively by the remaining Defendant insurers (Rec. Doc. 148).
Oral argument was held on October 19, 2011, at which time the
Court orally denied the State’s Motion to Remand.
169.
See Rec. Doc.
Now the Court issues its written reasons.
PROCEDURAL HISTORY AND BACKGROUND FACTS:
In the aftermath of Hurricanes Katrina and Rita, the State
of Louisiana, with funding from
the United States Department of
Housing and Urban Development, created the Louisiana Road Home
program.
The program was designed to distribute federal grants
to assist Louisiana residents in their efforts to reconstruct
homes damaged by the Hurricanes.
To date, it is the largest
single housing recovery program in United States history.1
The Road Home program is administered by the State of
Louisiana through the Louisiana Recovery Authority.
Consistent
with federal law, Road Home prohibits the distribution of grant
funds that would duplicate payments from other sources.
Accordingly, Louisiana required any homeowner receiving Road Home
funds to execute a limited subrogation/assignment agreement as
part of the grant closing process, assigning his rights against
his insurer to the State in the amount of the Road Home grant.
This allowed the State to proceed against the insurers to recover
Road Home funds used to pay for losses covered by the grantee’s
insurance.
The case before the Court, termed the “Road Home
Litigation.” was initiated by the State of Louisiana in August
2007 in Orleans Parish Civil District Court.
The State sought to
recoup the funds from over 200 insurers to which Road Home
recipients were entitled that had been assigned to the State
pursuant to the subrogation/assignment agreements.
At the time
the State initiated this action, many Road Home applications
1
See The Road Home, About Us,
https://www.road2la.org/about-us/default.htm (last
visited October 17, 2011).
2
remained unprocessed, and thus, thousands of applicants had not
executed subrogation agreements or filed claims against their
insurers for losses sustained as a result of the Hurricane.
Louisiana law provided that all Hurricane Katrina-related
insurance claims must be filed by September 1, 2007 deadline.
Aware of this deadline, the State amended its petition and added
a class action against the same defendant insurers in order to
preserve the rights of those applicants whose applications would
be approved in the future, and thus to further preserve its own
rights to bring claims which the grant recipients would
subsequently assign to the State.
The putative class members
consisted of
“[a]ll current and former citizens of the State of
Louisiana who have applied for and received or will
receive funds through the Road Home Program, and who
have executed or will execute a subrogation or
assignment agreement in favor of the State, and to whom
insurance proceeds are due and/or owed for damages
sustained to any such recipient's residence as result
of any natural or man-made occurrence associated with
Hurricanes Katrina and/or Rita under any policy of
insurance, as plead herein, and for which the State has
been or will be granted or be entitled to recover as
repayment or reimbursement of funds provided to any
such recipient through the Road Home Program.” Rec.
Doc. 1-1, pg. 21.
On behalf of the state and the homeowner class members, the
class action sought damages, injunctive relief, and a declaration
3
of these insurers’ duties under the “all risk” policies issued to
class members.
On September 11, 2007, Defendants removed this
case to Federal Court, asserting that federal jurisdiction was
proper under the Class Action Fairness Act (“CAFA”).
The case
was consolidated with the In re Katrina Canal Breaches
Consolidated Litigation (“Katrina Canal Breaches Litigation”) the
next day.
In response to the removal, Plaintiff filed a motion
to remand, which was denied by Judge Duval.
The State appealed
this decision, asserting that CAFA was inapplicable, and that
even if it did apply, the Eleventh Amendment barred Defendants
from removing a state law action brought by a state in its own
courts.
The Court of Appeals affirmed Judge Duval’s order
denying the State’s motion to remand on April 11, 2008.
In November of 2008, the State filed a Motion to Sever its
class allegations in the Road Home Litigation, along with a
Second Motion to Remand its subrogation claim.
While these
motions were pending, certain defendants in the Master Complaint
of the Katrina Canal Breaches Litigation, filed a motion to
strike the class allegations.
Although this motion did not
target the class status in the Road Home Litigation, the State
filed a stipulation stating that the class action portion of the
Road Home litigation was substantially similar to the class
allegations in the Master Complaint.
4
Accordingly, the State
agreed that its class allegations would be bound by whatever
ruling Judge Duval issued on class status in the Katrina Canal
Breaches Litigation Master Complaint.
Judge Duval denied the State’s Motion to Sever the class
action claims, as well as its Second Motion to Remand.
Defendants thereafter filed a Motion to Dismiss based in part on
their belief that “anti-assignment” clauses in their contracts
prevented their clients from assigning the benefits of the
insurance contracts to the State.
Judge Duval granted this
motion in part on March 5, 2009, dismissing the State’s
extra-
contractual claims and claims for declaratory relief, but finding
that the anti-assignment clauses did not bar the State’s
subrogation claim.
Defendants thereafter filed a motion for
reconsideration, which Judge Duval denied on April 16, 2009.
Judge Duval certified his ruling for interlocutory appeal and
stayed the proceedings pending the outcome of the appeal.
This
case was then deconsolidated from the Katrina Canal Breaches
Litigation and transferred to this Court for disposition on April
17, 2009.
On June 16, 2009, Judge Duval issued an order dismissing the
class action in the master complaint in the consolidated Katrina
Canal Breaches Litigation.
This order effectively dismissed the
class allegations in the Road Home Litigation by virtue of the
5
State’s stipulation agreeing to be bound by that ruling.
As a
result, the State filed a Third Motion to Remand these
proceedings to state court.
Because Judge Duval had previously
stayed the proceedings pending the Fifth Circuit’s ruling on the
enforceability of the anti-assignment clauses, however, this
Court enforced the stay and denied the State’s motion without
prejudice.
The Fifth Circuit, finding the issue of the enforceability
of the anti-assignment clauses to be dispositive but unclear
under Louisiana law, certified the question to the Louisiana
Supreme Court.
The Louisiana Supreme Court responded that
Louisiana’s public policy did not preclude the enforceability of
anti-assignment clauses to post-loss assignments, but cautioned
that the language of the clause “must clearly and unambiguously
express that it applies to post-loss assignments” and must
therefore be evaluated on a policy by policy basis.2
Accordingly, unable to resolve the issue en masse, the Fifth
Circuit vacated the district court’s previous ruling on the
motion to dismiss, and remanded the case for further proceedings.
After the stay of the proceedings was lifted, the State filed the
instant Motion to Remand on September 14, 2011.
2
See Rec. Doc. 129.
6
THE PARTIES’ ARGUMENTS:
Plaintiff’s Arguments
In support of its Motion to Remand, the State first asserts
that the dismissal of the class action allegations dissolves any
basis for federal jurisdiction which may have previously existed
under CAFA.
Specifically, it argues that, because the State of
Louisiana is the only remaining plaintiff, and because it is not
a “citizen” for jurisdictional purposes, CAFA’s “minimal
diversity” requirement is no longer satisfied.
Further, because
Louisiana’s subrogation claims are now the only claims pending,
it argues that there is no longer a “class action” within the
meaning of CAFA.
Accordingly, because the only basis for federal
jurisdiction has been dissolved, the State argues that the Court
should exercise its discretion to remand the remaining claim
under 28 U.S.C. § 1367(c).
Alternatively, it argues that the Eleventh Amendment does
not allow a federal court to require it to litigate its
subrogation claims in a federal forum.
Instead, it urges that,
as a constitutional sovereign, it is entitled to enforce its own
laws in its own courts.
While acknowledging that the Fifth
Circuit’s decision in the consolidated Katrina Canal Breaches
Litigation discussed the Eleventh Amendment issue, it argues that
7
it never reached the issue of Louisiana’s sovereign immunity “per
se” because it merely held that Louisiana could not extend that
immunity to the individual class members it had joined in the
suit.
Now that the class action has been dismissed, it urges
that the sovereign immunity issue is ripe for decision.
Defendant’s Arguments
Defendants respond that federal jurisdiction under CAFA is
unaffected by the withdrawal of the State’s class allegations.
In response to the State’s arguments that its pending subrogation
claim does not constitute a class action under CAFA, Defendants
respond that the plain language of CAFA makes clear that the
continued existence of a class action is immaterial for purposes
of jurisdiction once an action is properly removed.
Further,
they point out that courts, including five federal circuit courts
of appeal, have rejected the State’s argument that the dismissal
of the class allegations deprives the Court of jurisdiction.
While acknowledging the authority cited by the Defendant
insurers, the State contends that the instant case is
distinguishable, because in this case, the State has asserted its
own independent claims in addition to the now dismissed class
allegations.
With respect to the State’s argument that minimal diversity
no longer exists, Defendants rely on the longstanding and well8
established rule that federal subject matter jurisdiction is
determined at the time of removal, and that subsequent events,
including changes in party citizenship, cannot operate to divest
a court of jurisdiction.
They assert that the time-of-filing
rule applies equally to CAFA jurisdiction.
Accordingly, because
minimal diversity existed at the time of removal, Defendants
assert that the subsequent dismissal of the class allegations and
the resulting lack of minimal diversity does not deprive the
court of jurisdiction.
Furthermore, Defendants assert that the Court lacks
discretion to remand under 28 U.S.C. § 1367(c) because, in this
case, there are no “pendent” state law claims over which the
Court lacks original jurisdiction.
Instead, they assert that the
Court has original jurisdiction over this entire case under CAFA
and must therefore exercise this jurisdiction.
Even if the Court
does retain discretion to remand under 1367(c), however,
Defendants submit that the Court should refrain from remanding
the case under these circumstances.
Finally, Defendants maintain that the Eleventh Amendment
does not require the Court to remand this case to state court.
Contrary to the State’s assertions, Defendants contend that both
the Fifth Circuit and Judge Duval directly and clearly held that
the State has waived its sovereign immunity by filing the class
9
action which included private citizens.
In any event, Defendants
argue that binding precedent holds that Eleventh Amendment
sovereign immunity only applies when a state is a defendant – not
a plaintiff, as in this case.
In a separate Memorandum in Opposition, Defendants Republic
Fire and Casualty Insurance Company (“Republic”) and ANPAC
Companies assert an additional basis for denial of the State’s
Motion to Remand.
Because the viability and substance of the
State’s claims are governed by federal law, and not state law,
Defendants submit that there is no basis for discretionary remand
or application of the doctrine of sovereign immunity.
Defendants
argue that the prohibition against duplication of benefits, which
the State seeks to enforce in this litigation, is governed
exclusively by federal law under the Stafford Act.
In
particular, Defendants point out that the Stafford Act grants the
exclusive right of recovery of duplicate benefits to the federal
agency which provided those benefits, only allows such benefits
to be recovered “from the recipient” of the benefits, and only
allows recovery in accordance “with chapter 37 of title 31,” when
the applicable “agency head considers it to be in the best
interest of the Federal Government.”
See 42 U.S.C. § 5155.
Thus, Defendants argue that there are substantial federal
questions as to whether the State is even a proper party to bring
10
the present action to recover duplicate benefits.
Because
federal courts have no discretion to remand a lawsuit presenting
a federal question, Defendants submit that the Court lacks the
discretion to remand the State’s lawsuit.
Further, it asserts that no Eleventh Amendment concerns are
implicated in the present matter because the State is acting as
an agent and administrator of a federal program through the
Office of Community Development, which has been expressly
designated as “the fiscal agent responsible to the U.S.
Department of Housing and Urban Development,” and not as an
independent sovereign seeking to recoup its own state funds.
Finally, in the alternative, Defendants Republic and ANPAC
Companies argue that federal jurisdiction is proper under the
Multiparty, Multiforum Trial Jurisdiction Act of 2002 (“MMTJA”),
28 U.S.C. §§ 1369 and 1441(e)(1)(A).
DISCUSSION:
A.
Is Subject Matter Jurisdiction Dissolved by the
Withdrawal of the Class Allegations?
A state court defendant may remove to federal court any
action that could originally have been brought in federal court.
28 U.S.C. § 1441.
Most commonly, cases are removed when the
plaintiff’s action arises under federal law, see 28 U.S.C. §
11
1331, or when there is complete diversity of citizenship among
the parties and at least $75,000 in controversy, see 28 U.S.C. §
1332(a).
CAFA, which was enacted in 2005, provides another
basis for removal.
The statute amends the general diversity
jurisdiction statute and grants federal jurisdiction over “class
actions” where (1) the amount in controversy exceeds $5,000,000,
(2) there are at least 100 class members in the proposed class,
and (3) so-called “minimal diversity” exists between the parties.
See 28 U.S.C. § 1332(d)(2), (d)(5).
Minimal diversity exists
when the state citizenship of any plaintiff class member is
different from that of any one defendant.
28 U.S.C. §
1332(d)(2)(A).
At the time this action was originally filed, the Fifth
Circuit found that federal jurisdiction existed under CAFA and
thus held that the case was removable.
See In re Katrina Canal
Breaches, 524 F.3d 700, 705-712 (5th Cir. 2008).
Now that the
posture of the case has been altered by the withdrawal of the
State’s class allegations, the State contends that subject matter
jurisdiction has been dissolved
because CAFA’s minimal diversity
requirement is no longer satisfied because a state is not a
“citizen” for jurisdictional purposes, and because there is no
longer a “class action” within the purview of CAFA.
The statutory text of CAFA does not explicitly state whether
12
the certification of a class following is required in order for
federal jurisdiction to exist.
Until recently, there has been a
split in the district courts on this issue.
However, as Judge
Fallon recently recognized, “a consensus has begun to emerge.”
See Samuel v. Universal Health Servs., --- F. Supp. 2d ---, 2011
WL 3349826, at *2 (E.D. La. 2011).
The Sixth, Seventh, Eighth,
Ninth, and Eleventh Circuits have all held that a court retains
jurisdiction over a case filed or removed under CAFA even if
class certification is denied.
See Metz v. Unizan Bank, 649 F.3d
492, 500-501 (6th Cir. 2011); Charter Corp. v. Learjet, Inc., 592
F.3d 805, 806 (7th Cir. 2010); Buetow v. A.L.S., Enters., Inc., -- F.3d --- , 2011 WL 3611488, at *1, n.2 (8th Cir. Aug. 18,
2011); United Steel Workers Int'l Union v. Shell Oil Co., 602
F.3d 1087, 1092 (9th Cir. 2010); Cunningham Charter Corp. V.
Learjet, Inc., 592 F.3d 805,806-807 (7th Cir. 2010) ; Vega v.
T–Mobile USA, Inc., 564 F.3d 1256, 1268 n. 12 (11th Cir. 2009).
While the Fifth Circuit has not squarely addressed the issue,
district courts within the Fifth Circuit have consistently held
that federal jurisdiction under CAFA is not dependant upon class
certification.
See Samuel, 2011 WL 3349826, at *2; Thomas v.
Chesapeake Louisiana, L.P., No. 09-0888, 2010 WL 1229943, at *2
(W.D. La. Mar. 26, 2010); Kitts v. Citgo Petroleum Corp., No.071151, 2009 WL 192550, at *4 (W.D. La. Jan. 23, 2009); Brinston v.
13
Koppers Industries, Inc.,
538 F. Supp. 2d 969, 974-75 (W.D. Tex.
2008); Broquet v. Microsoft Corp., No. 08-094, 2008 WL 2965074,
at *3 (S.D. Tex. July 30, 2008); Garcia v. Boyard & Miller, P.C.,
No. 06-1936, 2007 WL 1556961, at *5 (N.D. Tex. May 30, 2007).
The plain language of CAFA supports the interpretation that
CAFA jurisdiction is not dependant upon class certification.
As
previously mentioned, CAFA extends diversity jurisdiction to class
actions where (1) the amount in controversy exceeds $5,000,000, (2)
there are at least 100 class members in the proposed class, and (3)
there is minimal diversity between the parties.
1332(d)(2), (d)(5).
See 28 U.S.C. §
The term “class action” is subsequently
defined as “any civil action filed under rule 23 of the Federal
Rules of Civil Procedure or similar State statute or rule of
judicial procedure authorizing an action to be brought by 1 or more
representative
persons
as
a
class
1332(d)(1)(B) (emphasis added).
action.”
28
U.S.C.
§
Thus, courts have recognized that
the plain language of the statute only requires the case to be
filed as a class action.
It does not require that the putative
class action actually meet the requirements of Rule 23 or that the
class be successfully certified.
See, e.g., Metz, 649 F.3d at 500
(“The ‘filed under’ language shows that it is the time of filing
that matters for determining jurisdiction under CAFA. Congress did
not base CAFA jurisdiction on a civil action being ‘certified’ as
14
a class action, but instead on an action being ‘filed under’ the
rule governing class actions.”); Cunningham, 592 F.3d at 806
(explaining that “jurisdiction attaches when a suit is filed as a
class action”).
Further, because CAFA merely amends the diversity statute, as
opposed to providing a sui generis jurisdictional grant, the courts
that
have
considered
the
issue
have
also
looked
to
general
jurisdictional principles for guidance. See Metz, 649 F.3d at 500501;
Cunningham, 592 F.3d at 807; Workers Int’l Union, 602 F.3d at
1091-92; Vega, 564 F.3d at 1268 n. 12.
Federal courts examine
jurisdictional facts as they exist at the time the case was filed.
Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 570
(2004).
In
cases
removed
from
state
court
under
§1332,
jurisdictional requirements must also be satisfied at the time of
removal.
Coury v. Prot, 85 F.3d 244, 248-49 (5th Cir. 1996).
Once
jurisdiction is properly established, subsequent events will not
divest the court of jurisdiction.
Freeport–McMoRan, Inc. v. KN
Energy, Inc., 498 U.S. 426, 428 (1991); see also Mobil Oil Corp. v.
Kelley,
493 F.2d 784, 786, 493 F.2d 784 (5th Cir. 1974)(federal
question jurisdiction is not destroyed by plaintiff’s failure to
prove his federal question claim); Gebbia v. Wal-Mart Stores, Inc.,
233 F.3d 880, 883 (5th Cir. 2000)(after removal jurisdiction is
established,
subsequent
events
15
which
reduce
the
amount
in
controversy
below
jurisdiction);
citizenship
$75,000
Coury,
following
85
do
F.3d
removal
not
at
does
deprive
249
the
(change
not
in
destroy
court
of
parties’
diversity
jurisdiction); Campbell v. Stone Ins., Inc., 509 F.3d 665, 669
(subsequent dismissal of the only diverse defendant does not
dissolve diversity jurisdiction).
Finding
post-removal
denial
of
class
certification
“not
meaningfully different” from other post-removal changes, courts
have simply applied this well-settled “time of filing rule” in
finding that federal jurisdiction, once properly established,
remains unaffected by subsequent events in the litigation. Samuel,
2011 WL 3349826, at *4; see United Steel Workers Int’l Union, 602
F.3d at 1092 (“We think it more likely that Congress intended that
the
usual
developments
and
do
long-standing
not
defeat
principles
jurisdiction
if
apply—post-filing
jurisdiction
was
properly invoked as of the time of filing.”); Cunningham, 592 F.3d
at 807 (“Our conclusion vindicates the general principle that
jurisdiction once properly invoked is not lost by developments
after a suit is filed, such as a change in the state of which a
party is a citizen that destroys diversity.”); Vega, 564 F.3d at
1268 n. 12 (“[J]urisdictional facts are assessed at the time of
removal; and post-removal events (including non-certification,
de-certification, or severance) do not deprive federal courts of
16
subject matter jurisdiction.”). Thus, even where the lax minimal
diversity requirement of CAFA is no longer satisfied following
denial of class certification, most courts have found that federal
jurisdiction continues.3
See, e.g., Cleary v. Philip Morris Inc.,
--- F. 3d ---, 2011 WL 3800122, *3 (7th Cir. Aug. 25, 2011); In re
HP Inkjet Printer Litig., No. C05-3580, 2009 WL 282051, at *2 (N.D.
3
The legislative history of CAFA appears to also support
this interpretation. The Senate Report for CAFA
explains:
Under existing law (which S. 5 would not change),
“diversity” of citizenship between the parties
must exist both at the time a complaint is filed
and at the time a complaint is removed to federal
court. For this reason, the federal court would
generally only need to measure the diversity of
the parties at the outset of the litigation . . .
The Supreme Court established this principle in
St. Paul Mercury Indem. Co. v. Red Cab Co.,
stating that “events occurring subsequent to
removal which reduce the amount recoverable,
whether beyond the plaintiff's control or the
result of his volition, do not oust the district
court's jurisdiction once it has attached.” The
same would be true if a case was removed to
federal court because minimal diversity existed at
the time and, because of a later event, minimal
diversity was eliminated. This would occur if, for
example, the federal court dismissed the claims of
out-of-state plaintiffs, leaving only the claims
of in-state plaintiffs against an in-state
defendant intact. “It uniformly has been held that
in a suit properly begun in federal court the
change of citizenship does not oust the
jurisdiction. The same rule governs a suit brought
in a state court and removed to federal court.”
S. Rep. No. 109-14, at 60-61 (2005)(footnotes and
internal citations omitted).
17
Cal. Feb. 5, 2009); Colomar v. Mercy Hosp., Inc., No. 05-22409-CIV,
2007 WL 2083562 (S.D. Fla. 2007); Genenbacher v. Centurytel Fiber
Co. II, LLC, 500 F. Supp. 2d 1014, 1016 (C.D. Ill.2007); but see
Arabian v. Sony Electronics Inc., 2007 WL 2701340, at *7 (S.D. Cal.
Sep. 13, 2007)(finding that lack of minimal diversity after denial
of class certification required dismissal).
Finally,
as
other
courts
have
recognized,
policy
considerations weigh in favor of retaining federal jurisdiction
following the denial of class certification.
The principle of
“once jurisdiction, always jurisdiction” is informed by a desire to
promote efficiency and avoid expense and delay.
F.3d at 807.
Cunningham, 592
It also avoids shunting cases between court systems
in what amounts to a “jurisdictional ping-pong game.” United Steel
Workers Int’l Union, 602 F.3d at 1090.
Furthermore, if federal
jurisdiction was dependant upon class certification, the purposes
of CAFA would be frustrated.
that,
if
class
jurisdiction,
the
Many courts have expressed concerns
certification
denial
of
were
class
a
prerequisite
certification
to
“will
CAFA
invite
plaintiffs to take another bite at the certification apple in state
court under the same facts but potentially different certification
standards,” thereby frustrating Congressional intent that more
class actions should be litigated in federal courts.
Samuel, 2011
WL 3349826, at *6; see also Cunningham, 592 F.3d at 807 (“An even
more important consideration is that the policy behind the Class
18
Action Fairness Act would be thwarted if because of a remand a suit
that was within the scope of the Act by virtue of having been filed
as a class action ended up being litigated as a class action in
state court.”).
Here, the Court finds the analysis cited above persuasive, and
adopts it as such.
At the time this action was originally filed
and removed, the Fifth Circuit found that federal jurisdiction
existed under CAFA.
See In re Katrina Canal Breaches, 524 F.3d
700, 705-712 (5th Cir. 2008). Accordingly, neither the State’s
subsequent withdrawal of its class allegations nor the fact that
minimal diversity no longer exists “ousts” the Court of its
jurisdiction over this case.
Furthermore, under these circumstances, considerations of
expediency, judicial economy, and equity weigh heavily in favor
of retaining jurisdiction.
This case has been pending in federal
court since 2007, and since the time that it was removed,
numerous substantive legal issues have been litigated by the
parties and decided by the federal courts.
Remanding the case at
this juncture would essentially nullify the countless hours of
effort expended by both the parties and the courts and would only
serve to delay the resolution of the remaining claims.
Notably,
Judge Duval invited the State to dismiss its class allegations in
consideration of the possibility of remanding the case as early
as March 5, 2009, see Case No. 05-4182, Rec. Doc. 18033, p. 5-6,
19
but the State nonetheless continued to maintain its class
allegations and continued to litigate substantive issues in the
federal forum.
If the Court decided to remand the remaining
claims, nothing would preclude the State from attempting to relitigate these previously decided substantive issues in the state
courts, or from seeking to reassert its class allegations, which,
as explained above, would frustrate the goals of CAFA.
While the
State professed to have no such intention at oral argument, the
mere potential is sufficient cause for concern.
Additionally, the Court notes that equitable principles
counsel against remanding the case solely on the basis of the
withdrawal of the class allegations.
The State has sought and
obtained important substantive benefits through the continued
maintenance of its class allegations.
argument that its intention
The State admitted at oral
in asserting and maintaining the
claims of the putative class members was to toll the claims for
which it had not obtained subrogation agreements prior to the
September 1, 2007 deadline for filing Hurricane Katrina-related
insurance claims.4
The state subsequently relied on the tolling
of these claims in arguing that its subrogation claims were not
time-barred.
Fairness dictates that the State should not be
allowed to rely on the maintenance of the class allegations to
further its interests, only to stipulate them away in an effort
4
See LA. REV. STAT. § 22:658.3.
20
to return to state court.
Other courts have rejected similar
attempts of forum manipulation.
See Braud v. Transp. Serv. Co.
of Ill., 445 F.3d 801, 808 (5th Cir. 2006);
In re Burlington
Northern Santa Fe Ry. Co., 606 F.3d 379, 381 (7th Cir. 2010).
B.
Does the Eleventh Amendment Require Remand?
Alternatively, the State urges that its Eleventh Amendment
sovereign immunity deprives the Court of jurisdiction.
It
contends that the Fifth Circuit never reached the issue of its
Eleventh Amendment immunity “per se” because it based its holding
on the fact that a state cannot extend that immunity to the
private citizens in the class action.
The Court does not read
the Fifth Circuit’s holding quite so narrowly.
After expressing at least theoretical disagreement with the
Defendants’ argument that a state enjoys absolutely no Eleventh
Amendment immunity as a plaintiff, the Fifth Circuit specifically
held that it would “ultimately conclude that any immunity from
removal to federal court was waived by the addition of the class
of private citizens in the amended complaint, and relatedly that
immunity of the State from removal to federal court does not
extend to the members of the class.”
In re Katrina Canal
Litigation Breaches, 524 F.3d at 707 (emphasis added).
Thus, the
Court did not merely hold that the State’s sovereign immunity did
not extend to the members of the class, as the State suggests,
but also held that the addition of the class allegations waived
21
whatever immunity it might have had in this case.
It did not
reach the broader issue of whether the Eleventh Amendment
precluded removal precisely because it found waiver had
occurred.5
Under the law of the case doctrine, a district court
is precluded from reexamining issues of law or fact decided on
appeal.
Alpha/Omega Ins. Services, Inc. v. Prudential Ins. Co.
of America,
272 F.3d 276, 279 (5th Cir. 2001).
Accordingly, the
Eleventh Amendment does not require this case to be remanded.
C. Does §1367 Provide the Court with Discretion to Remand?
Finally, the State contends that, even if the Court
originally had jurisdiction under CAFA, it should exercise its
discretion pursuant to §1367(c) to remand the case.
Because the
original basis for federal jurisdiction under CAFA – i.e., the
class allegations – have been dismissed, leaving only its state
law subrogation claims, the State argues that §1367(c) provides
the Court with discretion to remand.
Defendants contend that the
State mischaracterizes the nature of its own claims, and thus
argues that its attempts to invoke §1367(c) are misguided.
It
argues that its claims aren’t “independent,” but were asserted as
5
As Defendants have pointed out, this holding has
essentially been confirmed by a subsequent Fifth Circuit
opinion in which another Fifth Circuit panel held that it
was bound by the prior holding in the consolidated
Katrina Canal Breaches Litigation that the State had
waived its sovereign immunity. See Louisiana, ex rel.
Caldwell v. Allstate Insurance Co., 536 F.3d 418, 431-32
(5th Cir. 2008).
22
the representative plaintiff on behalf of the putative class
members.
A few cases, although not cited in the State’s briefs or
addressed at oral argument, have applied the supplemental
jurisdiction statute, 28 U.S.C. § 1367, following dismissal of
class allegations in cases removed under CAFA.
For example, in
Giannini v. Schering-Plough Corp., following removal to federal
court under CAFA, the plaintiff voluntarily dismissed his class
allegations and subsequently sought remand to state court.
No.
06-06823, 2007 WL 1839789, at *2-4 (N.D. Cal. June 26, 2007).
The court framed the issue as whether it should exercise its
discretionary supplemental jurisdiction under §1367 and concluded
that interests of economy, convenience, fairness, and comity all
suggested that it should decline supplemental jurisdiction and
remand the cases to state court.
Id. at *2-5; see also Seyboth
v. General Motors Corp., 2008 WL 1994912, at *2 (M.D. Fla. May 8,
2008)(declining to exercise supplemental jurisdiction after
denial of class certification).
There are, indeed, certain similarities between a court’s
decision on whether to continue to exercise CAFA jurisdiction
over the remaining state law claims following the dismissal of
class allegations in a case removed under CAFA, and that of a
court considering whether to exercise supplemental jurisdiction
after the dismissal of a federal claim.
23
As one commentator
noted, “[i]n each situation, the foundation that originally
justified federal jurisdiction has eroded away, leaving state law
claims in something of a limbo. G. Shaun Richardson, Class
Dismissed, Now What? Exploring the Exercise of CAFA Jurisdiction
After the Denial of Class Certification, 39 N.M. L. REV. 121, 130
(2009).
This commentator has criticized the application courts’
application of the supplemental jurisdiction statute as
misguided.
See id. at 134.
This approach requires reading a
class certification requirement into the CAFA statute, where
clearly none is present.
Id. Additionally, it requires
“contortion” of the text of §1367 in order to fit class
allegations, which are not themselves “claims,” under the
language of the statute as “claims over which it [had] original
jurisdiction.”
Id. at 130-31;
see 28 U.S.C. § 1367(c)(3).
The
Court agrees with this analysis.
More directly, however, the plain language of CAFA obviates
the need to resort to §1367.
The language of CAFA states grants
original jurisdiction over “civil action” where the requirements
of CAFA are met, and not simply the class allegations within that
action.
28 U.S.C. § 1332(d)(2).
The statutory text goes on to
state that CAFA “shall apply to any class action before or after
the entry of a class certification order by the court with
respect to that action.”
28 U.S.C. § 1332(d)(8).
The statute
goes on to define a class certification order as “an order issued
24
by a court approving the treatment of some or all aspects of a
civil action as a class action.”
1332(d)(1)(c)(emphasis added).
28 U.S.C. §
Thus, CAFA specifically
contemplates that some parts of a civil action may exist
independently of the class action and nonetheless expressly
states that CAFA jurisdiction applies to the “civil action” as a
whole – not just to individual claims within that action.
See
Braud v. Transp. Serv. Co. of Ill., 445 F.3d 801, 808 (5th Cir.
2006)(explaining that “it is the ‘action,’ not claims against
particular defendants, that is removable”)(citing Dinkel v.
General Motors Corp., 400 F. Supp. 2d 289, 293 (D. Me. 2005);
Lowery v. Alabama Power Co., 483 F.3d 1184, 1196 (11th Cir.
2007)(concluding that “in light of the plain language of CAFA,
removal under the statute encompasses all the claims in the
‘action’ as a whole . . . ”).
As a result, even if the state is
correct that its claims are independent of the now-dismissed
class allegations, the Court nonetheless concludes that
jurisdiction under CAFA extends to those claims, as well.
Thus,
the supplemental jurisdiction statute is inapplicable.
This case was removed pursuant to the diversity statute, as
amended by CAFA.
The Supreme Court has clearly indicated that
federal jurisdiction under §1332 is not discretionary.
See
Carnegie-Mellon University v. Cohill, 484 U.S. 343, 356 (1988).
A court exceeds its authority by remanding a case on grounds not
25
permitted by the controlling statute.
Thermtron Products, Inc.
v. Hermansdorfer, 423 U.S. 336, 345 (1976).
In the absence of
other controlling authority providing discretion to remand, the
Court concludes that it must exercise the jurisdiction Congress
has conferred on it.
See Colorado River Water Conservation Dist.
v. United States, 424 U.S. 800, 817 (1976)(describing the
“virtually unflagging obligation” of federal courts to exercise
the jurisdiction conferred upon them).
CONCLUSION
Accordingly, for the foregoing reasons, the State of
Louisiana’s Motion to Remand should be DENIED.6
New Orleans, Louisiana, this 28th day of October, 2011.
____________________________
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE
6
Because the Court concludes that the State’s Motion to
Remand should be denied without reference to separate
opposition filed by Defendants Republic and ANPAC
Companies, it is unnecessary to address the arguments
raised therein.
26
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