Klein et al v. Lewis Title Insurance Company, Inc. et al

Filing 41

ORDER: IT IS HEREBY ORDERED that Plaintiffs' 17 Motion to Remand is GRANTED. IT IS FURTHER ORDERED that the case is remanded to the Civil District Court for the Parish of Orleans, State of Louisiana. Signed by Judge Nannette Jolivette Brown on 7/7/2017. (mmv) (Additional attachment(s) added on 7/7/2017: # 1 Remand Letter) (mmv).

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
KLEIN, et al.

CIVIL ACTION

VERSUS

CASE NO. 17-2205

LEWIS TITLE INSURANCE COMPANY,
INC., et al.

SECTION: “G”(2)
ORDER

Pending before the Court is Plaintiff Henry L. Klein, the Succession of Frederick P.
Heisler, and Levy Gardens Partner 2007 LP’s (collectively, “Plaintiffs”) “Motion to Remand.”1
Having considered the motion, the memoranda in support and in opposition, the record, and the
applicable law, the Court will grant the motion and remand this case to the Civil District Court for
the Parish of Orleans, State of Louisiana.
I. Background
A.

Factual Background
In their Petition for Damages, Plaintiffs, “[p]ursuant to Louisiana Code of Civil Procedure

Article 1878,” seek a declaratory judgment establishing that the three underlying contracts sold by
Defendants Liskow & Lewis, PLC and Lewis Title Company (collectively “Defendants”) “are not
policies of insurance regulated by the Louisiana Insurance Code, Louisiana Revised Statutes, Title
22, but are retrospective Contracts of Warranty . . . and that all causes of action for breach are
regulated by the 10-year prescriptive period set forth by Louisiana Civil Code Article 3499.” 2 In

1

Rec. Doc. 17.

2

Rec. Doc. 1-3 at 26.

1

addition to their state law claim seeking declaratory judgment, Plaintiffs “reserve the right to seek
supplemental relief for damages depending on the Court’s granting Declaratory Judgment.”3
In general, Plaintiffs allege that they purchased land to construct a 100-unit multi-family
housing development in New Orleans East. 4 According to Plaintiffs, in connection with this
project, Plaintiffs purchased three title insurance policies for $100,628.92 from Commonwealth
Land Title Insurance Company and through Defendants.5 Plaintiffs contend that these policies
included zoning provisions that covered losses incurred if the property was not zoned to allow the
planned construction of the multi-family housing unit.6 Plaintiffs aver that after they invested over
$9 million in the project, a “watchdog group” successfully sued Plaintiffs to enforce a 1985 zoning
ordinance, thereby restricting Plaintiffs’ ability to use the property as intended.7 Plaintiffs allege
that Defendants failed to identify this zoning restriction in advance of the closing, and that
Defendants kept $80,503.14 of the $100,629.92 paid by Plaintiffs for the “ultimately worthless”
insurance policies.8
In response, Defendants allege that Plaintiffs have filed “numerous lawsuits” against them
in the Eastern District of Louisiana, the United States District Court for the District of Columbia,

3

Id.

4

See Rec. Doc. 1 at 6.

5

Id.; Rec. Doc. 1-2 at 1, 7.

6

See Rec. Doc. 1 at 6.

7

Id.; Rec. Doc. 1-2 at 1.

8

Rec. Doc. 1-2 at 1.

2

and in Louisiana state courts in connection with these allegations.9 Defendants assert that this
Court should dismiss Plaintiffs’ lawsuit, enjoin Plaintiff from filing “any further harassing
litigation,” and award Defendants attorneys’ fees.10
B.

Procedural Background
Plaintiffs filed their “Petition for Declaratory Judgment and Damages” in the Civil District

Court for the Parish of Orleans, State of Louisiana, on February 15, 2017. 11 On March 16, 2017,
Defendants removed the case to this Court. 12 On April 10, 2017, Plaintiffs filed a motion for
voluntary dismissal with prejudice as to any federal claims pursuant to Rule 41(a)(2), in which
Plaintiffs assert that they seek to “eliminate any doubt that [P]laintiffs do not seek any relief under
federal law in this case.”13
On April 17, 2017, Plaintiffs filed the instant “Motion to Remand.”14 On May 2, 2017,
Defendants filed an opposition.15
II. Parties= Arguments
A.

Defendants’ Notice of Removal
In their Notice of Removal, Defendants assert that this Court has original jurisdiction over

9

Rec. Doc. 1 at 7 (citations omitted).

10

Id. at 4.

11

Rec. Doc. 1–2.

12

Rec. Doc. 1.

13

Rec. Doc. 11-1 at 2.

14

Rec. Doc. 17.

15

Rec. Doc. 18.

3

this matter under 28 U.S.C. §§ 1331, 1337.16 Defendants argue that removal is proper because
Plaintiffs’ request for declaratory relief “necessarily turn[s] on some construction of federal law.”17
Defendants point out that this is the second time in three months that Plaintiffs have filed suit in
Louisiana state court against Defendants.18 According to Defendants, the first lawsuit was filed
on January 3, 2017, in state court (“January 3 Petition”) and was removed to this Court by
Defendants on the basis that Plaintiffs’ claims allegedly arose under federal law.19 Defendants
aver that Plaintiffs then voluntarily dismissed the January 3 Petition and stated that they would refile a “limited action for declaratory relief that will not involve any federal issues at the outset.” 20
However, Defendants argue that Plaintiffs’ instant Petition for Damages, filed on February
15, 2017 (“instant Petition”), in state court is not a “limited action . . . not involv[ing] any federal
issues,” but rather is a “near mirror image” of the claims in the January 3 Petition.21 Defendants
assert that Plaintiffs’ instant Petition seeks a declaratory judgment that the title insurance policies
purchased by Plaintiffs were not “insurance” but instead were “contracts of warranty.” 22
Defendants contend that Plaintiffs raised this same issue in their January 3 Petition and explicitly

16

Rec. Doc. 1 at 4.

17

Id. at 12 (quoting Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 808–09 (1986); Jacuzzi
v. Pimienta, 762 F.3d 419, 421 (5th Cir. 2014)).
18

Id. at 1.

19

Id.

20

Id. at 1–2.

21

Id.

22

Id. at 10.

4

argued that federal securities laws applied to the underlying contracts at issue.23
In particular, Defendants argue that in the January 3 Petition, Plaintiffs’ claims required an
interpretation and application of numerous federal laws and explicitly referenced Rule 10b-5 and
the Securities Exchange Act of 1934, the Real Estate Settlement Procedures Act (“RESPA”),
guidelines from the United States Department of Housing and Urban Development (“HUD”) and
the United States Government Accountability Office, the McCarran-Ferguson Act, Section 5 of
the Federal Trade Commission Act, Section 5 of the Sherman Act, and Section 5 of the Clayton
Act.24 According to Defendants, in their instant Petition, Plaintiffs merely “omit many (but not
all) of their prior references to federal statutes in an attempt to give the appearance that their claims
do ‘not involve any federal issues.’”25 Nonetheless, Defendants aver that Plaintiffs made clear in
the January 3 Petition that their demand for a declaratory judgment that the title insurance policies
allegedly sold by Defendants do not actually qualify as insurance and are “warranties” requires an
interpretation and application of federal securities laws.26
For example, in addressing the instant action, Defendants assert that a state court would
first have to consider whether the McCarran-Ferguson Act, which exempts the business of
insurance from most federal regulation, applies. 27 Defendants argue that Plaintiffs’ January 3
Petition also asserted that the underlying contracts at issue in this litigation were not “insurance”

23

Id.

24

Id. at 9.

25

Id. at 3.

26

Id. at 3, 10.

27

Id. at 13–14.

5

policies, but rather warranties subject to Rule 10b-5 of the Securities Exchange Act of 1934.28
Defendants assert that “given Plaintiffs’ prior position that their ‘warranties’ claim” is subject to
federal law, it is clear that Plaintiffs’ deletion of references to federal law is a “blatant attempt at
forum manipulation.”29 Likewise, Defendants contend that Plaintiffs’ allegation that Defendants
illegally accepted “kickbacks” involves an application of RESPA and HUD standards.30
Furthermore, in Plaintiffs’ Petition for Damages for this lawsuit, Defendants assert that
Plaintiffs specifically “adopt all arguments made in Klein v. ALTA,” which was a lawsuit filed by
Plaintiffs in 2012 in the United States District Court for the District of Columbia where Plaintiffs
allegedly invoked federal question jurisdiction in their claim that the contracts sold by Defendants
were not “title insurance.”31 Defendants contend that in Klein v. ALTA Plaintiffs also sought a
declaration of their rights under the McCarran-Ferguson Act, the Sherman Act, the Clayton Act,
and the Federal Trade Commission Act.32
B.

Plaintiffs’ Arguments in Support of the Motion to Remand
In their motion to remand, Plaintiffs argue that remand is proper because state law issues

predominate in this case and they have not asserted any federal causes of action. 33 Plaintiffs
provide a background of the case that they assert is “instructive” as to why this case should be

28

Id. at 12.

29

Id. at 12–13.

30

Id. at 15.

31

Id.

32

Id. at 8.

33

Rec. Doc. 17-1 at 1.

6

remanded. 34 Plaintiffs aver that this case arose out of a January 28, 2010 letter from
Commonwealth Land Title Insurance Company (“Commonwealth”) stating that Plaintiff Levy
Gardens was not an insured party under any of the policies purchased by Plaintiffs. 35 Plaintiffs
contend that while they filed suit against both Commonwealth and the Defendants in this action,
on July 27, 2010, they subsequently dismissed their claims against Defendants in that suit and
proceeded against Commonwealth alone.36 Thereafter, Plaintiffs assert that they filed suit against
Defendants again, and that those claims were dismissed with prejudice pursuant to Louisiana
Revised Statute § 9:5606, which Plaintiffs contend is a “preemption statute protecting insurance
agents and agencies.”37 As such, Plaintiffs concede that this action could be barred by res judicata,
but Plaintiffs argue that res judicata would not apply if a court declares that the title policies at
issue are not contracts of “insurance,” and thus Louisiana Revised Statute § 9:5606 would not
apply.38 Therefore, Plaintiffs argue that this lawsuit only seeks a declaratory judgment that the
polices at issue are not contracts of “insurance,” and that Louisiana contract law, as opposed to the
Louisiana Insurance Code, and the prescriptive periods applicable to contract claims apply to
Plaintiffs’ claims.39 Plaintiffs aver that if they are entitled to a declaratory judgment, then they

34

Id.

35

Id.

36

Id. at 1–2.

37

Id. at 2 (emphasis in original).

38

Id. at 2, 10–11.

39

Id.

7

may seek supplemental relief based on their claims.40
Further, Plaintiffs argue that remand is proper because they do not seek relief under federal
law or to enforce any duties or liabilities created by federal law, rules, or regulations.41 Plaintiffs
point out that they have filed a motion for voluntary dismissal of all federal claims pursuant to
Rule 41(a)(2) in order to “clear the record of any doubt that we did not intend to invoke federal
law . . . .” 42 Additionally, Plaintiffs argue that merely referencing federal regulations in their
pleadings filed in other cases does not provide a basis for federal jurisdiction.43 Plaintiffs point to
Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning, where the Supreme Court opined that
there is no federal jurisdiction in cases where a plaintiff only brings a state law action for breach
of contract and also alleges “for atmospheric reasons” that the defendants violated he Securities
Exchange Act.44 According to Plaintiffs, the Supreme Court held that such an action is brought to
enforce state contract law, and not the Securities Exchange Act, because “the plaintiff can get all
the relief he seeks just by showing the breach of an agreement, without proving any violation of
the federal securities law.”45
Moreover, Plaintiffs contend that the applicable test for determining whether a contract is
an insurance contract is set forth in Group Life & Health Insurance Company v. Royal Drug

40

Id.

41

Id. at 3.

42

Id. at 7 (emphasis in original).

43

Id. at 8.

44

Id. (citing 136 S. Ct. 1562, 1568 (2016)).

45

Id.

8

Company.46 According to Plaintiffs, the underlying title insurance policies fail this test because
they are allegedly retrospective, do not redistribute risk a futuro, involve a one-time purchase fee
and no premiums, and lack any reliable statistics showing what a property-owner must pay.47
Plaintiffs argue that their citation to Klein v. ALTA in the instant Petition for Damages also does
not provide for a basis for federal jurisdiction, as they only mentioned it to “borrow[] verbiage”
from that case.48 In sum, Plaintiffs assert that they abandoned the right to enforce “the 1934 Act
or other federal laws” and instead opted to get their desired relief pursuant to Louisiana law.49
Finally, Plaintiffs aver that the First NBC Bank has foreclosed on the underlying property
in this case, and that the State of Louisiana now has a second mortgage to protect on the property.50
Plaintiffs contend that this requires the Louisiana Attorney General to become involved in this
case “in a way that requires obedience to Colorado River Abstention” principles.51 According to
Plaintiffs, the Supreme Court in Colorado River determined that “the court first assuming
jurisdiction over property may exercise that jurisdiction to the exclusion of other courts . . . .”52
C.

Defendants’ Arguments in Opposition to Remand
In opposition, Defendants contend that this is the fourth lawsuit against them arising out of

46

Id. at 10 (citing Grp. Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205 (1979)).

47

Id.

48

Id.

49

Id.

50

Id. at 3.

51

Id.

52

Id.

9

a 2008 real estate transaction, and that this lawsuit was filed in state court only after Plaintiffs
dismissed their January 3 Petition in an attempt to avoid federal jurisdiction. 53 According to
Defendants, although Plaintiffs represented that this action would “not involve any federal issues
at the outset,” Plaintiffs’ instant Petition “largely mirrors” their January 3 Petition.54 Defendants
argue that Plaintiffs’ removal of their explicit references to federal law did not alter the substance
of their claims and demands which require interpretation of federal law.55
For example, Defendants aver that the McCarran-Ferguson Act provides that the “business
of insurance” shall be “subject to the laws of the several states,” and thus federal laws, regulations,
and causes of action would not apply if the underlying contracts in this case were insurance
policies.56 As such, Defendants argue that “the clear result” of Plaintiffs’ requested declaration
that “title insurance” is not the “business of insurance” “would be a holding that title insurance is
not protected from the application of federal law by the McCarran-Ferguson Act.”57 Therefore,
Defendants assert that the “only reason” for Plaintiffs to seek a declaration that the underlying
contracts are not “contracts of insurance” is to allow Plaintiffs “to pursue claims arising under
federal laws and regulations,” and that Plaintiffs’ “obvious goal” is to avoid the application of
McCarran-Ferguson and pursue claims arising under federal law.58

53

Rec. Doc. 18 at 1.

54

Id. at 2.

55

Id.

56

Id. at 2, 8–9.

57

Id.

58

Id. at 8–9, 13.

10

Defendants further contend that Plaintiffs’ incorporation of “all arguments made in Klein
v. ALTA, as if written out herein, fully and in extenso,” necessarily includes the arguments that:
(1) the Court has federal question jurisdiction under 28 U.S.C. § 1331; (2) title insurance is not
exempt from federal law by the McCarran-Ferguson Act; and (3) federal laws and regulations are
“available to redress” alleged abuses committed by the title insurance industry. 59 According to
Defendants, in both Klein v. ALTA and the January 3 Petition, Plaintiffs sought declarations that
the title insurance policies at issue are not “contracts of insurance” specifically to clear the way for
Plaintiffs to seek relief under federal securities laws, the Federal Trade Commission Act, the
Clayton Act, the Sherman Act, RESPA, HUD guidelines, and GAO standards. 60 Likewise,
Defendants point out that Plaintiffs’ petition alleges that the United States Supreme Court’s
decision in Group Life & Health Insurance Company, which involved an interpretation and
application of the McCarran-Ferguson Act, “is dispositive of the issue raised herein.”61
Additionally, Defendants assert that Plaintiffs have alleged violations of RESPA. 62
According to Defendants, RESPA is a federal statute that prohibits “kickbacks” and “unearned
fees” created during real estate settlement services involving federally-related mortgage loans and
exempts payments made to an “affiliated business arrangement” if it was not properly disclosed.63
Defendants aver that RESPA was explicitly referenced in the January 3 Petition and is implicitly

59

Id. (emphasis omitted).

60

Id. at 4–5.

61

Id. at 13.

62

Id. at 14–15.

63

Id. at 14.

11

raised by Plaintiffs’ allegations that Defendants are an “affiliated business arrangement” that failed
to properly disclose their splitting of insurance premiums and thus engaged in illegal
“kickbacks.”64
Finally, Defendants argue that the test for abstention under Colorado River is not met
here.65 According to Defendants, after this action was removed from state court, Plaintiffs added
Defendants as third-party defendants in the foreclosure action filed by First NBC Bank in state
court.66 Defendants aver that this was done in an attempt to argue that the Court should abstain
from this case in light of the pending parallel state court action.67 Defendants assert that a pending
state court action generally does not bar parallel proceedings in federal court, and that none of the
six factors listed in Colorado River weigh in favor of abstention.68
III. Law and Analysis
A.

Legal Standard
A defendant may remove a state civil court action to federal court if the federal court has

original jurisdiction over the action.69 Pursuant to 28 U.S.C. § 1331, a district court has subject
matter jurisdiction over “all civil actions arising under the Constitution, laws, or treaties of the
United States.” Often called “federal-question jurisdiction,” this type of jurisdiction “is invoked

64

Id. at 15.

65

Id.

66

Id.

67

Id. at 16.

68

Id. at 16–17.

69

28 U.S.C. § 1441(a); Syngenta Crop Prot., Inc. v. Henson, 537 U.S. 28, 34 (2002).

12

by and large by plaintiffs pleading a cause of action created by federal law (e.g., claims under 42
U.S.C. § 1983).”70 A single claim over which federal-question jurisdiction exists is sufficient to
allow removal.71
Pursuant to the “well-pleaded complaint” rule, “a federal court has original or removal
jurisdiction only if a federal question appears on the face of the plaintiff’s well-pleaded complaint;
generally, there is no federal jurisdiction if the plaintiff pleads only a state law cause of action.”72
Even where a federal remedy is also available, the “plaintiff is the master of his complaint and
may generally allege only a state law cause of action.”73 Further, “[a] defense that raises a federal
question is inadequate to confer jurisdiction.”74
Generally, there are “two recognized exceptions to the well-pleaded complaint rule.”75
First, there is the “complete pre-emption corollary to the well-pleaded complaint rule,” which is
not raised as a grounds for removal by Defendants. 76 Second, there is a “special and small”
category of cases in which a state law cause of action can give rise to federal question jurisdiction

70

Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308, 312 (2005);
see also Gunn v. Minton, 133 S. Ct. 1059, 1064 (2013) (“Most directly, a case arises under federal law when federal
law creates the cause of action asserted.”).
71
See Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 563 (2005); City of Chicago v. Int’l Coll.
of Surgeons, 522 U.S. 156, 164–66 (1997).
72

Bernhard v. Whitney Nat’l Bank, 523 F.3d 546, 551 (5th Cir. 2008).

73

Id.

74

Merrell Dow, 478 U.S. at 808.

75

Devon Energy Production Co., L.P. v. Mosaic Potash Carlsbad, Inc., 693 F.3d 1195, 1203 (10th Cir.

76

Caterpillar, 482 U.S. at 393.

2012).

13

because the claim involves important federal issues.77 This exception “captures the commonsense
notion that a federal court ought to be able to hear claims recognized under state law that
nonetheless turn on substantial questions of federal law, and thus justify resort to the experience,
solicitude, and hope of uniformity that a federal forum offers on federal issues.” 78 In Grable &
Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, the Supreme Court instructed
that the presence of a federal issue is not “a password opening federal courts to any state action
embracing a point of federal law.”79 Rather, “federal jurisdiction over a state law claim will lie if
a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of
resolution in federal court without disrupting the federal-state balance approved by Congress.”80
If all four requirements are met, “jurisdiction is proper because there is a ‘serious federal interest
in claiming the advantages thought to be inherent in a federal forum,’ which can be vindicated
without disrupting Congress’s intended division of labor between state and federal courts.”81 The
Fifth Circuit has similarly held that a complaint alleging a state law cause of action can create
federal question jurisdiction when: (1) a federal right is an essential element of the state claim;
(2) interpretation of the federal right is necessary to resolve the case; and (3) the question of federal
law is substantial.82

77

Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 699 (2006).

78

Grable, 545 U.S. at 312.

79

Id. at 314.

80

Gunn, 133 S. Ct. at 1065 (citing Grable, 545 U.S. at 314).

81

Id. (quoting Grable, 545 U.S. at 313–14).

82

Howery v. Allstate Ins. Co., 243 F.3d 912, 917 (5th Cir. 2001).

14

The removing party bears the burden of demonstrating that federal jurisdiction exists.83 In
assessing whether removal was appropriate, the Court is guided by the principle, grounded in
notions of comity and the recognition that federal courts are courts of limited jurisdiction, that
“removal statute[s] should be strictly construed in favor of remand.”84 Remand is appropriate if
the Court lacks subject matter jurisdiction, and “doubts regarding whether removal jurisdiction is
proper should be resolved against federal jurisdiction.”85
B.

Analysis
In their motion, Plaintiffs argue that remand is proper because they do not seek relief under

any federal law. 86 In response, Defendants contend that removal is proper because Plaintiffs’
request for declaratory relief and other allegations against Defendants necessarily require
interpretations and applications of federal laws, rules, and regulations.87
As a preliminary matter, the Court notes that, in their memoranda, both parties appear to
rely on arguments that are inapposite to the appropriate legal standard that the Court must apply
when determining whether an action was properly removed from state court. For example,
Plaintiffs have filed a motion for voluntary dismissal with prejudice as to any federal claims
Plaintiffs may have against Defendants to “clear the record of any doubt that [Plaintiffs] did not

83

See Allen v. R&H Oil & Gas Co., 63 F.3d 1326, 1335 (5th Cir. 1995).

84

Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002).

85
Acuna v. Brown & Root Inc., 200 F.3d 335, 339 (5th Cir. 2000) (citing Willy v. Coastal Corp., 855 F.2d
1160, 1164 (5th Cir. 1988)).
86

Rec. Doc. 17-1.

87

Rec. Doc. 18.

15

intend to invoke federal law” in their Petition for Damages.88 However, the Fifth Circuit has made
clear that determining whether a court has jurisdiction over an action removed from state court
requires courts to “consider the claims in the state court petition as they existed at the time of
removal.”89 Therefore, Plaintiffs’ pending motion to voluntarily dismiss any federal claims, which
was filed after removal to this Court,90 cannot divest this Court of jurisdiction if it finds that
removal was proper based on Plaintiffs’ claims “as they existed at the time of removal.”91 Indeed,
the Fifth Circuit has directly held that a plaintiff may not defeat jurisdiction over a properly
removed case by subsequently amending his or her complaint to omit all claims under federal
law.92 Moreover, Defendants do not appear to argue that Plaintiffs have directly asserted any
federal claims, but rather that Plaintiffs’ claim for declaratory relief and other allegations
necessarily involve the application and interpretation of federal laws and regulations. 93
Likewise, Defendants’ heavy reliance on the claims in Plaintiffs’ previously filed lawsuits,
including Plaintiffs’ January 3 Petition for Damages filed in their previous case that was
voluntarily dismissed, cannot create federal jurisdiction if it otherwise does not exist in the

88

See Rec. Doc. 11; Rec. Doc. 17-1 at 7 (emphasis in original).

89

Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002) (citing Cavallini v. State
Farm Mut. Auto Ins. Co., 44 F.3d 256, 264 (5th Cir. 1995)) (emphasis added).
90

Rec. Doc. 11.

91

Manguno, 276 F.3d at 723.

See Hook v. Morrison Milling Co., 38 F.3d 776, 780 (5th Cir. 1994) (“We have stated on several occasions
that a post-removal amendment to a petition that deletes all federal claims, leaving only pendent state claims, does not
divest the district court of its properly triggered subject matter jurisdiction.” (emphasis in original)) (citing Brown v.
Southwestern Bell Tel. Co., 901 F.2d 1250, 1254 (5th Cir. 1990); In re Carter, 618 F.2d 1093, 1101 (5th Cir. 1980)).
92

93

See Rec. Docs. 1, 18.

16

allegations and claims in Plaintiffs’ instant complaint.94 It is well-established that the plaintiff is
the “master of his complaint.”95 Indeed, as the Supreme Court has noted, a plaintiff “may avoid
federal jurisdiction by exclusive reliance on state law.”96 Here, Defendants criticize Plaintiffs’
decision to voluntarily dismiss their January 3 action pursuant to Federal Rule of Civil Procedure
41 and re-file a new action in state court without references to federal laws as “blatant forum
shopping.”97 However, the Fifth Circuit has determined that “Rule 41(a)(1) essentially permits
forum shopping.”98 As the Fifth Circuit has opined, “[i]t is not uncommon for plaintiffs to use
voluntary dismissal to ‘secure their preferred forum,’ such as when they seek to undo removal and
return to state court.”99 As such, the ultimate effect of a Rule 41(a)(1) voluntary dismissal is “to
put the plaintiff in a legal position as if he had never brought the first suit,” leaving Plaintiffs “free
to return to the dismissing court or other courts at a later date with the same claim.”100 Thus, the
extent to which Plaintiffs’ instant state court Petition and Plaintiffs’ dismissed January 3 Petition
or their previous lawsuits overlap is of little moment here, as the Court must examine whether

94
See Hook, 38 F.3d at 780 (“In a jurisdictional inquiry, we look at the complaint as it existed at the time the
petition for removal was filed . . . .”).
95

Elam v. Kansas City So. Ry. Co., 635 F.3d 796, 803 (5th Cir. 2011).

96

Caterpillar Inc. v. Williams, 482 U.S. 386, 391 & n. 7 (1987); see also d Oliver v. Lewis, 891 F. Supp. 2d
839, 842–43 (S.D. Tex. 2012) (finding that “a plaintiff who has a choice between federal- and state-law claims may
elect to proceed in state court on the exclusive basis of state law, defeating the defendant’s opportunity to remove but
taking the risk that any federal claims will be precluded”).
97

See Rec. Doc. 1 at 1–2.

98
Bechuck v. Home Depot U.S.A., Inc., 814 F.3d 287, 293 (5th Cir. 2016) (citing Harvey Specialty & Supply,
Inc. v. Anson Flowline Equip. Inc., 434 F.3d 320, 324 n.15 (5th Cir. 2005)).
99
100

Id.
Id.

17

jurisdiction exists based on the claims raised in this Petition for Damages filed for this case in state
court.101 Accordingly, the Court will now proceed to consider whether remand of this matter to
state court is proper.
1.

Plaintiffs’ Petition for Damages

In the instant Petition for Damages, Plaintiffs, “[p]ursuant to Louisiana Code of Civil
Procedure Article 1878,” seek a declaratory judgment that the three underlying contracts at issue
in this litigation “are not policies of insurance regulated by the Louisiana Insurance Code,
Louisiana Revised Statutes, Title 22, but are retrospective Contracts of Warranty . . . and that all
causes of action for breach are regulated by the 10-year prescriptive period set forth by Louisiana
Civil Code Article 3499.”102
Although Plaintiffs ultimately seek only a declaratory judgment, in this action Plaintiffs
also reserve the right “to seek further relief after declarations” establishing that the underlying
contracts are not policies of insurance and thus the 10-year prescriptive period applies to Plaintiffs’
potential state law claims.103 For example, Plaintiffs include approximately 25 pages of general
factual allegations against Defendants and third parties in their Petition for Damages, including
that Defendants breached their contractual duties to Plaintiffs, 104 breached their duty of good

101

Manguno, 276 F.3d at 723.

102

Rec. Doc. 1-3 at 26.

103

Id. at 3 (emphasis in original).

104

Id. at 3, 6.

18

faith, 105 engaged in illegal “kickbacks,” 106 violated their fiduciary duties, 107 fraudulently
concealed information from Plaintiffs,108 and committed fraud in the inducement and fraud in the
execution. 109 Plaintiffs aver that “this combination of shameless violations of contract law,
fiduciary duty law, natural law and moral law” require declaratory relief which “will lead to the
damages due” to Plaintiffs. 110 However, as Plaintiffs make clear in the instant Petition for
Damages and their motion to remand, Plaintiffs currently seek only declaratory relief in this
action.111
2.

Federal Question Jurisdiction

Based on the foregoing, the Court finds that it lacks subject matter jurisdiction over this
matter pursuant to 28 U.S.C. § 1331, and therefore remand to state court is proper. First, it is clear
from the face of Plaintiffs’ Petition that Plaintiffs only assert one state law cause of action for
declaratory relief,112 and that Plaintiffs do not expressly assert a federal cause of action over which
this Court may exercise federal question jurisdiction.113 Second, Defendants have not shown that

105

Id. at 4–5.

106

Id. at 5.

107

Id. at 4.

108

Id.

109

Id. at 11.

110

Id. at 12.

111

Id. at 26; see Rec. Doc. 17-1 at 2–3.

112

Id. at 26.

113

See Rec. Doc. 17-1 at 3 (Plaintiffs confirming that the removed Petition “seeks no relief under any federal

law”).

19

Plaintiffs’ claims fit into the “special and small” category of cases recognized by the Supreme
Court in which a state law cause of action involves important federal issues giving rise to federal
question jurisdiction.114 As stated supra, “federal jurisdiction over a state law claim will lie if a
federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of
resolution in federal court without disrupting the federal-state balance approved by Congress.”115
Here, Defendants have not shown that any of the four elements are met by Plaintiffs’ claims such
that the Court can exercise subject matter jurisdiction in this matter. The Court will consider each
of Defendants’ arguments in turn.
a.

The McCarran-Ferguson Act

In their opposition memorandum, Defendants argue that federal question jurisdiction exists
because “Plaintiffs’ request for declaratory relief turns on a construction of [the] McCarranFerguson [Act].” 116 However, in the instant Petition for Damages, Plaintiffs’ request for
declaratory judgment does not request an interpretation or construction of the McCarran-Ferguson
Act, but rather that the underlying contracts at issue “are not policies of insurance regulated by the
Louisiana Insurance Code.” 117 Moreover, the McCarran-Ferguson Act simply provides that
regulating the “business of insurance” is left to the states,118 and the Fifth Circuit has noted that

114

Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 699 (2006).

115

Gunn, 133 S. Ct. at 1065 (citing Grable, 545 U.S. at 314).

116

Rec. Doc. 18 at 11.

117

Rec. Doc. 1-3 at 26.

15 U.S.C. § 1012 (“The business of insurance . . . shall be subject to the laws of the several States . . . No
Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of
regulating the business of insurance . . . .”).
118

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the “test under McCarran–Ferguson is not whether a state has enacted statutes regulating the
business of insurance, but whether such state statutes will be invalidated, impaired, or superseded
by the application of federal law.”119 Here, Plaintiffs seek a limited declaration that the underlying
contracts are not insurance policies under Louisiana law and that the 10-year prescriptive period
for Louisiana state law claims applies.120 Plaintiffs do not seek a declaration regarding whether
the McCarran-Ferguson Act precludes Plaintiffs from asserting federal causes of action.
Defendants argue that Plaintiffs’ “goal” in seeking a declaration that the contracts at issue
are not insurance policies is to “avoid application of McCarran-Ferguson.”121 As stated supra, the
McCarran-Ferguson Act precludes the application of federal law and regulations to the “business
of insurance.” 122 As such, Defendants contend that Plaintiffs seek their desired declaratory
judgment that the contracts at issue are not insurance policies in order to allow Plaintiffs to “pursue
claims arising under federal law, including RESPA and federal securities laws.” 123 However,
whether Plaintiffs may later attempt to bring federal causes of action if they successfully receive
the declaratory relief sought in the instant Petition is of no moment, as jurisdiction must be
determined by the Petition for Damages as it exists at the time of removal.124 Regardless of what

119

Dehoyos v. Allstate Corp., 345 F.3d 290, 295 (5th Cir. 2003).

120

Rec. Doc. 1-3 at 26.

121

Rec. Doc. 18 at 13.

122

Id.

123

Id.

124

Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002) (citing Cavallini v. State
Farm Mut. Auto Ins. Co., 44 F.3d 256, 264 (5th Cir. 1995)) (emphasis added).

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Plaintiffs’ future “goal” might be, 125 Defendants have not shown that the instant Petition for
Damages asserts a cause of action upon which this Court can exercise subject matter jurisdiction.
Indeed, in Gunn v. Minton, the Supreme Court noted that “it is not enough that the federal
issue be significant to the particular parties in the immediate suit,” as the “substantiality inquiry
under Grable looks instead to the importance of the issue to the federal system as a whole.”126 The
Supreme Court has also held that “[n]ot every question of federal law emerging in a suit is proof
that a federal law is the basis of the suit.”127 Here, Defendants have not shown that Plaintiffs’
Petition raises any federal issues that are so substantial that they are “significant to the federal
system as a whole,” or that exercising federal jurisdiction is otherwise proper.128
b.

Allegations of illegal “kickbacks”

Defendants also assert that Plaintiffs’ instant Petition for Damages retains some references
to federal statutes, and that Plaintiffs make general allegations against Defendants, including that
they engaged in illegal “kickbacks,” which constitute a violation of the Real Estate Settlement
Procedures Act and other federal laws. 129 However, as stated supra, Plaintiffs’ Petition for
Damages makes clear that they only seek declaratory judgment at this time.130 Plaintiffs also argue

125

Rec. Doc. 18 at 13.

126

Gunn, 133 S. Ct. at 1068.

127

Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 672 (1950).

128

Gunn, 133 S. Ct. at 1068.

Rec. Doc. 1 at 12 (stating that “Plaintiffs have deleted many (but not all) references to federal statutes”);
Rec. Doc. 18 at 14 (arguing that Plaintiffs assert violations of RESPA).
129

130

Rec. Doc. 1-3 at 26.

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that they “seek[] no relief under any federal law” and that any references they made to federal law
in the Petition for Damages were simply for “atmospheric reasons.”131 By contrast, Defendants
have not shown that Plaintiffs are asserting a cause of action under RESPA, or that Plaintiffs have
asserted any other claims beyond their request under Louisiana state law for declaratory judgment.
In other words, Defendants have not shown that Plaintiffs’ general allegations that
Defendants engaged in “kickbacks” “necessarily raise[]” a “disputed” and “substantial” federal
issue.132 As the Supreme Court maintains, the mere presence of a federal issue in a case is not “a
password opening federal courts to any state action embracing a point of federal law.”133 Indeed,
when considering the similar question of whether a claim “arises under” the Securities Exchange
Act and confers federal jurisdiction, the Supreme Court has noted that a plaintiff who brings a
“simple state-law action for breach of contract” and further “alleges, for atmospheric reasons, that
the defendant’s conduct also violated the Exchange Act,” has not brought an action to enforce that
federal law.134 Rather, the Supreme Court opined that “the plaintiff can get all the relief he seeks
just by showing the breach of an agreement, without proving any violation of federal securities
law.”135 Similarly here, Plaintiffs can get the declaratory relief they seek without proving any
violation of RESPA or other federal laws. Thus, Defendants have not shown that Plaintiffs’
allegations and references to federal laws or regulations are sufficient to create a federal cause of

131

Rec. Doc. 17-1 at 3, 8.

132

Gunn, 133 S. Ct. at 1065 (citing Grable, 545 U.S. at 314).

133

Grable, 545 U.S. at 314.

134

Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning, 136 S. Ct. 1562, 1569 (2016).

135

Id.

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action or that Plaintiffs’ Petition for Damages sufficiently implicates a “serious federal interest”
such that exercising jurisdiction is proper.136 Defendants, as the removing parties, bear the burden
of demonstrating that federal jurisdiction exists, 137 and “doubts regarding whether removal
jurisdiction is proper should be resolved against federal jurisdiction.”138 Here, Defendants have
not shown that Plaintiffs’ general factual allegations and state law cause of action for declaratory
relief allows the Court to exercise federal jurisdiction.
c.

Contracts of warranty

Defendants also argue that Plaintiffs’ assertion that the underlying contracts are contracts
of warranty raises federal issues, as Defendants point out that Plaintiffs’ January 3 Petition alleged
that the same contracts sold by Defendants were “securities” requiring Defendants to “face the
rigors of the federal securities laws.” 139 As stated supra, however, Plaintiffs’ allegations and
arguments in their previous cases that were dismissed without prejudice cannot establish subject
matter jurisdiction over this matter presently before the Court. In the instant Petition for Damages,
Plaintiffs make clear that their request for declaratory judgment turns on state law, as they request
a declaration that the contracts “are not policies of insurance regulated by the Louisiana Insurance
Code . . . but are retrospective Contracts of Warranty . . . and that all causes of action for breach

136

Gunn, 133 S. Ct. at 1065; Grable, 545 U.S. at 314.

137

See Allen v. R&H Oil & Gas Co., 63 F.3d 1326, 1335 (5th Cir. 1995).

138

Acuna v. Brown & Root Inc., 200 F.3d 335, 339 (5th Cir. 2000) (citing Willy v. Coastal Corp., 855 F.2d
1160, 1164 (5th Cir. 1988)).
139

Rec. Doc. 1 at 10.

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are regulated by the 10-year prescriptive period set forth by Louisiana Civil Code Article 3499.”140
Moreover, in Plaintiffs’ motion to remand, they assert that they are requesting this declaratory
relief to determine whether the longer prescriptive period of 10 years for Louisiana contract law
would apply, “whereas the Louisiana Insurance Code would impose shorter periods” if a court
declares that the underlying contracts are contracts of insurance.141 Thus, Defendants have not
pointed to a sufficient basis to support a finding that Plaintiffs’ requested declaratory relief
“necessarily raise[]” any “actually disputed” and “substantial” federal issues that may be resolved
by this Court without disrupting the balance between states and federal courts.142
d.

Cases cited in Plaintiffs’ Petition for Damages

Finally, Defendants point out that Plaintiffs specifically “adopt all arguments made in Klein
v. ALTA,” which was a lawsuit filed by Plaintiffs in 2012 in the United States District Court for
the District of Columbia in which Plaintiffs sought a declaration of their rights under the
McCarran-Ferguson Act, the Sherman Act, the Clayton Act, and the Federal Trade Commission
Act.143 However, as is clear from the Petition for Damages, Plaintiffs did not adopt the causes of
action asserted in Klein v. ALTA.144 Rather, Plaintiffs only adopted the arguments made in the
case, and Defendants have not shown that adopting those “arguments” made in a separate case
seeking different relief under other causes of action are sufficient to create federal jurisdiction

140

Rec. Doc. 1-3 at 26 (emphasis added).

141

Rec. Doc. 17-1 at 2.

142

Gunn, 133 S. Ct. at 1065 (citing Grable, 545 U.S. at 314).

143

Rec. Doc. 1 at 7–8.

144

Rec. Doc. 1-3 at 12.

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here.145
Additionally, Defendants contend that Plaintiffs asserted in their Petition for Damages that
the Supreme Court case Group Life Insurance Company, which Defendants represent involved
interpreting and applying the McCarran-Ferguson Act, was “dispositive of the issue raised
herein.”146 However, it appears from Plaintiffs’ Petition for Damages that Plaintiffs cite to Group
Life Insurance Company to simply include the Supreme Court’s discussion of what constitutes
“insurance,” such as the Supreme Court’s holding that “risk underwriting” is an “indispensable
characteristic of insurance” and requires “some element of spreading risks more widely,” which
Plaintiffs appear to allege supports their argument that the underlying contracts at issue are not
“contracts of insurance.” 147 Defendants have not shown that Plaintiffs’ limited citation to a
Supreme Court case that involved federal law in support of Plaintiffs’ action seeking declaratory
relief under Louisiana law is sufficient to establish federal question jurisdiction here. Moreover,
the Court notes that Plaintiffs do not solely rely on the Supreme Court’s holding in Group Life
Insurance Company to support their requested declaratory relief. Rather, Plaintiffs’ Petition for
Damages also points to other sources to support their argument that the underlying contracts at
issue are not “contracts of insurance,” including a report by the Iowa State Bar Association,148
approximately twenty articles on title insurance, 149 statements and reports by the National

145

Id.

146

Rec. Doc. 18 at 13.

147

Rec. Doc. 1-3 at 14.

148

Id. at 9 (citing Iowa State Bar Association, Title Insurance: A Fleecing of America and Why It is Important
to Keep It Out of Iowa (Des Moines, Iowa State Bar Association, 2005)).
149

Id. at 9–10 (citations omitted) (listing approximately twenty articles in “[s]upport for this Court’s granting

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Association of Insurance Commissioners pointing out differences between title insurance and other
types of insurance policies,150 arguments made in Plaintiffs’ past cases filed against Defendants,151
and the dictionary definition of a “policy of insurance.”152
Furthermore, in Plaintiffs’ request for a declaratory judgment, Plaintiffs make clear they
seek a judgment declaring that the underlying contracts at issue are not “policies of insurance
regulated by the Louisiana Insurance Code.”153 Here, Defendants have not shown how Plaintiffs’
request cannot be determined by looking to the Louisiana Insurance Code’s general definitions of
types of “insurance,”154 the provisions of the Louisiana Insurance Code passed by the Louisiana
Title Insurance Act, which regulates the title insurance industry in Louisiana,155 or to Louisiana
state law generally. In sum, Defendants have not shown that Plaintiffs’ general citations to the
Supreme Court’s analysis regardling what constitutes “insurance” in Group Life Insurance
Company “necessarily raise[s]” a “disputed” and “substantial” federal issue, “which a federal
forum may entertain without disturbing any congressionally approved balance of federal and state

declaratory relief”).
150

Id. at 14, 16–19 (citation omitted).

151

Id. at 12, 24 (citations omitted).

152

Id. at 24 (quoting 1 G. Richards, The Law of Insurance § 2 (W. Freedman 5th ed. 1952)).

153

Rec. Doc. 1-3 at 26 (emphasis added).

La. Rev. Stat. § 22:47(9) (definition “title” insurance as “[i]nsurance of owners of property or others
having an interest therein, against loss by encumbrance, or defective titles, or adverse claim to title, and services
connected therewith”).
154

155
La. Rev. Stat. § 22:511 (providing that the purpose of the “Louisiana Title Insurance Act” is to “provide
the state of Louisiana with a comprehensive body of law for the effective regulation and supervision of title
insurance . . .”); see Commonwealth Land Title Ins. Co. v. Jones, 2006-1277 (La. App. 3 Cir. 2/7/07); 948 So. 2d 1243,
1246 (noting that the Louisiana Title Insurance Act “regulates the title insurance industry in Louisiana”).

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judicial responsibilities.”156 As stated supra, the mere presence of a federal issue in a case is not
“a password opening federal courts to any state action embracing a point of federal law,”157and
“[n]ot every question of federal law emerging in a suit is proof that a federal law is the basis of the
suit.”158
e.

Conclusion

Therefore, based on the foregoing, the Court finds that Defendants, as the removing parties,
have not shown that Plaintiffs have asserted a claim upon which Defendants can establish federal
question jurisdiction pursuant to 28 U.S.C. § 1331. Accordingly, the Court finds that it lacks
subject matter jurisdiction over the case and remands this matter back to state court.
IV. Conclusion
Based on the foregoing, the Court finds that Defendants have not shown that Plaintiffs have
alleged a federal cause of action or that Plaintiffs’ state law cause of action seeking declaratory
relief raises important federal issues such that exercising federal question jurisdiction pursuant to
28 U.S.C. § 1331 is proper. Therefore, the Court finds that it lacks subject matter jurisdiction in
this case, and that remand to state court is appropriate. Accordingly,
IT IS HEREBY ORDERED that Plaintiffs’ “Motion to Remand”159 is GRANTED.

156

Gunn, 133 S. Ct. at 1065; Grable, 545 U.S. at 314.

157

Grable, 545 U.S. at 314.

158

Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 672 (1950).

159

Rec. Doc. 17.

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IT IS FURTHER ORDERED that the case is remanded to the Civil District Court for the
Parish of Orleans, State of Louisiana.

7th
NEW ORLEANS, LOUISIANA, this ______ day of July, 2017.

________________________________
NANNETTE JOLIVETTE BROWN
UNITED STATES DISTRICT JUDGE

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