Louisiana Workers' Compensation Corporation v. American Interstate Insurance Company

Filing 14

RULING granting 5 Defendant's Motion to Dismiss. Signed by Judge James J. Brady on 6/15/2016. (JDL)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
LOUISIANA WORKERS’
COMPENSATION CORPORATION
CIVIL ACTION
VERSUS
NO. 16-190-JJB-EWD
AMERICAN INTERSATE INSURANCE
COMPANY
RULING
This matter is before the Court on a Motion to Dismiss (Doc. 5) for lack of subject matter
jurisdiction, brought by the defendant American Interstate Insurance Company (“American
Interstate”). The plaintiff, Louisiana Workers’ Compensation Corporation (“LWCC”), filed an
opposition (Doc. 9) and the defendant filed a reply brief (Doc. 12). Oral argument is unnecessary.
For the reasons stated herein, the defendant’s Motion to Dismiss (Doc. 5) is GRANTED.
I.

BACKGROUND
This case involves a primary employer, Original USA General Labor, LLC (“Original

USA”) and a secondary employer, A-Port. Original USA was insured by American Interstate in
accordance with the Longshore and Harbor Workers’ Compensation Act (“LHWCA”). Def.’s
Supp. Mem. 2–3, Doc. 5-1. A-Port was insured by LWCC. Id. at 2. The two employers entered a
contract in which Original USA acted as a hiring agency, supplying A-Port with employees. Id. at
7 (citing Ex. I at 1).
The contract between the employers declared Original USA the provider of General
Liability and Workers’ Compensation Insurance for all Original USA employees. Pl.’s Opp’n 3,
Doc. 9 (citing Ex. C at 1). The contract included an “Alternate Employer Endorsement” stating
that Original USA’s policies applied as though the alternate employer—A-Port—was also insured
by American Interstate. Id. at 2 (citing Ex. D at 19). American Interstate agreed to not “ask any
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other insurer of the alternate employer to share with [American Interstate] a loss covered by this
endorsement.” Id. at 3 (citing Ex. D at 19).
Subsequent to the contract, Original USA employed and insured Willie Walton (“Walton”).
Def.’s Supp. Mem. 2, Doc. 5-1. While alternately employed by A-Port, Walton was involved in an
accident on A-Port property. Id. Walton brought a tort claim against A-Port and others in the 21st
Judicial District Court in October of 2013 (“Walton Litigation”). Id.
In the Walton Litigation, A-Port sought immunity from Walton’s tort claim under the
Alternate Employment Endorsement. The endorsement contained the language “alternate
employer,” and the LHWCA only accounts for “borrowed employers.” Pl.’s Opp’n 2, Doc. 9. The
trial court awarded A-Port borrowed employer status. Id. As a borrowed employer, A-Port received
immunity from the tort claim and was dismissed from the suit. Id. (citing Ex. B at 1).1
Following A-Port’s dismissal, American Interstate demanded A-Port and LWCC
reimburse the benefits paid under the LHWCA and assume liability for all future benefits. Def.’s
Supp. Mem. 2–3, Doc. 5-1. Neither A-Port nor LWCC replied to the demands.2 Id. at 3. In March
of 2016, American Insurance e-mailed LWCC, indicating they would file a third-party demand in
seven days. Id. On the sixth day, LWCC filed their Declaratory Judgment Action in this Court to
determine if the Alternate Employer Endorsement covers A-Port as a LHWCA borrowed
employer. Id. at 3–4; Pl.’s Opp’n 3, Doc. 9.

American Interstate appealed A-Port’s borrowed employer status, but the Louisiana First Circuit Court of Appeals
upheld the status in September of 2015. Def.’s Supp. Mem. 2, Doc. 5-1.
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This is the first time LWCC would be named as a defendant in the tort claim since it began in October of 2013. Id.
at 3.
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American Interstate now seeks dismissal of LWCC’s Declaratory Judgment Action by this
Court for lack of federal question subject matter jurisdiction, or alternatively, it moves the court
abstain from ruling on the case at bar.3 Def.’s Supp. Mem. 1, Doc. 5-1.
II.

DISCUSSION
This court is one of limited jurisdiction and must have subject matter jurisdiction over any

case it hears. 5B Charles A. Wright & Arthur R. Miller et al., Federal Practice & Procedure § 1350
(3d ed. 2016). The plaintiff has the burden of establishing jurisdiction. Venable v. La. Workers’
Comp. Corp., 740 F.3d 937, 941 (5th Cir. 2013).
Federal district courts are vested with jurisdiction over “all civil actions arising under the
Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. For purposes of § 1331, an
action can “arise under” federal law in two ways: In a well-pleaded complaint, (1) the party asserts
a federal cause of action,4 or (2) the party asserts a state cause-of-action claim that necessarily
raises “a stated federal issue, actually disputed and substantial, which a federal forum may entertain
without disturbing any congressionally approved balance of federal and state judicial
responsibilities.”5 Under the second avenue, a federal court can exercise federal question
jurisdiction over a state-law claim if: “(1) the state-law claim raises a substantial federal issue; (2)
the parties actually dispute the federal issue; and (3) exercising jurisdiction over the particular
category of cases will not disturb any ‘congressionally approved balance of federal and state
judicial responsibilities.’” Venable, 740 F.3d at 942.

LWCC does not claim complete diversity subject matter jurisdiction; it asserts only “federal question” jurisdiction
in paragraph 3 of the Complaint. Id. at 4.
4
See Am. Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260 (1916).
5
Grable & Sons Metal Prod., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 314 (2005).
3

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In the instant case, it is clear that LWCC does not assert a federal cause of action arising
under the LHWCA. Instead, LWCC argues that a substantial federal question arises because its
right to relief depends on a resolution of a substantial federal question. See Pl.’s Opp’n 7, Doc. 9.
According to LWCC, the federal issue arises from the need for the court to: (1) interpret the
contract between the two employers, Original USA and A-Port, and (2) interpret whether A-Port
is covered as Walton’s borrowed employer (pursuant to the LHWCA coverage) under the Alternate
Employer Endorsement included in American Interstate’s policy. Id. at 2. According to LWCC,
the reference to the Alternate Employer Endorsement creates a federal issue, and the LHWCA
necessarily raises a federal question because it preempts state law. Id. at 6–10.
The Court finds that the plaintiff has failed to demonstrate how the contract interpretation
issues presented by this case create a federal issue under the LHWCA. Although it is not clearly
stated by either party, the Court finds that the salient issues presented by this case “arise under”
the contracts between Original USA, A-Port, and American Insurance. In support of its argument
that these contracts must be interpreted in light of the LHWCA, LWCC cites to several provisions
of the LHWCA. See id. at 5, 9–10 (citing §§ 902, 905(a), 932, 935, & 938(a)). From reading these
provisions, it is unclear how these provisions affect the interpretations of the applicable contracts.
Moreover, LWCC failed to explain how these provisions have any bearing on either of the two
contract interpretation issues that LWCC asserts are presented by this case.
Additionally, LWCC cites to an unpublished Fifth Circuit case for the proposition that the
LHWCA completely preempts state law in the field, and therefore the complaint necessarily
creates a federal question. Id. at 7 (quoting Nadheer v. Ins. Co. of Pa., 506 F. App’x 297, 300 (5th
Cir. 2013)). The cases cited by the plaintiff merely stand for the proposition that the LHWCA
preempts any state law remedies that an aggrieved employee might have against his employer or
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insurer because the LHWCA provides the exclusive remedy. Those cases do not stand for the
proposition that the LHWCA necessarily creates federal question jurisdiction in a dispute between
insurers over the interpretation of a contract. While the LHWCA arguably constitutes a federal
element within the overall dispute, the purported LHWCA question of law does not elevate the
entire case to the level of federal question subject matter jurisdiction.
Because LWCC has failed to carry its burden of proving there is a federal issue, the Court
finds it does not have subject matter jurisdiction and does not have authority to hear this case.
III.

CONCLUSION
For the reasons stated above, the defendant’s Motion to Dismiss (Doc. 5) is GRANTED.
Signed in Baton Rouge, Louisiana, on June 15, 2016.





JUDGE JAMES J. BRADY
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

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