Patin v. Allied Signal, Inc. , 69 F.3d 1 ( 1995 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 94-41150
JIMMY CHARLES PATIN, Sr., and
MARGARET PATIN,
Plaintiffs-Appellants,
versus
ALLIED SIGNAL, INC. and
TRAVELERS INSURANCE COMPANY
of RHODE ISLAND,
Defendants,
TRAVELERS INSURANCE COMPANY
of RHODE ISLAND,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of Texas
November 1, 1995
Before SMITH, WIENER and DEMOSS, Circuit Judges.
WIENER, Circuit Judge:
We render this opinion not only to decide the case before us,
but also to resolve an intra-circuit conflict on an important and
recurring issue implicating removal from and remand to state court.
For the reasons set forth below, we hold that a covered employee's
claims and the claims of those asserting rights through the
employee against the employer's workers' compensation insurance
carrier for breach of the duty of good faith and fair dealing are
not immunized against removal to federal court by the provisions of
28 U.S.C. § 1445(c). We conclude that such a claim is not a civil
action "arising under" the state workers' compensation law; rather,
such a claimSQ basically an insurance malpractice tortSQis separate
from and independent of a claim for statutory workers' compensation
benefits, regardless of the fact that such a tort claim is "related
to" a compensation benefits claim and to the workers' compensation
insurance coverage of the claimant's employer.
I
FACTS AND PROCEEDINGS
Plaintiff-Appellant Jimmy Charles Patin, Sr. sustained a work-
related injury on October 2, 1990, while employed by Defendant
Allied-Signal, Inc. (Allied). He continued to work for Allied
without loss of time or compensation until he was discharged on
November 2, 1990. As Allied's workers' compensation insurance
carrier, Defendant-Appellee Travelers Indemnity Company of Rhode
Island (Travelers) paid medical bills for Patin's treatment but
never initiated payment of weekly workers' compensation benefits
because (1) Patin had lost no time as a result of his work-related
injury, and (2) he had a pre-existing physical limitation in his
shoulder.
On March 21, 1991, Patin filed a workers' compensation claim
with the Texas Industrial Accidents Board (IAB), which awarded
Patin $42,091.02 in connection with the October 1990 accident.
2
Both parties to that administrative proceeding appealed in a suit
de novo filed in state district court. At the completion of the
jury trial that ensued, Patin's award was increased to $75,021.88
for permanent partial disability; his claim for total temporary
disability was rejected.
In another action, Patin sued Allied in federal court for age
discrimination and wrongful discharge, claiming that Allied had
retaliated against him for filing the workers' compensation claim
for the October 1990 accident. In that case, a federal jury
rendered a verdict in favor of Allied, producing a take-nothing
judgment adverse to Patin.
Yet a third lawsuit implicating Patin's October 1990
accidentSQthe suit from which this appeal arisesSQwas filed by Patin
and his wife, Margaret (collectively, the Patins), on July 23,
1993, in the 128th Judicial District Court, Orange County, Texas.
It included, among others, a claim against Travelers for breach of
the duty of good faith and fair dealing. Travelers removed the
case to federal district court on the basis of diversity of
citizenship. The Patins timely filed a motion to remand this case
to state court, contending that (1) as an insurance company
conducting business in Texas, Travelers is a de facto citizen of
that state, and thus removal is not proper; and (2) no proof
existed that the required $50,000 minimum jurisdictional amount was
met. In addition, the Patins' motion made mention, in connection
with the de facto citizenship argument, of the fact that Travelers
does business under the Texas Workers' Compensation Act (TWCA).
3
The Patins concluded their remand motion with the statement that
"[t]he cause should be remanded because the outcome depends
entirely on claims under the Texas Workers' Compensation Act, and
there are not [sic] federal questions." After a full hearing in
October 1993, the district court denied the Patins' motion to
remand.
In February 1994, Travelers filed a motion for summary
judgment, insisting that the Patins' claims were barred by both the
statute of limitations and the doctrine of res judicata. In August
1994, subsequent to a full merits hearing on that motion, the
district court granted summary judgment in favor of Travelers. The
following month the Patins timely filed a motion for
reconsideration, but it too was denied by the district court.1
The Patins timely filed their notice of appeal from the
district court's denial of that post-judgment motion. On appeal
the Patins insist that 28 U.S.C. § 1445(c) mandates remand to state
court because their claims against Travelers arise under the TWCA.2
Predictably, the Patins also assert that neither the doctrine of
res judicata nor the applicable state statute of limitations bars
their claims.
1
The Patins' reconsideration motion was styled as a motion
for new trial, pursuant to Fed. R. Civ. P. 59(a), but was correctly
analyzed and decided in the district court as a Rule 59(e) motion
to reconsider entry of summary judgment.
2
"A civil action in any State court arising under the
workmen's compensation laws of such State may not be removed to any
district court of the United States." 28 U.S.C. § 1445(c)
(emphasis added).
4
II
ANALYSIS
A. Standard of Review
We review the district court's grant of a motion for summary
judgment de novo, applying the same standard as the district court
applied.3 Questions of law are decided just as they are outside of
the summary judgment context: de novo.4
B. Remand to State Court
1. Jurisdictional Amount and De Facto Citizenship
In the district court the Patins, citizens of Louisiana,
contended that subject matter jurisdiction was wanting in federal
district court for the following reasons: (1) the summary
judgment evidence was insufficient to demonstrate that the amount
in controversy was equal to or exceeded $50,000, and (2) Travelers
was a de facto citizen of Texas by virtue of the way it does
business there.5 We agree with the district court's determination
that the requirements for diversity jurisdiction under 28 U.S.C.
§ 1332 were present and that 28 U.S.C. § 1441(b) does not prevent
3
Berry v. Armstrong Rubber Co., 989 F.2d 822, 824 (5th Cir.
1993), cert. denied, U.S. , 114 S. Ct. 1067, 127 L. Ed. 2d 386
(1994); Fraire v. City of Arlington, 957 F.2d 1268, 1273 (5th Cir.)
(citations omitted), cert. denied, U.S. , 113 S. Ct. 462,
121 L. Ed. 2d 371 (1992).
4
Walker v. Sears, Roebuck & Co., 853 F.2d 355, 358 (5th Cir.
1988).
5
Complete diversity would still exist even if the Patins had
successfully argued that Travelers was a citizen of Texas. Under
these circumstances, however, removal would have been improper
because the Patins brought the action in Texas state court. See 28
U.S.C. § 1441(b).
5
removal. Presumably the Patins do too, as they do not challenge
these holdings on appeal.
2. Remand under 28 U.S.C. § 1445(c)
Before us, the Patins rely solely on § 1445(c) as
justification for remand. They contend that all of their claims
against Travelers "aris[e] under Workmen's Compensation laws" of
Texas; as such, the removal of this case from state court was void,
and the case therefore must be remanded to state court. In
response, Travelers offers two theories on which it urges us to
affirm the district court's denial of remand and retention of
jurisdiction: (1) The Patins have waived their right to insist on
remand; and (2) the Patins' common law claim that Travelers
breached the duty of good faith and fair dealing, their Texas
Insurance Code claim, and their claim of civil conspiracy, were all
"separate and independent claims" from the claims for statutory
workers' compensation benefits that they advanced in their
IAB/state court litigation, confirming that the Patins' action
cannot come within the purview of the non-removability provisions
of § 1445(c). We address Travelers' two theories in sequence.
a. Waiver
If Travelers is correct that the Patins have waived
their right to claim improper removal, our remand inquiry is at an
end, and we need not consider non-removability under § 1445(c).
Travelers insists that the Patins neither cited nor relied on
§ 1445(c) in their Motion to Remand or in their argument to the
district court at the hearing on that motion. Rather, states
6
Travelers, remand based on § 1445(c) was raised for the first time
in the Patins' motion for a new trial (reconsideration), thereby
failing to comply with the requirement of § 1447(c) that "[a]
motion to remand the case on the basis of any defect in removal
procedure must be made within 30 days after the filing of the
notice of removal under section 1446(a)."6 Travelers notes
correctly that in this circuit the wrongful removal of a civil
action arising under a state's workers' compensation law is a
procedural defect that is waivable under § 1447(c).7 Patin no
longer disputes that diversity is complete, so the instant claim
clearly could have been brought originally in federal court. As
such, the following rule of this circuit applies:
If a plaintiff initially could have filed his
action in federal court, yet chose to file in
state court, even if a statutory provision
prohibits the defendant from removing the
action and the defendant removes despite a
statutory proscription against such removal,
the plaintiff must object to the improper
removal within thirty days after the removal,
or he waives his objection.8
Although Travelers correctly recites the applicable law when
it asserts that the Patins' removal complaint is procedural in
nature and thus waivable, the facts eschew waiver. True, § 1445(c)
was neither quoted nor cited by section number in the Patins'
removal motion or in their argument to the district court at the
6
28 U.S.C. § 1447(c).
7
Will. v. AC Sparkplugs, 985 F.2d 783 (5th Cir. 1993)
(construing § 1445(c)); Lirette v. N.L. Sperry Sun, Inc., 820 F.2d
116, 117 (5th Cir. 1987) (en banc) (construing § 1445(a)).
8
Will. v. AC Sparkplugs, 985 F.2d at 787.
7
hearing on that motion. Nevertheless, the substantive concept
embodied in § 1445(c)SQnon-removability of claims arising under
state workmen's compensation lawsSQwas adverted to in the motion
and was discussed, however briefly, in the hearing. Moreover, in
contesting removal Travelers apparently addressed briefly the issue
of non-removability and referred to § 1445(c) by number, thereby
eliminating any question whether that ground for remand was before
the district court. Thus, we reject Travelers' contention that the
Patins waived their right to insist on remand to state court.
b. "Arising Under" the Texas Workers' Compensation Act
The intra-circuit conflict alluded to in the introductory
portion of this opinion was created by diametrically opposed
jurisprudential answers to the question whether an employee's claim
against his employer's workers' compensation insurance carrier for
the breach of its duty of good faith and fair dealing "arises
under" the workers' compensation laws of the state. Federal
district courts of this circuit are split on the issue.9
9
Compare Warner v. Crum & Forster Commercial Ins. Co.,
839 F. Supp. 436, 439 (N.D. Tex. 1993); Haines v. National Union
Fire Ins. Co., 812 F. Supp. 93, 95 (S.D. Tex. 1993); Bastian v.
Travelers Ins. Co., 784 F. Supp. 1253, 1258 (N.D. Tex. 1992); Powers
v. Travelers Ins. Co., 664 F. Supp. 252, 254 (S.D. Miss. 1987) (good
faith and fair dealing claims removable) with Walker v. Health
Benefit Management Cost Containment, Inc., 860 F. Supp. 1163, 1166
(N.D. Tex. 1994); Almanza v. Transcontinental Ins. Co., 802 F. Supp.
1474, 1477 (N.D. Tex. 1992); Allsup v. Liberty Mutual Ins. Co., 782
F. Supp. 325, 327 (N.D. Tex. 1991); Watson v. Liberty Mutual Fire
Ins. Co., 715 F. Supp. 797, 798 (W.D. Tex. 1989) (good faith and
fair dealing claims arise under the TWCA and are not removable).
In both Allsup and Watson, claims for benefits were removed with
good faith and fair dealing claims. In both cases resolution of
the question whether the good faith and fair dealing claims arose
under the TWCA was unnecessary because the benefit claim was
sufficient alone to defeat removal. See Allsup, 782 F. Supp. at 328
8
We begin by reiterating a basic rule of this circuit that
the "arising under" standard expressed in § 1445(c) should be
interpreted broadly and in a manner consistent with our
interpretation of that standard under § 1331, which governs federal
question jurisdiction.10 We see that admonition followed by the
district court in Almanza v. Transcontinental Ins. Co., a case
relied on by the Patins, at least by analogy.11 The Almanza court
reasoned that, inasmuch as proof of a viable workers' compensation
claim is an essential element of a claim against the compensation
insurance carrier for breach of the duty of good faith and fair
dealing, the workers' compensation statute creates the cause of
action and the claim arises under that law.12 The district court
reasoned further that placing good faith and fair dealing claims
within the scope of § 1445(c) serves the important policy function
of allowing courts of the states to vindicate the policies embodied
in their workers' compensation schemes.13
Travelers distinguishes the situation in Jones v. Roadway
n.5 (reserving judgment on issue whether removal of claim alleging
breach of duty of good faith and fair dealing alone would have been
proper).
10
Jones v. Roadway Express, Inc., 931 F.2d 1086, 1092 (5th
Cir. 1991) (suit under Texas statute prohibiting discharge and
retaliation for filing Workers' Compensation claim arises under
TWCA).
11
Almanza v. Transcontinental Ins. Co., 802 F. Supp. 1477-79.
12
Id. at 1477 (quoting Jones, 931 F.2d at 1092 ("A suit
arises under the law that creates the cause of action.")).
13
Id. at 1479.
9
Express, Inc.14 from the circumstances in the good faith and fair
dealing cases that reliedSQerroneously, according to TravelersSQon
Jones. Travelers correctly observes that the cause of action
underlying the retaliatory discharge claim at issue in Jones was
created not by Texas common law but by statute, with specific
reference to workers' compensation claims.15
Historically, workers injured in Texas could not recover more
than the statutory remedies contained in the compensation statute.16
In 1988, however, the Texas Supreme Court recognized an employee's
common law cause of action in tort for the breachSQby an employer's
workers' compensation insurance carrierSQof the duty of good faith
and fair dealing in the mishandling of the employee's compensation
benefits claim.17 Nevertheless, the Texas Supreme Court in Aranda
made clear, as have the state appellate courts in the cases that
have followed, that good faith and fair dealing claims arise under
common law, not under the compensation statute.18 This is
14
931 F.2d 1086 (5th Cir. 1991).
15
See also Haines, 812 F. Supp. at 95 n.1; Bastian, 784
F. Supp. at 1256-57 (distinguishing Jones and retaliatory discharge
claims); Jones, 931 F.2d at 1091-92 & n.3.
16
See Aranda v. Insurance Co. of N. Am., 748 S.W.2d 210, 213
(Tex. 1988) (disapproving of a number of prior appellate decisions
which had held that no duty was owed to the injured worker).
17
Id.
18
Aranda, 748 S.W. 2d at 214 (good faith and fair dealing
claim permitted only when injured worker can demonstrate that
carrier's breach is "separate from the compensation claim and
produced an independent injury"); Izaguirre v. Texas Employers'
Ins. Ass'n, 749 S.W.2d 550, 553 (Tex. App.SQCorpus Christi 1988,
writ denied) (". . . ``bad faith' is a tort independent of the
underlying claim for employment injury . . ."); see also
10
consistent with the fact that damages for breach of good faith and
fair dealing are not measured by reference to the exclusive remedy
provisions of the TWCA.19
Even if we were inclined to stop at this point, though, our
inquiry could not be deemed complete. For, although state law may
create the cause of action and define the claim, federal law
governs whenever our consideration involves construction of a
removal statute.20 Those of our federal district courts that have
held that bad faith claims do not arise under the state statute
have, like the state courts, relied on the independent tort nature
of such claims, i.e., that the duty to deal fairly and in good
faith is created by the common law, not by the compensation
statute.21 For example, in Warner v. Crumb & Forster Commercial
Insurance Co.,22 the most recent federal case holding that claims
for breach of that duty are removable because they do not arise
under the TWCA, the district court speculated that "[i]f the Texas
legislature were to codify the duty of good faith and fair dealing,
Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 17 (Tex. 1994);
Viles v. Security Nat'l. Ins. Co., 788 S.W.2d 566, 567 (Tex. 1990)
(bad faith claim is separate from claim for breach of underlying
contract).
19
Moriel, 879 S.W.2d at 17-19.
20
Jones, 931 F.2d at 1092.
21
See, e.g., Haines, 812 F. Supp. at 95 (duty of good faith
and fair dealing is judicially created common law cause of action);
Bastian, 784 F. Supp. at 1256, 1258 (bad faith claims clearly not
created or determined by provisions of TWCA); Powers, 664 F. Supp.
at 255 (bad faith claim does not arise under Mississippi Workers'
Compensation Act).
22
839 F. Supp. 436 (N.D. Tex. 1993).
11
its codification undoubtedly would be with laws pertaining to the
obligations of insurers generally, not with worker's compensation
laws."23 Given the general nature of the duty and the broad
spectrum of relationships to which it can apply, the Warner court
concluded that good faith and fair dealing claims are only
"incidentally related" to the workers' compensation statute and the
underlying contract providing compensation benefits.24
Walker v. Health Benefit Management Cost Containment, Inc.,25
is the only published post-Almanza opinion from a district court of
this circuit to hold that bad faith claims are not removable. The
Walker court construed § 1445(c) as reflecting a strong
Congressional policy to defer to the states in the area of workers'
compensation.26 In Walker the district court placed great weight
on what it characterized as the "almost laughable anomaly" that
would be created if the bad faith claim were removable while the
claim for benefits, on which it depends, were not.27 We're not
laughing: Perhaps on deeper analysis the Walker court too would
have perceived the situation to be more serious and less amusing;
for, in actuality, these claims are quite often severed at the
state level.
Indeed, as most states have enacted expedient and less
23
Id. at 439 n.5.
24
Id. at 439.
25
860 F. Supp. 1163 (N.D. Tex. 1994).
26
Walker, 860 F. Supp. at 1169-70.
27
Id. at 1169.
12
expensive administrative procedures for adjudicating claims of
injured workers,28 we interpret the policy underlying § 1445(c)
somewhat differently than did the Walker court. Section 1445(c)
was passed to encourage the use of just such administrative
procedures and to prevent the undue burden that is placed on the
worker when an action is removed to federal court, where such
procedures generally do not apply. That underlying policy does not
appertain, though, when the cause of action at issue is independent
of the administrative procedures applicable to a state workers'
compensation claimSQas are claims for breach of the duty of good
faith and fair dealing.
Given (1) the cogent analysis of the Texas Supreme Court that
claims against insurers "arise under" the common law, not under the
TWCA, (2) the foregoing analysis of the purpose of § 1445(c), and
(3) the burgeoning administrative treatment of workers'
compensation claims in the several states, we conclude that claims
for the breach of the duty of good faith and fair dealing do not
"arise under" the state workers' compensation statutes but are, at
most, "related to" those statutes and thus do not come within the
ambit of the non-removability provision of § 1445(c).29 We
therefore affirm the ruling of the district court rejecting the
28
S. Rep. No. 1830, 85th Cong., 2d Sess. (1958), reprinted
in 1958 U.S.C.C.A.N. 3099, 3106.
29
This court recently reached the same conclusion in the
context of removal and remand of an action instituted by an
employee seeking to set aside a compromise settlement agreement
(CSA) with the employer's workers' compensation carrier. See Ehler
v. St. Paul Fire and Marine Ins. Co., F.3d (5th Cir. 1995).
13
Patins' motion to remove and their more recent motion to
reconsider. As this holding confirms the diversity jurisdiction of
the district court and sustains the district court's rejection of
the removal and remand challenge mounted by the Patins, we turn now
to consider the next hurdle that the Patins must clear to prevail,
res judicata.
C. Res Judicata
Recall that Patin initiated three lawsuits in the wake of his
work-related accident and employment termination by Allied. In
addition to the instant suit against Travelers and to the
employment discrimination suit against Allied, the Patins also
filed a lawsuit in the state district court in Orange County,
Texas, arising out of the Patins' successful (but, in his opinion,
undercompensated) claim with the IAB. In the Orange County suit,
Patin successfully increased his benefit award against Travelers
from $45,091.02 to $75,021.88.
The district court in the instant case concluded that, even
though the Patins did not assert the good faith and fair dealing
claim against Travelers in their state court suit for compensation
benefits, they could have and should have done so. We agree.
In federal court, the preclusive effect of a prior state court
judgment is governed by state law.30 Under Texas law, a prior
judgment "precludes a second action by the parties and their
privies not only on matters actually litigated, but also on causes
of action or defenses which arise out of the same subject matter
30
Kurzweg v. Marple, 841 F.2d 635, 639 (5th Cir. 1988).
14
and which might have been litigated in the first suit."31
The Patins dispute neither that rule nor its applicability in
federal court; instead, they insist that Patin's attempt to amend
his pleadings in the employment discrimination suit against Allied
immunizes the Patins' claims against Travelers in the instant suit
from the doctrine of res judicata. In advancing this theory, the
Patins rely on Turner v. Richardson I.S.D..32 In Turner a state
district court held that res judicata did not bar litigation of
pendent state law claims over which a federal district court had
previously refused to exercise supplemental jurisdiction.33
We find Turner inapposite, affording no support for Patin's
contention. Regardless of Patin's failed efforts to include the
instant good faith and fair dealing claim in his erstwhile
discrimination suit against Allied, the Patins clearly made no
attempt, either originally or subsequently, to include the breach
of good faith and fair dealing claim against Travelers in the state
court compensation benefit suit against that insurer; neither is
there any showing that the state trial judge denied the Patins the
opportunity to bring or add such claims.34
31
Getty Oil Co. v. Insurance Co. of N. Am., 845 S.W.2d 794,
798 (Tex. 1992) (quoting Barr v. Resolution Trust Corp., 837 S.W.
2d 627, 630 (Tex. 1992)), cert. denied sub nom., Youell & Cos. v.
Getty Oil Co., U.S. , 114 S. Ct. 76, 126 L. Ed. 2d 45 (1993).
32
885 S.W.2d 553 (Tex. App.SQDallas 1994, no writ).
33
Id. at 560.
34
Tex. R. Civ. P. 51(a) permits joinder of "as many claims
either legal or equitable or both as [plaintiff] may have against
an opposing party."
15
In that state court compensation suit against Travelers, the
Patins could have included or added claims for breach of that
insurer's duty of good faith and fair dealingSQa cause of action
that arose from the same subject matter as did their benefits
claims, i.e., Travelers' failure or refusal to pay compensation to
Patin following his work-related October 1990 accident.35 Thus, the
district court's dismissal of the instant suit as barred by the
doctrine of res judicata was correct and is hereby affirmed. As a
result, we need not, and therefore do not, reach the question
whether the Patins' claims against Travelers are time barred as
well.
III
CONCLUSION
The Patins could have brought their claim against Travelers
for its alleged breach of the duty of good faith and fair dealing
by filing suit in federal district court in the first place. It
follows, then, that the Patins' objection that the removal of their
state court suit violated § 1445(c) implicates a procedural defect
in that removal. As such, their objection was waivable.
Nevertheless, the record on appeal demonstrates that the Patins'
timelySQif inartfullySQplaced non-removability under § 1445(c)
before the district court in their Motion to Remand and again in
35
The Patins' contention that their bad faith claim did not
ripen until they won their compensation suit in state court is
simply wrong, and is not supported by Marino v. State Farm Fire &
Casualty Ins. Co., 787 S.W.2d 948 (Tex. 1990). Marino dealt with
a cause of action that arose post-judgment and thus could not have
been asserted in the prior case, clearly distinguishable from the
Patins' situation.
16
their argument at the hearing on that motion. Thus, they did not
waive their right to contest removal on grounds of a violation of
§ 1445(c).
We hold, however, that the breach of the duty of good faith
and fair dealing by a carrier of workers' compensation insurance is
an independent tort created bySQand thus "arising under"SQthe common
law, and is at most "related to" the workers' compensation laws
that create the basic benefit rights of the covered employee and
those claiming through him.36 Consequently, the non-removability
provisions of § 1445(c) are inapplicable to claims grounded in a
breach of that duty. The district court's denial of remand in the
instant case was correct. Also correct was the district court's
determination that res judicata bars the Patins' claims based on
Travelers' alleged breach of the duty of good faith and fair
dealing.
As we affirm the rulings of the district court on both removal
and res judicata, we affirm that court's dismissal of the Patins'
36
Non-retroactive amendments to the Texas Workers'
Compensation Statute post-dated the accrual of the Patins' cause of
action and thus could not affect the § 1445(c) issue in this case.
See Acts 1989, 71st Leg., 2nd C.S., ch. 1, § 10.41 (repealed and
codified at Tex. Lab. Code Ann. § 416.001) (providing that certain
actions taken by the carrier in reliance on the Commission or the
benefit review officer are not actionable for breach of the duty of
good faith and fair dealing); and § 416.002 (placing a cap on the
quantum of damages recoverable from a compensation carrier on a
claim for breach of the duty of good faith and fair dealing). Even
if these amendments had been in effect when the Patins' cause of
action accrued, they would not change our conclusion that a cause
of action for breach of that duty "arises under" the common law;
these statutory amendments at most "relate to" that common law
cause of action, and therefore do not affect the § 1445(c)
question.
17
claims against Travelers.
AFFIRMED.
DeMOSS, Circuit Judge, dissenting:
I concur with the conclusion reached in Part 2(a) of the
majority opinion, which rejects Travelers' contention that the
Patins waived their right to insist on remand to state court.
However, I am unable to concur with the conclusion reached by the
majority in Part 2(b), that claims for breach of the duty of good
faith and fair dealing do not "arise under" the state workers'
compensation statutes, and thus do not come within the ambit of the
nonremovability provision of § 1445(c).
I start with the text of 28 U.S.C. § 1445(c) which reads:
(c) A civil action in any State court arising under
the workmen's compensation laws of such State may not be
removed to any district court of the United States.
(emphasis added.) The critical error which I believe the majority
makes is to read the underlined word "laws" as if it were
"statutes". Section 1445 subparts (a) and (b) both define actions
that may not be removed by reference to specific sections in the
United States Code. However, in subsection (c) the Congress used
the broad generic term "laws". The majority opinion recognizes
that "the ``arising under' standard expressed in § 1445(c) should be
interpreted broadly and in a manner consistent with our
interpretation of that standard under § 1331, which governs federal
question jurisdiction;" and cites as precedent Jones v. Roadway
Express, Inc., 931 F.2d 1086, 1092 (5th Cir. 1991). In my view,
this cross-reference to § 1331 decides this case. In interpreting
18
the language of § 1331 which gives district courts original
jurisdiction "of all civil actions arising under the Constitution,
laws or treaties of the United States," the Supreme Court has
clearly interpreted the word "laws" to include, not only statutory
enactments, but also judicial decisions which construe and extend
those statutory provisions. See Illinois v. City of Milwaukee, 406
U.S. 91, 92 S. Ct. 1385, 31 L. Ed. 2d 712 (1972) (holding that §
1331 jurisdiction will support claims founded upon federal common
law as well as those of statutory origin). Likewise, in another
context, the Supreme Court has recognized that the statutory word
"laws" includes court decisions for purposes of determining the
"state law" to be applied by federal courts. Erie Railroad Co. v.
Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed 2d 1188 (1932). In
§ 1445(c), Congress used the phrase "arising under the workmen's
compensation laws of such State." In my view, that includes both
(1) civil actions specified by the state's workers' compensation
statute, and (2) civil actions created by the state's Supreme Court
which substantially relate to the duties, rights and privileges
established by that statute. The Supreme Court of Texas recognized
such a civil action in Aranda v. Insurance Company of North
America, 748 S.W.2d 210 (Tex. 1988), which held:
(a) that the Texas Workers' Compensation Act sets
forth a compensation scheme that is based on a three-
party agreement entered into by the employer, the
employee and the compensation carrier;
(b) that the constitutionality of the Workers'
Compensation Act rests on the contractual nature of this
agreement;
(c) that the injured employee is a party to the
contract and therefore entitled to recover in that
capacity;
(d) that the contract between the compensation
carrier and the injured employee creates the same type of
special relationship that arises under other insurance
contracts; and
(e) that there is a duty on the workers'
compensation carrier to deal fairly and in good faith
with injured employees in the processing of compensation
claims.
Aranda, 748 S.W.2d at 212-13. When the Texas Supreme Court so
clearly bases its recognition of the right to sue for breach of the
duty of good faith and fair dealing on the rights and duties
created by the Workers' Compensation Act, then I have no trouble
whatsoever in concluding that a claim by an injured employee
against the compensation carrier for bad faith in dealing with his
claim is one "arising under the workers' compensation laws" of the
State of Texas, and is therefore not removable. The majority's
cramped and stingy reading of the word "laws", which insists that
if you can't find the words "good faith and fair dealing" in the
text of the workers' compensation statute then the cause of action
does not arise under the "workers' compensation laws," is clearly
inconsistent with Supreme Court cases, the Congressional policy
reflected in § 1445(c) and our own precedent in Jones v. Roadway
Express, 931 F.2d at 1092 ("whether a state has codified a statute
as part of its workers' compensation chapter does not determine
whether a claim filed under that statute is one ``arising under the
workers' compensation laws' for the purpose of § 1445(c)")
(alteration in original).
Furthermore, I would point out that the Texas workers'
compensation statute was amended in 1989 to include new provisions
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that expressly define and limit good faith and fair dealing actions
against Texas workers' compensation carriers. These amendments
came right on the heels of the Texas Supreme Court decision in
Aranda and it is significant to me that, contrary to the district
court's speculation in Warner, the legislature used the workers'
compensation statute rather than statutes relating "to the
obligations of insurers generally," as the vehicle for implementing
these changes. Warner, 839 F. Supp. at 439 n.5. One statutory
amendment provides that certain actions taken by the carrier in
reliance on the Commission or the Benefit Review officer are not
actionable for breach of the duty of good faith and fair dealing.
Acts 1989, 71st Leg., 2d C.S., ch. 1, § 1041 repealed and codified,
TEX. LABOR CODE § 416.001. The second provision places a damage cap
on good faith and fair dealing actions against compensation
carriers. Acts 1989, 71st Leg., 2d C.S., ch. 1, § 1042 repealed
and codified, TEX. LABOR CODE § 416.002. Because both of these
sections became effective June 1, 1991, which was after Patin's
original injury, I recognize they do not control the present case.
I mention them to point out the strange anomaly that will occur
when the majority opinion is applied to workers' injuries occurring
after June 1, 1991. In those cases, the compensation carrier will
be able to remove any claim for breach of the duty of good faith
and fair dealing to federal court, because in the majority's view
that claim does not arise under the Texas workers' compensation
statute. At the same time, however, the carrier will be entitled
to exemptions from liability and limitations on its damage exposure
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because express provisions have been inserted in the Texas workers'
compensation statute giving those protections. The majority's
treatment of sections 416.001 and 416.002 in footnote 36
accentuates the stinginess of the majority's interpretation of the
word "laws"; and in my view the majority errs in not leaving open
for future decisions whether good faith and fair dealing claims
based on injuries occurring after the effective date of these
sections "arise under" the Texas workers' compensation statutes.
Finally, it seems to me that whether or not a compensation
carrier did in fact deal fairly and in good faith with the injured
employee is a determination which will be inextricably intertwined
with the determination of what the injured employee was entitled to
in the way of compensation benefits under the Texas Compensation
Act. In Aranda, the Texas Supreme Court made this expressly clear
by specifying that an injured employee who asserts that a
compensation carrier has breached the duty of good faith and fair
dealing by refusing to pay or delaying payment of a claim must
establish:
(1) the absence of a reasonable basis for denying or
delaying payment of the benefits of the policy; and (2)
that the carrier knew or should have known that there was
not a reasonable basis for denying the claim or delaying
payment of the claim.
Aranda, 748 S.W.2d at 213. Clearly, the benefits to which an
employee may be entitled under the Texas Compensation Act are
issues of state law, as to which federal district courts have no
background or expertise and have heretofore been prohibited by §
1445(c) from addressing. The majority opinion will now force
opin\94-41150.dis
22
federal district courts in Texas to address the intricacies of the
Texas workers' compensation statute as an integral part of
resolving a claim of lack of good faith and fair dealing by the
compensation carrier after removal from the state court. I think
it would be better policy and more efficient judicial management to
leave the disposition of the cases brought against the compensation
carrier for noncompliance with its duty of fair dealing with the
state courts.
I would vacate the judgment of the district court and remand
the case to the district court with instructions to remand to the
state court from whence it was removed.
opin\94-41150.dis
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