Arnold v. State Farm Fire & Casualty Co

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________
No. 00-60104
Cons/w 00-60531
_______________________
D. EUGENE ARNOLD, on behalf of himself and all other residents of
the State of Mississippi who own dwellings, and who are otherwise
similarly situated, in Jackson, Harrison and/or Hancock Counties,
Mississippi, BOBBY E. VINING; DANIEL B. STORY,
Plaintiffs-Appellees,
versus
STATE FARM FIRE AND CASUALTY COMPANY; ALLSTATE INSURANCE COMPANY,
Defendants-Appellants.
_________________________________________________________________
Appeals from the United States District Court
for the Southern District of Mississippi
_________________________________________________________________
December 28, 2001
Before JONES, DeMOSS, and BENAVIDES, Circuit Judges.
EDITH H. JONES, Circuit Judge:
As its courts have become a mecca for plaintiffs’ claims
against out-of-state businesses, Mississippi is affording numerous
opportunities for federal courts to explore questions of removal
jurisdiction and remand. In this diversity case, the district
court remanded a putative class action removed from the state court
after making three decisions: (a) it implicitly ignored the
remaining claims of one named plaintiff who had settled with his
insurer; (b) it disregarded class action allegations because
Mississippi courts currently do not authorize class action joinder;
and (c) it held that the remaining two named plaintiffs’ claims
fell below the minimum federal jurisdictional amount. Whether the
remand order or any of these specific decisions is reviewable by
appeal or mandamus is the question before us. We conclude that we
must dismiss the appeal.
BACKGROUND
Plaintiffs Arnold, Vining and Story filed a purported
class action suit in Jackson County, Mississippi, court to complain
of a two-percent hurricane deductible imposed by their three
insurance carriers on damage claims following Hurricane Georges.
Although Mississippi procedure does not currently recognize class
actions, the plaintiffs’ counsel meticulously pled the
prerequisites of a federal class action, hoping to persuade state
courts to innovate in this case. Because there are thousands of
similarly situated homeowners, the allegations foreshadowed an
aggregation of punitive damages greatly in excess of the federal
jurisdictional minimum1 and would ordinarily have sufficed to
justify the insurers’ removal of the case to federal court.
But the federal district court did not respond warmly to
removal. With the barest discussion, he held that the plaintiffs’
claims encompassed only two named individuals and a few thousand
1
Allen v. R&H Oil & Gas Co., 63 F.3d 1326 (5th Cir. 1995).
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dollars in potential damages. He remanded the case to state court
and then refused to entertain a motion to reconsider, because the
remand order had been prematurely certified to the state court
through an oversight of the clerk’s office. See Browning v.
Navaro, 743 F.2d 1069, 1078-79 (5th Cir. 1984).
DISCUSSION
In their appeal or alternative petition for mandamus,
State Farm and Allstate confront Congress’s intent to limit appeals
of remand orders. 28 U.S.C. § 1447(d) precludes appellate review
of a remand order premised on lack of jurisdiction2 -- but that is
precisely the kind of order that the district court issued here.
Each of his decisions dissecting the plaintiffs’ complaint was made
in order to determine jurisdiction. No appeal lies from a remand
ruling, no matter how erroneous, which is actually predicated on
lack of federal subject matter jurisdiction.
That there were errors here is unfortunately too clear.
The district court failed to consider the claim of plaintiff Story
for purposes of tallying a jurisdictional amount. Even though
Story had settled with his insurer USF&G, which had been dismissed
before removal, Story remained a named plaintiff in a complaint
2
In Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S. 336, 96
S. Ct. 584 (1976), the Supreme Court emphasized the unavailability
of appeals where the remand order is footed on lack of federal
jurisdiction, even as it carved out an exception allowing appeals
where the order falls outside § 1447(c). See also Things
Remembered, Inc. v. Petrarca, 516 U.S. 124, 127-28, 116 S. Ct. 494,
496-97 (1995).
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that charged conspiracy among the companies and with the State
Commissioner of Insurance. The technical possibility thus remained
that Story could assert damages against defendant insurers with
whom he had no contract. Some estimate of such damages should have
been made. This oversight of the district court was minor, and it
amounts to no more than a miscalculation pertinent to
jurisdictional amount. This part of the remand order cannot be
reviewed on appeal or otherwise.
The district court also probably erred in attributing
extremely small amounts of punitive damages to the claims of Arnold
and Vining, and he appears to have erred in adding up their claims
and finding that they did not satisfy the $75,000 federal
threshold.3 But again, mathematical errors in assessing
3
The judge calculated compensatory damages of $10,402 for
Arnold and $1,082 for Vining arising solely from the hurricane
deductible. He ignored damages for the tortious actions claimed by
these plaintiffs. He applied a very conservative ratio of 6:1 for
any punitive damage award. Contrary to the court’s math, the total
actual and punitive damages so estimated exceed $75,000. Based on
other Mississippi awards, it is highly unlikely that the plaintiffs
will be content with seeking a 6:1 ratio. See, e.g., State Farm
Mut. Auto Ins. Co. v. Grimes, 722 So. 2d 636 (Miss. 1998) ($1.25
million in punitive damages awarded on $1,900 actual damages).
The district court fortified his ruling with reliance on post-
removal affidavits by Arnold and Vining that limit their joint
claims to less than $75,000. We agree with the judge’s view that
the affidavits preclude Arnold and Vining from seeking damages in
excess of that amount in state courts either as a judicial
admission, judicial estoppel or a matter of preclusion. See Bogle
v. Phillips Petroleum Co., 24 F.3d 758, 762 (5th Cir. 1994).
Compare Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 585-86, 119
S. Ct. 1563, 1570-71 (1999) (Supreme Court suggests in dictum that
certain federal court jurisdiction decisions may be binding on
parties on remand as a matter of issue preclusion. For present
purposes, we assume arguendo that Arnold’s and Vining’s post-
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jurisdictional amount do not confer appellate authority on this
court.
Most critically, the court erred in disregarding the
class action allegations. This error poses a far more serious
possibility of appellate review, because it is a decision logically
antecedent to the question of remand that involves the joinder of
parties.
A recent decision of this court carefully summarizes our
profuse caselaw on the reviewability of district court decisions
associated with remand orders. Doleac ex rel. Doleac v. Michalson,
264 F.3d 470 (5th Cir. 2001). Like its predecessors, Doleac finds
the original test for appellate jurisdiction in City of Waco v.
United States Fid. & Guar. Co., 293 U.S. 140, 143, 55 S. Ct. 6, 7
(1934). City of Waco explained that while a remand order cannot be
reviewed on appeal, certain separable orders that (1) logically
precede the remand and (2) are conclusive, in the sense of being
functionally unreviewable in state courts, can be reviewed. 293
U.S. at 143, 55 S.Ct. at 7. Such orders must, however, also be
independently reviewable by means of devices like the collateral
order doctrine. Doleac, 264 F.3d at 478.
Here, there is no question that the disregarding of class
action allegations, which amounted to a refusal to acknowledge the
removal affidavits merely “clarified” their claims at the date of
filing and did not impermissibly attempt to reduce those claims
solely to compel remand. DeAguilar v. Boeing Co., 47 F.3d 1404
(5th Cir. 1993).
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potential joinder of additional parties, preceded the remand in
logic and in fact. Whether that decision was “conclusive” for City
of Waco purposes might be uncertain based on the analysis in
Doleac. In that case, the district court allowed an amendment
joining a non-diverse defendant after considering factors, peculiar
to federal court procedure, that would affect the propriety of such
a jurisdiction-divesting order. Doleac pointed out the various
difficulties, case-specific difficulties that we need not recount,
attendant on finding the order “conclusive.” But as in Doleac, the
“conclusiveness” of the lower court’s decision concerning the
amenability of this case to Rule 23 class action treatment is
dubious, because the decision affects only the forum in which the
case will be heard; the district court’s opinion on either federal
or Mississippi class action practice cannot affect Mississippi
courts. “Thus, [w]hile the conclusiveness of the [decision to
disregard class action allegations] suggests a substantive
decision, the lack of preclusiveness suggests a jurisdictional
decision.” Doleac, 264 F.3d at 470. Doleac used the terminology
advanced in previous Fifth Circuit cases -- “jurisdictional”
decisions are not “conclusive,” while “substantive” decisions are.
See, e.g., Linton v. Airbus Industrie, 30 F.3d 592 (5th Cir. 1994),
cert. denied, 513 U.S. 1044, 115 S. Ct. 639 (1994). Notwithstanding
such uncertainties, Doleac ultimately held us bound by an earlier
precedent stating that a decision on joinder of a party is
separable for City of Waco purposes. See Doleac, 264 F.3d at 489,
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relying on Tillman v. CSX Transportation, Inc., 929 F.2d 1023 (5th
Cir. 1991). Following Doleac, we must conclude that the district
court’s refusal to recognize a class action is separable from the
remand order.
The next step of the analysis considers whether the
district court’s class action decision, though not a final order
under 28 U.S.C. § 1291, is independently reviewable under the
collateral order doctrine. See Doleac, 264 F.3d at 489; Mitchell
v. Carlson, 896 F.2d 128, 133 (5th Cir. 1990). An appealable
collateral order is an order that conclusively resolves an issue
separate from the merits of the controversy, is effectively
unreviewable on appeal from final judgment, and is too important to
be denied review. Quackenbush v. Allstate Insurance Co., 517 U.S.
706, 712, 116 S. Ct. 1712, 1718 (1996). The precise order we are
considering held that because Mississippi does not currently allow
class actions, a diversity suit removed from Mississippi court but
alleging a class action under Fed. R. Civ. P. 23 could not be
entertained as a federal court class action. The district court’s
decision on this purely legal issue is both final and separate from
the merits of the lawsuit. Further, because the court determined
that the case would not be heard as a federal class action, the
decision radically affected the nature of the suit as well as the
forum in which it would be litigated. Such an order would
ordinarily seem too important to be denied interlocutory review,
not in the least because it represents a fundamental
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misunderstanding by the district court of the principles that the
Erie doctrine is limited to matters of state substantive law and
that cases removed to federal court are governed solely by federal
procedure. See Hanna v. Plumer, 380 U.S. 460, 465, 85 S. Ct. 1136,
1141 (1965); Willy v. Coastal Corp., 503 U.S. 131, 134-35, 112
S. Ct. 1076, 1079 (1992); Resolution Trust Corp. v. Northpark Joint
Venture, 958 F.2d 1313, 1316 (5th Cir. 1992).
The sticking point in collateral order analysis is
whether the district court’s order is effectively unreviewable.
Were it not for the remand, the decision to disregard the class
allegations would clearly be reviewable along with a final
judgment. It is effectively unreviewable, however, not just
because of the remand, but because the issue will be irrelevant in
state court. This is troubling, but not enough to propel the
district court’s decision into the narrow class of appealable
collateral orders. First, whether for good or ill, federal courts
have not previously been predisposed to expedite appellate review
of class action certifications or denials. See generally 7B
Wright, Miller & Kane, Federal Practice & Procedure § 1802 (1986).
Even after the 1998 amendment of Rule 23 facilitated interlocutory
appeal of class action orders, that avenue is hedged by a strict
timetable and considerable appellate court discretion. See Fed. R.
Civ. P. 23(f). More important, engaging in appellate review of the
district court’s joinder decision would lead to an impermissible
advisory opinion, for under City of Waco, our decision cannot
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reverse the remand order, which in any event has no effect,
preclusive or otherwise, on the ongoing state litigation.
Thus, while the district court’s decision disregarding
the plaintiffs’ class action allegations is separable under City of
Waco, it does not qualify as a reviewable collateral order. We
return to the nostrum originally invoked concerning appellate
jurisdiction over remand orders -- where the court’s order is
premised on lack of federal subject matter jurisdiction, even
though it be wrong, it is not reviewable “by appeal or otherwise.”
28 U.S.C. § 1447(d). Because neither the remand order nor the
separable decision concerning the class action is reviewable, this
court lacks jurisdiction and must dismiss the appeal.
Appeal DISMISSED; mandamus DENIED.
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