Buddy Trahan v. Liberty Mutual Insurance Co.

Case: 13-20717 Document: 00512658616 Page: 1 Date Filed: 06/10/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 13-20717 FILED
Summary Calendar June 10, 2014
Lyle W. Cayce
Clerk
BUDDY TRAHAN
Plaintiff-Appellant
v.
LIBERTY MUTUAL INSURANCE CO.
Defendant-Appellee
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:13-CV-2927
Before DAVIS, BENAVIDES, and PRADO, Circuit Judges.
PER CURIAM:*
Before the court is a dispute regarding whether a workers’ compensation
insurance carrier is entitled to subrogation following a settlement between a
third party and the insurance beneficiary, Buddy Trahan. The issue on appeal
is whether Trahan’s claims were properly removed from Texas court. Trahan
argues that his claims arise under workers’ compensation law such that
removal is precluded by 28 U.S.C. § 1445(c). The district court rejected his
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
Case: 13-20717 Document: 00512658616 Page: 2 Date Filed: 06/10/2014
No. 13-20717
argument, denying a timely motion to remand. That court, however, then
dismissed all claims pending the resolution of relevant administrative
proceedings. 1 The two orders issued on the same day, and both were rendered
without opinion. Because we find that the district court erred in concluding
that “this case does not arise under the workers’ compensation laws,” we
reverse the remand denial, vacate the dismissal, and instruct the district court
to return the case to the state of Texas.
The permissibility of removal is a question of law that this court reviews
de novo. Sherrod v. Am. Airlines, Inc., 132 F.3d 1112, 1117 (5th Cir. 1998). “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). “Section 1445(c) expresses a public policy favoring the
litigation of a civil action arising under the workers’ compensation laws of the
state in state court.” Unida v. Levi Strauss & Co., 986 F.2d 970, 974 (5th Cir.
1993). Therefore, “[b]ecause Congress intended that all cases arising under a
state’s workers’ compensation scheme remain in state court, we believe that
we should read section 1445(c) broadly to further that purpose.” Trevino v.
Ramos, 197 F.3d 777, 781 (5th Cir. 1999) (citation omitted).
Bearing these principles in mind, we turn to Trahan’s claims. First,
Trahan’s complaint lists a series of requests for declaratory judgment:
Trahan seeks a declaratory judgment against Liberty that:
(1) Liberty contractually waived its rights under Texas Labor Code
§ 417.001, et. seq., to recover from Trahan the amount of benefits
it has paid in the past, or a credit against future benefits; (2) that
Liberty is not entitled to reimbursement for the payment of
medical expenses out of the settlement proceeds recovered by
1It is unclear whether the court was dismissing the claims outright or issuing a stay
pending the outcome of the proceedings. Because the case should have been remanded, we
vacate the order irrespective of the court’s intent. We do not reach the apparent issue of
administrative exhaustion, leaving that question to the state.
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Trahan, pursuant to Texas Labor Code § 417.002(a); (3) Liberty is
not entitled to a statutory credit for the future payment of medical
benefits pursuant to Texas Labor Code § 417.002(b); and (4)
Liberty is required to continue paying benefits to Trahan pursuant
to applicable Texas Law.
Compl. ¶ 10. These requests revolve around the payment of benefits and the
subrogation of the payor, both of which unambiguously arise under Texas
workers’ compensation law. See TEX. LABOR CODE §§ 409 (regarding payment
of benefits), 417 (regarding subrogation). It is of no consequence that the
dispute is embedded in a declaratory action, as this court does not allow
declaratory relief to be used as “an ‘end run’ around removal procedures and
jurisprudence.” Tex. Employers’ Ins. Ass’n v. Jackson, 862 F.2d 491, 508 n.24
(5th Cir. 1988). Trahan is asserting paradigmatic workers’ compensation
claims under Texas law, and removal is therefore improper.
Trahan’s only other claim also arises out of Texas workers’ compensation
law. Trahan pleads a breach of good faith:
Liberty is liable to Trahan for breach of the duty of good faith
and fair dealing and violations of the Texas Insurance Code.
Liberty’s acts and/or omissions were a producing and/or proximate
case of Trahan’s injuries and damages.
Compl. ¶ 11. For more than two decades, Texas courts recognized an aggrieved
beneficiary’s allegations of “bad faith” as arising under the Texas Insurance
Code and state common law, and not under workers’ compensation law. See
TEX. INS. CODE §§ 541.060, 542.003 (referring to duty of good faith in insurance
practices); Aranda v. Ins. Co. N. Am., 748 S.W.2d 210, 212–14 (Tex. 1988)
(recognizing independent cause of action under common law), overruled by Tex.
Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430, 433 (Tex. 2012). Accordingly, we
allowed removal of such claims. See generally Patin v. Allied Signal, Inc., 77
F.3d 782 (5th Cir. 1998). Yet due to subsequent amendments to the Texas
Workers’ Compensation Act, the statute now expressly addresses the duty of
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good faith and fair dealing and specifies the remedy for breach of that duty.
See TEX. LABOR CODE § 416.002. Consequently, and as explained in detail by
the Texas Supreme Court, claims of bad faith no longer arise outside of the
workers’ compensation laws. See Ruttiger, 381 S.W.3d 430 at 445–51
(explaining that administrative remedies now afforded by the workers’
compensation system have “eliminate[d] the need for a judicially imposed
cause of action” and obviated claims brought pursuant to Texas Insurance
Code §§ 541.060 and 542.003). Accordingly, removal of Trahan’s claim is
precluded by 28 U.S.C. § 1445(c).
We conclude that Trahan has not stated any claim that “is legally
distinct from and independent of any claims arising under the Workers’
Compensation Act.” Williams v. Liberty Mut. Ins. Co., 741 F.3d 617, 622 (5th
Cir. 2014). Removal of the case is therefore improper. Accordingly, the remand
denial is REVERSED and the dismissal order is VACATED. We REMAND
with instructions to return the case to the state court from which it was
removed.
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