Armistead v. C & M Transport, Inc.

March 21, 1995
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 94-1525

CLYDE ARMISTEAD,
Plaintiff, Appellant,

v.

C & M TRANSPORT, INC., ET AL.,
Defendants, Appellees.

ERRATA SHEET

The opinion of this Court issued on March 13, 1995, is
amended as follows:

On page 9, line 9, change "chose" to "choose".

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 94-1525

CLYDE ARMISTEAD,

Plaintiff, Appellant,

v.

C & M TRANSPORT, INC., ET AL.,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MAINE

[Hon. Morton A. Brody, U.S. District Judge]

Before

Selya, Circuit Judge,

Campbell, Senior Circuit Judge,

and Boudin, Circuit Judge.

Clyde Armistead on brief pro se.

John H. Montgomery, Diane S. Lukac, Mary Elizabeth Fougere,

and Bernstein, Shur, Sawyer & Nelson on brief for appellee, The

Travelers Insurance Company.

March 9, 1995

Selya, Circuit Judge. Defendant-appellee Travelers

Insurance Company ("Travelers") removed this action to the

federal district court despite the provision in 28 U.S.C.

1445(c) forbidding removal of cases arising under state

workers' compensation laws. Plaintiff-appellant Clyde

Armistead unsuccessfully resisted the removal on

jurisdictional grounds, but overlooked the bar of section

1445(c). The district court granted summary judgment in

Travelers' favor. On appeal, Armistead for the first time

invokes section 1445(c). We hold that the district court

lacked subject matter jurisdiction in this case.

Accordingly, we vacate the judgment below and direct that the

case be remanded to state court.

I
I

Armistead, a citizen and resident of Maine, worked

as a truck driver for C & M Transport, Inc. ("C & M"), a

Maine corporation. He was injured on May 7, 1987, while

driving a C & M truck in Maryland. Appellee Travelers, a

Connecticut corporation, was at one time C & M's workers'

compensation insurer.

Armistead filed a petition for benefits under the

Maine Workers' Compensation Act, 39 M.R.S.A. 1-195

(repealed),1 in October, 1987. The Workers' Compensation

1. The legislature retrofitted the Act with neoteric
provisions which took effect on January 1, 1993. See 39-A

M.R.S.A. 101-409. The new law alters benefits and

-2-

Commission issued a benefits award in February, 1988 (after C

& M defaulted), but no compensation payments were made. The

Commission's award indicates "no record of insurance," and as

for C & M, it filed for Chapter 7 protection, was adjudicated

bankrupt, and ceased doing business. According to the

record before us, Travelers had notified the Commission that

it had canceled C & M's coverage for nonpayment of premiums,

effective some three weeks before the date of injury.

In July of 1992, Armistead resumed his quest for

benefits by seeking a Commission determination that Travelers

was liable on the award because it had failed to send a prior

notice of the cancellation to C & M, as required by state

law. See 39 M.R.S.A. 23(1) (1987) (repealed); see also 39-

A M.R.S.A. 403(1) (1992). After informal proceedings

failed to resolve the claim, Armistead filed a formal motion

for enforcement of the award. Travelers denied liability and

cross-moved for a review of Armistead's alleged disability.

The statute contemplates an evidentiary hearing before a

Commissioner on such motions, subject to appellate review in

replaces the Workers' Compensation Commission with an
administrative board. See 39-A M.R.S.A. 151, 152.

Transitional provisions preserve benefits under the former
law for injuries sustained before January 1, 1993, and
continue the Commission's authority over pending claims for a
limited period. See generally Clark v. International Paper

Co., 638 A.2d 65 (Me. 1994). In all procedural respects

relevant here, the current law is parallel to the former law.
The transitional provisions and other changes do not affect
our analysis.

-3-

the Commission and a discretionary appeal to Maine's highest

court. See 39 M.R.S A. 94-B, 98-99, 103-A, 103-B, 103-C.

While these motions were pending before the

Commission, Armistead also filed a complaint in the state

superior court for enforcement of the Commission's original

award. The complaint alleged a right to relief by virtue of

the superior court's equitable power to enforce Commission

orders under the Workers' Compensation Act, 39 M.R.S.A.

103-E. Count 1 sought enforcement of the award against C &

M; count 2 sought a declaration that Travelers afforded

coverage to C & M under the Act on the date of injury, and

also sought enforcement of the Commission's award against

Travelers and C & M jointly.

Travelers promptly removed the action to federal

district court, claiming diversity of citizenship between

Travelers and Armistead, and describing the action as one for

"breach of contract." Seven months later, Armistead moved

for a remand to the state court, arguing that C & M's Maine

citizenship destroyed complete diversity between the parties.

But there was a rub; C & M had not been served with process,

and its very existence was dubious.2 The district judge

2. Armistead renews here the claim that C & M retains its
corporate existence under Maine's corporation laws, and is a
"necessary" party to this suit. The argument was not fully
developed below, and we deem it waived. See Ryan v. Royal

Ins. Co., 916 F.2d 731, 734 (1st Cir. 1990). At any rate,

Armistead still has not explained his failure to serve
process on C & M.

-4-

dismissed the claim against C & M and, applying the holding

of White v. United States Fidelity & Guar. Co., 356 F.2d 746

(1st Cir. 1966), rejected Armistead's alternative argument

that Travelers should be deemed to have the same citizenship

as its insured under 28 U.S.C. 1332(c)(1). The court

thereafter addressed the parties' cross-motions for summary

judgment and decided the merits in favor of Travelers. This

appeal ensued.

On appeal, Armistead adds for the first time the

argument that the removal violated 28 U.S.C. 1445(c).

Travelers urges that section 1445(c) is inapplicable because

Armistead's suit does not "arise under" Maine's workers'

compensation law, and, alternatively, that Armistead waived

the argument.

II
II

Section 1445(c) renders nonremovable suits "arising

under" the workers' compensation laws of the state in which

the federal court sits. The statute reflects a congressional

concern for the states' interest in administering their own

workers' compensation schemes, the burdens on injured

claimants of maintaining a federal court suit, and the

incidence of federal court congestion. See generally Horton

v. Liberty Mut. Ins. Co., 367 U.S. 348, 350 (1961)

(explaining purpose of limitation on removal); 14A Charles A.

-5-

Wright et. al, Federal Practice & Procedure 3729 (2d ed.

Supp. 1994) (listing cases).

Travelers does not directly assert a right to

remove the proceedings pending before the Commission, but

focuses solely on the subsequent superior court complaint.

While the complaint was a separate filing, however, it did

not comprise independent litigation based on a separate

common law right to relief. Rather, the complaint sought

statutory compensation under a provision of the workers'

compensation law vesting in the superior court equitable

powers to enforce Commission orders and to issue pro forma

decisions enforcing Commission benefit awards.3 As an

integral part of the administrative enforcement scheme, the

superior court action was merely supplementary to the

Commission proceeding, and both proceedings obviously arose

under the workers' compensation law within the meaning of 28

U.S.C. 1445(c). Cf. Spearman v. Exxon Coal USA, 16 F.3d

3. Commission orders are enforceable only by petition to
the superior court, which may issue "any suitable process" in
aid of Commission proceedings. See 39 M.R.S.A. 93, 103-E.

The Commission itself has no general equity powers. See

Clark v. International Paper Co., 638 A.2d at 66. Benefit

awards and Commission decisions become enforceable on
presentation of a certified copy to the superior court, which
"shall render a pro forma decision in accordance therewith."
39 M.R.S.A. 103-E. The Commission's decisions thus acquire
the same force as if rendered by the superior court. See 39

M.R.S.A. 103-E. Moreover, an award may be confirmed by the
superior court even if it remains subject to post-order
administrative proceedings or a pending appeal. See Cilley

v. Georgia-Pac. Corp., 519 A.2d 191, 192 (Me. 1986); see also

39 M.R.S.A. 104-A.

-6-

722, 725 (7th Cir.) (holding that a claim did not arise under

a workers' compensation law when it stated a right to relief

in tort and sought common law damages distinct from statutory

compensation scheme), cert. denied, 115 S. Ct. 377 (1994).

Removal of the case thus was doubly barred, once

under section 1445(c), and again because the supplementary

superior court proceeding does not independently qualify as a

removable "civil action" under 28 U.S.C. 1441(a). See

Barrow v. Hunton, 99 U.S. 80, 82 (1879) (explaining that a

supplementary action so connected with an original action as

to form a mere incident or continuation of it is not

removable as a separate suit); Bank v. Turnbull & Co., 83

U.S. (16 Wall.) 190, 193 (1873) (same); Federal Savings &

Loan Ins. Corp. v. Quinn, 419 F.2d 1014, 1018 (7th Cir. 1969)

(same, but making claim that federal standards determine

independence of action); Overman v. Overman, 412 F. Supp.

411, 412 (E.D. Tenn. 1976) (same, discussing possible Erie

concerns). Recent cases in which parties attempt to remove

state supplementary proceedings are scarce, but the federal

bar to entertaining "satellite elements" of pending state

suits and judgments clearly remains intact as the "sensible"

judicial rule. 14A Wright et al., supra, 3721 (Supp.

1994); see also 1A James Wm. Moore et al., Moore's Federal

Practice 0.157[4-11] (2d ed. Supp. 1994) (distinguishing

-7-

the principle from the "independent" claim concept embodied

in 28 U.S.C. 1441(c)).

III
III

Under 28 U.S.C. 1447(c), a motion challenging

subject matter jurisdiction may be made at any time, but

objections based on a "defect in removal procedure" must be

made within thirty days of the removal. Travelers argues

that Armistead waived any objection to the lack of removal

jurisdiction by failing to move for a remand within this

period.

In Williams v. AC Spark Plugs Div. of Gen. Motors

Corp., 985 F.2d 783 (5th Cir. 1993) the Fifth Circuit decided

that removal of a Texas workers' compensation case in

violation of section 1445(c) should be treated as the

embodiment of a procedural defect and, thus, subject to

section 1447(c)'s thirty day waiver rule. The court

interpreted section 1447(c) as meaning that any wrongful

removal is subject to waiver so long as the district court

would have had original subject matter jurisdiction had the

plaintiff initiated the action in federal court. Id. at 787.

Since the plaintiff in Williams could have chosen to bring

her Texas claim as an original diversity action, the court

held that she waived her objection to federal court

jurisdiction by waiting more than thirty days to seek a

remand. Id. at 788.

-8-

The Eighth Circuit, however, has taken the view

that where Congress expressly restricts removal jurisdiction

over a particular class of cases, wrongful removal should not

be treated as a "mere procedural irregularity" waivable by

the parties, but as a violation of the court's limited

subject matter jurisdiction.

The fact that [plaintiff] could have invoked the
original jurisdiction of the federal court
initially is irrelevant. . . . The jurisdiction of
the lower federal courts, both original and removal
is entirely a creature of statute. . . . If one of
the statutory requirements is not met, the district
court has no jurisdiction.

Hurt v. Dow Chem. Co., 963 F.2d 1142, 1145 (8th Cir. 1992)

(determining that a failure to object to lack of removal

jurisdiction under 1441(b) did not operate as a waiver).

We need not choose between these contradictory views

because in this case there was neither removal jurisdiction

nor original diversity jurisdiction. Unlike the Texas

statute at issue in Williams, Maine's compensation scheme

does not permit a de novo state court action for workers'

compensation benefits. See Dorey v. Forster Mfg. Co., 591

A.2d 240, 241 (Me. 1991). By reason of the policies

expressed in Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938),

the state's rule barring suitors from bringing such an action

de novo in its own courts must be applied to bar an original

diversity action in the forum's federal courts. See

Feinstein v. Massachusetts Gen. Hosp., 643 F.2d 880, 888 (1st

-9-

Cir. 1981) (stating that Erie policies requiring adherence to

state door-closing statutes likewise require a federal court

to apply state-created administrative limitations on rights

to recovery) (citing Woods v. Interstate Realty Co., 337 U.S.

535 (1949)); Construction Aggregates Corp. v. Rivera de

Vicenty, 573 F.2d 86, 96 (1st Cir. 1978) (holding that if

Puerto Rico does not give its own courts jurisdiction over a

claim collaterally attacking workers' compensation rates for

locally hired workers, a federal court cannot exercise

diversity jurisdiction over the claim); accord Dial v.

Hartford Accident & Indem. Co., 863 F.2d 15 (5th Cir. 1989)

(examining Mississippi workers' compensation law); Trapp v.

Goetz, 373 F.2d 380 (10th Cir. 1966) (examining state pension

law); Shultz v. Lion Oil Co., 106 F. Supp. 119 (D. Ark. 1952)

(examining Arkansas workers' compensation law), appeal

dismissed, 202 F.2d 752 (8th Cir. 1953).

Moreover, the limited supplementary and appellate

authority exercised by the Maine courts over Commission

proceedings finds no analog in federal diversity

jurisdiction. As courts of original jurisdiction, federal

district courts sitting in diversity jurisdiction do not have

appellate power, nor the right to exercise supplementary

equitable control over original proceedings in the state's

administrative tribunals. See Rooker v. Fidelity Trust Co.,

263 U.S. 413, 416 (1923) (noting that the jurisdiction

-10-

possessed by federal district courts is "strictly original");

Barrow v. Hunton, 99 U.S. 80, 82 (1879) (explaining that

federal courts may not exercise control over state

proceedings by entertaining supplementary actions which are

but incidents of state suits); MacKay v. Pfeil, 827 F.2d

540, 545 (9th Cir. 1987) (holding that a request for

declaratory relief that does not state a new case arising

upon new facts, but in reality seeks review and correction of

a state court judgment is not within federal court's original

jurisdiction); cf. 1A Moore's Federal Practice, supra,

0.167[6] (Supp. 1994) (where state courts have only

appellate, quasi-administrative review over the claim, the

proceeding "is not a civil action within the cognizance of

the original jurisdiction of the federal court").4

We need go no further. In the absence of federal

subject matter jurisdiction, we cannot proceed to the merits

of this appeal, and the case must be remanded to the state

4. Any claim in this case not covered by the foregoing
principles would be subject to dismissal under the related
doctrine of Burford-type abstention. The state has signalled

its interest in regulatory coherency by concentrating all
claims in an exclusive administrative process, and parallel
federal suits could "in a very real sense . . . disrupt the
regulatory scheme." Allstate Ins. Co. v. Sabbagh, 603 F.2d

228, 233 (1st Cir. 1979); see also Bath Memorial Hosp. v.

Maine Health Care Fin. Com., 853 F.2d 1007, 1013 (1st Cir.

1988) (holding that a court should abstain when an exercise
of jurisdiction might lead to a parallel federal `regulatory
review' mechanism, complicating state administration);
Construction Aggregates Corp., 573 F.2d at 91-93, 96

(applying principles of Burford-type abstention to various

claims relating to workers' compensation law).

-11-

court. See Halleran v. Hoffman, 966 F.2d 45, 47-48 (1st Cir.

1992).

Accordingly, the judgment is vacated and this case

is remanded to the district court which shall immediately

remand the action to the state court. All parties shall bear

their own costs.

-12-