IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
March 28, 2008
No. 07-30482 Charles R. Fulbruge III
Clerk
JAMES J. DONELON,
COMMISSIONER OF INSURANCE
FOR THE STATE OF LOUISIANA
Plaintiff-Appellant,
v.
LOUISIANA DIVISION OF ADMINISTRATIVE LAW
THROUGH ITS DIRECTOR, ANN WISE
Defendant-Appellee.
Appeal from the United States District Court
for the Middle District of Louisiana
Before JONES, Chief Judge, and DAVIS and GARZA, Circuit Judges.
EDITH H. JONES, Chief Judge:
James J. Donelon, Commissioner of Insurance for the State of Louisiana,
challenges the district court’s dismissal of his declaratory judgment action
attacking the constitutionality of LA. REV. STAT. ANN. § 49:992(B)(2). He argued
that under 18 U.S.C. § 1033, he is the sole authority in Louisiana who may
regulate which individuals may engage in the insurance business. Section
49:992(B)(2), he contends, is unconstitutional because it allows judges in the
Louisiana Division of Administrative law to overturn his decisions and,
therefore, violates both the Commerce and Supremacy Clauses. The district
No. 07-30482
court dismissed the case on grounds of Eleventh Amendment sovereign
immunity. Because we conclude that Donelon lacks standing to bring this cause
of action, we affirm.
BACKGROUND
Congress enacted 18 U.S.C. § 1033 as part of the “Violent Crime Control
and Law Enforcement Act of 1994” (“the Act”) which included criminal and civil
enforcement provisions aimed at white-collar and insurance fraud. Engaging in
the insurance business with a prior felony conviction, making false material
statements, and embezzlement are among insurance-related crimes defined by
the statute. Id. Section 1033(e)(2) allows a person who has been convicted of
any offense enumerated in the statute, as well as “any criminal felony involving
dishonesty or a breach of trust,”1 to engage in the insurance business only if the
person has the written consent of “any insurance regulatory official authorized
to regulate the insurer.” This is the only portion of § 1033 that discusses state
regulatory authorities. The statute does not give states or state insurance
officials any specific guidance as to how the waivers are to be granted or denied,
nor does it define “insurance regulatory official.” Because states are the primary
regulators of the insurance industry,2 enforcing the statute is their
responsibility.
Appellant Donelon is Louisiana’s Commissioner of Insurance. His office
and the Louisiana Department of Insurance (“DOI”) are creations of the 1974
Louisiana Constitution. See LA. CONST. art. IV, §11. An enabling statute directs
the commissioner to administer the state insurance code. See LA. REV. STAT.
ANN. § 22:2(A)(1) (2007). Pursuant to the code, an applicant for licensure must
1
See 18 U.S.C. § 1033(e)(1)(A).
2
THE MCCARRAN-FERGUSON ACT, 15 U.S.C. § 1101, et seq. reserves insurance
regulation to the states.
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No. 07-30482
have “the written consent of the commissioner pursuant to 18 U.S.C. § 1033" in
order to obtain a license. LA. REV. STAT. ANN. § 22:1136(A)(7) (2007).
In 1996, the Louisiana legislature created the Division of Administrative
Law (“DAL”). The DAL has the authority to review administrative decisions of
other departments3 and serves as the final, neutral arbiter of claims of citizens
aggrieved by administrative orders of executive agencies, including the DOI.4
DAL decisions are effectively unappealable. See LA. REV. STAT. ANN.
§ 49:992(B)(2) (“Upon the issuance of such a final decision or order, the agency
or any official thereof shall comply fully with the final order or decision of the
[ALJ].”). Donelon believes this process violates the federal Constitution and
laws, usurping his authority as commissioner.
The Louisiana Supreme Court rejected a contention that the DAL violated
the Louisiana constitution. See Wooley, 893 So.2d at 762. Donelon then filed
suit in November 2006, seeking a declaration that LA. REV. STAT. ANN.
§ 49:992(B)(2) is unconstitutional and conflicts with § 1033. The district court
dismissed the action for lack of subject-matter jurisdiction, concluding that the
DAL, as an arm of the state, had sovereign immunity from suit and that none
of the exceptions to sovereign immunity applied. Donelon timely appealed.
DISCUSSION
We review de novo a district court’s dismissal for lack of subject-matter
jurisdiction. Meyers ex rel. Benzing v. Texas, 410 F.3d 236 (5th Cir. 2005);
United States v. Tex. Tech Univ., 171 F.3d 279, 288 (5th Cir. 1999). Although the
parties’ briefing in this court addressed only the issue of sovereign immunity, we
3
In creating the DAL, “the legislature decided to transfer [the administrative law
judges] previously employed by the various agencies to a central division to remove the [ALJs]
from the direct influence of the agency heads and to give them a measure of independence.”
Wooley v. State Farm Fire & Cas. Ins. Co., 893 So. 2d 746, 767 (La. 2005).
4
The legislature specifically excluded some agencies from the DAL’s reach; the DOI was
not one of them. See LA. REV. STAT. ANN. § 49:992(D)(1–8).
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No. 07-30482
are obliged also to consider threshold questions of justiciability such as standing.
Because Donelon’s alleged lack of standing was a legal issue briefed to the
district court, we are not proceeding sua sponte when we consider it.
In order to have standing to sue in a federal court, a plaintiff must bring
a “case or controversy.” U.S. CONST. art. III. This requires more than an
abstract legal dispute. Allen v. Wright, 468 U.S. 737, 754 (1984). “To meet the
standing requirements of Article III, ‘[a] plaintiff must allege personal injury
fairly traceable to the defendant’s allegedly unlawful conduct and likely to be
redressed by the requested relief.’” Raines v. Byrd, 521 U.S. 811, 818–19 (1997)
(quoting Wright, 468 U.S. at 751). Put another way, the plaintiff must establish
a “personal stake” in the dispute and that the injury is particularized to him. Id.
at 819; see also Baker v. Carr, 369 U.S. 186, 204 (1962). The injury cannot be
one suffered by the citizens at large. Finch v. Miss. St. Med. Ass’n, 585 F.2d 765,
771 (5th Cir. 1978).
The Supreme Court has held that state officials lack standing to challenge
the constitutional validity of a state statute when they are not adversely affected
by the statute, and their interest in the litigation is official, rather than
personal. See County Court of Braxton County v. West Virginia ex rel. Dillon,
208 U.S. 192, 197 (1908). In another context, the Supreme Court made it clear
that courts should not pass upon the constitutionality of a statute “upon
complaint of one who fails to show that he is injured by its operation. . . . Thus,
the challenge by a public official interested only in the performance of his official
duty will not be entertained.” Ashwander v. Tenn. Valley Auth., 297 U.S. 288,
348 (1936).
In Finch, this court rejected the claimed standing of the Governor of
Mississippi to challenge a state law whose enforcement, he believed, would cause
him to violate his oath to uphold the Constitution. See Finch, 585 F.2d at 773.
The court observed:
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No. 07-30482
The mental disposition of the Governor is all that gives him cause
to complain; were he to change his mind tomorrow and decide,
rightly or wrongly, that the state statute is valid, he would no longer
have any interest in the case. He has no personal stake in the
outcome of this case; he will not be affected favorably by a decision
that the statute is unconstitutional nor adversely by a decision that
it is valid.
Id. at 774.5
Shortly after Finch, this court took the anomalous, if not unique, position
that a political subdivision might have standing to challenge state laws that
allegedly violate the Supremacy Clause.6 See Rogers v. Brockette, 588 F.2d 1057
(5th Cir. 1979). In Brockette, a local school district sued Texas state educational
authorities because a Texas statute required it to participate in an otherwise
voluntary federal school breakfast program. Id. at 1059. The court concluded
the district had standing, in part, because it alleged that Congress made the
district the proper body to decide some significant questions under the breakfast
program. Id. at 1062.
5
Finch recognized that the Supreme Court had previously concluded that school board
officials had standing to challenge a state statute requiring school districts to purchase and
loan textbooks to students in enrolled in parochial schools. See Bd. of Educ. of Cent. Sch. Dist.
No. 1 v. Allen, 392 U.S. 236, 241 n.5 (1968). But Finch explained that later standing decisions
limited Allen and that Allen was factually distinct. Finch, 585 F.2d 773–74; see also 13A
Wright & Miller, FEDERAL PRACTICE & PROCEDURE § 3531.11 (stating that federal circuit
courts have recognized that Allen’s holding has been undermined by the Court’s more recent
standing decisions).
6
The opinion laboriously, and not very convincingly distinguished the long line of cases
holding that a political subdivision did not have standing to sue the parent state that created
it. See Brockette, 588 F.2d at 1067–68; cf. Town of Ball v. Rapides Parish Policy Jury, 746 F.2d
1049, 1051 n.1 (5th Cir. 1984) (noting general rule that political subdivisions have no standing
to invoke the Contract Clause or the Fourteenth Amendment in opposition to the will of their
creator, and citing long line of cases illustrating the rule). Although some circuits have
followed a per se rule that political subdivisions may not sue their parent states under any
constitutional provision, that is not the rule in this circuit. See Brian P. Keenan, Note,
Subdivisions, Standing, and the Supremacy Clause: Can a Political Subdivision Sue Its Parent
State Under Federal Law?, 103 MICH. L. REV. 1899, 1902 (2005).
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No. 07-30482
But for an important distinction made by that court, Brockette bears some
similarity to the case here. The court distinguished, for purposes of standing,
between political subdivisions and state agencies. The court stated:
Some state agencies may well be so closely identified with the state
government, and so thoroughly controlled by the body they are
suing that the litigation amounts to a suit by the state against itself;
such a suit lacks the live adversariness we must find before we can
entertain a case.
Id. at 1065. Thus, when a state is essentially suing itself, there is no “case or
controversy.” Id. The court concluded that political subdivisions like the school
district were sufficiently independent of the state “to ensure that suit between
them [would] be a genuinely adversary contest.” Id.
Similarly, the Seventh Circuit holds that a suit involving a state official
challenging the constitutional validity of another state actor’s decisions under
state law is “clearly outside the cognizance of the federal courts.” Cronson v.
Clark, 810 F.2d 662, 664 (7th Cir. 1987). The court went on to state that the
typical subjects of injury — deprivation of liberty and property — “do not
encompass the interest of a public official in being allowed to act to the full
extent of what he conceives to be his powers under state law. The federal courts
do not sit to resolve intramural disputes among state officials over the bounds
of their authority under state law.” Id. at 665.
Here, Donelon has no “personal stake” in this litigation. Rather, he seeks
to exercise what he believes are the full extent of his official powers under
federal and state law. There is no claim that he suffers any personal injury
when an ALJ overturns one of his decisions regarding 18 U.S.C. § 1033 waivers.
Nor is there a claim that he will be expelled from office or lose public funding if
he complies with Louisiana law.7 As in Finch, he is merely suing to ensure
7
Cf. Allen, supra, note 5.
6
No. 07-30482
Louisiana law conforms to his opinion of what federal law requires. And
although this court held in Brockette that a political subdivision could bring a
Supremacy Clause challenge to a state law in federal court, Donelon’s position
as the head of a state agency creates a situation where the state is essentially
suing itself. The dispute between Donelon and the DAL is decidedly
“intramural.” Cronson, 810 F.2d at 665. Thus, there is no Article III case or
controversy.
Because Donelon lacks standing to sue, the district court’s dismissal for
lack of federal jurisdiction is AFFIRMED.
7