UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
__________________
No. 93-4902
__________________
THE ST. PAUL INSURANCE COMPANY,
Plaintiff-Appellant,
versus
ESTANISLADO TREJO,
Defendant-Appellee.
______________________________________________
Appeal from the United States District Court for the
Eastern District of Texas
______________________________________________
(November 29, 1994)
Before REAVLEY, GARWOOD and HIGGINBOTHAM, Circuit Judges.
GARWOOD, Circuit Judge:
Plaintiff-appellant St. Paul Insurance Company (St. Paul)
appeals the district court's order dismissing its declaratory
judgment action. St. Paul contends that the district court erred
in dismissing the suit based on both 28 U.S.C. § 1445(c) and
federal abstention concerns. We reverse and remand.
Facts and Proceedings Below
In March 1990 defendant-appellee Estanislado Trejo (Trejo) was
injured on the job in Texas. Consequently, Trejo received an award
from the Texas Workers Compensation Commission against his employer
and their worker's compensation carrier, St. Paul. Thereafter,
St. Paul filed suit in the state district court in Angelina County,
Texas, to set aside the award. The parties then entered into a
court-approved settlement agreement (First Settlement) whereby St.
Paul agreed to pay Trejo $45,000 plus all past and future medical
expenses through October 31, 1995.
Trejo then filed suit in the same Angelina County state court
against a third party, Moore Brothers Construction Company (Moore
Brothers). Trejo alleged that Moore Brothers' negligence caused
his work-related injury. St. Paul intervened in the lawsuit to
obtain payment of its subrogation interests. Subsequently, Moore
Brothers settled the lawsuit by agreeing to pay $195,000 for
Trejo's injuries. St. Paul received $40,000 of the $195,000 in
settlement of its subrogation interests and Trejo received the
remaining $150,000.
After the settlement Trejo and St. Paul had a dispute about
Trejo's medical expenses. The dispute concerned whether, pursuant
to Tex. Rev. Civ. Stat. art 8307 6a(c),1 St. Paul had to pay
1
Although this provision was repealed in 1991, it was in
effect at the time of Trejo's injuries. Article 8307 § 6a(c)
provides:
"If at the conclusion of a third party action a
workmen's compensation beneficiary is entitled to
compensation, the net amount recovered by such
beneficiary from the third party action shall be
applied to reimburse the association for past benefits
and medical expenses paid and any amount in excess of
past benefits and medical expenses shall be treated as
an advance against future benefit payments of
compensation to [sic] which the beneficiary is entitled
to receive under the Act. When the advance is adequate
to cover all future compensation and medical benefits
payments as provided by this law, no further payments
shall be made by the association but if insufficient,
the association shall resume such payments when the
2
medical expenses incurred by Trejo after settlement of the Moore
Brothers case.
On November 2, 1992, St. Paul filed this action, based upon
diversity of citizenship, against Trejo. St. Paul's lawsuit sought
a declaratory judgment of its rights and responsibilities under
both the First Settlement and article 8307 § 6a(c). On March 4,
1993, Trejo filed suit against St. Paul in the Angelina County
state courtSQthe same court in which the two earlier suits had been
filedSQalleging St. Paul had breached its duty of good faith and
fair dealing and requesting actual and punitive damages. On March
5, 1993, Trejo filed a motion to dismiss the instant federal
lawsuit.
On May 7, 1993, the district court granted Trejo's motion to
dismiss. The court ruled that the case should be dismissed for two
reasons. First, the court held that the suit should be dismissed
pursuant to 28 U.S.C. §1445(c) since it arose under the Texas
worker's compensation laws. Second, the court determined that
dismissal was appropriate on general federal abstention principles.
St. Paul now appeals.
Discussion
I. 28 U.S.C. § 1445(c)
28 U.S.C. § 1445(c) provides that "[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
advance is exhausted. The reasonable and necessary
medical expenses incurred by the claimant on account of
the injury shall be deducted from the advance in the
same manner as benefit payments."
3
States." St. Paul argues that the district court erred in deciding
that section 1445(c) authorizes dismissal of its lawsuit. St. Paul
contends that its action is not dismissible under section 1445(c)
since it was properly filed in the federal court on the basis of
diversity jurisdiction and was never subject to removal from a
state court.
Although the district court acknowledged that St. Paul's
lawsuit had not been removed, it nevertheless concluded that the
federalism concerns underlying section 1445(c) allowed the lawsuit
to be dismissed. The district court reasoned that since St. Paul's
lawsuit involved a request for a declaration of rights under a
worker's compensation agreement it was a lawsuit "arising under"
the Texas worker's compensation laws. And it concluded that
retaining jurisdiction of the case would thus thwart the
congressional purpose behind section 1445(c).
The Supreme Court decision in Horton v. Liberty Mutual Ins.
Co., 81 S.Ct. 1570, 1572-73 (1961), speaks directly to this
question. In Horton, Liberty Mutual filed a federal lawsuit, on
the basis of diversity of citizenship, to set aside a worker's
compensation award granted by a state administrative board.
Thereafter, Horton filed his own action in state court and then
moved for dismissal of the federal lawsuit on jurisdictional
grounds. In Horton, the Supreme Court held that federal
jurisdiction was not barred by the 1958 amendment to Title 28 (now
section 1445(c)), which forbade the removal of state worker's
compensation cases. The Court observed that while the purposes of
the 1958 amendment, such as limiting federal court congestion and
4
eliminating the burdens that worker's compensation claimants might
suffer, militated against the exercise of jurisdiction, the
amendment did not specifically prohibit jurisdiction in worker's
compensation cases which were originally filed in federal court.
Id. Further, the Court noted that "Congress used language
specifically barring removal of such cases from state to federal
courts [but] left unchanged the old language which . . .
specifically permits civil suits to be filed in federal courts in
cases where there are both diversity of citizenship and the
prescribed jurisdictional amount." Id. at 1573 (emphasis added).
The Horton Court concluded that "we must take the intent of
Congress with regard to the filing of diversity cases in Federal
District Courts to be that which its language clearly sets forth."
Id.
In accordance with Horton, even though St. Paul's declaratory
judgment action involved a state worker's compensation law,2
jurisdiction was still proper based on diversity of citizenship.
We accordingly hold that the district court erred in dismissing St.
Paul's suit on the basis of section 1445(c), or the supposed
congressional purposes underlying it, or on the basis of any
analogy to section 1445(c) or its purposes. See also Home
Indemnity Company v. Moore, 499 F.2d 1202, 1204 (8th Cir. 1974)
(noting that section 1445(c) "cannot be extended to cases beyond
the scope of the plain wording of the statute").
2
We assume, arguendo only, that St. Paul's suit is properly
characterized as one "arising under" the Texas worker's
compensation law.
5
II. Abstention Concerns
The district court alternatively held that St Paul's suit
could also be dismissed under federal abstention principles. The
court concluded that judicial abstention was proper under both the
Burford and the Colorado River abstention doctrines. St. Paul
contends that, in the instant case, neither of these doctrines is
applicable.
A. Burford abstention
Pursuant to the Burford doctrine,
"[w]here timely and adequate state-court review is
available, a federal court sitting in equity must decline
to interfere with the proceedings or orders of state
administrative agencies: (1) when there are 'difficult
questions of state law bearing on policy problems of
substantial public import whose importance transcends the
result in the case then at bar'; or (2) where the
'exercise of federal review of the question in a case and
in similar cases would be disruptive of state efforts to
establish a coherent policy with respect to a matter of
substantial public concern.'" New Orleans Public Serv.
Inc. v. Council of New Orleans, 109 S. Ct. 2506, 2514
(1989) (citing Colorado River Water Conservation Dist. v.
United States, 96 S.Ct. 1236, 1244 (1976)).3
Although "Burford is concerned with protecting complex state
administrative processes from undue federal interference, it does
not require abstention whenever there exists such a process, or
3
In Burford v. Sun Oil Company, 63 S.Ct. 1098 (1943) the Sun
Oil Company filed a federal court suit seeking to enjoin an order
by the Texas Railroad Commission granting Burford a permit to
drill four oil wells. The sole issue in Sun's lawsuit was
whether the Commission had improperly applied its oil and gas
regulations, denying Sun due process. Noting that (1) the
lawsuit involved highly technical and complicated regulatory
issues which affected the entire state's oil and gas conservation
system, id. at 1101-1102, and (2) the state had created a
comprehensive centralized system for judicial review of the
Commission's orders, the Court determined that abstention was
proper to protect the state's administrative process from undue
federal influence. Id. at 1107.
6
even in all cases where there is a 'potential for conflict' with
state regulatory law or policy." New Orleans Pub. Serv., 109
S.Ct.at 2515.
The concerns governing the Burford abstention doctrine are not
present in the instant case. St. Paul's lawsuit does not involve
a state administrative proceeding. Further, it does not seek to
interfere with Texas' worker's compensation system. St. Paul's
declaratory judgment action simply seeks interpretation of the
First Settlement in light of a Texas statute. Thus, unlike the
situations in which Burford-type abstention is appropriate, federal
jurisdiction in this case would neither affect the state's system
of reviewing worker's compensation awards nor be disruptive of the
state's policies respecting worker's compensation. Hence, the
district court erred in relying on the Burford doctrine to dismiss
this case.
B. Colorado River abstention
Noting that abstention is warranted in order to avoid
duplicative litigation and discourage forum shopping, the district
court also concluded that it should abstain from jurisdiction in
the "interests of wise administration." Abstention based on "wise
judicial administration" is commonly recognized as Colorado River
abstention. This abstention doctrine was developed by the Supreme
Court to "govern in situations involving the contemporaneous
exercise of concurrent jurisdictions either by federal courts or by
state and federal courts." Colorado River, 96 S.Ct. at 1246.
In fashioning this abstention doctrine, the Supreme Court
emphasized that as a general rule a federal court may not abstain
7
from jurisdiction simply because there are parallel proceedings in
a state court. Id. However, in spite of the federal court's
"virtually unflagging obligation . . . to exercise the jurisdiction
given them," the Court determined that there were a few
"exceptional circumstances" in which a federal court may abstain
based on concurrent litigation. Id.
Colorado River identified four factors that a district court
should consider when determining whether "exceptional
circumstances" overcome its general duty to exercise jurisdiction.
These factors are: (1) whether another court has assumed
jurisdiction over property, (2) whether the federal forum is
inconvenient, (3) whether it is desirable to avoid piecemeal
litigation, and (4) the order in which jurisdiction was obtained by
the concurrent forums. Later, in Moses H. Cone Memorial Hosp. v.
Mercury Constr. Corp., 103 S.Ct. 927 (1983), the Supreme Court
added two additional factors to the Colorado River test. These
factors are: (1) whether the federal law provides the rule of
decision and (2) whether the state court proceedings are inadequate
to protect the federal court plaintiff's rights.4 Id. at 942. In
Moses Cone, the Court stressed the very limited nature of
abstention under the Colorado River doctrine and noted that a
decision to dismiss did not rest on "a mechanical checklist, but on
4
Unlike the first four factors, these two factors were not
added as considerations to weigh against retaining jurisdiction.
Instead, these two factors provide additional reasons for
retaining jurisdiction. Id. at 942. For example, while the
presence of a federal-law issue is an additional reason for
retaining federal jurisdiction, the lack of such an issue would
not, alone, be a sufficient reason to abstain.
8
a careful balancing of the important factors as they apply in a
given case, with the balance heavily weighted in favor of the
exercise of jurisdiction." Id. at 937.
The district court's order failed to apply any of the six
factors developed under the Colorado River/Moses Cone "exceptional
circumstances" test. Instead, the district court simply recognized
that Colorado River, in limited circumstances, allows for
abstention where there are concurrent state proceedings, and
summarily stated its decision to dismiss.5 This conclusory
statement is not sufficient to satisfy the "exceptional
circumstances" analysis required by Colorado River and Moses Cone.
In considering the factors governing the Colorado River/Moses
Cone "exceptional circumstances" test, we conclude that abstention
on this basis was erroneous. This case does not satisfy any of the
first four Colorado River factors since it does not involve: (1) a
suit for property; (2) a less convenient federal forum; (3)
piecemeal litigation, i.e. no more than one plaintiff, one
defendant, and one issue; or (4) a federal court case being filed
after the pending state case. And although under the fifth factor
this case does not involve a question of federal law, this alone
cannot justify Colorado River abstention in a suit which is
properly before the federal court on the basis of diversity. As
5
The district court simply held that "in this case . . . --
i.e., one brought in diversity, under the Declaratory Judgment
Act, and one in which the insurer's action 'arises under' the
Texas worker's compensation scheme so that had it been but
removed from state court it would have been remanded under 28
U.S.C. § 1445(c) -- abstention is clearly called for by wise
judicial administration."
9
the Moses Cone Court observed, only in "rare circumstances [will]
the presence of state-law issues . . . weigh in favor of . . .
surrender." In addition, the sixth factor does not outweigh the
heavy presumption in favor of retaining jurisdiction. Even though
it appears that a state court proceeding would be adequate to
protect St. Paul's rights, this alone, or together with only the
fifth factor, is insufficient to overcome a federal court's
"virtually unflagging obligation" to exercise jurisdiction in a
case that is properly before it.
We hold that this suit does not qualify under the stringent
"exceptional circumstances" test of Colorado River and Moses Cone.
Hence, the district court erred in dismissing the case on the basis
of the Colorado River abstention doctrine.
III. Dismissal of a Declaratory Judgment Action
Although the instant case does involve concurrent state and
federal litigation, the Colorado River doctrine is not the only
basis on which the district court could have considered abstention.
Under settled Fifth Circuit law, a declaratory judgment action may
be dismissed even though it fails to satisfy the stringent Colorado
River/Moses Cone "exceptional circumstances" test. See Travelers
Ins. Co. v. Louisiana Farm Bureau Federation, 996 F.2d 774, 778
n.12 (5th Cir. 1993) (stating "the factors set out in Colorado
River . . . are inapplicable in declaratory judgment actions.)";
see also Granite State Ins. Co. v. Tandy Corp., 986 F.2d 94, 95
(5th Cir. 1992), cert. dismissed, 113 S.Ct. 1836 (1993).6
6
We note that in both Travelers and Granite State this Court
declined to determine whether the dismissal satisfied the
10
Under the Declaratory Judgment Act, a district court has a
measure of discretion in deciding whether to entertain the action.7
Although "the district court's discretion is broad, it is not
unfettered." Travelers, 996 F.2d at 778. For example, the
district court may not dismiss declaratory judgment actions "'on
the basis of whim or personal disinclination.'" Id. (citation
omitted). In addition, "unless the district court addresses and
balances the purposes of the Declaratory Judgment Act and the
factors relevant to the abstention doctrine on the record, it
abuses its discretion." Id. Relevant factors the district court
must consider in determining whether to dismiss a declaratory
judgment, include:
"(1) whether there is a pending state action in which all
of the matters in controversy may be fully litigated, 2)
whether the plaintiff filed suit in anticipation of a
lawsuit filed by the defendant, 3) whether the plaintiff
engaged in forum shopping in bringing the suit, 4)
whether possible inequities in allowing the declaratory
plaintiff to gain precedence in time or to change forums
exist, 5) whether the federal court is a convenient forum
Colorado River doctrine. See Travelers, 996 F.2d at 778 n.1.;
Granite State, 986 F.2d at 95. In the instant case, we evaluated
the district court's dismissal under the Colorado River doctrine
because the district court rendered its decision, in part, on
that basis. As a general matter, a district court's
discretionary, nonmerits based dismissal of a declaratory
judgment action cannot be successfully challenged merely because
it does not satisfy Colorado River abstention. See, e.g.,
Mission Ins. Co. v. Puritan Fashion Corp., 706 F.2d 599, 601 n.1.
(5th Cir. 1983). If such a dismissal is in accordance with the
Declaratory Judgment Act, it does not have to satisfy the more
stringent Colorado River abstention test.
7
See to 28 U.S.C. § 2201, stating in part: "any court of the
United States, upon the filing of an appropriate pleading, may
declare the rights and other legal relations of any interested
party seeking such declaration . . . ." (emphasis added).
11
for the parties and witnesses, and 6) whether retaining
the lawsuit in federal court would serve the purposes of
judicial economy," id.,
and, we hold, whether the federal court is being called on to
construe a state judicial decree involving the same parties and
entered by the court before whom the parallel state suit between
the same parties is pending.8
We observe that although the district court noted its
discretionary power to dismiss declaratory judgments, it never
addressed the specific factors relevant to a dismissal on that
basis. After reviewing the relevant factors, we note that
questions such as whether St. Paul filed an anticipatory suit (as
Trejo claimed) and whether the court would be construing a judicial
decree to which the present litigants were parties entered by the
same state court before whom the parallel state litigation between
the same parties is pending, are potentially important, unresolved
factors. On the present record we cannot say as a matter of law
that the district court will be precluded from from dismissing the
lawsuit.9 As a result, we remand to the district court for
8
For example, here the district court should determine
whether it makes more sense for the state court that approved the
First Settlement to interpret it.
We also note that St. Paul's suit was filed first and there
is no finding that it was anticipatory. Moreover, St. Paul's
suit does not challenge, but merely seeks to interpret, the First
Settlement and judgment approving it. (Nor do we understand St.
Paul to challenge any order or judgment in the Moore Brothers
suit). Hence at this stage there is no reason to assume that
retention of the federal case would violate Texas Employers' Ins.
Ass'n v. Jackson, 862 F.2d 491 (5th Cir. 1988) (en banc), cert.
denied, 109 S.Ct. 1932 (1989). Cf. Royal Ins. Co. of America v.
Quinn-L Capital Corp., 3 F.3d 877, 884 (5th Cir 1993). Nor has
Trejo argued that it would.
9
Whether the state decree is now subject to being reopened
12
reconsideration, and possible further proceedings, in accordance
with the Declaratory Judgment Act and above-mentioned relevant
factors.10
Conclusion
For the foregoing reasons, the district court's dismissal of
this lawsuit is REVERSED and the cause is REMANDED for further
proceedings consistent herewith.
might conceivably also be relevant; also, proceedings in the
Moore Brothers suit before the same state court might conceivably
be relevant; on this record, we simply cannot tell.
10
We emphasize that the district court should not dismiss this
declaratory judgment suit simply because it does not involve a
question of federal law. The case is properly before the
district court on the basis of diversity, and, as a result, is
entitled to the same consideration as cases before the court on
some other jurisdictional basis. As there is no policy against
diversity jurisdiction, a district court's dismissal of a lawsuit
simply because it involves an issue of state lawSQeven an issue
of state worker's compensation lawSQwould not be proper.
13