United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
August 3, 2004
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
______________________ Clerk
No. 03-30558
______________________
LIBERTY MUTUAL INSURANCE COMPANY,
LIBERTY MUTUAL FIRE INSURANCE COMPANY
AND LIBERTY INSURANCE CORPORATION
Plaintiffs-Appellants
versus
JAMES H. BROWN, DOUGLAS D. GREEN, SHERMAN A. BERNARD, SR., DUANE
COWART, WAYNE DUCOTE, GAIL N. McKAY, JIMMY PATTERSON, EDWARD
ROBERSON, CHARLES KIRSCH, JR., CHRIS FASER, III, and OTHER AS YET
UNDETERMINED INDIVIDUALS WHO ARE MEMBERS OF THE LOUISIANA
INSURANCE RATING COMMISSION
Defendants-Appellees
___________________________________________________
Appeal from the United States District Court for
the Middle District of Louisiana
___________________________________________________
Before DUHÉ, BARKSDALE and DENNIS, Circuit Judges.
Dennis, Circuit Judge:
Liberty Mutual Insurance Co. (“Liberty Mutual”) sued the
defendants, members of the Louisiana Insurance Rating Commission
(“LIRC”), arguing that the rates for workers’ compensation
insurance set by the LIRC over a period of several years were
confiscatory. Liberty Mutual argues that these rates thus
constitute an impermissible taking without compensation in
violation of the Fifth Amendment as incorporated by the Fourteenth.
1
The district court dismissed Liberty Mutual’s claims sua sponte
based on its determinations that Liberty Mutual’s claims were not
ripe and were precluded from ever ripening. We affirm.
FACTS AND PROCEDURAL BACKGROUND
Liberty Mutual provides various types of insurance coverage in
Louisiana, including workers’ compensation insurance policies. The
rates for workers’ compensation insurance are set by the LIRC. At
one point in time, Louisiana divided the market for workers’
compensation insurance into a voluntary market and an involuntary
market, the latter of which is comprised of consumers who cannot
obtain insurance in the voluntary market. Insurers were required
to serve the involuntary market as well as the voluntary market.
Liberty Mutual argues that, from 1985 to 1992, the LIRC set
rates in both the voluntary and involuntary markets so low that, in
combination, they were confiscatory and thus constituted a taking
by the state. Louisiana law provides for an appeal process from
decisions of the LIRC, which consists of administrative hearings
followed by judicial review. Liberty Mutual did not utilize these
procedures except with respect to the year 1989. Regarding the
1989 rates, Liberty Mutual utilized these procedures to seek a
prospective rate increase in the voluntary market only. The state
courts did not give Liberty Mutual the relief it requested but left
Liberty Mutual free to apply for a rate increase in the involuntary
market; Liberty Mutual did not do so.
2
Bypassing the administrative and judicial remedies made
available by Louisiana law, Liberty Mutual filed suit in federal
district court on January 6, 1993, alleging that Louisiana had
taken Liberty Mutual’s property without just compensation in
violation of the Fifth Amendment. The district court decided to
allow some limited discovery, and the defendants filed an
interlocutory appeal of that discovery ruling. A panel of this
court then dismissed Liberty Mutual’s taking claim as unripe,
noting that in Williamson County Regional Planning Comm’n v.
Hamilton Bank, 473 U.S. 172 (1985), the Supreme Court held that a
takings claim against a state did not ripen until (1) the
administrative body rendered a final decision and (2) the owner had
resorted to state judicial remedies for just compensation. Liberty
Mutual Ins. Co. v. Louisiana Dept. of Ins., 62 F.3d 115, 117 (5th
Cir. 1995). The panel stated that “it is an open question whether
Louisiana provides a compensation remedy for the kind of
deprivation alleged here, and Liberty Mutual should have first
posed the question to the state courts before bringing it here.”
Id. at 117-18. The panel further held that “[t]his reasoning
applies equally to the one order for which Liberty Mutual sought
judicial review in the Louisiana state courts [the appeal of the
1989 voluntary market rate]. That claim rested on the takings
clause and sought prospective relief only in the voluntary market
and only in the form of a rate increase, not damages.” Id. at 118.
3
The panel thus remanded the action to the district court with
instructions to dismiss the takings claim as unripe.
Liberty Mutual had also filed a state court action in 1993
alleging a taking without just compensation, but Liberty Mutual had
withheld service of the state court petition. After the federal
case was dismissed, Liberty Mutual then filed an “Amended, Restated
and Superseding Petition” in the lawsuit in Louisiana state court.
The trial court dismissed the suit, and the Louisiana First Circuit
Court of Appeal affirmed. Liberty Mutual Ins. Co. v. Louisiana
Ins. Rating Comm’n, 713 So.2d 1250 (La. App. 1st Cir. 1998). The
court noted that Louisiana law generally recognizes a cause of
action for inverse condemnation. Id. at 1253. But because Liberty
Mutual had not exercised the administrative and judicial review
remedies provided insurers by Louisiana statute,1 the court ruled
1
Like this court’s 1995 opinion dismissing Liberty Mutual’s
claims, the Louisiana appellate court did not find a meaningful
distinction between the 1989 year, in which Liberty Mutual
utilized the statutory procedures to seek injunctive relief in
the voluntary market only, and the other years in which Liberty
Mutual took no action to avail itself of those statutory
procedures. 713 So.2d at 1254-55. The court reasoned:
“[T]his court determined that Liberty Mutual’s
remedy appeared to lie in applying for a rate
increase in the involuntary market sufficient to
make its participation in the involuntary market
profitable. Liberty Mutual made no such request
for 1989. Thus, we likewise conclude that no
cause of action ever accrued to Liberty Mutual for
compensation based on allegedly confiscatory rates
of return resulting from artificially low rates in
the involuntary market for 1989.”
4
that no cause of action had accrued to Liberty Mutual; thus, the
state appellate court did not answer the more specific question of
whether an insurance company could sue for monetary damages
stemming from alleged confiscatory rates. Id. at 1253-55. The
Louisiana Supreme Court denied writs. Liberty Mut. Ins. Co. v. La.
Ins. Rating Comm’n, 728 So.2d 396 (La. 1998).
After its state court action was dismissed without an
examination of the merits of its claim, Liberty Mutual again filed
suit in federal district court re-asserting its takings claim. The
district court raised the issue of ripeness sua sponte and
concluded that Liberty Mutual’s takings claim was still not ripe.2
The district court reasoned that Liberty Mutual never met the
second requirement for a ripe takings claim under Williamson County
because Liberty Mutual failed to use available state procedures to
seek compensation. And, the district court further reasoned,
Id. Because Liberty Mutual’s claims, as articulated to this
panel, hinge on the allegedly confiscatory effect created by the
combination of the voluntary market rate and the involuntary
market rate, we agree that Liberty Mutual’s failure to utilize
Louisiana statutory procedures for challenging the 1989
involuntary market rate puts its claim as to that year on the
same footing as its claims regarding the other years in question.
2
The district court had earlier granted the defendants’
motion to dismiss or alternatively for summary judgment but never
provided reasons for its decision. We remanded this case to the
district court for the limited purpose of permitting that court
to assign reasons for its decision. Liberty Mutual Ins. Co. v.
Brown, No. 03-30558, 2004 U.S. App. LEXIS 1629 (5th Cir. Feb. 3,
2004). On remand, the district court raised the issue of
ripeness sua sponte.
5
because Liberty Mutual has since allowed the statute of limitations
on its state remedies to expire, Liberty Mutual permanently
prevented the claim from ever ripening. The district court
therefore dismissed Liberty Mutual’s claims for lack of
jurisdiction. Liberty Mutual timely appealed.
ANALYSIS
We review a district court’s decision to dismiss for lack of
jurisdiction de novo. Vogt v. Bd. of Comm'rs of the Orleans Levee
Dist., 294 F.3d 684, 688 (5th Cir. 2002). The defendants, of
course, argue that the reasoning and the result reached by the
district court are correct. Liberty Mutual conversely argues that
its claim is ripe when properly analyzed under the Williamson
County framework.
Takings Claim Prerequisites
As noted above, in Williamson County the Supreme Court held
that a takings claim against a state was not ripe until (1) “the
government entity charged with implementing the regulations has
reached a final decision,” 472 U.S. at 186, and (2) the plaintiff
“seek[s] compensation through the procedures the State has provided
for doing so.” Id. at 194. In Williamson County, the plaintiff
owned property in Tennessee, and a regional planning commission
disapproved of some of the plaintiff’s development plans. 473 U.S.
at 181. The plaintiff then filed suit in federal district court,
alleging a taking without just compensation. Id. at 182. The
6
Supreme Court concluded that the claim was not ripe because (1) the
plaintiff had not yet obtained a final decision from the commission
by asking the commission for a variance from the applicable zoning
requirements, id. at 187-88, and (2) the plaintiff did not seek
compensation through the procedures provided by Tennessee. Id. at
194. The Supreme Court noted that the exhaustion of administrative
remedies is generally not required before a section 1983 action may
be pursued in federal court and clarified that its ripeness
requirements for a takings claim were not contrary to that general
rule, id. at 192, as discussed below.
The Final Decision Requirement
Under its analysis of the first ripeness requirement,
obtaining a final decision from the governmental entity
implementing the regulations, the Williamson County Court explained
that this federal finality requirement did not require the
plaintiff to exhaust administrative remedies by utilizing
administrative and judicial procedures to review the adverse
decision but only required the plaintiff to obtain a final answer
from the initial decision-maker. Id. at 192-93. Thus, while a
takings plaintiff must obtain a final decision from the decision-
making entity and must avail itself of state procedures for
obtaining compensation before the federal takings claim ripens (for
instance, by filing an inverse condemnation lawsuit as required by
the Supreme Court in Williamson County), the exhaustion of
7
administrative remedies at the state level is not an independent
and separate requirement for a takings claim to be considered ripe
under federal law.
Based on this principle, Liberty Mutual argues that it was not
required to utilize the Louisiana statutory procedures providing
for administrative and judicial review and that its claim is ripe.
While, as the district court concluded, Liberty Mutual appears to
have satisfied the final decision requirement, Liberty Mutual must
also establish that it sought compensation through the procedures
provided by Louisiana in order for its federal takings claim to be
ripe.
The Requirement that Adequate State Procedures for Obtaining
Compensation be Utilized
In this case Liberty Mutual’s failure to avail itself of
Louisiana’s statutory procedures providing for administrative and
judicial review prevented it from meeting the second Williamson
County requirement. Again, according to Williamson County’s second
ripeness prerequisite, the plaintiff must avail himself of
procedures the state has provided for seeking compensation. 473
U.S. at 194. “[I]f a state provides an adequate procedure for
seeking just compensation, the property owner cannot claim a
violation of the Just Compensation Clause until it has used the
procedure and been denied just compensation.” Id. at 195. The
Court again distinguished Tennessee’s procedures for review of the
8
commission’s actions, which the Court did not require, from
Tennessee’s provision for inverse condemnation actions, which the
Court noted that the plaintiff had not shown to be unavailable or
inadequate. Id. at 196. Liberty Mutual thus argues that it was
not required to utilize Louisiana’s statutory procedures for
administrative and judicial review. And, again, Liberty Mutual is
correct that the exhaustion of state administrative remedies is not
an independent federal law prerequisite to a federal takings claim.
Here, however, according to Louisiana state law, Liberty
Mutual’s decision to bypass Louisiana statutory procedures
providing for administrative review and judicial review prevented
Louisiana courts from examining the merits of Liberty Mutual’s
claim in an inverse condemnation action. The Louisiana First
Circuit Court of Appeals found that no inverse condemnation cause
of action could accrue to Liberty Mutual under Louisiana law
because of Liberty Mutual’s failure to pursue its statutory
remedies of administrative and judicial review before filing suit,
consistent with Louisiana’s general rule requiring exhaustion of
state administrative remedies.3 Id. at 1253. As Liberty Mutual
3
Liberty Mutual argues that Louisiana misconstrued
Williamson County in determining that the inverse condemnation
action was unripe for state court purposes. But a review of the
Louisiana court’s opinion reveals that it did not purport to
directly apply Williamson County. Instead, the court was simply
analogizing the Louisiana law requirement that the plaintiff
avail itself of state statutory remedies before filing an inverse
condemnation suit to Williamson County’s requirement that the
plaintiff utilize state procedures for obtaining compensation
9
failed to present its inverse condemnation action to the state
court in a posture such that the state court could rule on the
merits of Liberty Mutual’s claim, Liberty Mutual failed to utilize
the available state procedures for obtaining compensation. Cf.
Pascoag Reservoir & Dam, L.L.C. v. Rhode Island, 337 F.3d 87, 90-94
(1st Cir. 2003) (holding that Pascoag forfeited its federal takings
claim by failing to timely state a cause of action in state court;
Pascoag had alleged an inverse condemnation claim in state court,
then voluntarily dismissed that claim, and the Rhode Island Supreme
before bringing a federal takings claim. 713 So.2d at 1254.
The court based its holding on the “general rule” of
Louisiana law that “a person aggrieved by the action of a state
agency must exhaust all administrative remedies before being
entitled to judicial review.” Id.; accord Polk v. State,
Department of Transportation and Development, 538 So.2d 239, 250
(La. 1989). The court explained this requirement by stating that
“[t]he rationale behind this requirement is that matters of
agency expertise should be first addressed by the administrative
tribunals created by the legislature to address those issues.”
Id.; see also Polk, 538 So.2d at 250. Citing the Louisiana
Supreme Court in Polk, 538 So.2d at 250, the court further
explained: “Part of the function of the exhaustion doctrine is to
give the agency whose decision is under attack an opportunity to
review, supplement and, if necessary, correct its decision.” 713
So.2d at 1254.
The court also pointed out that “Liberty Mutual took no
action to present this issue for judicial review and therefore,
the courts were not given the opportunity to modify or reverse
the allegedly unreasonably low rates.” Id. A review of the
court’s rationale for applying the Louisiana law requirement that
Liberty Mutual utilize available state statutory procedures
before filing suit reveals that the court’s enforcement of this
requirement was based on deference to the Louisiana legislature
and the statutory procedure for judicial review. The court did
not purport to apply a federal law requirement enunciated in
Williamson County but instead simply cited that case based on the
analogous “principles” considered in that case. 713 So.2d at
1254.
10
Court subsequently stated in dicta that the claim was time-barred);
Gamble v. Eau Claire County, 5 F.3d 285, 286 (7th Cir. 1993)
(holding that the plaintiff had forfeited her federal rights when
she waited too long to file an inverse condemnation claim in state
court and her state judicial review proceeding was dismissed for
failure of service).
Any other rule would allow plaintiffs to circumvent state
court by failing to comply with state procedural requirements for
bringing inverse condemnation claims, thereby nullifying Williamson
County’s requirement that the plaintiff avail itself of the
available state procedures for obtaining compensation. Cf.
Pascoag, 337 F.3d at 93 (concluding that if the failure to bring a
state inverse condemnation claim could be excused simply because
that claim was time-barred, the exception “would swallow the
general rule of state remedy exhaustion”). Moreover, this does not
conflict with the Williamson County Court’s discussion of
administrative exhaustion, as it does not impose a requirement of
administrative exhaustion under federal law. If a plaintiff is
able to have the merits of its claim considered in state court
without first having to exhaust administrative remedies, then no
administrative exhaustion is required for the takings claim to be
considered ripe in federal court. Here, however, because Louisiana
does require the potential plaintiff to utilize Louisiana’s
statutory provisions providing for administrative and judicial
11
review prior to bringing an inverse condemnation action in state
court, Liberty Mutual was required to follow these procedures to
comply with the second prong of the Williamson County test.
To excuse its failure to comply with Williamson County’s
second requirement, Liberty Mutual must show that available state
procedures were inadequate or unavailable at the time of the
taking. Williamson County, 473 U.S. at 196-97. Liberty Mutual has
not argued that the state procedures were inadequate or unavailable
at the time of the taking. And the fact that Liberty Mutual’s
inverse condemnation claim is currently barred because of Liberty
Mutual’s failure to exhaust administrative remedies as required by
Louisiana law does not mean that the state remedies were inadequate
or unavailable at the time of the alleged taking. Cf. Pascoag, 337
F.3d at 93-94 (holding that Rhode Island’s inverse condemnation
action was not unavailable, inadequate, or futile at the time of
the taking even though it was time-barred at the time the federal
suit was brought).
By failing to utilize available state remedies for obtaining
compensation, Liberty Mutual has prevented itself from meeting the
second ripeness requirement of Williamson County. Further, because
the three-year prescriptive period for an inverse condemnation
action in Louisiana provided for by LA. REV. STAT. ANN. § 13:5111
(LEXIS 2004) has now expired, the district court was correct in
concluding that Liberty Mutual has permanently prevented the claim
12
from ever ripening. See, e.g., Vandor, Inc. v. Militello, 301 F.3d
37, 39 (2nd Cir. 2002) (holding that the plaintiff’s federal takings
claim was permanently unripe because it allowed the time for
seeking a state remedy to pass). The district court was thus
correct that it had no jurisdiction, and its dismissal for lack of
jurisdiction is AFFIRMED.
CONCLUSION
Because Liberty Mutual did not avail itself of adequate state
procedures for obtaining compensation, its federal takings claim is
not ripe. Because the time for bringing an inverse condemnation
action in Louisiana state court has expired, Liberty Mutual’s
takings claim is permanently unripe. The district court’s
dismissal for lack of jurisdiction is AFFIRMED.
13
Liberty Mutual Insurance v. Brown
Court: Court of Appeals for the Fifth Circuit
Date filed: 2004-08-03
Citations: 380 F.3d 793
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