Revised May 24, 1999
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
No. 98-50527
_______________
JACK M. WEBB,
Special Deputy Receiver for
Employers National Insurance Company in Receivership,
Plaintiff-Appellee,
VERSUS
B.C. ROGERS POULTRY, INC.,
and
B.C. ROGERS PROCESSORS, INC.,
Defendants-Appellants.
_________________________
Appeal from the United States District Court
for the Western District of Texas
_________________________
May 21, 1999
Before REAVLEY, POLITZ, and SMITH, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
B.C. Rogers Poultry, Inc., and B.C. Rogers Processors, Inc.
(collectively, “B.C. Rogers”), appeal a remand to state court
ordered pursuant to the Burford abstention doctrine. Concluding
that the court acted without the doctrine's strictures as defined
by the Supreme Court, we reverse.
I.
The State of Texas brought Employers National Insurance
Company (“ENIC”), an insurance company regulated under Texas law,
into state court, where it was declared insolvent and placed in
receivership. Pursuant to the Texas Insurance Code, the state
obtained a permanent injunction and order, appointing Jack Webb as
Special Deputy Receiver (“SDR”) for ENIC and enjoining any person
from interfering with the state receivership court proceedings or
the lawful acts of the SDR and from taking any action involving the
SDR outside of the state receivership court.
Webb, carrying out his duties as SDR, brought suit in state
court against B.C. Rogers, as ENIC policyholders, to collect
assetsSSunpaid workers' compensation premiumsSSallegedly belonging
to ENIC. Webb asserts three alternative causes of action:
(1) breach of contract, (2) quantum meruit, and (3) suit on sworn
account. He seeks $674,335 in damages, plus interest and
attorney's fees.
B.C. Rogers removed to federal court pursuant to 28 U.S.C.
§ 1441, alleging original jurisdiction based on diversity of
citizenship. See 28 U.S.C. § 1332. Webb sought remand, advancing
three grounds: (1) B.C. Rogers had failed to comply with the
2
removal statute, (2) the permanent injunction enjoined B.C. Rogers
from litigating the dispute in a forum other than the receivership
court, and (3) under the Burford abstention doctrine, the district
court should refrain from exercising jurisdiction.1 The district
court summarily rejected the first two bases but elected Burford
abstention and remanded, holding that
[a]bstention is appropriate in this case, for if this
Court were to exercise federal jurisdiction, it could
well interfere with the State of Texas' efforts to effect
a coherent policy on a matter of public concern, that is,
the collection of assets of an insolvent insurer through
a state district court receivership proceeding wherein
the state district court retains continuing jurisdiction
over the liquidation proceedings.
II.
We always must be certain that our limited jurisdiction
encompasses the appeal before us. See Castaneda v. Falcon,
166 F.3d 799, 801 (5th Cir. 1999); Jones v. Collins, 132 F.3d 1048,
1051 (5th Cir. 1998). We sua sponte requested briefing on the
issue and now clarify our jurisdiction.
The order abstaining under Burford and remanding is a final
order disposing of all issues. We have jurisdiction, therefore,
pursuant to 28 U.S.C. § 1291. See Quackenbush v. Allstate Ins.
Co., 517 U.S. 706, 715 (1996); Munich Am. Reinsurance Co. v.
Crawford, 141 F.3d 585, 589 (5th Cir. 1998), cert. denied,
1
See Burford v. Sun Oil Co., 319 U.S. 315 (1943).
3
119 S. Ct. 539 (1999).
In 28 U.S.C. § 1334(d), Congress has denied us jurisdiction
over an appeal from a decision to abstain under § 1334(c) (allowing
abstention, in the interest of comity or respect for state law,
from state law causes of action arising under, or related to,
title 11). Here, the receivership proceedings in state court arose
under the Texas Insurance Code, not the Bankruptcy Code. See Clark
v. Fitzgibbons, 105 F.3d 1049, 1051 (5th Cir. 1997) (“Insurance
companies are ineligible for the protections afforded by the
federal Bankruptcy Code. 11 U.S.C. § 109."). The district court,
therefore, did not exercise jurisdiction over the removed action
under 28 U.S.C. § 1452(a) (providing for removal of any action over
which the court has jurisdiction under 28 U.S.C. § 1334) and
28 U.S.C. § 1334(b) (providing for original jurisdiction in the
district courts “of all civil proceedings arising under title 11,
or arising in or related to cases under title 11.”). Rather, it
based its jurisdiction on diversity of citizenship, found in
28 U.S.C. § 1332. The court's decision to abstain, then, did not
fall within 28 U.S.C. § 1334(c), so § 1334(d) is inapposite.
Similarly, in 28 U.S.C. § 1447(d), Congress denied us
jurisdiction over remands pursuant to 28 U.S.C. § 1447(c), which
requires a district court to remand if it lacks subject matter
jurisdiction or if the removal was defective; conversely, § 1447(d)
4
does not preclude review of remands on other grounds.2 Neither
party argues that the district court lacked subject matter
jurisdiction. Rather, they dispute whether the court abused its
discretion in abstaining from exercising its jurisdiction. Section
1447(d), therefore, is also inapposite, and we have jurisdiction to
consider the appeal.
III.
The Burford doctrine allows a federal court to abstain from
exercising its jurisdiction in deference to complex state
administrative procedures. The Supreme Court has described the
Burford doctrine as follows:
Where 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 Pub. Serv., Inc. v. Council of New Orleans ("NOPSI"),
491 U.S. 350, 361 (1989) (quoting Colorado River Water Conservation
2
See Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 127 (1995);
Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 345-52 (1976); see also,
e.g., Angelides v. Baylor College of Med., 117 F.3d 833, 835-36 (5th Cir. 1997);
Soley v. First Nat'l Bank of Commerce, 923 F.2d 406, 407-08 (5th Cir. 1991). Our
inability to review a § 1447(c) remand obtains even if the order was erroneous.
See Thermtron, 423 U.S. at 351; Angelides, 117 F.3d at 836.
5
Dist. v. United States, 424 U.S. 800, 814 (1976)).3 Essentially,
Burford instructs a district court to weigh the federal interests
in retaining jurisdiction over the dispute against the state's
interests in independent action to uniformly address a matter of
state concern, and to abstain when the balance tips in favor of the
latter. See Quackenbush, 517 U.S. at 728; NOPSI, 491 U.S. at 363;
Burford, 319 U.S. at 334. But this “balance only rarely favors
abstention.” Quackenbush, 517 U.S. at 728. Typically, “federal
courts have a virtually unflagging obligation . . . to exercise the
jurisdiction given them.” Colorado River, 424 U.S. at 821
(quotation omitted).
In Quackenbush, the Court determined that an action seeking
damages never warrants abstention. The Court examined the
foundation and history of abstention doctrines, and Burford
abstention in particular, finding that the power to abstain
originated in “the discretion federal courts have traditionally
exercised in deciding whether to provide equitable or discretionary
relief.” Quackenbush, 517 U.S. at 730. The Court disagreed with
the Ninth Circuit's limitation of abstention to equitable cases,
instead extending the doctrine “to all cases in which a federal
court is asked to provide some form of discretionary relief.” Id.4
3
See also Baran v. Port of Beaumont Navigation Dist., 57 F.3d 436, 441 (5th
Cir. 1995).
4
See also Quackenbush, 517 U.S. at 718 (recognizing that “the authority
(continued...)
6
A damages action, however, allows the court no discretion and may
not be remanded. Id. at 731.5
A.
We review an abstention for abuse of discretion. See Clark,
105 F.3d at 1051; see also Burford, 319 U.S. at 318 (describing
court's choice of whether to abstain as a matter of discretion).
The exercise of discretion must “fit[] within the narrow and
specific limits prescribed by the particular abstention doctrine
involved.” Clark, 105 F.3d at 1051 (quotation omitted). A court
necessarily abuses its discretion when it abstains outside of the
doctrine's strictures.
B.
B.C. Rogers presents a simple argument for reversal: Under
Quackenbush, a court may not remand pursuant to Burford abstention
if the plaintiff seeks damages. Webb seeks damages, so a Burford
abstention remand is not permitted.
4
(...continued)
of a court to abstain from exercising its jurisdiction extends to all cases in
which the court has discretion to grant or deny relief.”).
5
See id. at 731 (“[F]ederal courts have the power to dismiss or remand
cases based on abstention principles only where the relief being sought is
equitable or otherwise discretionary. Because this was a damages action, we
conclude that the District Court's remand was an unwarranted application of the
Burford doctrine.”). Although remanding a damages case is inappropriate, the
Court noted that a court could stay an action pending resolution in state court
of an issue relevant to the federal case if the Burford doctrine called for
abstention. Id.
7
Webb counters with three ultimately unsuccessful arguments.
First, he cites precedent no longer applicable after Quackenbush
and argues to support an exercise of discretion where no discretion
exists. He next incorrectly avers that the Quackenbush rule on
which B.C. Rogers relies is not ironclad. He finally contends
that, because one of his causes of action sounds in the equitable
doctrine of quantum meruit, Burford abstention is appropriate
within Quackenbush's limitations.6 We conclude that, because
Quackenbush denies the legal authority to remand, the district
court abused its discretion.
1.
Webb vigorously argues that the usual Burford considerations
support remand. The McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015,
assigns primary responsibility for regulating the insurance
industry to the states. Texas has enacted an extensive regulatory
scheme for dealing with insolvent insurers and has an interest in
applying its law to marshal efficiently all the assets of such
insurers in a uniform manner. Webb contends that the federal
government, on the other hand, has a “complete absence” of interest
6
This argument relies on two premises: (1) A quantum meruit claim falls
within the set of cases from which the Supreme Court has found a district court
may abstain, and (2) a court may abstain and remand an entire case, including
damages actions, so long as one cause of action falls within that set Quackenbush
approved. Because we reject the first premise, we do not reach the second.
8
in this dispute. The causes of action sound solely in state law;
no federal statutes or interests are involved.
Webb buttresses this argument by citing several of our
decisions in which we have affirmed abstention and have mentioned
the strong interests states have in addressing insolvent insurers.7
But these cases indicate only that we probably would find the
remand to be within the court's discretion if it had acted within
the bounds of the Burford doctrine.8 The analysis ignores
B.C. Rogers's argument that the district court had no discretion.
Relatedly, Webb overlooks that these cited cases precede
Quackenbush and the limits it imposed on abstention.9 As we
explained in Munich American, we previously had approved abstention
7
See, e.g., Barnhardt Marine Ins., Inc. v. New England Int'l Sur. of Am.,
Inc., 961 F.2d 529, 531-32 n.4 (5th Cir. 1992) (affirming remand and noting near
unanimity among the circuit courts that Burford abstention is appropriate in
cases related to a state's administration of an insolvent insurer); Martin Ins.
Agency, Inc. v. Prudential Reinsurance Co., 910 F.2d 249 (5th Cir. 1990).
8
This is true even though Webb overstates his case in declaring the
“complete absence” of federal interest. The district court assumed removal
jurisdiction based on diversity pursuant to 28 U.S.C. § 1332. The Constitution,
in Art. III, § 2, allows for federal court jurisdiction in cases and
controversies “between Citizens of different States.” When Congress first
created lower federal courts in the Judiciary Act of 1789, Act of Sept. 24, 1789,
1 Stat. 73, it included diversity jurisdiction as one basis for original federal
court jurisdictionSSa basis that has survived since. The presupposition for
diversity jurisdiction is to provide diverse parties with a federal forum in
which an out-of-state party might escape local bias. See, e.g., Jerome B.
Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527, 546 n.6 (1995)
(noting this purpose). By this grant of jurisdiction, Congress has expressed a
federal interest in administering impartial justice to diverse parties.
9
Webb cites one case, Clark, in which we affirmed an abstention remand in
an insurance case post-Quackenbush. See Clark, 105 F.3d at 1052. Clark does not
control our outcome, because we did not confront the issue we face here. We did
not discuss whether the damages sought precluded remand under Quackenbush and,
indeed, we did not cite Quackenbush.
9
remands in cases related to insolvent insurers involved in state
proceedings; but this changed with Quackenbush's prohibition on
remanding damages action. See Munich American, 141 F.3d at 589.
Now a court may abstain “only when the district court has
discretion to grant or deny relief.” Id. Accordingly, we found
that the court abused its discretion by invoking Burford, because
it had no discretion in the relief sought. Id. at 590.10
Webb's argument and the cited precedent would provide a sound
basis for affirming the district court's application of the Burford
doctrine if it were within its discretion. Because, however, we
find that the nature of Webb's claims precludes Burford abstention,
we do not reach whether the Burford doctrine otherwise favors
abstention on these facts.
2.
Webb's contention that Quackenbush does not impose an
ironclad, per se bar to remanding damages action lacks merit. Webb
quotes a passage11 from a section in which the Court explained the
10
Webb attempts to distinguish Munich American by comparing the alleged
lack of federal interest here to the federal interest in the Federal Arbitration
Act (“FAA”) on which the Munich American plaintiffs relied. But our discussion
of the FAA focused on the lack of discretion in the relief sought, which bars a
remand; we did not reference, even in passing, a federal interest.
11
“Ultimately, what is at stake is a federal court's decision, based on
a careful consideration of the federal interests in retaining jurisdiction over
(continued...)
10
roots and purpose of abstention. See Quackenbush, 517 U.S.
at 727-28. It also noted that prior caselaw does “not provide a
formulaic test for determining when dismissal [or remand] under
Burford is appropriate.” Id. at 727. But the Court had not even
begun its application of these general principles to the case
before it. When it did reach its holding, it left no exceptions:
abstention is appropriate “only where the relief being sought is
equitable or otherwise discretionary.” Id. at 731 (emphasis
added).12
3.
Webb makes the superficially appealing argument that the
“equitable nature” of quantum meruit brings the case within
Quackenbush and allows for remand. “Quantum meruit is an equitable
doctrine based on the principle that one who benefits from
another's labor and materials should not be unjustly enriched
11
(...continued)
the dispute and the competing concern for the 'independence of state action,'
that the State's interests are paramount and that a dispute would best be
adjudicated in a state forum.” Quackenbush, 517 U.S. at 728 (internal citation
omitted).
12
See also id. at 730 (noting that staying a damages action is
permissible, “but we have not permitted [courts] to dismiss the action
altogether”). Webb also resourcefully quotes a decision interpreting Quackenbush
to mean “that abstention, under Burford or otherwise, may be appropriate in suits
for damages.” See DeMauro v. DeMauro, 115 F.3d 94, 98 (1st Cir. 1997). Although
true, this lends no support to Webb's position. The court further explained that
a “district court may only order a stay pending resolution of state proceedings;
it cannot invoke abstention to dismiss the suit altogether.” Id. Here, the
court did not stay the action; it remanded, the functional equivalent of
dismissal in this context.
11
thereby.” SMP Sales Management, Inc. v. Fleet Credit Corp.,
960 F.2d 557, 560 n.3 (5th Cir. 1992). Texas courts also have
noted the equitable nature of quantum meruit.13 Because the case
includes this claim for equitable relief, the argument goes, it
falls within Quackenbush and may be remanded.
a.
Webb reads Quackenbush too simply and fails to comprehend the
complexity of quantum meruit. For Burford to apply, a federal
court must be sitting in equity with the discretion to deny relief.
See Quackenbush, 517 U.S. at 728 (explaining that the power to
abstain “derives from the discretion historically exercised by
courts of equity.”). As part of the Court's formulation of when
abstention doctrines apply, the court must be sitting in equity.14
13
See, e.g., Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39,
41 (Tex. 1992) (“Quantum meruit is an equitable theory of recovery which is based
on an implied agreement to pay for benefits received.”); Vortt Exploration Co. v.
Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex. 1990) (“Quantum meruit is an
equitable remedy which does not arise out of a contract, but is independent of
it.”); see also, e.g., Brankline v. Capuano, 656 So. 2d 1, 5 (La. App. 3d Cir. 1995)
(“Quantum meruit is an equitable remedy founded upon the principle that no one who
benefits from the labor or materials of another should be unjustly enriched at the
other's expense.”); McGee v. McGee, 648 A.2d 1128, 1133 (N.J. Super. Ct. App. Div.
1994) (describing “equitable remedies such as . . . quantum meruit,” “invocable for
equitable reasons”); Feingold v. Pucello, 654 A.2d 1093, 1094 (Pa. Super. Ct. 1995)
(“Quantum meruit is an equitable remedy.”); Castelli v. Lien, 910 S.W.2d 420, 428
(Tenn. Ct. App. 1995) (“quantum meruit is an equitable remedy” available if the
contract is no longer enforceable); Po River Water & Sewer Co. v. Indian Acres Club,
Inc., 495 S.E.2d 478, 482 (Va. 1998) (describing relief under quantum meruit theory
as equitable); Bowles v. Sunrise Home Ctr., Inc., 847 P.2d 1002, 1004 (Wyo. 1993)
(“Unjust enrichment (or quantum meruit) is an equitable remedy which implies a
contract”).
14
See Quackenbush, 517 U.S. at 728; id. at 717 (“[I]t has long been
established that a federal court has the authority to decline to exercise
(continued...)
12
In Quackenbush, the Court emphasized a court of equity's
discretion to grant or deny relief, holding that abstention based
remands or dismissals are appropriate “only where the relief being
sought is equitable or otherwise discretionary.” Quackenbush,
517 U.S. at 731.15 The source of the power to abstain confirms the
centrality of the court's sitting in equity and hence possessing
discretion in the relief afforded. See Quackenbush, 517 U.S.
at 728. That discretion allows it to deny relief; the abstention
doctrines merely add that “the exercise of this discretion must
reflect principles of federalism and comity.” Id. When a court
considers these factors, balancing state and federal interests,
discretion may favor withholding relief by way of abstention-based
14
(...continued)
jurisdiction when it 'is asked to employ its historic powers as a court of
equity.'”) (quoting Fair Assessment in Real Estate Ass'n, Inc. v. McNary,
454 U.S. 100, 120 (1981) (Brennan, J., concurring)); NOPSI, 491 U.S. at 361
(explaining that in certain circumstances “a federal court sitting in equity must
decline to interfere with the proceedings or orders of state administrative
agencies”); see also Tribune Co. v. Abiola, 66 F.3d 12, 16 (2d Cir. 1995) (“We
find it significant that the Supreme Court [in NOPSI] traced the origin of
abstention doctrines to the federal court's discretion to withhold equitable
relief, and reformulated the Burford doctrine to require federal courts 'sitting
in equity' to abstain from exercising their jurisdiction in certain
circumstances.” (citation omitted)); id. at 15-16 (“When a federal court sits in
equity[,]” abstention may be warranted).
15
The use of “or otherwise” rather than simply “or discretionary” in
“equitable or otherwise discretionary” implies that the Court assumed that the
equitable relief to which it referred also was discretionary. See also
Quackenbush, 517 U.S. at 730 (holding abstention extends “to all cases in which
a federal court is asked to provide some form of discretionary relief”); Munich
Am., 141 F.3d at 589 (“Burford abstention is permissible only when the district
court has discretion to grant or deny relief.”).
13
remand or dismissal.16
This withholding of extraordinary relief by courts having
authority to give it is not a denial of the jurisdiction
which Congress has conferred on the federal courts
. . . . On the contrary, it is but a recognition . . .
that a federal court of equity . . . should stay its hand
in the public interest when it reasonably appears that
private interests will not suffer . . . . It is in the
public interest that federal courts of equity should
exercise their discretionary power to grant or withhold
relief so as to avoid needless obstruction of the
domestic policy of the states.
Alabama Pub. Serv. Comm'n v. Southern R.R., 341 U.S. 341, 350-51
(1951).
b.
When a court hears a claim for quantum meruit, it neither sits
in equity nor possesses discretion. Courts frequently refer to
quantum meruit as an equitable doctrine and even as seeking
equitable relief. Despite its equitable nature, however, quantum
meruit is an action at lawSSa legal cause of action seeking money
damages. Indeed, courts recognize that they do not sit in equity
16
The higher degree of interference with state proceedings that injunctive
or declaratory relief imposes, as opposed to a damages award, also favors
allowing abstention when a court sits in equity, but not in an action at law.
See Quackenbush, 517 U.S. at 717-18 (“The history of equity jurisdiction is the
history of regard for public consequences in employing the extraordinary remedy
of the injunction . . . . Few public interest have a higher claim upon the
discretion of a federal chancellor than the avoidance of needless friction with
state policies [by means of abstention] . . . .”); Tribune Co., 66 F.3d at 16
(holding that abstention is available only when the court sits in equity, because
“[i]njunctions are the most intrusive sort of judicial relief, and may directly
interfere with the proceedings or orders of state administrative agencies.”
(quotation omitted)).
14
when they hear a quantum meruit claim,17 and they recognize that a
division between equity and law places quantum meruit on the law
side.18
17
See American Nat'l Ins. Co. v. Warnock, 114 S.W.2d 1161, 1165 (Tex.
1938) (holding that, although “courts of equity will not enforce” the statute of
frauds if doing so would work a fraud, specific performance will not be granted
for land contract barred by statute of frauds, “since the value of the
consideration may be recovered in an action at law on a quantum meruit.”); Upson
v. Fitzgerald, 103 S.W.2d 147, 150 (Tex. 1937) (same); Richardson v. Iley,
299 S.W.2d 187, 188 (Tex. App.SSSan Antonio 1957, writ ref'd n.r.e.) (same); see
also, e.g., Tompkins v. Hoge, 250 P.2d 174, 178 (Cal. Ct. App. 1952) (denying
equitable relief of specific performance because, the services being compensable
“in quantum meruit, the remedy at law is adequate”); Frontier Properties Corp.
v. Swanberg, 488 N.W.2d 146, 147 (Iowa 1992) (“[A]ctions for amounts due under
a contract or for quantum meruit recovery based on implied contract are actions
at law.”); Campbell v. Welsh, 460 A.2d 76, 82 (Md. Ct. Spec. App. 1983)
(referencing cases that permit “recovery at law, on a quantum meruit basis”); Van
Horn v. DeMarest, 77 A. 354, 367-68 (N.J. 1910) (referring to “an action at law
upon a quantum meruit”); Ogletree, Deakins, Nash, Smoak & Stewart P.C. v. Albany
Steel Inc., 663 N.Y.S.2d 313, 315 (App. Div. 1997) (rejecting categorization of
claim as equitable because a “quantum meruit action is essentially an action at
law, inasmuch as it seeks money damages in the nature of a breach of contract,
notwithstanding that the rationale underlying such causes of action is fairness
and equitable principles in a general rather than legal sense.”) (quotation
omitted); Cordrey v. Cordrey, 579 P.2d 209, 213 (Okla. Ct. App. 1978) (describing
quantum meruit action as “one at law and not equity”); Welch v. Webb, 615 P.2d
391, 393 n.3 (Or. Ct. App. 1980) (“This case, brought as a suit in equity, has
become an action at law for quantum meruit.”); Tri-State Home Improvement Co. v.
Mansavage, 253 N.W.2d 474, 479 (Wis. 1977) (“A cause of action for quantum
meruit, while equitable in nature, is an action at law” usually heard by jury,
and not by court sitting in equity).
18
See, e.g., Allen v. Peachtree Airport Park Joint Venture, 499 S.E.2d
690, 691 (Ga. Ct. App. 1998) (rejecting argument that district court lacked
jurisdiction “to determine equitable issues such as quantum meruit” because
“state courts have subject matter jurisdiction of quantum meruit claims, which
are considered actions at law”); Ordon v. Johnson, 77 N.W.2d 377, 383 (Mich.
1956) (affirming transfer of cause by chancery judge to law side to allow hearing
on quantum meruit claim); Craig v. Jo B. Gardner, Inc., 586 S.W.2d 316, 325 (Mo.
1979) (holding court of equity could hear quantum meruit claim, “a suit at law,”
but only because equity court already had “rightful possession” of case because
of equitable claim); Galloway v. Eichells, 62 A.2d 499, 502 (N.J. Super. Ct. Ch.
Div. 1948) (transferring action to Law Division because only possible relief
would be damages “at law upon quantum meruit”); Turcott v. Gilbane Bldg. Co.,
179 A.2d 491, 493 (R.I. 1962) (holding that quantum meruit action, “a remedy at
law,” must be brought “in an action at law” and not in a court of equity); Lanmor
Corp. v. B M & K Builders, Inc., 1990 Va. Cir. LEXIS 443, at *7 (Va. Cir. Ct.
Sept. 10, 1990) (denying leave to amend bill of equity to add quantum meruit,
which “involves legal principles cognizable at law, not in equity,” because
(continued...)
15
Furthermore, in a quantum meruit action, the court lacks
discretion to balance interests between the state and federal
governments. Relief turns not on a weighing of the equities but on
a straightforward application of law to facts. If the facts
justify relief under the legal standardSSa question often answered
by jurySSthe court has no discretion to weigh the equities and
decide against relief.19
Sitting at law, without discretion to deny relief, a court
cannot remand a quantum meruit claim under Quackenbush. The
state's interests must yield to the federal court's “strict duty to
exercise the jurisdiction that is conferred upon [it] by Congress.”
Quackenbush, 517 U.S. at 716. Because the district court lacked
discretion to remand these damages actions, we REVERSE and REMAND
for further proceedings consistent with this opinion.
18
(...continued)
sustaining demurrer on equitable claims left no basis for equitable
jurisdiction).
19
Cf. Knebel v. Capital Nat'l Bank, 505 S.W.2d 628, 631 (Tex.
App.SSAustin) (describing the “equitable concept” of unjust enrichment, “enforced
through the common law courts as Quantum meruit,” which “obligated the common law
courts” to enforce certain implied promises) (emphasis added), aff'd in part and
rev'd in part on other grounds, 518 S.W.2d 74 (Tex. 1974).
16
POLITZ, Circuit Judge, dissenting:
My colleagues in the majority have issued a forceful opinion
from which I respectfully must dissent.
My colleagues conclude that the district court abused its
discretion by abstaining under Burford20 because the nature of
Webb’s claims precludes abstention. According to the Burford
abstention doctrine, a federal court may abstain and remand a case
to state court “only where the relief being sought is equitable or
otherwise discretionary.”21 After determining that Webb’s claim for
quantum meruit is an action at law – a determination that in part
spurs my dissent – the majority concludes that the district court
was not sitting in equity and did not possess discretion to grant
or deny relief. Thus, they opine, the district court acted outside
the strictures of the doctrine by abstaining. I dissent,
concluding that quantum meruit more appropriately should be
considered an equitable action, and fully convinced that the
district court’s abstention order should be affirmed.
I.
The nature of quantum meruit is, indeed, “complex[].”22 The
20
Burford v. Sun Oil Co., 319 U.S. 315 (1943).
21
Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 731 (1996).
22
Supra, at ____ [majority draft, p. 12]. Cf. 5 ALAN LINTON
CORBIN, CORBIN ON CONTRACTS § 1103, at 557 (1964) (“The remedy of
(continued...)
majority describes quantum meruit as an action at law – a legal
cause of action seeking money damages – and cites numerous cases in
support thereof. There is contrary jurisprudence describing
quantum meruit as an equitable action.23 “The battle of the string
citations [, however,] can have no winner.”24 Thus, reflection on
the Supreme Court’s discussion in Quackenbush v. Allstate Insurance
Company25 is appropriate.
Congress imposed upon the federal courts a duty to exercise
their jurisdiction, but the statutes conferring jurisdiction were
enacted against a background of traditional principles that
22
(...continued)
restitution [, a broad remedy within which quantum meruit has been
classified,] cannot properly be described as either ‘legal’ or
‘equitable’ in any narrowly restricted signification of those
terms. It was once a remedy that was created and applied by both
the Judges and the Chancellors . . . .”).
23
See supra, at _____ n.13 [majority draft, p. 11]; FDIC v.
Plato, 981 F.2d 852, 858 n.14 (5th Cir. 1993) (treating quantum
meruit damages as equitable relief); see also United States Gypsum
Co. v. National Gypsum Co., 352 U.S. 457, 478 (1957) (Black, J.,
dissenting) (hinting that quantum meruit is an action in equity by
stating that recovery under that theory runs counter to the
equitable doctrine of “unclean hands”). But see Mertens v. Hewitt
Assocs., 508 U.S. 248, 255 (1993) (“Money damages are, of course,
the classic form of legal relief.”); cf. Reich v. Continental Cas.
Co., 33 F.3d 754, 756 (7th Cir. 1994) (dictum) (In seeking
restitution,“[plaintiff] was seeking not a profit, but merely a
receipt, an insurance premium, net of some expenses; to call this
a ‘profit,’ it could be argued, would convert every suit for the
price of a contract into a suit for restitution, contrary to the
law.”).
24
Smith v. Wade, 461 U.S. 30, 93 (1983) (O’Connor, J.,
dissenting).
25
517 U.S. 706 (1996).
18
included a court’s ability to abstain in certain circumstances.26
Thus, “it has long been established that a federal court has the
authority to decline to exercise its jurisdiction when it is asked
to employ its historic powers as a court of equity.”27 And more
specifically, “the power to dismiss under the Burford doctrine . .
. derives from the discretion historically enjoyed by courts of
equity.”28 Thus, the appropriate issue to be resolved is whether
courts of equity historically heard claims of quantum meruit.
Given the Supreme Court’s historical emphasis, it is my
perception that the focus should be upon the origin of the relief
and its position at the time the federal judicial system was
created, not how the cause of action has since evolved.29 The roots
of quantum meruit are in the courts of equity;30 claims for quantum
meruit appeared in those courts before the cause of action could be
pursued at law. Claims for quantum meruit were pursued in the
26
Id., at 716-17.
27
Id., at 717 (internal quotations omitted).
28
Id., at 727-28.
29
It appears that courts competed for jurisdiction, see JOHN
P. DAWSON ET AL., CASES AND COMMENT ON CONTRACTS 107 (6th ed. 1993) (“Since
judges derived their income from litigants’ fees, it is not
surprising that competition for judicial business developed . . .
.”), so emphasis on the evolution of the cause of action does not
seem appropriate.
30
JAMES BARR AMES, LECTURES ON LEGAL HISTORY 156 (1913).
19
courts of equity at the birth of our judicial system.31 Thus,
despite some indications, historically speaking, that quantum
meruit was a legal cause of action,32 I am not prepared to
dispositively rule that quantum meruit is a legal cause of action.
II.
Having personally concluded that a federal court sits in
equity when hearing a claim for quantum meruit,33 I continue with
the Burford analysis. The Supreme Court describes the Burford
abstention doctrine as follows:
31
Morton J. Horwitz, The Historical Foundations of Modern
Contract Law, 87 Harv. L. Rev. 917, 934 (1974) (“As late as the
turn of the century, it was also the prevailing practice in America
to sue in indebitatus assumptsit for an express contract and for
counts in both indebitatus and quantum meruit to be ‘usually joined
in the declaration; so that on failure of proof of an express debt
or price, the Plf. may resort ad debitum equitatis,’ that is, to an
equitable action in quantum meruit.”) (footnote omitted, italics
added) (quoting AMERICAN PRECEDENTS OF DECLARATIONS 95 (B. Perham ed.
1802).
32
See J.L. Barton, Contract and Quantum Meruit: The
Antecedents of Cutter v. Powell, 8 J. Legal Hist. 48 (1987);
Horwitz, supra note 12, at 936 (discussing the jury’s power to set
a reasonable price in quantum meruit); see also RESTATEMENT OF
RESTITUTION: QUASI CONTRACTS AND CONSTRUCTIVE TRUSTS § 4 cmt. e, at 21
(1937) (“Although ordinarily such money judgment is obtained by an
action at law, a decree for money will sometimes be rendered by a
court of equity.”).
33
Besides quantum meruit, Webb also pursued causes of action
for breach of contract and for suit on sworn account, but these
legal claims do not undermine the conclusion that the district
court was sitting in equity. Quackenbush, 517 U.S. at 730 (“We
have not strictly limited abstention to equitable cases, . . . but
rather have extended the doctrine to all cases in which a federal
court is asked to provide some form of discretionary relief.”)
(internal quotations and citations omitted).
20
Where 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.34
The district court abstained under the second noted circumstance,35
and, in doing so, in my opinion, it did not abuse its discretion.
Prior to Quackenbush, this court and other courts consistently
had approved Burford abstention in actions involving an insurance
company that, in turn, was involved in ongoing state delinquency
proceedings.36 Being persuaded that the holding of Quackenbush
does not torpedo the district court’s decision to abstain, I
34
New Orleans Pub. Serv., Inc. v. Council of New Orleans, 491
U.S. 350, 361 (1989) (internal quotations and citations omitted).
35
Webb v. B.C. Rogers Poultry, Inc., No. A-98-CA-005-SS (W.D.
Tex. Feb. 19, 1998) (“Abstention is appropriate in this case, for
if this Court were to exercise federal jurisdiction, it could well
interfere with the State of Texas’ efforts to effect a coherent
policy on a matter of public concern, that is, the collection of
assets of an insolvent insurer through a state district court
receivership proceeding wherein the state district court retains
continuing jurisdiction over the liquidation proceedings. Failure
to abstain could lead to removal of cases to federal court and
possible changes of venue, leaving the receiver facing litigation
in several forums and under different circumstances. This would be
detrimental to the overall scheme of the liquidation proceedings in
Texas when an insurance company becomes insolvent.”).
36
Munich Am. Reins. Co. v. Crawford, 141 F.3d 585, 589 n.2 (5th
Cir.) (collecting cases), cert. denied, 119 S. Ct. 539 (1998).
21
briefly reflect only on the remaining analysis because of the solid
background of precedent upholding Burford abstention in similar
situations.
A.
Texas’ regulation of the insurance industry is “a matter of
substantial public concern.” Congress manifestly considers such
regulation a matter of public concern.37 Precedent teaches that
this concern is substantial.38
B.
Texas has established a coherent policy regulating the
insurance industry. It has formulated a complex and comprehensive
scheme involving numerous actors, including the Department of
Insurance, the Commissioner of Insurance, as well as the District
Court of Travis County. Under Texas law, the governor, with the
advice and consent of the senate, appoints a Commissioner of
Insurance who is charged with the primary responsibility of
administering, enforcing, and executing provisions of the Insurance
37
15 U.S.C. §1011 (“Congress hereby declares that the
continued regulation . . . by the several States of the business of
insurance is in the public interest . . . .”).
38
See Martin Ins. Agency, Inc. v. Prudential Reins. Co., 910
F.2d 249, 255 (5th Cir. 1990) (necessarily finding the concern
“substantial” because it was “appropriate to abstain on Burford
abstention grounds”); see also Lac D’Amiante du Quebec, Ltee v.
American Home Assurance Co., 864 F.2d 1033, 1045 (3d Cir. 1988)
(“essential state concern”).
22
Code.39 Decisions by the Commissioner may be challenged by
interested parties in the District Court of Travis County, “and not
elsewhere.”40 The Attorney General for the State of Texas is
charged with representing and advising the Commissioner in all
legal matters.41
Texas’ comprehensive scheme also quite appropriately covers
matters concerning those insurance companies that become
insolvent.42 Particular financial considerations must be met before
an insurance company may be incorporated in Texas,43 and the
Department of Insurance is charged with monitoring the continuing
performance of insurance companies.44 If the department determines
that an insurance company’s financial position has dipped below a
prescribed level, the Commissioner must notify the company of this
determination and provide the company with a list of requirements,
39
TEX. INS. CODE ANN. Art. 1.09(a), (b).
40
TEX. INS. CODE ANN. Art. 1.04(a).
41
TEX. INS. CODE ANN. Art. 1.09-1(a).
42
See generally TEX. INS. CODE ANN. Arts. 21.28, 21.28-A; El
Paso Elec. Co. v. Texas Dep’t of Ins., 937 S.W.2d 432, 434-35 (Tex.
1996) (“Article 21.28 of the Texas Insurance Code sets forth a
comprehensive scheme for the liquidation, rehabilitation, and
reorganization of insolvent insurers.”); see also TEX. INS. CODE ANN.
Art. 21.28 § 16 (“In the event of conflict between the provisions
of this Article and the provisions of any existing law, the
provisions of this Article shall prevail, and all laws, or parts of
law, in conflict with the provisions of this Article, are hereby
repealed to the extent of such conflict.”).
43
TEX. INS. CODE ANN. Art. 2.02.
44
TEX. INS. CODE ANN. Art. 1.10.
23
compliance with which will absolve the earlier departmental
determination.45 If, after a specified period of time, the company
has not met the requirements set forth by the Commissioner and
other criteria have not been met, the Commissioner must notify the
Attorney General who may apply to any Travis County court for
remedial action, including the appointment of a receiver.46 Texas
law charges an appointed receiver with the duty of conducting
the business of the delinquent insurer and conserving the
assets and protecting the rights of policyholders and
claimants.47 Additionally, Texas law specifies where the
proceeds collected by the receiver shall be held.48
Finally, Texas law specifies that the exclusive venue for
delinquency proceedings shall be in Travis County.49 It
is abundantly clear that Texas indeed has established a
coherent policy in this area.
45
TEX. INS. CODE ANN. Art. 21.28-A.
46
TEX. INS. CODE ANN. Art. 21.28-A.
47
TEX. INS. CODE ANN. Art. 21.28 § 2(e).
48
TEX. INS. CODE ANN. Art. 21.28 § 2(h) (“Except as provided by
this subsection, all money collected by the receiver shall be
forthwith deposited into the Texas Treasury Safekeeping Trust
Company . . . .”).
49
TEX. INS. CODE ANN. Art. 21.28 § 2(i) (“Exclusive venue of
delinquency proceedings shall be in Travis County, Texas.”).
24
C.
I find no basis for suggesting that the district
court abused its discretion in concluding that federal
review of the questions presented in this case and
similar cases would be disruptive of Texas’ efforts to
effectuate its coherent policy. Congress delegated the
regulation of the business of insurance to the states,50
and Texas has created a complex and comprehensive scheme
to do exactly that. The Texas legislature has
concentrated judicial review of insurance proceedings in
Travis County, and consequently those courts, like the
Department of Insurance and the Commissioner of
Insurance, have developed a specialized knowledge
regarding these proceedings.51 In my view, reversing the
district court and allowing this case to continue in
federal court inappropriately “usurp[s]” Texas’ control
50
15 U.S.C. § 1012(a) (“The business of insurance, and every
person engaged therein, shall be subject to the laws of the several
States which relate to the regulation or taxation of such
business.”). But see 15 U.S.C. § 1012(b) (“No Act of Congress
shall be construed to invalidate, impair, or supercede any law
enacted by any State for the purpose of regulating the business of
insurance . . . unless such Act specifically relates to the
business of insurance . . . .”).
51
See Burford, 319 U.S. at 325-27.
25
over the liquidation proceeding.52
Finally, Texas requires the receiver to “take such
steps as may be necessary to conserve the assets . . .
for the purpose of liquidating . . . the affairs of the
insurer.”53 By holding that the federal district court
possessed jurisdiction over this case, the majority
potentially sacrifices one of the chief purposes of the
Texas regulatory scheme by effectively requiring the
“dissipation of the insolvent company’s funds”54 likely to
result from litigation conducted outside Travis County
and away from the court with the responsibility for this
insurance company salvage operation.
Splintering a portion of this on-going proceeding and
insisting on jurisdiction herein for the federal district
court unduly threatens the scheme enacted by Texas as
specifically authorized by Congress. As our courts have
52
Barnhardt Marine Ins., Inc. v. New England Int’l Surety of
Am., Inc., 961 F.2d 529, 532 (5th Cir. 1992).
53
TEX. INS. CODE ANN. Art. 21.28 § 2(e) (emphasis added).
54
Munich Am. Reins. Co., 141 F.3d at 593 (“[C]onsolidation
prevents the unnecessary and wasteful dissipation of the insolvent
company’s funds that would occur if the receiver had to defend
unconnected suits in different forums across the country.”).
26
so forcefully noted: “‘in instances, where states have
. . . formulat[ed] complex and specialized administrative
and judicial schemes to regulate insurers, especially the
liquidation of insolvent insurers,’ the federal court
should abstain from exercising jurisdiction in disputes
occurring in the larger context of state liquidation
proceedings.”55 I am in absolute agreement with this
statement.
III.
In sum, we should conclude that quantum meruit
historically was, and therefore should be deemed to be,
an equitable action and that the district court did not
abuse its discretion in abstaining under Burford. I
55
Martin Ins. Agency, Inc., 910 F.2d at 254 (quoting Grimes
v. Crown Life Ins. Co., 857 F.2d 699, 703 (10th Cir. 1988)); cf.
Sierra Club v. City of San Antonio, 112 F.3d 789, 796 (5th Cir.
1997) (“Burford abstention is particularly appropriate where by
proceeding the district court would have risked reaching a
different answer than the state institutions with greater interest
in and familiarity with such matters.”) (internal quotations and
citations omitted). True, the district court noted that “the case
at bar may be a simple determination of what, if any, premium is
owed by the defendants to the receiver acting through his appointed
authority.” Webb v. B.C. Rogers Poultry, Inc., No. A-98-CA-005-SS
(W.D. Tex. Feb. 19, 1998). Our precedent, nonetheless, reveals
that “disruption” may stem either from unsettled law or from the
application of settled law to complex, local facts. Wilson v.
Valley Elec. Membership Corp., 8 F.3d 311, 314-15 (5th Cir. 1993).
And on the record before this court, I cannot conclude that the
district court abused its discretion in abstaining.
27
would affirm the judgment appealed.
28