Edgаr Allen GIBSON and Leslie Gibson, Plaintiffs-Appellants, v. AMERICAN BANKERS INSURANCE COMPANY, Defendant-Appellee.
No. 00-5560.
United States Court of Appeals, Sixth Circuit.
Argued Sept. 19, 2001. Decided and Filed May 16, 2002.
289 F.3d 943
However, the All Writs Act only authorizes the issuance of writs “in aid of ... jurisdiction[ ].”
III. CONCLUSION
We AFFIRM the district court‘s dismissal of the Tropfs’ claims for lack of subject matter jurisdiction based on the Rooker-Feldman abstention doctrine, and we AFFIRM the district court‘s imposition of monetary sanctions and an injunctive sanction related to the federal courts. We REVERSE the district court‘s order indirectly enjoining the Tropfs’ state court action against Holzman and its imposition of an injunctive sanction affecting further proceedings by the Tropfs in the state courts and state administrative bodies, and we REMAND for proceedings consistent with this opinion.
Timothy D. Belcher (argued and briefed), Elkhorn City, KY, for Plaintiffs-Appellants.
Roger L. Massengale (briefed), Law Offices of Roger L. Massengale, Paintsville, KY, Gerald J. Nielsen (argued and briefed), Nielsen Law Firm, Metairie, LA, for Defendant-Appellee.
Before: GUY and MOORE, Circuit Judges; HULL, District Judge.*
RALPH B. GUY, JR., J., delivered the opinion of the court, in which HULL, D.J., joined. MOORE, J. (pp. 950-58), delivered a separate opinion concurring in part and dissenting in part.
RALPH B. GUY, JR., Circuit Judge.
Plaintiffs, Edgar Allen Gibson and Leslie Gibson, appeal the dismissal of their suit seeking recovery under a standard flood insurance policy. Plaintiffs argue that their сlaims were not barred by the statute of limitations and that their state law claims should have been remanded to state court. We affirm.
I.
Plaintiffs purchased a standard flood insurance policy (SFIP) issued by defendant, American Bankers Insurance Company, under authority of the National Flood Insurance Act (NFIA),
After removal, a magistrate judge granted defеndant‘s motion to dismiss under
II.
A dismissal pursuant to a Rule 12(b)(6) motion is reviewed de novo. See S.W. Williamson County Cmty. Ass‘n v. Slater, 173 F.3d 1033, 1035 (6th Cir.1999). Dismissal of a complaint because it is barred by the statute of limitations is proper when “the statement of the claim affirmatively shows that the plaintiff can prove no set of facts that would entitlе him to relief.” Duncan v. Leeds, 742 F.2d 989, 991 (6th Cir.1984) (emphasis in original) (internal quotation marks and citation omitted).
Plaintiffs argue that their claims are not barred by the statute of limitations because the filing in state court tolled the one-year statute under NFIA. The filing in a state court of competent jurisdiction tolls the statute of limitations during the pendency of the state action. Burnett v. N.Y. Cent. R.R. Co., 380 U.S. 424 (1965). We agree with the district court that plaintiffs’ claims disputing the handling and denial of coverage under the SFIP were within the exclusive jurisdiction of the federal district court and, therefore, the filing in state court did not toll the statute of limitations.
NFIA was enacted to provide a unified national program to reduce and avoid losses due to flood by making reasonably priced flood insurance available for residential and commercial properties. The Federal Emergеncy Management Administration (FEMA) administers the National Flood Insurance Program.
Jurisdiction and the statute of limitations for claims made under NFIA are defined in
[U]pon the disallowance by the Director of any such claim, or upon the refusal of the clаimant to accept the amount allowed upon any such claim, the claimant, within one year after the date of mailing of notice of disallowance or partial disallowance by the Director, may institute an action against the Director on such claim in the United States district court for the district in which the insured property or the major part thereof shall have been situated, and original exclusive jurisdiction is hereby conferred upon such court to hear and determine such action without regard to the amount in controversy.
See also 44 C.F.R. § 62.22. We have concluded that this language mandates that federal district courts have exclusive jurisdiction over suits under NFIA. See State Bank of Coloma v. Nat‘l Flood Ins. Program, 851 F.2d 817 (6th Cir.1988).
The insurance policy in State Bank was issued directly by FEMA, as opposed to a policy, like the one in this case, that was issued by a private insurance comрany under the WYO program. In Van Holt v. Liberty Mutual Fire Insurance Company, 163 F.3d 161, 166-67 (3d Cir.1998), the Third Circuit addressed this difference and concluded:
For several reasons, a suit against a WYO company is the functional equivalent of a suit against FEMA. First, a WYO company is a fiscal agent of the United States.
42 U.S.C. § 4071(a)(1) . Second, FEMA regulations require a WYO company to defend claims but assure that FEMA will reimburse the WYO company for defense costs. 44 C.F.R. § 62.23(i)(6). Third, an insured‘s flood insurance claims are ultimately paid by FEMA. After a WYO company depletes its net premium income, FEMA reimburses the company for the company‘s claims payments. 44 C.F.R. Pt. 62, App. A, Art. IV(A). When a WYO company‘s proceeds from insurance premiums exceeds its current expenditures, it must pay the excess proceeds to the FIA. 44 C.F.R. Pt. 62, App. A, Art. VII(B). Although a WYO company collects premiums and disburses claims, only FEMA bears the risk under the flood insurance program. Thus, a lawsuit against a WYO company is, in reality, a suit against FEMA.
The Third Circuit noted that to construe
Because FEMA bears the risk and financial responsibility regardless of whether the lawsuit formally names FEMA or a WYO company as the defendant, it would make little sense for Congress to have intended to create original exclusive jurisdiction for suits against FEMA but not for suits in which FEMA‘s fiscal agent is the nominal defendant.
We adopt the Third Circuit‘s reasoning and hold that
We have also held, however, that if the state court does not clearly lack jurisdiction, equitable tolling may still apply. Farrell v. Auto. Club of Mich., 870 F.2d 1129, 1133 (6th Cir.1989). Equitable tolling should be applied sparingly and only when exceptional circumstances prevented timely filing through no fault of the
When plaintiffs filed their suit in state court, the Sixth Circuit had not addressed whether such claims were within the exclusive jurisdiction of the federal district courts. At that time, however, every court that had addressed this issue concluded that
In addition, plaintiffs’ SFIP specifically stated:
Conditions for Filing a Lawsuit: You may not sue us to recover money under this policy unless you have complied with all the requirements of the policy. If you do sue, you must start the suit within 12 months from the date we mailed you notice that we have denied your claim, or part of your claim, and you must file the suit in the United States District Court of the district in which the insured property was located at the time of loss.
44 C.F.R., pt. 61, App. A(1), Art. 9, R (1997).2 While forum selection clauses in contracts do not deprive courts of jurisdiction, they are presumptively valid. See Stewart Org. v. Ricoh Corp., 487 U.S. 22 (1988); M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972). In light of the lack of any judicial authority supporting the filing of plaintiffs’ suit in state court and given that plaintiffs were explicitly put on notice of the need to sue defendant in federal court through the specific contractual language of the SFIP, there are no exceptional circumstances that justify the tolling of the statute of limitations. See Hairston v. Travelers Cas. & Sur. Co., 232 F.3d 1348 (11th Cir.2000) (filing in state court did not toll statute of limitations on plaintiff‘s SFIP claims because state court did not have jurisdiction).
That leaves plaintiffs’ final argument that their claims under the Kentucky Unfair Claims Settlement Stаtute,
This court will give preemptive effect to federal law where (1) a federal statute expressly preempts state law, (2) a
While this circuit has not addressed this issue, most courts have consistently found that NFIA preempts state law claims that are based on the handling and disposition of SFIP clаims. See Novikov v. Allstate Ins. Co., No. Civ. S-01-0305 WBS/G, 2001 WL 880852 (E.D.Cal. July 11, 2001) (state law claims of breach of contract, breach of the covenant of good faith and fair dealing, and intentional and negligent infliction of emotional distress under an SFIP were preempted by NFIA because applicability of state law would undermine a nationally unified program of flood insurance); Jamal v. Travelers Lloyds of Texas Ins. Co., 129 F.Supp.2d 1024 (S.D.Tex.2001) (claims of breach of duty of good faith and fair dealing and violations of Texas law are preempted by NFIA); Neill v. State Farm Fire & Cas. Co., 159 F.Supp.2d 770 (E.D.Pa.2000) (ex-contractual causes related to the insurance company‘s claims handling under state law was preempted). Some cases have distinguished between state law claims based on the handling of an SFIP claim and those that are related to the procurement of the policy. See Messa v. Omaha Prop. & Cas. Ins. Co., 122 F.Supp.2d 513, 522-23 (D.N.J.2000) (state law claims were nothing more than disagreement with disposition of SFIP claim and are barred by field preemption under NFIA). Some courts have found that claims relating to the procurement of the policy are not preempted by NFIA. See Spence v. Omaha Indem. Ins. Co., 996 F.2d 793 (5th Cir.1993); Powers v. Autin-Gettys-Cohen Ins. Agency, No. CIV. A. 00-1821, 2000 WL 1593401 (E.D.La. Oct.24, 2000). But see Bleecker v. Standard Fire Ins. Co., 130 F.Supp.2d 726 (E.D.N.C.2000) (no preemption because federal funds would not be used to pay damages for torts committed by WYO companies).
In this case, plaintiffs claim defendant violated the Kentucky statute by failing to act promptly on communications, refusing to pay the claim, failing to affirm coverage, and not attempting a good faith settlement. All of these claims are in essence over the disposition of the SFIP claim. They are all based on defendant‘s handling and denial of coverage under the SFIP. Congress and FEMA have regulated the claims adjustment process and judicial review of coverage claims under floоd insurance policies. Uniformity of decision requires the application of federal law and precludes the enforcement of state laws on the same subject. If plaintiffs prevail, their coverage claims will be paid with federal funds. The defense costs incurred by defendant are also covered by federal funds. See 44 C.F.R. § 62.23(i)(6). It is unnecessary for us to decide whether poli
AFFIRMED.
MOORE, Circuit Judge, concurring in part and dissenting in part.
I concur in the majority‘s conclusion that the federal courts have exclusive original jurisdiction over lawsuits challenging the disallowance of claims against private insurers participating in the Write Your Own (“WYO“) program under the National Flood Insurance Act (“NFIA“), pursuant to
I. PREEMPTION
The Gibsons argue on appeal that, even if the magistrate judge correctly determined that their federal contract claim for breach of the insurance policy was time-barred, the magistrate judge erred in dismissing their state-law tort claims against American instead of remanding them to Kentucky state court. Opрosing the remand of these state claims to state court, the WYO insurer, American Bankers Insurance Co. (“American“), argues (1) that remanding these state-law claims would be inconsistent with the exclusive jurisdiction of the federal courts under
A. Exclusive Federal Jurisdiction over State-Law Tort Claims
With respect to American‘s first argument, it is clear that Congress may confine jurisdiction over federal claims to the federal courts and thus override, in effect, the concurrent jurisdiction of the state courts. See, e.g., Tafflin v. Levitt, 493 U.S. 455, 459-60 (1990); Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 477-78 (1981). But this rule applies only to federal claims—Congress may not confine jurisdiction over state claims to the federal courts—so the issue is really whether the Gibsons advanced federal or state claims in their complaint.
The majority agrees with American that
In effect, the majority transforms the Gibsons’ state-law tort claims into a contractual claim and then holds that that claim is preempted by federal law.1 The
Van Holt may be read to stand for the proposition that claims against WYO insurers are, effectively, federal claims where the federal government would be required, by statute, to cover the liability of the WYO insurers on those claims. Although I agree with this proposition in principle, I disagree with the Van Holt court‘s application of it to insureds’ state-law tort claims. Not every lawsuit against a WYO insurer is really a suit against FEMA, with costs to be paid ultimately out of the U.S. Treasury. Although FEMA covers the expenses of WYO insurers in paying out claims and in litigating challenged disallowances in federal court, the NFIA states a clear exception to this rule: “[t]he Director of the Federal Emergency Management Agency may not hold harmless or indemnify an agent or broker for his or her error or omission.”
The issue, then, is whether the Gibsons’ state-law tort claims qua tort claims are preempted by federal law. The majority concludes that they are, but, as demonstrated in the next section, this conclusion cannot be squared with the statutory and regulatory language in effect at the time this lawsuit was initiated.
B. Preemption of State-Law Tort Claims
Under the Supremacy Clause, U.S. Const. art. VI, cl. 2, federal law can
Despite the majority‘s conclusion to the contrary, the NFIA does not preempt state-law tort claims such as the Gibsons’ in any of these ways.2 First, Congress has not explicitly preempted state-law tort claims, as the NFIA does not include an express preemption provision. See Spence v. Omaha Indem. Ins. Co., 996 F.2d 793, 796 n. 20 (5th Cir.1993) (“The NFIA contains no express preemption provision.“); Scherz v. S. Car. Ins. Co., 112 F.Supp.2d 1000, 1004 (C.D.Cal.2000) (“[T]he NFIA does not contain an express preemption provision.“); id. n. 5 (“In an amicus brief ... the United States and FEMA acknowledge[ ] that the NFIA does not contain an express preemption provision.“). Some courts that have held, incorrectly, that
Second, Congress did not intend federal law to occupy the field of flood insurance regulation to the exclusion of state tort law. This conclusion is based primarily on the structure and language of the NFIA itself. In enacting the NFIA, Congress provided that FEMA would bear the costs incurred by the WYO insurers in litigating claims arising out of claims under the WYO policies themselves. Thus, as the Van Holt court recognized, “a lawsuit against a WYO company is, in reality, a suit against FEMA.” Van Holt, 163 F.3d at 167. But, as discussed supra, not every lawsuit against a WYO company is really a
In addition, regulations promulgated by FEMA under the NFIA reinforce this conclusion. For example, in describing the arrangement between FEMA and the WYO insurers, the regulations state, in relevant part:
Limitation on Litigation Costs. Following receipt of notice of [a] claim, the Office of General Counsel (OGC), FEMA, shall review the information submitted. If it is determined that the claim is grounded in actions by the [insurer] that are outside the scope of this Arrangement, the [NFIA], and 44 CFR chapter 1, subchapter B, and/or involve issues of insurer/agent negligence ... the OGC shall make a recommendation to the Administrator as to whether the claim is grounded in actions by the [insurer] that are significantly outside the scope of this Arrangement. In the event the Administrator determines that the claim is grounded in actions by the [insurer] that are significantly outside the scope of this Arrangement, the [insurer] will be notified, in writing, within thirty (30) days of the Administrator‘s decision, if the decision is that any award or judgment for damages arising out of such actions will not be recognized ... as a reimbursable loss cost, expense or expense reimbursement.
44 C.F.R. pt. 62, app A, art. III.D.4. As discussed supra, the payment of claims arising under the WYO policies—claims that are governed by federal law and over which federal courts have exclusive jurisdiction—аre reimbursed by FEMA. But these regulations envision that WYO insurers will incur litigation costs that are not reimbursable under the NFIA. See also 44 C.F.R. pt. 62, app. A, art. IX (“[T]he responsible party shall bear all liability attached to that delay, error or omission to the extent permissible by law.“). Although the regulations, like
Similarly, National Flood Insurance Program (“NFIP“) regulations require that WYO insurers be licensed by the State to “engage in the business of property insurance,” 44 C.F.R. § 62.23(a), and allow for state auditing and regulation of WYO insurers, see 44 C.F.R. Pt. 62, App. B(b) (“The WYO Cоmpanies are subject to audit, examination, and regulatory controls of the various States.“). See also Moore v. Allstate Ins. Co., 995 P.2d 231, 236 (Alaska 2000) (noting that “the federal government did not preempt all state involvement in flood insurance“).
With respect to the second prong, the better conclusion is that subjecting WYO insurers to state-law tort liability will not impede Congress‘s goals in enacting the NFIA. Although it could be argued that the application of state tort law to the handling of claims under the NFIA will result in different rules in different states, which will in turn obstruct congressional objectives, I agree with the Davis court that such a result is unlikely:
Chaos is unlikely. Nationwide insurers are already subject to fifty separate regimes .... [T]he NFIP works incredibly well and results in very few law suits of this nature. It is hard to believe that the NFIP will be compromised merely if states subject WYO carriers to their normal rules that apply to the same carriers in non-NFIP contexts, all the more so since FEMA‘s own regulations contemplate that such suits will occur from time to time.
This is a close question, and many courts have reached the conclusion that state-law tort claims conflict or obstruct the objectives of the NFIP. One district court, for example, concluded that state-law tort claims would frustrate congressional objectives because fear of such liability would lead WYO insurers to “err on the side of overpaying claims.” Scherz, 112 F.Supp.2d at 1008. But see Davis, 96 F.Supp.2d at 1004 (rejecting the argument that “state-law claims interfere with the statutory scheme and frustrate the intent of Congress, while depleting federal funds in a manner not contemplated by Congress“). Another district court concluded that “WYO insurers ... would be less willing to participate in the NFIP program were they to be held subject to state law claims for bad faith or unfair trade practices.” Neill v. State Farm Fire & Cas. Co., 159 F.Supp.2d 770, 776-77 (E.D.Pa.2000).4
The argument that insurers will refuse to participate in the system unless they are insulated from state-law tort claims in the flood-insurance area fails to take account of the fact that insurers are ordinarily subject to state-law tort claims. I do not see how subjecting WYO insurers to the same rules to which they are normally subject would affect their behavior. As for the danger that WYO insurers will err on the side of over-paying claims, those incentives exist regardless of whether insurers are subject to state-law tort claims. When WYO insurers pay claims, they are paying out federal dollars, rather than their own; moreover, WYO insurers receive a 3.3% commission on paid claims. See 44 C.F.R. pt. 62, app. A, art. III.C.1; see also, e.g., Stanton v. State Farm Fire & Cas. Co., 169 F.Supp.2d 1109, 1117 (D.S.D.2001) (discussing 3.3% commission and noting that “such companies make the real money ... by paying claims“). If these facts do not lead to overpayment, then it is difficult to see how the added risk of tort liability will.
For these reasons, I conclude that the majority‘s holding with respect to its preemption analysis is flawed.5
The Gibsons also argue that the filing of their lawsuit in state court tolled the one-year statute of limitations under
The issue here can be reduced to whether the state court‘s lack of jurisdiction was clear. Our precedents establish that “the filing of an action in a court that clearly lacks jurisdiction will not toll the statute of limitations.” Farrell v. Automobile Club of Michigan, 870 F.2d 1129, 1133 (6th Cir.1989). See also Fox v. Eaton Corp., 615 F.2d 716, 719 (6th Cir.1980) (“[A]s a general matter, the filing of an action in a court that clearly lacks jurisdiction will not toll the statute of limitations.“), cert. denied, 450 U.S. 935 (1981).
In Dunlap v. United States, 250 F.3d 1001, 1009 (6th Cir.), cert. denied, 534 U.S. 1057 (2001), this court held that equitable tolling is only appropriate “after a court has properly considered and balanced the factors set out in Andrews v. Orr unless there is congressional authority to the contrary.” Andrews v. Orr, 851 F.2d 146 (6th Cir.1988), set out five factors to be balanced in determining whether to apply equitable tolling. Those faсtors are: “(1) the petitioner‘s lack of notice of the filing requirement; (2) the petitioner‘s lack of constructive knowledge of the filing requirement; (3) diligence in pursuing one‘s rights; (4) absence of prejudice to the respondent; and (5) the petitioner‘s reasonableness in remaining ignorant of the legal requirement for filing his claim.” Dunlap, 250 F.3d at 1008.
In considering the first two Andrews v. Orr factors, the WYO insurance policy itself provided the Gibsons with notice of the filing requirement or, at minimum, provided them with constructive knowledge of it. Under 44 C.F.R. §§ 61.4(b)6 and 61.13(d),7 all WYO policies contain the terms and conditions of the Standard Flood Insurance Policy (“SFIP“) and its endorsements. The SFIP and endorsements are found in 44 C.F.R. pt. 61, app. A(1)-(6). As the majority correctly points out, the SFIP and endorsements clearly state that lawsuits arising out of WYO policies must be brought in federal district court: “If you do sue, you must start the suit within 12 months from the date we mаiled you notice that we have denied your claim ... and you must file the suit in the United States District Court of the district in which the insured property was located at the time of loss.” Id. app. A(1), art. 9(R).
The majority places a great deal of weight on this language in the SFIP. Despite this language, however, I agree with the Gibsons that it was not clear that the state court lacked jurisdiction over their lawsuit. The status of the quoted provi
Moreover, the WYO insurer does not argue that the SFIP stripped Kentucky courts of jurisdiction over the Gibsons’ claims but rather that
In reaching this conclusion, I note that, when faced with a similar lawsuit, one of our sister circuits initially reached the conclusion that the federal courts lacked jurisdiction over state-law tort claims brought by an insured against a WYO insurer. See Van Holt, 163 F.3d at 164. When federal judges find it difficult to determine whether federal courts have jurisdiction over a claim, it seems unfair to hold litigants (and their attorneys) responsible for making the same mistake. In other words, I would find that the Gibsons’ ignorance of the legal requirement for the filing of their claim was not unreasonable, under the fifth Andrews v. Orr factor. See Dunlap, 250 F.3d at 1008.
With respect to the third Andrews v. Orr factor, the Gibsons were not lax in pursuing their claims, having filed their state lawsuit within the one-year federal statute of limitations. If the lack of state court jurisdiction had been clear, it seems likely that they would have filed within the limitations period in federal court. Considering prejudice to the defendant, the fourth Andrews v. Orr factor, American cannot claim prejudice or unfairness as a result of the Gibsons’ failure to file in federal court within the one-year statute of limitations, as it was able to remove the action to federal court in the same month as the limitations period expired. Cf. Farrell, 870 F.2d at 1134 (“Where circumstances arise in which the plaintiff has been diligent and the defendant has been given adequate notice of the claim, courts must be flexible to assure that the true purpose of the [statute of limitations] is served.“) (quotation omitted). See also Irwin v. Dep‘t of Veterans Affairs, 498 U.S. 89, 96 (1990) (“We have allowed equitable tolling in situations where the claimant has actively pursued his judicial remedies by filing a defective pleading during the statutory period ....“); Burnett v. N.Y. Cent. R. Co., 380 U.S. 424, 428 (1965) (“Statutes of limitations are primarily designed to assure fairness to defendants.“).
Having considered the Andrews v. Orr factors, I would conclude that the equities in the present case weigh in favor of equitable tolling. Given that Congress has not indicated that equitable tolling is not permitted under the NFIA, I would hold that
III.
For the foregoing reasons, I respectfully dissent from those parts of the majority‘s opinion holding that federal law preempts the Gibsons’ state-law tort claims and that equitable tolling does not apply.
Sharon L. GRAGG, Plaintiff-Appellee, v. KENTUCKY CABINET FOR WORKFORCE DEVELOPMENT; Somerset Technical College; Kentucky Community and Technical College System; Ann W. Cline, Dr., Individually; Carol Ann VanHook, Dr., Individually; William D. Huston, Individually; Charles Wade, Dr., Individually; Rodney “Biz” Cain, Individually; Delmus Murrell, Individually, Defendants-Appellants.
No. 01-5171.
United States Court of Appeals, Sixth Circuit.
Argued Dec. 4, 2001. Decided and Filed May 20, 2002.