Case Information
*1 Before JOLLY, SMITH, and CLEMENT, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
In this Class Action Fairness Act (“CAFA”) case, having roots in Hurricane Katrina and arising from a state program to assist homeowner victims, the defendant, American National Property & Casualty Company (“ANPAC”), appeals the judgment of the district court holding that it lacked subject matter jurisdiction over the case. This case was initiated as a class action, in state court under state law, by the State of Louisiana (the “State”). The State brought the suit against several insurers, including ANPAC, to recover on the homeowner insurance policies purchased by individual Louisiana citizens but assigned by the respective policy holders to the State in return for State financial assistance in repairing and rebuilding their homes in the wake of the hurricanes. The defendant insurance companies removed the case to federal court, asserting jurisdiction under CAFA. The federal court certified a question relating to the legality of the assignment of the policies to the Supreme Court of Louisiana. After the Louisiana Supreme Court held that, under Louisiana law, the insurance policies at issue must be considered individually, the State dropped its class allegations and severed this individual action from the original class action case. Thus arose the question of federal jurisdiction over these individual cases, once part of the CAFA class action. Although an earlier opinion from this court had held that CAFA provided federal jurisdiction over the class, the district courts held that these severed individual actions must have their own independent federal jurisdictional basis and found none. Because they lacked an independent basis for federal jurisdiction, the district courts remanded the cases to state court.
We hold that the general rule regarding federal jurisdiction over a removed case controls here: Jurisdictional facts are determined at the time of removal, not by subsequent events. Because at the time of removal CAFA supplied federal subject matter jurisdiction over these cases – as a prior panel of this court explicitly had held – we hold that CAFA continues to provide jurisdiction over these individual cases notwithstanding their severance from the class. Accordingly, we REVERSE the judgments of the district courts and REMAND for further proceedings not inconsistent with this opinion.
I.
As a result of the damage inflicted on Louisiana by Hurricanes Katrina and Rita, the State of Louisiana – with funding from the Department of Housing and Urban Development – initiated the Louisiana Road Home program. Through this program, the State distributed funds to residents to assist efforts to rebuild homes damaged by the hurricanes. In return for these funds, and to avoid the homeowners recovering duplicate payments from multiple sources, citizens participating in the Road Home program were required to assign to the State the homeowner’s rights against his insurer up to the amount received from the program.
In August 2007, the State initiated a class action lawsuit in Louisiana state court to recover on the insurance policies of its citizens. The suit was brought under Louisiana Code of Civil Procedure Article 591(A) – a state class action statute – and named several insurance companies as defendants. This “Road Home Litigation” has been ongoing ever since. We will only recount the relevant procedural steps that have brought the case before this panel.
After the Road Home Litigation was filed, the insurance company
defendants removed the case to federal court. The State moved to remand
arguing that the court lacked subject matter jurisdiction. The defendants
argued, and the district court agreed, that because the case was brought under
a state class action statute, more than $5,000,000 was in controversy, and
minimal diversity existed, CAFA supplied federal subject matter jurisdiction.
The State requested permission to appeal the district court’s denial of its
motion to remand. This court granted permission to appeal, and subsequently
affirmed the judgment of the district court holding that CAFA supplied federal
jurisdiction.
In re Katrina Canal Litig. Breaches
,
Federal jurisdiction having been established, the case continued in the
district court. The defendants next filed a motion to dismiss the State’s claims
arguing that, under Louisiana law, homeowners were forbidden to assign their
recovery to the State under the anti-assignment clauses in the respective
insurance policies. The State countered that these anti-assignment provisions
did not apply to post-loss assignments. Again, this issue was litigated and
appealed to this court. Recognizing that the issue was novel and dispositive,
this court certified the question to the Louisiana Supreme Court. The
Louisiana Supreme Court accepted the certified question and responded that
applying anti-assignment clauses to post-loss assignments did not violate
Louisiana public policy, but that “it must be evaluated on a policy by policy
basis.”
In re Katrina Canal Breaches Litig.
,
In reaction to this ruling, the district court handling the litigation ordered the claims on behalf of each individual severed from the collective action and directed the State to file a new amended complaint for each individual claim. Accordingly, the State filed 1,504 amended complaints, each encompassing its claim on behalf of each respective policy holder; each was given a new case number and randomly assigned to a district judge.
Following the severance, the district judges ordered ANPAC to show
cause why, now severed from the alleged CAFA class action, these cases should
not be remanded to state court. ANPAC responded that jurisdictional facts of
a case removed from state court are assessed at the time of removal and are
not affected by later events, and further, because this court unambiguously
held that CAFA supplied jurisdiction at the time of removal, it was clear that
post-removal events could not divest the court of jurisdiction. The district
courts disagreed and held that they lacked jurisdiction. The district courts
relied on
Honeywell Int’l, Inc. v. Phillips Petroleum Co.
, in which this court
stated that “a severed action must have an independent jurisdictional basis.”
Pursuant to 28 U.S.C. § 1453(c), ANPAC petitioned this court for
permission to appeal the remand order. Because we recognized that this case
presents an important CAFA-related question both for this case and for the
other individual actions currently pending, and because the record before us
was sufficiently developed, we granted permission to appeal.
See, e.g., Coll. of
Dental Surgeons of P.R. v. Conn. Gen. Life Ins. Co.
,
II.
A.
As presented to us, we have two competing principles that address
federal jurisdiction in these removed cases. The first is a long-established
general rule, holding that jurisdictional facts are determined at the time of
removal, and consequently post-removal events do not affect that properly
established jurisdiction.
See Grupo Dataflux v. Atlas Global Grp., L.P.
, 541
U.S. 567, 569–70 (2004) (recognizing “the general rule that, for purposes of
determining the existence of diversity jurisdiction, the citizenship of the
parties is to be determined with reference to the facts as they existed at the
time of filing”);
Freeport-McMoRan, Inc. v. KN Energy, Inc.
,
Reviewing the district court’s remand order de novo,
Admiral Ins. Co. v.
Abshire
,
B.
1.
We begin by considering the factual and legal context underlying
Honeywell
’s statement that “a severed action must have an independent
jurisdictional basis.” ,
The legal authority cited to support its proposition that federal jurisdiction must be established anew for severed claims related only to a particular species of severed claims – claims that were never infused with original jurisdiction, but state claims that were tagging along in the tail wind of the original federal claims. Specifically, the panel relied on United States v. O’Neil , 709 F.2d 361 (5th Cir. 1983) and 28 U.S.C. § 1367. O’Neil , like , dealt with the severance of counterclaims over which the district court had apparently exercised only supplemental jurisdiction. O’Neil , 709 F.2d at 365. O’Neil held that these severed counterclaims required an independent jurisdictional basis if they were going to stay in federal court; they simply had never, at any point, established a federal jurisdictional basis independent of the underlying federal claim. Id . at 375. Thus, O’Neil does not support the broad application the State urges – overruling the customary time- of-removal rule with respect to claims that are original federal claims at the time they were removed to federal court.
Similarly, ’s citation of and reliance on § 1367 further, and strongly, supports the conclusion that its statement, although cast in broad language, only applies to claims based on supplemental jurisdiction. Section 1367 grants the district court the discretion to exercise supplemental jurisdiction over related state claims that have been joined “in the action within such original jurisdiction.” Thus, when the related state claim is severed from the federal claim, the once-upon-a-time related claim is no longer a related claim because there is no federal claim to which it can relate; nor does the claim any longer supplement the federal claim, and supplemental jurisdiction was the only support for its brief federal life.
Neither is § 1367 authority for the broader rule that the State urges. The section contains nothing to suggest that a court which has original federal jurisdiction over a claim is stripped of that jurisdiction when the claim is severed from a claim that itself embodies original jurisdiction. Here, these individual claims are not related claims subject to § 1367; they are the specific claims over which the district courts had possessed original jurisdiction at the time of removal and later were adjudicated to be federal claims.
To sum up: Honeywell examined a severed third-party claim that the district court had only exercised supplemental jurisdiction over. In support of its ruling that severed claims require an independent jurisdictional basis, Honeywell cited O’Neil , a case dealing with the severance of claims that enjoyed only supplemental jurisdiction, and the code section granting supplemental jurisdiction, which constrains the exercise of supplemental jurisdiction to claims within the same action. These contextual markers strongly suggest that Honeywell ’s statement was not intended to apply to severed claims that enjoyed original federal jurisdiction, but instead was only applicable to situations like that before the Honeywell court involving the severance of “related” claims.
2.
Furthermore, the subsequent history of Honeywell also suggests that a broad reading of the case should be avoided. No court of appeals has ever cited Honeywell for the proposition that severed actions require an independent jurisdictional basis. Nor have we found another case in our circuit or in any other circuit that states, so sweepingly, this exception to the time-of-filing rule; nor have we seen analysis that gainsays a limited application of to claims based on supplemental jurisdiction. And we certainly have found no circuit court cases that apply the rule in to severed claims over which the district court had original jurisdiction at the time of removal.
The State’s reading of finds some limited support in the
opinions of some federal district courts. With the exception of several district
court decisions within this Road Home Litigation, we have, however, found no
district court case that applies
Honeywell
to a claim that enjoyed original
jurisdiction prior to severance.
See, e.g., Admiral Ins. Co. v. Health Holdings
USA, Inc.
, No. Civ. A. 3:03CV1634-G,
This subsequent history further suggests that ’s statement, though phrased broadly and without exception, should be applied only to severed claims that find themselves in federal court on the basis of supplemental jurisdiction.
3.
Next, applying ’s statement to this case would likely run afoul of the statutory language of CAFA. The text of CAFA states that federal jurisdiction will extend to “class actions” with minimal diversity and at least $5,000,000 in controversy. 28 U.S.C. § 1332(d)(2). The statute defines “class action” as “any civil action filed ” under Rule 23 or a state class action statute. Id . at § 1332(d)(1)(B) (emphasis added). Thus, federal jurisdiction under the statutory provision of CAFA is explicitly concerned with the status of an action when filed – not how it subsequently evolves. And, it is undisputed that this action was filed as a class action, consistent with the standards of the statute.
Similarly, the legislative history of CAFA indicates that the time-of- removal rule was to be applied in these cases. The Senate Report on the bill reflects concerns about post-filing events either creating or destroying federal jurisdiction. See S. Rep. 109-14, at 70 (2005), reprinted in 2005 U.S.C.C.A.N. 3, 65. The Senate Report dismisses these concerns as “unfounded” recognizing that “[w]ell-established law exists to resolve these questions, and [CAFA] does not change–or even complicate–the answers to these questions.” Id . The Senate Report goes on to state that “[c]urrent law (that [CAFA] does not alter) is also clear that, once a complaint is properly removed to federal court, the federal court’s jurisdiction cannot be ‘ousted’ by later events.” Id . Thus, the Senate Report is a further indication that Honeywell should not be applied to this case; instead, CAFA provides original jurisdiction, determined at the time of removal.
4.
Finally, we doubt that the statement in could apply as broadly as the State suggests in the light of the overwhelming authority with which it would pose conflicts if given this broad reading.
The State’s reading of would obviously constitute a significant
exception to the time-of-removal rule for assessing jurisdiction, a rule well
entrenched in federal jurisprudence.
See Grupo Dataflux
,
It is true, as the State points out, that none of the subsequent events in these cases involved a claim actually severed from the original case. But on the other hand, the severed claim in was not a claim suffused with original federal jurisdiction at the time of removal, as indeed the instant severed claims were. In the face of this overwhelming and unanimous authority, we are unwilling to isolate our circuit on so thin a distinction as a single broad, unexplicated statement taken out of context.
III.
In sum, we hold that at the time of removal, these claims clearly possessed original federal jurisdiction as an integrated part of the CAFA class action. ’s statement – that severed actions require an independent jurisdictional basis – applies only to severed claims that are based on supplemental jurisdiction. Consequently, we find the exception is inapplicable here and hold that the usual time-of-removal rule controls this appeal, and federal jurisdiction is properly exercised over these severed cases.
For the reasons stated herein, the judgments remanding to state court are REVERSED, and the cases are hereby REMANDED to the federal district courts a quo for further proceedings not inconsistent with this opinion.
Notes
[1] Subsequent to this decision, the State settled with all of the defendants save ANPAC. These settlements reduced the number of claims (i.e. individuals on whose behalf the State was attempting to collect) from about 160,000 to 1,504.
[2] The State argues that subsequent developments in these cases have demonstrated that jurisdiction did not exist even at the time of removal. This argument is unavailing especially in the light of the prior panel opinion squarely holding that CAFA provides federal jurisdiction. In re Katrina Canal Litig. Breaches , 524 F.3d at 705–12. Although when subsequent discovery reveals that alleged jurisdictional facts were untrue at the time of removal a court may hold that jurisdiction was lacking at the time of removal, the State has made no meritorious argument that any alleged facts have been discovered to be untrue.