SUSAN K. LEE, United States Magistrate Judge.
The Court ordered the parties to brief the issue of its subject matter jurisdiction over this case [Doc. 56]. The parties filed initial briefs [Docs. 57, 58, & 59], and chose not to file responsive briefs. After considering the parties' briefs and the applicable law, and for the reasons outlined below, the Court will
This action, asserting state law contract and tort claims against an insurance agency
The claims asserted in this action arise from a crop insurance policy issued to Plaintiff Dusty Wanamaker to cover nursery crops at Skymont Farms [Doc. 1-1 at PageID#: 6]. The Complaint alleges that the policy was issued by NAU Country Insurance Company ("NAU") in conjunction with the Federal Crop Insurance Corporation ("FCIC") and the Risk Management Agency ("RMA") whereby the insurance company had a reinsurance agreement with the FCIC [id.]. The Defendants named in the Complaint, however, are Summitville Crop Insurance Agency, the insurance agency through which Plaintiffs conducted their crop insurance business, and the individual agents working for the agency — Suzanne North, Cindy Anderson, and Richard Mackie [id.].
Plaintiffs allege in the Complaint that Defendants were aware of the ownership of various nurseries belonging to the Wanamaker family and held themselves out as being able to provide appropriate insurance coverage for the nurseries for the 2006 crop year; however, after a hail storm damaged the crops at Skymont Farms in April 2006, Plaintiff Dusty Wanamaker submitted a claim, and the RMA took over the adjustment of the claim and eventually denied it [id. at PageID#: 6-7]. Plaintiffs allege Defendants were negligent in failing to properly obtain an insurance policy for Skymont Farms, were negligent in obtaining the proper information from Plaintiffs to secure appropriate coverage, made misrepresentations regarding the procurement of such coverage upon which Plaintiffs relied, and breached their duties and contractual obligations to Plaintiffs [id. at PageID#: 7-8].
The Court is under a continuing obligation to ensure it has subject matter jurisdiction over the cases before it and can raise the issue of jurisdiction sua sponte at any time during the pendency of a case. See Answers in Genesis of Ky., Inc. v. Creation Ministries Intern., Ltd., 556 F.3d 459, 465 (6th Cir.2009); see also 28 U.S.C. § 1447 ("[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded."). The Court became aware of a line of cases indicating that FCIA did not create federal question jurisdiction over cases asserting strictly state law claims against private reinsurers of crop insurance or insurance agencies. The Court listed those cases for the parties, along with two early cases reaching the opposite conclusion, Owen v. Crop Hail Mgmt., 841 F.Supp. 297 (W.D.Mo.1994) and Brown v. Crop Hail Mgmt., Inc., 813 F.Supp. 519 (S.D.Tex.1993), at the time it required the parties to brief the issue of its subject matter jurisdiction.
In compliance with the Court's order to address its subject matter jurisdiction, Defendant Mackie argued that Owen and Brown should be followed to find federal question jurisdiction in this case and noted that the case would not exist were it not
As a preliminary matter, judicial economy does not create subject matter jurisdiction, and the parties cannot agree to federal question jurisdiction where it does not exist.
The United States Court of Appeals for the Sixth Circuit has identified four ways in which a complaint can "arise under" federal law to establish federal question jurisdiction: "it ... (1) states a federal cause of action; (2) includes state-law claims that necessarily depend on a substantial and disputed federal issue; (3) raises state-law claims that are completely preempted by federal law; or (4) artfully pleads state-law claims that amount to federal-law claims in disguise." Ohio ex rel. Skaggs v. Brunner, 629 F.3d 527, 530 (6th Cir.2010) (citing Mikulski v. Centerior Energy Corp., 501 F.3d 555, 560 (6th Cir. 2007)). Applying these ways in which a complaint may arise under federal law here, there is no federal cause of action asserted on the face of Plaintiffs' Complaint and the Court finds no basis to conclude that Plaintiffs have engaged in any "artful pleading" to disguise federal claims as state law claims. The Court has subject matter jurisdiction over Plaintiffs' Complaint, therefore, only if the state law claims asserted therein are completely preempted by federal law or the state law claims implicate a substantial question involving federal law.
The Court listed and allowed the parties an opportunity to review at least seven cases concluding that either the FCIA did not completely preempt the field of crop insurance to afford federal question jurisdiction over state law claims, did not give rise to a substantial question of federal law, or both. In fact, there are a dozen cases which have addressed these issues and reached similar conclusions, including cases from the United States Court of Appeals for the Fifth, Ninth, and Eleventh Circuits.
The complete preemption doctrine is a very narrow exception to the well-pleaded complaint rule and is intended to be used sparingly for only a few "extraordinary" statutes. Palkow v. CSX Transp., Inc., 431 F.3d 543, 553 (6th Cir.2005). It is important to note that complete preemption and simple, or defensive, preemption are different principles. While a plaintiff's individual state law claims may be preempted by federal law or regulation because the state law conflicts with federal law or regulation or the law explicitly invalidates certain types of state law claims, that does not equate to complete preemption, which is "designed to occupy the regulatory field with respect to a particular subject" and mandate that all claims asserted within that field, including state law claims, be addressed exclusively in federal court. Warner v. Ford Motor Co., 46 F.3d 531, 535 (6th Cir.1995), see Strong v. Telectronics Pacing Sys., Inc., 78 F.3d 256, 260 (6th Cir.1996). "[T]he doctrine of complete preemption makes removal available automatically in those extraordinary cases where a state law claim is completely preempted." NGS Am., Inc. v. Jefferson, 218 F.3d 519, 527 (6th Cir.2000) (citing Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 64-67, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987)). Furthermore, the Sixth Circuit has recognized precedent that only Congress can effect complete preemption of a state law cause of action and that federal regulations promulgated by federal agencies do not carry equal weight in the analysis. AmSouth Bank v. Dale, 386 F.3d 763, 776 (6th Cir.2004) (citing cases).
The United States Supreme Court has determined that the doctrine of "complete preemption" applies to the Labor Management Relations Act ("LMRA"), the Employee Retirement Income Security Act ("ERISA") and the National Bank Act. See Brunner, 629 F.3d at 531 (citing Metro. Life Ins. Co., Avco Corp. v. Aero Lodge No. 735, Int'l Ass'n of Machinists, 390 U.S. 557, 88 S.Ct. 1235, 20 L.Ed.2d 126 (1968), and Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 123 S.Ct. 2058, 156 L.Ed.2d 1 (2003)), see also Palkow, 431 F.3d at 553 n. 6 (pointing out another area in which the Supreme Court has recognized complete preemption). The Sixth Circuit has expanded the doctrine to one other statute, the National Flood Insurance Act ("NFIA"), and has declined to further extend the doctrine. Mikulski, 501 F.3d at 564, see also Palkow, 431 F.3d at 553 n. 6 (acknowledging a number of
The FCIA contains two provisions regarding lawsuits, reproduced below as they appeared during the time relevant to this case:
7 U.S.C. § 1506(d) (emphasis added).
7 U.S.C. § 1508(j) (emphasis added). These provisions specifically provide for exclusive federal jurisdiction over lawsuits filed arising from crop insurance policies, but only provide for such jurisdiction as to suits against the "Corporation," meaning the FCIC, or the "Secretary," meaning the Secretary of Agriculture. See 7 U.S.C. § 1502(b)(4), (7).
The FCIA also includes the following provision with respect to the interplay of state law with crop insurance policies:
7 U.S.C. § 1506(l) (emphasis added). This provision establishes simple or defensive preemption, invalidating state laws, rules, and claims that are specifically addressed as inapplicable in the contracts or regulations or those which conflict with the federal statutes or regulations governing crop insurance. As other courts have found, this provision does not completely preempt the field of crop insurance as to exclude all state law claims and mandate jurisdiction in federal courts. See Rio Grande Underwriters, Inc. v. Pitts Farms, Inc., 276 F.3d 683, 686 (5th Cir.2001), Reimers v. Farm Credit Servs. AgCountry, ACA, No. CIV. A3-00-168, 2001 WL 1820379, at *5 (D.N.D. June 22, 2001) ("[T]he FCIC regulations do preempt and limit certain state and local government action and interference... [but] this type of preemption is merely a defense to a lawsuit; it is not a jurisdictional limitation."), Horn v. Rural Cmty. Ins. Servs., 903 F.Supp. 1502, 1505 (M.D.Ala.1995) (noting the section provides a preemption defense), Hyzer v. Cigna Prop. Cas. Ins. Co., 884 F.Supp. 1146, 1151 (E.D.Mich.1995) (discussing § 1506(k), the predecessor to this section, and criticizing the Brown court's reliance on this section to find complete preemption).
The courts which have addressed the issue of complete preemption under the FCIA have focused on the statutes, regulations, and legislative history to determine Congress's intent. Beginning with the applicable cases from appellate courts, the court in Rio Grande applied the Fifth Circuit's three-part test to analyze an area of law for complete federal preemption and noted as follows:
Id. at 686-87.
The Eleventh Circuit noted that the evolution of 7 U.S.C. § 1508(j)(2)(A) during the legislative process changed it from mandating lawsuits against either the FCIC or a reinsured private insurance company to be filed in federal court to permissibly allowing suits to be filed in federal district court only if the suit was against the FCIC. Williams Farms of Homestead, Inc. v. Rain & Hail Ins. Servs., Inc., 121 F.3d 630, 634 (11th Cir. 1997). The Williams court further noted that had Congress intended to require such suits against private insurance companies be filed in federal court, it could have included a provision much like that in the National Flood Insurance Act; as it had not, the Williams court "infer[red] that Congress intended to leave insureds with their traditional contract remedies against their insurance companies ... includ[ing] a state law breach of contract claim."
A Ninth Circuit case, Holman, has been cited by several courts reaching the conclusion that there is no complete preemption. In Holman, the Ninth Circuit reviewed the legislative history of the FCIA and noted the review "uncovers no congressional intent that claims against insurance agents for the agents' own errors or omissions are to be deemed to create federal-question jurisdiction." Id. at 669. The Holman court found, therefore, that the FCIA did not have the preemptive force to satisfy the doctrine of complete preemption. Id. at 670.
Several district courts have also determined the FCIA does not completely preempt the field of crop insurance. For example, the United States District Court for the District of North Dakota in Bullinger v. Trebas, 245 F.Supp.2d 1060 (D.N.D.2003) ruled that "neither the legislative history of the Federal Crop Insurance Act nor its express provisions establish an intent to create a federal cause of action against private insurance companies or to grant exclusive federal jurisdiction over such suits." Id. at 1066. In the absence of clear intent, the FCIA did not completely preempt state and common law claims against private insurance companies and did not create a federal cause of action for lawsuits filed against such companies. Id. at 1067.
In Agre v. Rain & Hail, LLC, 196 F.Supp.2d 905 (D.Minn.2002), the United States District Court for the District of Minnesota analyzed the applicable regulations and statutes to find Congress had no intent to preempt state claims arising from a crop insurance policy. Id. at 912. The Agre court held that, in the FCIA, "Congress did confer exclusive federal jurisdiction over cases in which the FCIC is a party. It also granted exclusive jurisdiction over indemnity suits against the FCIC. These specific grants of exclusive jurisdiction lead the Court to consider one of the traditional canons of statutory interpretation: est inclusio unius est exclusio alterius." Id. (citing 7 U.S.C. § 1506(d) and § 1508(j)(2)(A)) (emphasis in original).
Although the Brown decision finding complete preemption was issued by the United States District Court for the Southern District of Texas (and has theoretically been cast into doubt by Rio Grande, referenced above), two other districts in Texas — the Northern and Eastern — have reached the opposite conclusion. As in Rio Grande, the court in Halfmann v. USAG Ins. Servs., 118 F.Supp.2d 714 (N.D.Texas 2000) reviewed the Fifth Circuit's three-part test to find that there was no specific provision in the FCIA or its regulations mandating federal jurisdiction in cases involving approved insurance providers, no jurisdictional grant which would give federal courts jurisdiction over such cases, and no clear congressional intent to completely preempt the field of crop insurance, given that an earlier version of 7 U.S.C. § 1508(j) included insurance providers in the federal jurisdictional grant and the final version removed them. Id. at 718-21.
The court in Bullard rejected the analysis in Brown as erroneously equating suits against the FCIC with suits against private insurance companies and found that the FCIA contained no explicit grant of federal jurisdiction for suits against the insurance companies or agents. Bullard, 984 F.Supp. at 535-36. The Bullard court compared the specific grant of jurisdiction over any action in the ERISA statute with the FCIA's grant of jurisdiction only over suits involving the Corporation or Secretary and also referenced the legislative history which omitted the term "or insurance provider" from the final version of the statute. Id. at 536-37. The Bullard court held that "the FCIA fails to express the clear manifestation of congressional intent necessary for a finding of complete preemption. Neither the legislative history of the FCIA nor its express provisions clearly establish Congress' intent to create a federal cause of action against private insurance companies, or to grant federal jurisdiction over such suits." Id. at 538.
A few other district courts have reached the same conclusion for largely the same reasons, including two other district courts within the Sixth Circuit. See Horn, 903 F.Supp. 1502 (finding "no indication that Congress intended that suits against reinsurers of the FCIC be included in the jurisdictional provision"), Hyzer, 884 F.Supp. at 1149-53 (distinguishing between complete preemption and defensive preemption and finding the former inapplicable to the FCIA), O'Neal v. CIGNA Prop. & Cas. Ins. Co., 878 F.Supp. 848, 850-52 (D.S.C.1995) (claims against the insurance agency and insurance provider for their own errors and omissions were not completely preempted by the FCIA such that they had to be filed in federal court), and Ehler v. Empire Fire & Marine Ins. Co., No. 5-93-CV-48, 1993 WL 778122, at
After reviewing all the applicable case law and the relevant statutes, the Court agrees with the majority of courts that have addressed this issue and concludes that the complete preemption doctrine does not apply to the FCIA. First, focusing on the statutory provisions referenced above, the sole federal jurisdictional grants in the FCIA apply only to lawsuits filed against the FCIC or the Secretary of Agriculture. There is no similar jurisdictional grant to private insurance companies issuing reinsured policies and, without unnecessarily echoing prior cases or belaboring the point, several of the courts cited above have reviewed the legislative history on this issue to bolster the point that the lack of such a grant was not accidental because an intermediate version included insurance providers in the federal jurisdictional grant and the final version removed them. See Williams, 121 F.3d at 634, Bullinger, 245 F.Supp.2d at 1067, Halfmann, 118 F.Supp.2d at 721, Bullard, 984 F.Supp. at 537. Moreover, even if there was such a grant, it is unlikely it would apply to the instant case, which involves only a local insurance agency and agents, not the insurance company that has the relevant reinsurance contract with the FCIC and actually issued the crop insurance policy.
Finally, the Court finds the reasoning in O'Neal provides another relevant basis for refusing to find complete preemption: "no express prohibition exists against a private insurer selling crop insurance ... it is possible for a private insurer to sell crop insurance [because] [t]he federal regulations apply only to crop insurance that is reinsured or insured by the FCIC. Because of this possibility of private crop insurance, federal law cannot be said to have occupied the field." O'Neal, 878 F.Supp. at 852.
Accordingly, the Court
The only other available avenue to maintain the case in this Court, then, is if the Complaint involves a substantial question of federal law. The parties did not address
As previously noted, there is a pending related case, Civil Case No. 4:09-cv-65, in which Plaintiffs are proceeding against the federal government entities as well as the reinsuring insurance company that issued the applicable crop insurance policy to Plaintiffs. It appears to the Court that the posture of this case and the related case against the federal entities and insurance company would nearly eliminate the need to address any questions of federal law, let alone a substantial one, in this case. The parties have essentially explained the relationship between the cases as follows: if insurance coverage is found in the related case against the federal entities and insurance company, then there will be no need to continue pursuing this case against the agency and agents, as Plaintiffs would receive the relief sought; if, on the other hand, the Court finds no insurance coverage in the related case, then the instant case asserting state law claims against the insurance agency and agents will be Plaintiffs' sole source of potential recovery.
Plaintiffs' state law claims against the insurance agency and agents do not present a substantial question of federal law because if the Court finds no coverage exists in the related case, this finding would likely provide a starting point for the analysis of the state law claims, which will focus on, among other issues, the actions taken by the individual agents, their knowledge of Plaintiffs' nursery structure, and their knowledge of the information required for submission of a proper insurance application. In this context of such state law claims, a court would not need to conduct much inquiry into the application of federal regulations and statutes governing crop insurance, which means little, if any, federal law will impact the analysis or resolution of the case against the agents and insurance agency.
The Court
For the reasons outlined above, the Court
SO ORDERED.
