Quackenbush v. Allstate Insurance Company

PETITIONER: Quackenbush
RESPONDENT: Allstate Insurance Company
LOCATION: Rhode Island General Assembly

DOCKET NO.: 95-244
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 517 US 706 (1996)
ARGUED: Feb 20, 1996
DECIDED: Jun 03, 1996

ADVOCATES:
Donald Francis Donovan - Argued the cause for the respondent
Karl L. Rubinstein - Argued the cause for the petitioner

Facts of the case

The California Insurance Commissioner filed a state court action against Allstate Insurance Co. seeking damages for Allstate's alleged breach of reinsurance agreements in an effort to gather the assets of the defunct Mission Insurance companies. Allstate removed the action to federal court on diversity grounds and filed a motion to compel arbitration under the Federal Arbitration Act. The Commissioner sought to remand the case to state court, arguing that the court should abstain from hearing the case, under Burford v. Sun Oil Co., because its resolution might interfere with California's regulation of insurance insolvencies and liquidations. The District Court agreed, concluded that an abstention was appropriate, and remanded the case to state court without ruling on Allstate's arbitration motion. After determining the appealability of the District Court's remand order, the Court of Appeals vacated the decision and ordered the case sent to arbitration. The court held that abstention was inappropriate in this damages action because a Burford abstention is limited to equitable actions.

Question

Is an abstention-based remand order appealable as a final order? Can the abstention doctrine recognized in Burford v. Sun Oil Co. be applied in a suit for damages?

Media for Quackenbush v. Allstate Insurance Company

Audio Transcription for Oral Argument - February 20, 1996 in Quackenbush v. Allstate Insurance Company

William H. Rehnquist:

We'll hear argument next in Number 95-244, Charles Quackenbush, California Insurance Commissioner, v. Allstate Insurance Company.

Mr. Rubinstein, you may proceed whenever you're ready.

Karl L. Rubinstein:

Mr. Chief Justice, may it please the Court:

Commissioner Quackenbush is the last of a line of several insurance commissioners who have struggled for going on 10 years to marshall the assets and to effectively administer one of the largest property and casualty insurance insolvencies in the history--

William H. Rehnquist:

Perhaps you should say the most recent, rather than the last.

[Laughter]

Karl L. Rubinstein:

--Exactly correct, Your Honor.

However, we have a final liquidation dividend plan which has been recently approved by the Superior Court in California, and we're hoping that during Commissioner Quackenbush's administration we'll be able to complete this case, and actually the issues before this Court are crucial to that issue.

What has happened, the Court is already aware because we have explained it in the briefs and you're aware of how we got here, it is Commissioner Quackenbush's position, and that he urges upon the Court, that the Ninth Circuit erred in improperly permitting an appeal based upon an antiquated and inappropriate standard distinguishing between equitable remedies and legal remedies and thereby prevented, or would forbid, this district court, and any district court in a similar case, from considering issues that legitimately relate to abstention, such as the failure to recognize the need for a consolidated proceeding in a State court, which can protect itself from being dissipated through dozens and in this case it could have been hundreds of Federal court litigations, would disturb, and in fact destroy, a fundamental interest of the State of California--

Antonin Scalia:

What authority do you... you see, when you say it's a matter of discretion whether the court will provide relief or not, I don't care whether you call it equity or antiquated or anything else, the crux of the matter is, I can understand this abstention doctrine when the court below has discretion as to whether it wants to grant relief or not.

Then the case is brought before it and the court says, well, I don't have to grant relief even if you have a good case, and therefore I think I shouldn't even hear this case.

I'm going to send it back to State court.

That makes sense to me.

But where the court has no discretion, where the plaintiff is entitled to judgment from that Federal court, where does the Federal court get the power to send it back to State court?

It's a statute that says the case is removable.

Karl L. Rubinstein:

--Assuming--

Antonin Scalia:

Where does the power come from?

Karl L. Rubinstein:

--Assuming the hypothetical, Justice Scalia, you're exactly correct, and... however, the question comes, is there a Federal... fundamentally the question is, is there now a Federal court of equity, and the fact is there is not a Federal court of equity.

There is a single district court which sits postmerger with equitable powers--

Antonin Scalia:

Which has discretion to deny judgments that are... judgments for money, has discretion to say, well, you're entitled to this money, but I just think I'm not going to give it to you.

Do Federal courts now, under this new order of the world, have that power?

Karl L. Rubinstein:

--Of course not, Your Honor.

However--

Antonin Scalia:

So I don't care whether you call it equity or not, the fact is, if the court must grant relief, it seems to me the court must entertain the case.

Karl L. Rubinstein:

--The question is, what is the power of the court to grant relief, and what is the relief requested of the court?

In this case, the relief requested of the court, the key relief requested, was the motion by the insurance commissioner to invoke the reasoned discretion of the district court to apply the abstention doctrines which have been long-established by this Court, and that is the reasoned discretion of the district court.

Antonin Scalia:

Whose discretion doctrines have been long-established in cases where the court was able to say, yes, you have a good case but I'm not going to give you relief.

Those are the cases in which that's been well established.

Karl L. Rubinstein:

I don't agree with that, Your Honor.

I believe that under the principles of Burford and under the principles of Colorado River, for example, that the Federal district courts have been recognized to have a reasoned discretion.