Fifth Circuit Holds that Mandatory Abstention of 28 U.S.C. § 1369(b) Does Not Trump Supplemental Jurisdiction in Federal Court

BNA’s The United States Law Week (Volume 74 Number 38, Tues., Apr. 11, 2006, Page 1596, ISSN 1522-4317) is reporting on Wallace v. La. Citizens Property Ins. Corp., --- F.3d ----, 2006 WL 84858 (5th Cir. Mar. 31, 2006):

"Federal court abstention requirements imposed by the little known Multiparty, Multiforum Trial Jurisdiction Act do not preclude removal to federal court of a spate of insurance claims stemming from Hurricane Katrina losses, the U.S. Court of Appeals for the Fifth Circuit held March 31."

In Wallace, the Fifth Circuit held:

On the merits of their appeal, Petitioners argue that the district court erred by applying § 1369(b) to a case removed under § 1441(e)(1)(B). Although the district court recognized that Farm Bureau removed under § 1441(e)(1)(B), the court did not determine whether the defendants met the requirements of § 1441(e)(1)(B), instead stating that even if the defendants could meet those requirements, the abstention provisions of 1369(b) prevented the case from being heard in the federal courts.

The district court misapplied mandatory § 1369(b) abstention to the exercise of supplemental jurisdiction established by § 1441(e)(1)(B). Section 1369(b) applies only to original jurisdiction under § 1369(a). By its own terms, § 1369(b) limits its application to “any civil action described in subsection (a).” Subsection (a) sets out the prerequisites for original jurisdiction under the [Multiparty, Multiforum Trial Jurisdiction Act (MMTJA)]. Thus, it is proper for a district court to abstain from hearing a case brought as an original matter under § 1369(a), when the exceptions listed in § 1369(b) apply. In contrast, § 1441(e)(1)(B) permits removal in those situations where original federal subject matter jurisdiction does not exist. In so allowing, § 1441(e)(1)(B) establishes supplemental jurisdiction over the Wallace action, piggy-backing jurisdiction on the district court's original jurisdiction under § 1369(a) over the pending Chehardy action. When the requirements of § 1441(e)(1)(B) are met, defendants need not establish the existence of independent subject matter jurisdiction under any other provision, including under § 1369(a), because supplemental jurisdiction has been established. Consequently, § 1369(b) is not an independent bar to the exercise of jurisdiction over a case removed pursuant to § 1441(e)(1)(B), as it applies only to the exercise of original jurisdiction under § 1369(a).