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property, jurisdiction over such property is withdrawn from all other courts.
The Nebraska Department of Trade & Commerce was permitted to liquidate a
domestic insurance company under Nebraska law.
Penn General Casualty Co. v. Pennsylvania, 294 U.S. 189 (1935). Both state and
federal courts have concurrent jurisdiction in an action in personam for
recovery of money or an injunction, but if the suit is in rem or quasi in rem, the
court first assuming jurisdiction over the property may exercise jurisdiction to
the exclusion of the other. Pennsylvania Supreme Court's holding permitting
insurance commissioner to take possession of the property and enjoining
insolvent company from surrendering its books and records to anyone other
than the insurance commissioner was reversed since federal district court
obtained in rem jurisdiction first. The Court remanded the proceeding and
noted the commissioner could apply to the federal court for a voluntary
surrender of its jurisdiction.
Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (1996). The Supreme Court
affirmed the decision of the Ninth Circuit in Garamendi v. Allstate Ins. Co., 47
F.3d 350 (9th Cir. 1995), holding that a federal court can abstain under the
Burford doctrine from exercising its jurisdiction only where the relief sought
is equitable or otherwise discretionary, and may not abstain in a common
law action for damages. The Court based its decision on the well‐settled
principle that, given the potentially disruptive effect of such equitable
remedies as injunctions on state proceedings, federal courts have the power
to dismiss or remand cases based on abstention principles where the relief
sought is equitable or otherwise discretionary.
U.S. v. Bank of New York & Trust Co., 296 U.S. 463 (1935). The U.S. Supreme
Court held that the United States as the assignee of the Russian government
was not entitled to maintain suit in the federal district court for an accounting
and delivery of the assets of Russian insurance companies whose funds had
been appropriated by the Russian government to the exclusion of all other
claimants on such contention that such suit would not interfere with the
proceedings in the New York state court. The state court proceedings directed
the insurance commissioner to take possession of the assets, and the Supreme
Court stated that the principle that a court first assuming jurisdiction over
property may maintain and exercise that jurisdiction to the exclusion of all
other applies equally to cases where the assets are actually seized or where
suit is brought to marshal assets, administer trusts or liquidate estates ‐‐
whenever the court must control the property. Therefore, the state court took
jurisdiction of the res to the exclusion of the United States.
First Circuit
Fragoso v. Lopez, 991 F.2d 878 (1 st Cir. 1993). After the appeal of a medical
malpractice action in federal court, an insurer‐defendant was placed in
liquidation and the receiver requested abstention of the federal court under
Burford. The Court declined to abstain after analyzing the effect that New
Orleans Pub. Serv., Inc. v. City Council of New Orleans [NOPSI], 491 U.S. 350
(1989), has on the Burford abstention doctrine. It concluded that: (i) NOPSI
requires a significant disruption of a state regulatory scheme before
abstention is appropriate; (ii) previous circuit court decisions favoring
abstention are "suspect" after NOPSI; and (iii) the "mere existence" of a
"complex state apparatus" does not necessarily justify abstention.
Gonzales v. Media Elements, Inc., 946 F.2d 157 (1st Cir. 1991). In personal injury
action against an insolvent insurer, court held that abstention was required
under Burford v. Sun Oil Co., 319 U.S. 315 (1943), because federal jurisdiction