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proceedings. The New York insurance commissioner had first obtained
jurisdiction and other courts, except when called on by the court of primary
jurisdiction for assistance, are excluded from participation.
Warmus v. Melahn, et al., 110 F. 3rd. 566 (8 th Cir. 1997). Plaintiff controlled an
insurance holding company including Missouri‐domiciled American Financial
Security Life Insurance Company (“AFSLIC”). Plaintiff filed suit in federal
court against the Director of Insurance, Melahn, in his personal capacity. The
suit was for damages that allegedly resulted from Melahn’s state petition
placing AFSLIC in rehabilitation. The District Court dismissed on a threepronged
Younger abstention and Plaintiff appealed. The appellate court
affirmed finding that there was the potential for undue federal interference
present.
Wolfson v. Mutual Benefit Life Ins. Co., 51 F.3d 141 (8 th Cir. 1995). Mutual
Benefit issued group life policies to the employees of Dippy Donuts, Inc.
Plaintiff was the beneficiary of a deceased employee, but her claim for
benefits under the policy was denied based upon contractual issues.
Plaintiff sued in Nebraska state court and Mutual Benefit removed. Plaintiff
amended her claim to include an ERISA count. Subsequently, Mutual Benefit
was placed in rehabilitation and Plaintiff’s action was temporarily stayed
pending action by the court overseeing Mutual Benefit’s rehabilitation. As
part of the recovery plan, Mutual Benefit’s group life policies were sold by
the rehabilitator to Fortis Benefits Insurance company. Plaintiff attempted
on four occasions to get relief from the stay and to amend her complaint to
add Fortis as an additional party. All were denied by the U.S. District Court
and Plaintiff appealed. The appellate court found that both Burford and
Colorado River abstention was proper in light of the state insolvency
proceedings surrounding Mutual Benefit. This holding was subsequently
rejected by the U.S. Supreme Court in Quackenbush v. Allstate Ins. Co., 517
U.S. 706 (1996), which held that the power to dismiss or remand cases based
on abstention principles only applied where the relief being sought was
equitable or otherwise discretionary.
Ninth Circuit
Garamendi v. Allstate Ins. Co., 47 F.3d 350 (9th Cir. 1995). The Ninth Circuit
held that a remand order based on Burford abstention was a final collateral
order and therefore was reviewable on appeal, rather than by writ of
mandamus. The court further held that the Burford abstention doctrine did
not apply to a suit solely seeking legal relief. The suit was commenced in
state court by the Insurance Commissioner seeking contract and tort
damages against a reinsurer of an insolvent insurer. The reinsurer removed
the action to federal court on diversity grounds and filed a motion to compel
arbitration. The Commissioner then sought remand to the state court. The
Commissioner argued that the federal court’s resolution of the action might
interfere with California’s regulation of insurer insolvencies because the
issue of the reinsurer’s setoff rights, which was before the federal court, was
also before the state court. Accordingly, the Commissioner argued,
abstention was proper. The Ninth Circuit vacated the District Court’s
decision to abstain and remanded for further proceedings.
Hutchins v. Pacific Mutual Life Ins. Co. of California, 97 F.2d 58 (9th Cir. 1938),
cert. denied, 305 U.S. 630, (1938). The Ninth Circuit repeated the settled law
that where a state and a federal court both have concurrent jurisdiction in suits
in rem or quasi in rem, the court first assuming jurisdiction over the property
may maintain and exercise that jurisdiction to the exclusion of the other. Since
the state court acquired possession of the res, it had power to determine,