White v. United States (493 U.S. 5)/Dissent Stevens

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Dissenting Opinion

Justice STEVENS, dissenting.

Workers' compensation is generally a subject of local interest and control with which federal courts have only minimal contact. The Texas Workers' Compensation Act is unusual because employers who carry workers' compensation insurance normally are not parties to the processing of claims that are made against their insurers. Moreover, when an award is made, either the employee or the insurance company may obtain de novo review in a judicial proceeding in which the employee bears the burden of proof regardless of which party requested review. In other words, in both the administrative proceeding and the judicial proceeding, the employee is the party who must assert and prove that his claim against a carrier is meritorious.

One of the consequences of the unique Texas program was the generation of an unusually large volume of federal litigation between Texas employees and out-of-state insurance companies. In 1957 the dockets of the United States District Courts in Texas were burdened with 2,147 Texas workers' compensation cases. Over half of them (1,148) were cases that had been originally filed in a Texas court and removed to a federal court. Of the remainder, 957 were original actions filed by employees and 25 were original actions filed by insurance carriers. [1] The statute enacted by Congress in 1958, [2] which prevents the removal of workers' compensation cases, eliminated a little over half of that burden but did not affect the actions originally filed in the federal district court by either employees or insurance carriers. See Horton v. Liberty Mutual Ins. Co., 367 U.S. 348, 352, 81 S.Ct. 1570, 1573, 6 L.Ed.2d 890 (1961); see also ante, at 9.

In 1964, Congress passed another statute further curtailing federal diversity jurisdiction over claims against insurance carriers. As the Court correctly notes, ante, at 9-10, that statute was a response to the dramatic increase in the workload of the Federal District Courts in Louisiana resulting from the enactment of the Louisiana statute authorizing injured parties to bring direct actions against insurance companies without joining the alleged tortfeasors as parties. [3] The legislative history of that statute does not mention workers' compensation cases. The question whether the 1964 statute ousted the federal courts in Texas of jurisdiction over the remaining half of their workers' compensation docket was, therefore, not answered by legislative history.

The United States Court of Appeals for the Fifth Circuit has, however, answered that question in two steps. In 1974, in Hernandez v. Travelers Ins. Co., 489 F.2d 721, cert. denied, 419 U.S. 844, 95 S.Ct. 78, 42 L.Ed.2d 73 (1974), the Court of Appeals held that a workers' compensation policy is a "policy or contract of liability insurance" and that an action against an insurer on such a policy is a "direct action" within the meaning of 28 U.S.C. § 1332(c) (1982 ed.). [4] That holding took care of over 95 percent of the post-1958 residue of Texas workers' compensation cases. In 1977, the Fifth Circuit took the second step to dispose of the remaining handful of cases-those originally filed in federal court by insurance companies. In Campbell v. Insurance Co. of North America, 552 F.2d 604 (1977), the court held that the specific characteristics of the Texas workers' compensation statute made it appropriate to treat a federal action that had been filed by the insurance carrier as an action "against the insurer" within the meaning of the proviso to § 1332(c).

Today the Court rejects the second, relatively unimportant, holding in Campbell, and leaves standing the decision in Hernandez. The net result of this case, then, is to preserve federal jurisdiction over the tiny fraction of Texas workers' compensation cases that are brought by insurance carriers and to leave untouched the interpretation of the statute governing the other 971/2 percent. Since the Hernandez decision is consistent with the interpretation of the proviso to § 1332(c) that has been adopted in other Circuits, see Aetna Casualty & Surety Ins. Co. v. Greene, 606 F.2d 123, 126 (CA6 1979), and since the question whether the case involves a "direct action" and a "policy of liability insurance" turns in large part on an understanding of specific features of the Texas statute, I agree with the Court's decision to leave that holding untouched. I disagree, however, with its disposition of the issue it does decide.

On the merits, three characteristics of the Texas scheme make it appropriate to characterize the judicial review of a compensation award as an action "against" the insurance carrier regardless of which party initiated the review proceeding. First, the underlying claim for compensation that is at issue from beginning to end is unquestionably a claim against the insurance company. Second, the fact that as a matter of state law the burden of proof remains on the employee is of more importance in determining the true character of the judicial proceeding than the identity of the party who filed the initial pleading. [5] Third, and perhaps of greatest importance, the question whether the matter in controversy is sufficient to sustain federal jurisdiction is determined by the magnitude of the employee's claim, rather than by the amount of the award that the insurance company challenges. Horton v. Liberty Mutual Ins. Co., 367 U.S. 348, 81 S.Ct. 1570, 6 L.Ed.2d 890 (1961). [6] Arguably, these three features of the Texas scheme are not sufficient to overcome the Court's literal approach to the art of statutory interpretation. They are, however, buttressed by three additional considerations that are persuasive to me. First, since the resolution of the issue depends largely on a correct understanding of a state statute, I believe we should give deference to the Court of Appeals' evaluation of the characteristics of the Texas procedures. Cf. Bishop v. Wood, 426 U.S. 341, 346, 96 S.Ct. 2074, 2078, 48 L.Ed.2d 684 (1976). Second, that court's interpretation of the law provides evenhanded treatment to both parties, whereas the opinion this Court expresses today gives favored treatment to the insurance carriers; [7] it seems unlikely that Congress intended the 1964 statute to have that kind of discriminatory impact. Third, the Court's construction of the provision ignores the dominant policy that should be heeded whenever we construe statutes governing federal diversity jurisdiction.

"These requirements, however technical seeming, must be viewed in the perspective of the constitutional limitations upon the judicial power of the federal courts, and of the Judiciary Acts in defining the authority of the federal courts when they sit, in effect, as state courts. See Madisonville Traction Co. v. Mining Co., 196 U.S. 239, 255 [25 S.Ct. 251, 255, 49 L.Ed. 462], and Ex parte Schollenberger, 96 U.S. 369, 377 [24 L.Ed. 853]. The dominant note in the successive enactments of Congress relating to diversity jurisdiction, is one of jealous restriction, of avoiding offense to state sensitiveness, and of relieving the federal courts of the overwhelming burden of 'business that intrinsically belongs to the state courts,' in order to keep them free for their distinctive federal business. See Friendly, The Historic Basis of Diversity Jurisdiction, 41 Harv.L.Rev. 483, 510; Shamrock Oil Corp. v. Sheets, 313 U.S. 100, 108-09 [61 S.Ct. 868, 872, 85 L.Ed. 1214]; Healy v. Ratta, 292 U.S. 263, 270 [54 S.Ct. 700, 703, 78 L.Ed. 1248]." Indianapolis v. Chase National Bank, 314 U.S. 63, 76 [62 S.Ct. 15, 20, 86 L.Ed. 47] (1941).

Finally, I must add a word about the unwisdom in granting certiorari to decide the merits of this case. The law had been settled in the Fifth Circuit in a perfectly sound and sensible way for over a decade when at least four Members of this Court voted to hear this case. Measured by 1957 standards, the question we decide today affects only 25 cases out of a total that then amounted to 2,147. Since the jurisdictional amount has since been increased from $3,000 to $50,000, the number of cases actually affected by today's decision may be even smaller. [8] Thus, although it is true as the Court observes that Congress has the power to amend the statute to eliminate its disparate consequences, ante, at 12-13, it is hardly likely to consider such action worth the effort. The most significant aspect of today's decision is the revelatory light it sheds on the way we manage our scarce resources.

I respectfully dissent.


^1  There were also 17 cases transferred from other jurisdictions. See S.Rep. No. 1830, 85th Cong., 2d Sess., 8 (1958), U.S.Code Cong. & Admin.News 1958, p. 3099.

^2  "Sec. 5. (a) Section 1445 of title 28 of the United States Code is amended by adding at the end thereof a new paragraph as follows:

" '(c) A civil action in any State court arising under the workmen's compensation laws of such State may not be removed to any district court of the United States.' " 72 Stat. 415.

^3  See H.R.Rep. No. 1229, 88th Cong., 2d Sess., 4-5 (1964).

^4  That section provides:

"(c) For the purposes of this section and section 1441 of this title, a corporation shall be deemed a citizen of any State by which it has been incorporated and of the State where it has its principal place of business: Provided further, That in any direct action against the insurer of a policy or contract of liability insurance, whether incorporated or unincorporated, to which action the insured is not joined as a party-defendant, such insurer shall be deemed a citizen of the State of which the insured is a citizen, as well as of any State by which the insurer has been incorporated and of the State where it has its principal place of business."

^5  "The specific question is this: Does an alignment of the parties in relation to their real interests in the 'matter in controversy' satisfy the settled requirements of diversity jurisdiction?

"As is true of many problems in the law, the answer is to be found not in legal learning but in the realities of the record. Though variously expressed in the decisions, the governing principles are clear. To sustain diversity jurisdiction there must exist an 'actual,' Helm v. Zarecor, 222 U.S. 32, 36 [32 S.Ct. 10, 12, 56 L.Ed. 77], 'substantial,' Niles-Bement-Pond Co. v. Iron Moulders Union, 254 U.S. 77, 81 [41 S.Ct. 39, 41, 65 L.Ed. 145], controversy between citizens of different states, all of whom on one side of the controversy are citizens of different states from all parties on the other side. Strawbridge v. Curtiss, 3 Cranch 267 [2 L.Ed. 435]. Diversity jurisdiction cannot be conferred upon the federal courts by the parties' own determination of who are plaintiffs and who defendants. It is our duty, as it is that of the lower federal courts, to 'look beyond the pleadings and arrange the parties according to their sides in the dispute.' Dawson v. Columbia Trust Co., 197 U.S. 178, 180 [25 S.Ct. 420, 421, 49 L.Ed. 713]. Indianapolis v. Chase National Bank, 314 U.S. 63, 69, 62 S.Ct. 15, 16, 86 L.Ed. 47 (1941).

^6  As Judge Tuttle has explained:

"The Texas Compensation Law permits any interested party, including, of course, the insurer, to bring suit to 'set aside' the award of the Industrial Accident Board. As noted previously, however, once such an action is commenced, the award becomes an absolute nullity under the Texas statute. The filing of the suit, in and of itself, abrogates the award, and this is so even if a voluntary nonsuit is taken and the case dismissed without judgment on the merits. The insurer is under no obligation to prove that the award was erroneous, even though the insurer's action is designated as an action to 'set aside' the award. To the contrary, once an action such as this is filed, a trial de novo is conducted, and the burden is on the insured (here, the defendant) to plead and prove whether and to what extent he is entitled to compensation. Thus, when the insurer institutes such an action, it is a 'plaintiff' in name only. The filing of suit by the insurer is nothing more than a notice to the insured to come into court and prove his claim.

"Thus it is that the amount actually in controversy in the action cannot be determined until the insured responds to this notice by filing a claim for compensation against the insurer. The insured's 'counterclaim' is, for all intents and purposes, the only claim involved in the action." Hardware Mutual Casualty Co. v. McIntyre, 304 F.2d 566, 570 (CA5) (citations omitted), cert. denied, 371 U.S. 878, 83 S.Ct. 147, 9 L.Ed.2d 115 (1962).

^7  In his dissenting opinion in Horton v. Liberty Mutual Ins. Co., 367 U.S. 348, 362-363, 81 S.Ct. 1570, 1578-1579, 6 L.Ed.2d 890 (1961), Justice Clark, who was also familiar with Texas procedures, observed:

"Moreover, the Senate Report expressed concern for the problems of the injured employee in federal court,

" '[S]ome of these State [workmen's compensation] statutes limit the venue to the place where the accident occurred or to the district of the workman's residence. When removed to the Federal court the venue provisions of the State statute cannot be applied. Very often cases removed to the Federal courts require the workman to travel long distances and to bring his witnesses at great expense. This places an undue burden upon the workman and very often the workman settles his claim because he cannot afford the luxury of a trial in Federal court.' S.Rep. No. 1830, 85th Cong., 2d Sess. 9 [U.S.Code Cong. & Admin.News 1958, p. 3106].

"While 28 U.S.C. § 1332 does not specifically prohibit the filing of original workmen's compensation cases, a clearer expression of congressional dislike for saddling federal courts with such cases could hardly be imagined. We should, therefore, give effect to this policy wherever possible. Not only does the decision today fail to do this, but the Court goes out of its way to defeat the congressional intent. The statement that 'the workman has the option to file his case in either the Federal or the State court,' S.Rep. No. 1830, 85th Cong., 2d Sess. 9 [U.S.Code Cong. & Admin.News 1958, p. 3106], is no longer correct. It is now an unequal race to the courthouse door-a race which the insurers will invariably win, since they have resident counsel in Austin (the location of the Texas Industrial Accident Board) who quickly secure news of Board awards and are thus enabled to 'beat' the workman in the choice of forums. Thus, the Court-contrary to the specifically expressed intention of the Congress-grants the insurance companies the option of going into federal court, with all its attendant difficulties to the already overburdened federal judiciary and the impecunious workman."

^8  It is true that the Court of Appeals for the Sixth Circuit had held that a declaratory judgment action brought by an insurance company to construe a workers' compensation policy is not an action "against" the company within the meaning of the proviso, Aetna Casualty & Surety Ins. Co. v. Greene, 606 F.2d 123 (1979), and that case might at first blush have been thought to create a conflict with the Fifth Circuit's decision in Campbell v. Insurance Co. of North America, 552 F.2d 604 (1977). That apparent conflict, however, was wholly illusory because the special characteristics of the Texas workers' compensation statute were not replicated in Tennessee. Indeed, in later cases the Fifth Circuit has itself recognized that the holding in Campbell is not applicable to actions filed by insurance companies seeking constructions of policies covering liability for personal injury. See Evanston Ins. Co. v. Jimco, Inc., 844 F.2d 1185, 1189 (1988); Dairyland Ins. Co. v. Makover, 654 F.2d 1120, 1124-1125 (1981).

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).