Muriel's New Orleans, LLC v. State Farm Fire & Cas. Co.

501 F.Supp.3d 378

MURIEL'S NEW ORLEANS, LLC

v.STATE FARM FIRE AND CASUALTY COMPANY

CIVIL ACTION NO. 20-2295

United States District Court, E.D. Louisiana.

Signed November 18, 2020

Daniel Ernest Davillier, Charles F. Zimmer, II, Jonathan David Lewis, Davillier Law Group, LLC, Roderick Alvendia, Alvendia, Kelly, & Demarest, LLC, New Orleans, LA, James McClendon Williams, Chehardy, Sherman, Williams, Murray, Recile, Stakelum & Hayes, LLC, Metairie, LA, for Muriel's New Orleans, LLC.

David A. Strauss, Chelsea Coleman Crews, Strauss Massey Dinneen LLC, New Orleans, LA, for State Farm Fire and Casualty Company.

SECTION: "G"(5)

ORDER

NANNETTE JOLIVETTE BROWN, CHIEF JUDGE

This litigation arises from an alleged denial of insurance coverage for damages arising from the COVID-19 pandemic. Pending before the Court is Plaintiff Muriel's New Orleans, LLC's ("Muriel's") "Motion to Remand."¹ Defendant State Farm Fire and Casualty Company ("State Farm") opposes the motion. Considering the motion, the memoranda in support and in opposition, the record, and the applicable law, the Court denies Muriel's motion to remand.

I. Background

On June 22, 2020, Muriel's filed a petition against State Farm in the Civil District Court for the Parish of Orleans, State of Louisiana.² In the petition, Muriel's alleges that it entered into an "all-risk" insurance contract with State Farm to cover losses at its restaurant, Muriel's Jackson Square, in New Orleans, Louisiana (the "Policy").³ According to Muriel's, the Policy was in "full effect, providing property, business personal property, business income, and extra expense, and additional coverages between the period of June 19, 2019 through June 19, 2020."⁴ During this time, Muriel's allegedly "faithfully paid policy premiums" to State Farm.⁵ Muriel's alleges that under the Policy, insurance coverage is extended to "apply to the actual loss of business income sustained and necessary extra expenses incurred when access to the insured premises is specifically prohibited by order of civil authority."⁶

In March and April 2020, in response to the COVID-19 pandemic, Louisiana Governor John Bel Edwards and New Orleans Mayor LaToya Cantrell issued a series of orders and emergency proclamations restricting public gatherings and limiting restaurant operations.⁷ Plaintiff alleges that it sustained a "massive and detrimental hit to its business income" and lost the "functionality and use of its physical property" as a result of these directives.⁸ Muriel's avers that its losses constitute "direct physical losses" covered by the Policy.⁹

Muriel's alleges that State Farm nevertheless denied coverage, claiming that Muriel's: (1) had not suffered physical loss or damage, and (2) was precluded from coverage due to the "virus exclusion."¹⁰ Muriel's asserts that State Farm's denial of coverage constitutes a breach of contract resulting in "significant damages."¹¹ Muriel's also seeks a judicial declaration as to its rights and State Farm's obligations under the Policy.¹²

A. Procedural Background

On June 22, 2020, Muriel's filed a petition in the Civil District Court for the Parish of Orleans, State of Louisiana.¹³ State Farm removed the case to this Court on August 19, 2020, asserting diversity jurisdiction under Title 28, United States Code, Section 1332.¹⁴

On September 11, 2020, Muriel's filed the instant motion to remand the case to state court.¹⁵ In support of remand, Muriel's argues that Louisiana law requires that foreign insurers such as State Farm submit to the exclusive jurisdiction and venue of the state courts of Louisiana in exchange for the right to sell insurance policies to its citizens.¹⁶

On September 16, 2020, State Farm filed a motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6).¹⁷ On September 23, 2020, Muriel's filed a motion to continue the submission date of State Farm's motion to dismiss, requesting that the Court defer ruling on State Farm's motion to dismiss until after it rules on Muriel's motion to remand.¹⁸ On October 1, 2020, the Court granted Muriel's motion and continued the submission date for "State Farm's Rule 12(b)(6) Motion to Dismiss Plaintiff's Petition for Failure to State a Claim"¹⁹ to November 18, 2020.

On October 13, 2020, State Farm filed an opposition to the instant motion to remand.²⁰ With leave of Court, Muriel's filed a reply memorandum in further support of the motion to remand on October 19, 2020.²¹ On October 22, 2020, with leave of Court, State Farm filed a sur-reply to Muriel's reply memorandum.²²

II. Parties’ Arguments

A. Muriel's Arguments in Support of the Motion to Remand

In the motion to remand, Muriel's "does not challenge the jurisdiction of this Court over the instant matter based on diversity of citizenship and a claim in excess of the $75,000."²³ Rather, Muriel's argues that State Farm waived its right to remove the instant action to federal court.²⁴ Muriel's relies on Louisiana Revised Statute § 22:868 to argue that "State Farm agreed to subject itself to the exclusive jurisdiction and venue of Louisiana's state courts."²⁵

Louisiana Revised Statute § 22:868, as amended in June 2020, provides, in pertinent part:

A. No insurance contract delivered or issued for delivery in this state and covering subjects located, resident, or to be performed in this state, ..., shall contain any condition, stipulation, or agreement either:

(1) Requiring it to be construed according to the laws of any other state or country except as necessary to meet the requirements of the motor vehicle financial responsibility laws of such other state or country.

(2) Depriving the courts of this state of the jurisdiction or venue of action against the insurer.²⁶

Muriel's contends that pursuant to § 22:868, "in exchange for the right to sell insurance in Louisiana[,] foreign insurers are required to agree that they cannot deprive Louisiana's state courts of jurisdiction or venue over disputes with the insureds."²⁷ Muriel's argues that the statutory language of § 22:868(A)(2) constitutes "a forum selection prohibition enacted as part of the Insurance Code's goal to protect Louisiana insureds," and by "chos[ing] to sell insurance in Louisiana," State Farm "overt[ly] waive[d] its right to seek redress by any court other than a Louisiana state court."²⁸ In addition, Muriel's contends that pursuant to § 22:868, "State Farm was not allowed to state plainly in a bilateral contract that federal court was the forum of choice."²⁹ Muriel's also notes that in June 2020, the Louisiana legislature "clarified its intent that jurisdiction and venue before a court ‘of the state’ of Louisiana is required for any dispute over an insurance contract regulated by the Louisiana Department of Insurance."³⁰

B. State Farm's Arguments in Opposition to the Motion to Remand

State Farm offers four arguments in opposition to Muriel's motion to remand.³¹ First, State Farm argues that "there is no basis in federal law for remand."³² Specifically, State Farm contends that Muriel's does not base its motion for remand on the grounds set forth in 28 U.S.C. § 1446(c), and that "[f]ederal abstention jurisprudence provides no basis for remand here."³³

Second, State Farm argues that "the Supremacy Clause [of the United States Constitution] prohibits Muriel's argument because the states may not infringe on the right of removal."³⁴ Specifically, State Farm contends that remanding the instant action on the basis of § 22:868 would be unconstitutional because it would require the Court to "find that state legislatures are empowered to enact laws which limit federal subject matter jurisdiction (original and/or removal)."³⁵ State Farm asserts that state law "cannot alter or limit a federal court's original jurisdiction" in this way.³⁶ For this reason, State Farm avers that "[u]nder the Supremacy Clause, a Louisiana law cannot be interpreted to compel State Farm, a foreign insurer, to waive its constitutional right to federal jurisdiction under 28 U.S.C. § 1332."³⁷

Third, State Farm argues that "[ Louisiana Revised Statute §] 22:868 solely addresses the contractual requirements for policies and does not purport to address matters outside the scope of the contract of insurance."³⁸ State Farm contends that § 22:868 does not dislodge the "long-established constitutional right of defendants to remove suits to federal court, and the long-established federal law prohibiting states from attempting to limit this right."³⁹ Rather, State Farm asserts that § 22:868 prohibits insurers from issuing policy contracts containing a condition requiring policyholders to agree to litigate disputes outside of Louisiana.⁴⁰ For this reason, State Farm argues that § 22:868 is inapplicable to the instant lawsuit.⁴¹

Fourth, State Farm argues that the amendment adding "or venue" to the statutory text of § 22:868 became effective on August 1, 2020, and does not apply retroactively to this matter.⁴² Specifically, State Farm asserts that the amendment is "substantive in nature" and therefore applies only prospectively pursuant to Louisiana Civil Code article 6.⁴³ Because the instant lawsuit was filed in July 2020, State Farm contends that the amended Louisiana Revised Statute § 22:868 does not apply.⁴⁴

C. Muriel's Arguments in Further Support of the Motion to Remand

In reply, Muriel's first argues that the McCarran–Ferguson Act, 15 U.S.C. § 1012, controls in the event of a conflict between state and federal law regarding regulation of the insurance industry.⁴⁵ Muriel's contends that, pursuant to the McCarran–Ferguson Act and Fifth Circuit precedent interpreting the McCarran–Ferguson Act, Louisiana Revised Statute § 22:868 "cannot be preempted by the removal statutes of 28 U.S.C. § 1441."⁴⁶ Instead, Muriel's contends that the McCarran–Ferguson Act provides for "reverse-preemption" whereby state law supersedes an otherwise applicable federal statute unless the federal statute "specifically relates to the business of...