United States Court of Appeals,

Fifth Circuit.

No. 91-4970

Summary Calendar.

The AMERICAN BANK AND TRUST COMPANY OF OPELOUSAS, Plaintiff-Appellant,

v.

Fred C. DENT, etc., et al., Defendants,

Lynda Drake, In Her Capacity as Commissioner of Financial Institutions for the State of

Louisiana, Defendant-Appellee.

Feb. 10, 1993.

Appeal from the United States District Court for the Western District of Louisiana.

Before GARWOOD, HIGGINBOTHAM and BARKSDALE, Circuit Judges.

GARWOOD, Circuit Judge:

Plaintiff-appellant American Bank & Trust Company of Opelous as, Lo uisiana (American

Bank) brought this suit in the United States D ist rict Court for the Western District of Louisiana

seeking a declaratory judgment that a Louisiana statute allegedly prohibiting it from selling insurance

was unconstitutional, and an injunction against any acts by the Louisiana Commissioner of Financial

Institutions to enforce the statute. The district court dismissed the suit, concluding that it was barred

by the Eleventh Amendment. We reverse and remand.

Facts and Proceedings Below

On March 21, 1990, American Bank wrote to Fred C. Dent, Commissioner of Financial

Institutions for the State of Louisiana (Commissioner), asking on behalf of itself and other similarly

situated Louisiana state-c hart ered banks that the Commissioner promulgate parity regulations

permitting those banks to act as general agents for the sale of life and casualty insurance. The letter

observed that because of a combination of federal and state statutes and regulations, state banks were

denied this ancillary business opportuni ty while the financial institutions in Louisiana against whom

they competed were not: national banks were permitted to engage in general insurance agency1 12 U.S.C. § 92 [note] provides that any national bank "located and doing business in any

place the population of which does not exceed five thousand inhabitants ... may, under such rules

and regulations as may be prescribed by the Comptroller of the Currency, act as the agent for any

fire, life, or other insurance company authorized by the authorities of the State in which such bank

is located to do business in said State." Although since 1952 the United States Code has omitted

this section on the basis that it was not included in a 1918 amendment and was thereby repealed,

the Comptroller of the Currency has promulgated regulations under it, see 12 C.F.R. § 7.7100,

and the Supreme Court and this Court have also assumed that it is still in force. See

Commissioner v. First Security Bank of Utah, N.A., 405 U.S. 394, 402 & n. 12, 92 S.Ct. 1085,

1090 & n. 12, 31 L.Ed.2d 318 (1972); First National Bank of La Marque v. Smith, 610 F.2d

1258, 1261 n. 6 (5th Cir.1980); Saxon v. Georgia Association of Independent Insurance Agents,

Inc., 399 F.2d 1010 (5th Cir.1968). The D.C.Circuit, however, recently addressed the question

squarely and concluded that Congress repealed the section in 1918 (though in all likelihood

because of inadvertently placed quotation marks in a 1916 enactment). Independent Insurance

Agents of America v. Clarke, 955 F.2d 731, 734-39 (D.C.Cir.), reh'g en banc denied, 965 F.2d

1077 (D.C.Cir.1992), cert. granted, --- U.S. ----, 113 S.Ct. 810, --- L.Ed.2d ---- (1992).

2 Section 6:121(B)(2) provides in pertinent part:

"Notwithstanding any other provision of this Title, the commissioner shall

not authorize any bank, bank holding company, or subsidiary thereof to engage in

any insurance activity except an insurance activity in which a bank may engage

pursuant to the provisions of R.S. 6:242(A)(6)."

La.Rev.Stat.Ann. § 6:242(A)(6)(a) authorizes a state bank to act as the agent for an

insurance company "only with respect to credit insurance which, within the terms and

conditions authorized by law, is limited to assuring repayment or partial repayment of the

outstanding balance due on a specific extension of credit by a bank ... and collecting

premiums on those policies issued through the bank by such insurance company." Section

6:242(A)(6)(a) also provides that "[n]otwithstanding any other provisions of this Title, no

bank shall engage or be authorized to engage in any insurance activity that is not expressly

permitted by this Paragraph." activities in communities of less than five thousand persons; 1 federal-chartered and state-chartered

thrift institutions were allowed to engage in such activities through t heir servi ce corporati on

subsidiaries, see 12 C.F.R. § 545.74(c)(6)(ii); La.Reg. 541; and, credit unions could sell insurance

to their members, see La.Rev.Stat.Ann. § 6:644(B)(9) (West 1986).

The parity regulations, the letter contended, should enable state banks to engage in general

insurance activities to the same extent as national banks; specifically, they should allow state banks

to act as general insurance agents through branches located in communities of less than five thousand

persons. American Bank called upon the Commissioner to promulgate such regulations

notwithstanding what it ackn o wledged to be the "clear prohibition" of La.Rev.Stat.Ann. §

6:121(B)(2), 2 arguing that that statute was facially and in application violative of the Equal Protecti on3 Lynda Drake has since been substituted as the party defendant in her capacity as Deputy

Commissioner of Financial Institutions. Clause. The letter not ed that, by virtue of La.Rev.Stat.Ann. §§ 6:902(B) and 6:903, the

Commissioner could promu lgat e parity regulations to give state-chartered savings and loan

associations the same authority as their federal counterparts (and that the Commissioner's predecessor

in office had promulgated such regulations), and argued that se c tion 6:121(B)(2)'s prohibition of

similar regulations for state banks was arbitrary and discriminatory state action.

On April 3, 1990, the Commissioner responded with a one-sentence letter advising American

Bank that its request was denied. On April 11, American Bank commenced this action in federal

district court seeking declaratory and injunctive relief against Dent in hi s o fficial capacity as

Commissioner. 3 The complaint sought a declaratory judgment that La.Rev.Stat.Ann. §§ 6:121(B)(2)

and 6:242(A)(6) denied American Bank equal prote ct io n of the law guaranteed by the Fourteenth

Amendment and 42 U.S.C. § 1983 and that the Commissioner's refusal to promulgate pari ty

regulations was therefore unconstitu t io nal. It also requested an injunction against any acts by the

Commissioner or his employees to enforce sections 6:121(B)(2) and 6:242(A)(6).

On June 15, 1990, the Commissioner moved to dismiss on the ground that, inter alia, the suit

against him in his official capacity was in substance a suit against the State of Louisiana and thus

barred by the Eleventh Amendment. The motio n also argued that the court should dismiss the

complaint under any of three abstention doctrines: (1) the doctrine of Y ounger v. Harris, 401 U.S.

37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), under which federal courts should abstain from interfering

with pending state proceedings; (2) the principle of B urford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct.

1098, 87 L.Ed. 1424 (1943), under which, when t imely and adequate state court review is available,

federal courts sitting in equity should avoid disrupting a state's efforts to implement a coherent policy

through an administrative scheme; and (3) the doctrine of R ailroad Commission of Texas v. Pullman

Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941), under which federal courts should refrain

from granting equitable relief on constitutional grounds if resolution of an unsettled question of state

law may obviate the constitutional question. This last type of abstention was urged because ofLa.Rev.Stat.Ann. § 6:242(C) (West Supp.1992), a statute enacted in 1988 that had not been invoked

by American Bank. Section 6:242(C) provides:

"In addition to any o t her powers, a state bank shall have and possess such rights,

po wers, privileges, and immunities of a national bank domiciled in this state as may be

prescribed by rule or regulation promulgated by the commissioner. In the event of a conflict

between this Subsection or any rule o r regulation promulgated hereunder and any other

provision of law, the provisions of this Subsection shall control."

The Commissioner alleged in his motion to dismiss that American Bank ' s request raised the

question—not yet addressed by the Louisiana courts—whether section 6:242(C)'s apparent general

grant of authority to promulgate the type of regulations sought by American Bank overrode the

specific prohibition of 6:121(B)(2). On the advice of counsel that it did not, the Commissioner had

denied American Bank's request.

Fo llo wing a hearing on the motion to dismiss on September 12, 1991, the district court

accepted the Commissioner's Eleventh Amendment argument, and entered judgment on November

4 dismissing t he case under Fed.R.Civ.P. 12(b)(1). The judgment did not address the question of

abstention. No opinion was entered by the district court. American Bank brings this appeal.

Discussion

American Bank argues that the district court erred in dismissing the suit on sovereign

immunit y grounds because thi s case falls within the exception to Eleventh Amendment immunity

carved out by E

x parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), and succeeding

cases. Y oung established the principle that the Eleventh Amendment does not bar a suit in federal

court against a state official to enjoin his enforcement of a state law alleged to be unconstitutional.

The Supreme Court, though it has clarified that Y oung cannot be extended to permit a suit for

equitable monetary restitution from the state treasury for a past breach of a legal duty, Edelman v.

Jordan, 415 U.S. 651, 662-72, 94 S.Ct. 1347, 1355-60, 39 L.Ed.2d 662 (1974), has reaffirmed the

basic holding of Young as to purely prospective relief on numerous occasions. S ee, e.g., Papasan v.

Allain, 478 U.S. 265, 276, 106 S.Ct. 2932, 2939, 92 L.Ed.2d 209 (1986); P ennhurst State School

& Hospit al v. Halderman, 465 U.S. 89, 102, 104 S.Ct. 900, 909, 79 L.Ed.2d 67 (1984); R ay v.

Atlantic Richfield Co., 435 U.S. 151, 15 7 n. 6, 98 S.Ct. 988, 994 n. 6, 55 L.Ed.2d 179 (1978);4 See, e.g., 17 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 4231, at

567 (1988); 1 R. Rotunda, J. Nowak, & J. Young, Treatise on Constitutional Law : Substance

and Procedure § 2.12, at 87 (1986). Georgia Railroad & Banking Co. v. Redw ine, 342 U.S. 299, 304, 72 S.Ct. 321, 324, 96 L.Ed. 335

(1952).

We agree with American Bank that the present case falls squarely within the Young doctrine.

The Commissioner's arguments to the contrary are unavailing. First, the Commissioner argues that

the suit is barred because "the stat e is t he real, substantial party in interest," F ord Motor Co. v.

Departme nt of Treasury, 323 U.S. 459, 464, 65 S.Ct. 347, 350, 89 L.Ed. 389 (1945), in that any

relief granted would profoundly affect Louisiana's system for regulating banks and insurance

companies. Relying on L aje v. R.E. Thomason General Hospital, 665 F.2d 724, 727 (5th Cir.1982),

the Commissioner suggests that the inquiry for this Cour t is whether the Office of Financial

Institutions is merely an alter ego of the state. These arguments, however, misapprehend the essence

of the Young holding. Young did not establish a scheme in which courts are to pierce the plaint iff's

pleadings to decide if the suit is in substance one for relief against the state; indeed, since the nominal

defendant in Young, the attorney general of Minnesota, was merely acting under his general duty to

enforce the statutes of the state, such a test would have compelled a different outcome in that case.

Rather, the Court in Young held that enforcement of an unconstitutional law is by

definition—commentators often describe it as a "fiction" 4 —not an official act because the state cannot

confer authority on its officers to violate the Constitution or federal law. Y oung, 209 U.S. at 160,

28 S.Ct. at 454. The F

ord Motor Co. case was not one governed by the Young doctrine because it

was a suit for a refund of taxes from the state, i.e., retroactive monetary relief. S ee Ford Motor Co.,

323 U.S. at 464, 65 S.Ct. at 350. L aje was also a suit for monetary damages, and the discussion

relied upon by the Commissioner deals with an antecedent issue not pertinent to this case: Whether

the defendant hospital had a sufficiently close relationsh ip wit h the state to be entitled to raise the

defense of sovereign immunity in the first place. S ee Laje, 665 F.2d at 727. In this case, American

Bank does not contend that the Commissioner is not a state official (or that the Office of Financial

Institutions, which has not been named as a defendant, is not an arm of the State of Louisiana). Nochallenge is made to the Commissioner's abilit y in a proper case to invoke the Eleventh Amendment;

rather, it is simply argued—correctly—that because of the nature of relief sought he must contend

with the Young exception.

Second, the Commissioner seeks to escape the reach of Young by arguing that this case falls

within the group excluded from the Young doctrine by Pennhurst, i.e., those seeking pr ospective

injunctive relief on the basis of state law. S ee Pennhurst, 465 U.S. at 103-06, 104 S.Ct. at 909-11.

This argument is utterly without merit, however, because American Bank is alleging t hat sections

6:121(B)(2) and 6:242(A)(6) deny it the equal protecti on of the laws guaranteed by the Fourteenth

Amendment. As is common in Young cases, it is a state law that is challenged as unconstitutional,

but this does not mean that American Bank's cause of action arises under state law; American Bank

does not, like the Pennhurst plaintiff, rely on an alleged violation of the state statute.

Finally, the Commissioner relies on a statement by the Supreme C o urt in Will v. Michigan

Department of State Police, 491 U.S. 58, 109 S.Ct. 2304, 105 L.Ed.2d 45 (1989). In Will, having

decided that states were not "person[s]" subject to suit under 42 U.S.C. § 1983, the Court concluded

that the same result must apply to state o fficials sued in their official capacities because "a suit against

a state official in his or her official capacity

... is no different from a suit against the State itself." I d.

at 71, 109 S.Ct. at 2311. The Commissioner's attempt to invoke the Court's statement as dispositive

o f this Eleventh Amendment case, however (and thus as an implicit abandonment of the Y oung

do ct rine), is undercut by the W ill Court's recognition of the special sovereign immuni ty rules

applicable to suits for purely prospective relief, and the limitation of its section 1983 holding to make

it consistent with those principles: "Of course a State official in his or her official capacity, when sued

for injunctive relief, would be a person under § 1983 because "offic ial-capacity actions for

prospective relief are not treated as actions against the State.' " I d. at 71 n. 10, 109 S.Ct. at 2311 n.

10 (quoting Kentucky v. Graham, 473 U.S. 159, 167 n. 14, 105 S.Ct. 3099, 3106 n. 14, 87 L.Ed.2d

114 (1985)).

For the foregoing reasons, we conclude that the district court erred in dismissing the case

"pursuant to Federal Rule of Civil Procedure 12(b)(1) ... because this Court lacks subject matter5 The appropriate disposition would depend in part on what type of abstention were deemed

applicable. Whereas Pullman abstention contemplates merely the postponement of the exercise of

federal jurisdiction, see Harrison v. National Association for the Advancement of Colored

People, 360 U.S. 167, 177, 79 S.Ct. 1025, 1030, 3 L.Ed.2d 1152 (1959), Burford rests on the

premise that any intervention by a federal court would impermissibly disrupt state regulation, and

thus counsels dismissal. 17A Wright, Miller, & Cooper, supra note 4, § 4245, at 102.

6 This and other circuit courts generally review abstention decisions under an

abuse-of-discretion standard, see Allen v. Louisiana State Board of Dentistry, 948 F.2d 946, 949

(5th Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 1764, 118 L.Ed.2d 426 (1992); Hospital

Council of Western Pennsylvania v. City of Pittsburgh, 949 F.2d 83, 90 n. 4 (3d Cir.1991);

McIntyre v. McIntyre, 771 F.2d 1316, 1319 (9th Cir.1985), though it has been stated that

decisions to abstain are reviewed under a standard narrower than that applicable to decisions such

as evidentiary rulings, because the discretion to abstain "must be exercised within the narrow and

specific limits prescribed by the particular abstention doctrine involved." C-Y Development Co. v.

City of Redlands, 703 F.2d 375, 377 (9th Cir.1983). See also Shamrock Development Co. v. City

of Concord, 656 F.2d 1380, 1385 (9th Cir.1981) (although Pullman abstention would have been

advisable and within the discretion of the district court, the district court's decision to retain the

case fell short of an abuse of discretion).

7 However, we do consider the Commissioner's reliance on the Younger abstention doctrine to

be obviously unavailing; there are no pending state judicial proceedings in this case. jurisdiction." The Commissioner asks that we consider the abstention arguments raised in the

alternative, and dismiss the case on that basis. Because the abstention doctrines are not exceptions

to the federal courts' jurisdiction, but are rather judicially created guidelines defining circumstances

in which courts may decline to exercise jurisdiction, see New Orleans Public Service, Inc. v. Council

of City of New Orleans, 491 U.S. 350, 358-60, 109 S.Ct. 2506, 2512-13, 105 L.Ed.2d 298 (1989),

we could not sustain the district court's 12(b)(1) dismissal on their authority; a determination that

abstention is warranted would merely allow us to reach a comparable disposition 5 on other grounds.

We conclude, however, that the better course is to remand to the district court to enable it

to consider the abstention questions in the first instance. Even if all the preconditions for abstention

are present, the decision whether or not to abstain is generally one involving some exercise of

discretion by the district court. 6 Because the propriety of P ullman or Burford abst ent ion is not

absolutely clear on the present record, 7 we deem it advisable for the matter to be deci ded by the

district court in the first instance.

Conclusion

Because we conclude that under Ex parte Young and its progeny the Eleventh Amendmentdoes not bar this suit, we reverse the district court's dismissal and remand the case. We decline to

make a determination whether abstention is warranted under Pullman or Burford, in the belief that

the Comm

issio ner's abstention arguments are more properly addressed to the district court on

remand.

REVERSED AND REMANDED.