IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_____________________

No. 97-10302

_____________________

MUNICH AMERICAN REINSURANCE COMPANY;

NAC REINSURANCE CORPORATION,

Plaintiffs-Appellants,

versus

JOHN P. CRAWFORD, Insurance Commissioner

of the State of Oklahoma, as Receiver of

Employers National Insurance Corporation,

Defendant-Appellee.

_________________________________________________________________

Appeal from the United States District Court for the

Northern District of Texas

_________________________________________________________________ June 2, 1998 Before JOLLY, DUHÉ, and PARKER, Circuit Judges.

E. GRADY JOLLY, Circuit Judge

The dispute in this appeal is about who will decide the

entitlement to a $1.5 million pile of money--arbitrators pursuant

to the Federal Arbitration Act (the “FAA”), or the Oklahoma state

insurance regulato rs and courts under the McCarran-Ferguson Act.

Or, perhaps, the more specific question is who gets to decide who

will decide the enti tlement question--the federal courts or the

state courts. There are, however, several questions we must

address before we reach the ultimate disposition of this a ppeal.

The first question is one of jurisdiction: whether the district2

court had jurisdiction to reconsider its initial order compelling

arbitration of the dispute. We next consider whether the district

court correctly invoked the Burford abstention doctrine to dismiss

the action t o compel arbitration. Finally, we consider whether

state laws governing insurance company delinquency proceedings

reverse pre-empt the FAA under the McCarran-Ferguson Act. Although

we hold that Burford abstention was improper, we conclude that

jurisdiction was proper, that the FAA was reverse pre-empted by

Oklahoma law under the McCarran-Ferguson Act, and that this dispute

is one for the State of Oklahoma to resolve . We, accordingly,

affirm the district court’s dismissal of the petition to compel

arbitration.

I

On January 1, 1986, Employers National Insurance Corporation

(“ENIC”) and its parent corporation, Employe rs Casualty Company

(“ECC”), entered into reinsurance agreements with Munich American

Reinsurance Company (“Munich”) and NAC Reinsurance Corporation

(“NAC”). Munich and NAC entered into reinsurance agreements with

ECC and ENIC to cover ENIC’s potential losses under a prior

insurance contract (the “umbrella policy”) issued by ENIC to Jobs

Building Servic es, Inc. (“Jobs”). Under the reinsurance

agreements, Munich and NAC agreed to insure ENIC for a percentage

of the net loss on claims paid by ENIC under the umbrella policy.1 ECC had also been placed in receivership by its state

insurance commissioner.

3 “Net loss” was defined as “all payments by [ENIC] in settlement of

claims or losses, payment or benefits, or satisfaction of judgments

or awards, after deduction of salvage.” “Salvage” was in turn

defined as “any recovery made by [ENIC] in connection with a claim

or loss, less all expenses paid by [ENIC], other than payments to

any salaried employee of [ENIC] making such recovery.”

In 1991, ENIC paid $2,065,000 under the umbrella policy to

settle a wrongful death action against Jobs. Munich and NAC

maintain that ENIC submitted the claim and that each reinsurer paid

$829,250 on the reinsurance agreements. ENIC later brought an

action in Texas against the underlying insurer in the Jobs wrongful

death suit. The case was settled for $2.5 million following an

unsuccessful appeal.

On February 14, 1994, prior to the time that the settlement

was entered, an Oklahoma state court placed ENIC into liquidation. 1

John R. Crawford, the Insurance Commissioner of Oklahoma, was

appointed ENIC’s receiver for the ensuing delinquency proceedings.

The court’s liquidation order authorized and directed Crawford to

take all actions necessary and appropriate to accomplish ENIC’s

liquidation i n accordance with the Oklahoma Uniform Insurers

Liquidation Act. The order vested Crawford with title to all4

property of ENIC and directed him to take immediate and exclusive

possession of such property wherever located or thereafter

discovered. It also enjoined any action against ENIC, Crawford, or

any of ENIC’s assets.

Consistent with the liquidation order, ENIC’s attorneys

remitted to Crawford $1.5 million from settlement of the wrongful

death action, net of attorneys fees. Munich and NAC contacted

Crawford, asserting a vested property right in the proceeds. They

urged that t hese proceeds, as salvage under the reinsurance

agreements, were n ot part of the ENIC estate, but being held in

trust for them. Crawford insisted that the proceeds were not

salvage because, based on ENIC’s books and records, ENIC never

sought or received reimbursement from Munich, NAC, or ECC for the

unde rlying claims. When Crawford refused to remit the money,

Munich and NAC requested that he submit the dispute to arbitration

as called for by the reinsurance agreements. Crawford again

refused.

Finally, on July 18, 1996, Munich and NAC filed a petition in

federal district court to compel arbitration u nder the FAA, 9

U.S.C. § 4. On September 18, 1996, the district court entered an

order finding that ENIC was a party to the reinsurance agreements

and compelling the parties to submit the dispute to arbitration.

Crawford moved for a new trial, a rehearing, or an amendment to the5

judgment under Rule 59(e) of the Federal Rules of Civil Procedure.

It was on this motion that the district court first learned of the

state court injunction. On October 8, 1996, the district court

denied Crawford’s motion, noting, however, that principles of

comity and federalism required the state court to inter pret and

enforce its injunction with the appropriate contempt order if

necessary. As a result, Crawford filed a motion in state court

seeking specifically to enjoin the federal arbitration order and to

find Munich and NAC in contempt for v iolating the previous

injunction. Munich and NAC responded with a motion in the federal

district court for an injunction fo rcing Crawford to comply with

the arbitration order.

On November 14, 1996, the district court denied Munich’s and

NAC’s motion. The court also took the opportunity to clarify its

earlier order, stating:

[W]hether Petitioners violated the state court injunction

by filing this action is a matter for the state court to

determine. If the state court determines that the filing

of this action violated its injunction, this Court will

respect that decision by vacating the arbitration order

and dismissi ng the case. Except in exceptional

circumstances, it is the policy of this Court to refrain

from interfering with an ongoing state court proceeding.

Accordingly, the district court directed Crawford to file a motion

to dismiss the instant action if the state court determined that

its injunction had been violated. On January 13, 1997, the state

court found that Munich and NAC had violated the injunction issued6

at the outset of ENIC’s delinquency proceedings by petitioning the

federal district court to compel arbitration.

Pursuant to the district court’s November 14 order, Crawford

filed a motion to dismiss the action to compel arbitration. Munich

and NAC argued that abstention was inappropriate in this case and

that Crawford was estopped from asserting this issue by his delay

in raising it. Crawford responded that the FAA was reverse

pre-empted by the McCarran-Ferguson Act and that abstentio n was

therefore appropriate. In the event dismissal was not appropriate,

Crawford also requested a stay of the district court proceedings.

On February 27, 1997, the district court granted Crawford’s motion

to dismiss under the Burford abstention doctrine. Munich and NAC

appeal.

II

Munich and NAC first contend that the district court lacked

jurisdiction to reconsider its October 8 order denying Crawford’s

Rule 59(e) motion because Crawford did not timely appeal or

otherwise challenge that order. Crawford responds that in cases

where Burford abstention is appropriate, it can be ordered at any

time, even on appeal. Although we agree with Crawford that B urford

abstention may be raised at any time, see Martin Ins. Agency, Inc.

v. Prudential Reins. Co.

, 910 F.2d 249, 255 (5th Cir. 1990), we

ultimately conclude, as exp lained below, that B urford abstention7

was inappropriate in this cas e. Nevertheless, based upon our

review of the district court’s orders, we are confident that the

district court maintained jurisdiction to iss ue the abstention

order.

The district court’s October 8 order reflects its intention to

retain jurisdicti on over the case until the state court resolved

the injunction issue. In the October 8 order, the district court

denied the Rule 59(e) motion, but altered the finality of its

earlier judgment by effectively reserving the right to revisit that

judgment pursuant to appropriate state court action. Having now

been informed of the state court injunction, the district court

concluded that principles of comity and f ederalism prevented it

from interfering with ongoing state court proceedings and that the

state court should enforce its ow n injunction, citing T rainor v.

Hernandez

, 431 U.S. 434 (1977), and Younger v. Harris

, 401 U.S. 37

(1971). This language evinces the district court’s intent to make

its September 18 order compelling arbitration conditional pending

the state court’s resolution of the scope and effect of its

injunction.

Our conclusion in this respect is confirmed by the November 14

order, which merely clarified the district court’s already-stated

position. The November 14 order came as a result of a petition b y

Muni ch and NAC

- -not a tardy motion by Crawford or a sua sponte8

reconsideration by the district court--to enforce what they

apparently believed was a final order compelling arbitration. As

the district court explained, ho wever, “[a]fter considering the

[petition], the Court is of the opinion that it should be denied

and that the Court’s position regarding a previous state court

injunction should be clarified.” The petition prompted the

district court to make explicit what it thought was clear in its

October 8 order, namely, that if the state court’s injunction had

been violated, the district court would respect that decision by

vacating the arbitration order and dismissing the case. Thus, when

the court finally a bstained and dismissed this action on

February 27, 1997, it was in compliance with and in fulfillment of

its previous orders. For these reasons, we conclude that the

district court had not relinquished jurisdiction over this matter

when it compelled arbitration on September 18.

Because the district court’s order of abstention and dismissal

is a final order disposing of all issues pending in the federal

suit between the present parties, we have jurisdiction to hear this

appeal under 28 U.S.C. § 1291. S ee Clark v. Fitzgibbons

, 105 F.3d

1049, 1051 (5th Cir. 1997). We review the district court’s

decision to abstain for abuse of discretion, taking care to ensure

that the decision fits within the specific limits prescribed by the

particular abstention doctrine involved. Id.9 III

Munich and NAC contend that th e district court erred by

invoking Burford abstention and dismissing the present act i on

because the FAA does not vest the district court with discretion to

deny arbitration, which is a prerequisi te to B urford abstention.

They further contend that, even if the Burford abstention doctrine

were available in this case, arbitration of the dispute between

Munich, NAC, and Crawford would not u nnecessarily interfere with

ENIC’s ongoing state court delinquency proceedings, thus, making

Burford abstention inappropriate. Crawford, on the other hand,

argues that the district court had no power to compel arbitration

becau se, to the extent the FAA impedes Oklahoma’s efforts in

regulating the business of insurance and the liquidation of

insurance companies, it is revers e pre-empted by the McCarranFerguson Act.

A

We first consider whether the district court properly invoked

the Burford abstention doctrine to dismiss the reinsurers’ petition

to compel arbitration. B urford abstention is appro priate in two

circumstances: (1) cases involving difficult questions of state law

bearing on policy problems of substantial public import whose

importance transcends the result in the case, or (2) where federal

adjudication of the case would disrupt state efforts to establish2 Prior to Quackenbush

, we and other cour ts had consistently

approved Burford abstention in actions against an insurance company

involved in ongoing state delinq uency proceedings. S ee, e.g.

, Barnhardt Marine Ins., Inc. v. New England Int’l Sur. of Am., Inc.

, 961 F.2d 529 (5th Cir. 1992); Martin Ins. Agency, Inc. v.

Prudential Reins. Co.

, 910 F.2d 249 (5th Cir. 1990); Gonzalez v.

Media Elements, Inc.

, 946 F.2d 157 (1st Cir. 1991); Law Enforcement

Ins. Co. v. Corcoran

, 807 F.2d 38 (2d Cir. 1986); Lac D’ Amiante du

Quebec, Ltee v. American Home Assurance Co.

, 864 F.2d 1033 (3d Cir.

1988); Wolfson v. Mutual Benefit Life Ins. Co. , 51 F.3d 141 (8th

Cir. 1995); Grimes v. Crown Life Ins. Co.

, 857 F.2d 699 (10th Cir.

1988). Moreover, these cases upheld B urford abstention in such

actions without regard for the type of relief being sought in

federal court. S ee, e.g.

, Wolfson

, 51 F.3d at 147; Lac D’ Amiante

, 864 F.2d at 1044.

10 a coheren t policy with respect to matters of substantial public

importance. S ee New Orleans Public Serv., Inc. v. Counsel of City

of New Orleans , 491 U.S. 350, 361 (1989) (“ NOPSI ”). Furthermore,

it is true, as argued by Munich and NAC, that Burford abstention is

permissible only when the district court has discretion to grant or

deny relief. S ee Quackenbush v. Allstate Ins. Co.

, 116 S.Ct. 1712,

1721-22 (1996). 2

Here, the relief Munich and NAC sought from the district court

was neither equ itable nor otherwise committed to its discretion.

Munich and NAC petitioned the district court under the FAA for a

determination that their dispute wi th Crawford was subject to an

arbitration clause and for an order compelling the parties to

submit the matter for arbitration. The FAA provides that written

agreements to arbitrate controver sies arising out of an existing

contract “shall be valid, irrevocable, and enforceable, save upon3 We do not reach the question whether, if arbitrators were to

determine that the nature of the relief Munich and NAC seek in the

underlying claim is equitable, the district court may abstain from

enforcing the award.

4 M unich and NAC argue that Quackenbush disposes of this cas e

in Munich’s favor. That case, however, never addressed the

McCarran-Ferguson Act. Nor does it appear that the lower courts

ever considered the applicability of the McCarran-Ferguson Act or

that the parties even raised the issue in Quackenbush

. S ee

Garamendi v. Allstate Ins. Co. , 47 F.3d 350 (9th Cir. 1995).

11 such grounds as exist at law or in equity for the revocation of any

contract.” 9 U.S.C. § 2. “By its terms, the [FAA] leaves no place

for the exercise of discretion by a district court, but instead

mandates that district courts shall direct the parties to proceed

to arbitration on issues as to which an arbitration agreement has

been signed.” D ean Wit ter Reynolds, Inc. v. Byrd , 470 U.S. 213,

218 (1985) (citing 9 U.S.C. §§ 3 & 4). Having determined that the

reinsurance agreements contained valid and binding arbitration

clauses, the district court had no discretion under the FAA to deny

Munich and NAC their right to an order compelling arbitration, at

least as to an interpretation of the rights and remedies provided

under the reinsurance agreements. The district court, therefore,

abused its discretion in invoking Burford abstention in this case. 3

B

The question remains, then, whether dismissal was nonetheless

required because, as Crawford c ontends, the FAA is reverse

pre-empted by the McCarran-Ferguson Act. 4 Congress enacted the12

McCarran-Ferguson Act, 15 U.S.C. § 1101, et seq.

, for the specific

purpose of consigning to the States broad and primary

responsibility for regulating the insurance industry. See SEC v.

National Sec ., Inc. , 393 U.S. 453, 458 (1969); B arnhardt Marine

Ins., Inc. v. New England Int’l Sur. of Am., Inc. , 961 F.2d 529,

531 (5th Cir. 1992). In relevant part, the Act provides:

No Act of Congress shall be construed to invalidate,

impair, or supersede any law enacted by any State for the

p urpose of regulating the business of insurance

. . . unless such Act specifically relates to the business of

insurance.

15 U.S.C. § 1012(b). Ordinarily, federal law pre-empts conflicting

state law by virtue of the Supremacy Clause. S ee U.S. Const. art.

VI, cl. 2. The McCarran-Ferguson Act reverses that effect in the

narrow range of cases involving state regulation of the insurance

industry.

By its terms, the Act permits a state law to reverse pre-empt

a federal statute only if: (1) the federal statute does not

specifically relate to the “business of insurance,” (2) the state

law was enacted for the “purpose of regulating the business of

insurance,” and (3) the federal statute operates to “invalidate,

impair, or supersede” the state law. There is no question that the

FAA does not relate specifically to the business of insurance.

Thus, we need only address the last two requirements.13 (1)

The category of laws enacted “for the purpose of regulating

the business of insurance” is broad and consists of those laws

“that possess the ‘end, intention, or aim’ of adjusting, managing,

or controlling the business of insurance.” U nited States Treasury

Depot v. Fabe

, 508 U.S. 491, 505 (1993) (quoting Black’s Law

Dictionary 1236, 1286 (6th ed. 1990)). Statutes that focus on

protecting the relationship between the insurer and insure d are

laws regulating the business of insurance. I d. at 501. The three

criteri a relevant in determining whether a regulated practice

properly involves the relationship between the insurer and insured

include whether: (1) the practice has the effect of transferring or

spreading a policyholder’s risk; (2) the practice is an integral

part of the policy relationship between the insurer and the

insured; and (3) the practice is limited to entities within the

insurance industry. U nion Labor Life Ins. Co. v. Perino

, 458 U.S.

119, 129 (1982). None of these criteria is dispositive. Id.

(a)

In this case, the Oklahoma laws in question are the provisions

of the Oklahoma Uniform Insurers Liquidation Act (“OUILA”), which

regulate delinquency proceedings in connection with insolvent

insurance companies. S ee 36 Okl. St. Ann. § 1901, et seq. When an

Oklahoma insurance company is declared insolvent and placed into14

state delinquency proceedings by the state insurance commissioner,

the district court of Oklahoma County is vested with “exclusive

original jurisdiction” over all delinquency proceedings. S ee

§§ 1903 & 1902(A). These proceedings are intended to be “the sole

and exclusive method of liquidating, rehabilitating, reorganizing,

or conserving” the insurance company. § 1902(B). The insurance

commissioner, a s receiver of the estate, is directed to take

immediate possession of all of the insurance company’s assets and

is “vested by operation of law with title to all of the property,

contracts, and rights of action

. . . of th e insurer, wherever

located.” §§ 1914(A) & (B). To assure orderly disposition of

these assets and management of the company’s affairs, OUILA further

provides comprehensive procedures for the resolution and

prioritization of claims against the company. See §§ 1903-20.

OUILA also provides Oklahoma courts with broad powers to

enforce the provisions governing delinquency proceedings, such as

the power to make “all necessary and proper orders to carry out the

purposes of [OUILA].” S ee § 1902(A). Once delinquency proceedings

have commenced, the court m ay issue an injunction to prevent

interference with the receiver, waste of the insurer’s assets, or

the “commencement or prosecution of any actions, or the obtaining

of preferences, judgments, attachments or other liens, or the

making of any levy against the insurer or against its assets or any15

part thereof.” § 1904(B). The Oklahoma court in this case issued

just such an injunction, precluding Munich from commencing or

prosecuting the FAA action in federal d istrict court. The

existence of this injunction later served as the basis for the

district court’s decision to dismiss Munich’s FAA petition.

(b)

Crawford argues that OUILA serves th e purpose of regulating

the business of insurance and, therefore, falls within the scope of

the McCarran-Ferguson Act. His position draws substantial support

from the Second Circuit’s decision in Stephens v. America n Int’l

Ins. Co.

, 66 F.3d 41 (2d Cir. 1995). On facts that run parallel to

those in this case, the Second Circuit held that the Kentucky

Liquidation Act reverse pre-empted the FAA by operation of the

McCarran-Ferguson Act. S ee id. a t 45. Kentucky had enacted a

comprehensive scheme for the liquidation of insolvent insurance

compan ies, including a provision nullifying the effect of

a rbitration clauses against the receiver. The appellees,

reinsurance companies seeking to compel arbitration regarding their

rights of setoff under the reinsurance agreements, argued that the

anti-arbitration provision was not enacted to protect policyholders

and deprived them of their bargained-for right to arbitration. S ee

id. The Second Circuit refused to limit its focus to the antiarbitration provision, but instead, examined the Kentucky16

Liquidation Act as a whole. It concluded that the Act protected

policyholders “by assurin g that an insolvent insurer will be

l iquidated in an orderly and predictable manner and the an tiarbitration provision is simply one piece of that mechanism.” I d.

Like Kentucky, Oklahoma “has formulated a complex and

comprehensive scheme of insurance r egulation which contains the

U niform Insurers Liquidation Act for the liquidation of a n

insolvent insurer.” Grimes v. Crown Life Ins. Co. , 857 F.2d 699,

705 (10th Cir. 1988) (ordering Burford abstention in case against

insurance company involved in delinquency proceedings in Oklahoma

state court). It, like most States, enacted these laws under the

shield provided by the McCarran-Ferguson Act. C f., e.g.

, Hartford

Cas. Ins. Co. v. Borg -Warner Corp. , 913 F.2d 419, 426 (7th Cir.

1 990) (Illinois law); L aw Enforcement Ins. Co. v. Corcoran

, 807

F.2d 38, 43 (2d Cir. 1986) (New York law). Oklahoma courts, whom

we must recognize in our federal system as the primary expositors

of O klahoma law and public policy, have expressly declared that

“Oklahoma’s Uniform Insurers Liquidation Act is designed to protect

the public in general, and policyholders of an insolvent insurer in

particular .” C ockrell v. Grimes

, 740 P.2d 746, 749 (Okl. Ct. App.

1987) (emphasis add ed); a ccord Motor Club of Am. v. Weatherford

,

8 41 F. Supp. 610, 618 (D.N.J. 1994) (“[OUILA’s] breadth refle cts

the need to fully protect the insolvent insurer’s policyholders,17

who are generally unfamiliar with the financial condition of the

insurer and rely on state regulation to ensure that the promise of

payment on their insurance policies at some future date will come

to fruition.”).

Furthermore, at least two of the three Perino factors suggest

that this comprehensive regulatory scheme, viewed in its entirety,

regulates the business of insurance. First, it is crucial to the

relationship between the insurance co mpany and its policyholders

f or both parties to know that, in the event of insolvency, th e

insurance company will be liquidated in an organized fashion. S ee

Stephens , 66 F.3d at 44-45; L ac D’ Amiante du Quebec , Ltee v.

American Home Assurance Co.

, 864 F.2d 1033, 1041 n.9 (3d Cir.

1988); Blackhawk Heating & Plumbing Co. v. Geeslin , 530 F.2d 154,

159-60 (7th Cir. 1976). Second, OUILA is limited to entities in

the insurance industry. It does not apply to insolvent companies

generally, but only to insolvent insurance companies. S ee 36 Okl.

Stat. Ann. §§ 1901-1903. In short, “[r]ecognition by this Court of

the effectuation of the liquidation of [ENIC] by the State of

[Oklahoma] is in accordance with federal policy which directs that

the control over the insurance business remain in the hands of the

states. ” Anshutz v. J. Ray McDermott Co., Inc. , 642 F.2d 94, 95

(5th Cir. Uni t A Mar. 1981) (staying appeal as result of state18

court injunction restraining interference with ongoing liquidation

of insurance company).

(c)

Munich and NAC contend, however, that Fabe rejected the notion

that we may consider OUILA as a whole in determining whether it was

enacted for the p urpose of regulating the business of insurance.

Fabe indeed offers some support for their position. There, the

issue was whether, under the McCarran-Ferguson Act, a federal

priority statute was reverse pre-empted by a conflicting Ohio

priority statute that was part of a “complex and specialized

administrative structure” designed for the regulation of insurance

company insolvency. S ee 508 U.S. at 493-94. The Ohio statute

provided sequential priority for (1) administrative costs, (2)

spec i fied wage claims, (3) policyholders’ claims, (4) general

creditors’ claims, and (5) government claims. S ee id. at 495. The

federal statute gave the federal government first pri ority. S ee

id. Examining each priority provision of the Ohio statute

separately, the Court held that the priorities for administrative

costs and policyholder claims displaced the federal priority, but

that th e federal priority trumped all other claims. S ee id. at

509. The Court reasoned that the Ohio statute was enacted for the

purpose of regulating the business of insurance to the extent it

regulated policyholder interests. Id. at 508. But to the extent19

that the statute was designed to further the interests of other

claimants, it did not have such a purpose. See id.

Certainly, Fabe ’s holding and analysis suggest that a statute

may require parsing to determine the extent of its pre-emptive

power under the McCarran-Ferguson Act. At the same time, however,

the Court stopped short of directing that this approach be taken in

every case. S ee id. at 509 n.8. F abe ’s holding in this respect is

simply unclear. C ompare Antonio Garcia v. Island Program Designer,

Inc.

, 4 F.3d 57, 61-62 (1st Cir. 1993) (every provision must be

parsed), with Stephens

, 66 F.3d at 45 (statutory scheme may be

considered in its entirety).

This uncertainty need not concern us today, however, because

even if we are required to parse OUILA, the specific provisions of

the statute at issue here--vesting exclusive original jurisdiction

of delinquency proceedings in the O klahoma state court and

authorizing the court to enjoin any action interfering with the

delinquency proceedings--are laws enacted clearly for the purpose

of regulating the business of insurance. These provisions give the

state court the power to decide all issues relating to disposition

of an insolvent insurance company’s assets, including whether any

given property is part of the insolvent estate in the first place.

Thus, as the Tenth Circuit has recognized, “Oklahoma has not only

adopted a comprehensive scheme to oversee the liquidation of20

insolvent insurers, it has provided a particular court . . . to

o versee liquidation proceedings. The effect of this provision

grants the Oklahoma County District Court a special relationship of

cooperation, technical oversight and concentrated review with the

Oklahoma Commissioner of Insurance in t he process of liquidating

insurers.” Grimes , 857 F.2d at 705; see also Lac D’ Amiante , 864

F.2d at 1045 (i dentifying same interests in New York insolvency

proceedings). This special relationship contributes markedly to

the orderly liquidation or rehabilitation of the insurance company

and the adjudication of claims against it.

Oklahoma’s policy of placing ultimate control over all issues

relating to the insolvency proceedings in a single court is aimed

at protecting the relationship between the insurance co mpany and

its policyholders. Insurance companies are ineligible for the

protections afforded by the federal Bankruptcy Code, see 11 U.S.C.

§ 109; such protections instead are provided by state laws, which

are shielded from federal interference by the McCarran-Ferguson

Act. Clark , 105 F.2d at 1051; see also Wolfson v. Mutual Benefit

Life Ins. Co.

, 51 F.3d 141, 147 (8th Cir. 1995). The experience of

the federal bankruptcy courts , which evidences the importance of

consolidating all of the assets of an insolvent company and the

claims against those assets in a single forum, supports the

legitimacy of the Oklahoma scheme in protecting the interests of21

policyholders. S ee Levy v. L ewis , 635 F.2d 960, 964 (2d Cir.

1980). In addition to the interests served by orderly adjudication

of claims, which we have already discussed, consolidation prevents

the unnecessary and wasteful dissipation of the insolvent company’s

funds that would occur if the receiver had to defend unconnected

suits in different forums across the country. G onzalez v. Media

Elements, Inc.

, 946 F.2d 157, 157 (1st Cir. 1991) (per curiam); Lac

D’ Amiante

, 864 F.2d at 1045. Consolidation also eliminates the

risk of conflic ting rulings, piecemeal litigation of claims, and

unequal treatment of claimants, all of which are of particular

interest to insurance companies and policyholders, who are often

relying on policies with the same or similar provisions. S ee

Gonzalez , 946 F.2d at 157; Lac D’ Amiante , 864 F.2d at 1047 n.16;

cf. also Martin , 910 F.2d at 253-54 (approving Burford abstention

to avoid risk of inconsistent adjudications). Thus, consolidation,

enforced through injunctions, conserves the insurance company’s

assets for ultima te payment to policyholders as well as other

creditors. See Anshutz , 642 F.2d at 95 (approving of injunctions

by state receivership courts to consolidate claims against

insolvent insurance companies ); U.S. Fin. Corp. v. Warfield , 839

F. Supp. 684, 689 (D. Ariz. 1993).

Munich and NAC counter that the OUILA provisions requiring

consolidation benefit all c reditors in addition to policyholders22

and, therefore, should not be considered under Fabe as enacted for

the purpose of regulating the business of insurance. We disagree.

The Court in Fabe found that the Ohio provision granting a

preference to expenses in administering delinquency proceedings was

enacted for the purpose of regulating the business of i nsurance

because it was “reasonably ne cessary” to further the goal of

protecting policyholders. S ee 508 U.S. at 509. The Court reasoned

that “[w]ithout payment of administrative costs, liquidation could

not even commence.” I d. Surely, the ability of a state and

receiver to administer delinquenc y proceedings inures to the

benefit of all creditors, not just policyholders. But this fact

alone did not alter the insurance-related character of the Ohio

provision in Fabe

. As the Court explained in S EC v. National Sec.,

I nc. , 393 U.S. 453 (1969), “[s]tatutes aimed at protecting this

relationship [between an insurance company and its policyholders],

directly or indirectly are laws regulating the ‘b usiness of

insurance.’” I d. at 460 (emphasis added), quoted in Fabe

, 508 U.S.

at 501.

The same logic a pplies to the provisions of OUILA requiring

consolidation of all claims related to the delinquency proceedings

in Oklahoma state court. For the many reasons we have just

identified, these laws are reasonably necessary to further the goal

o f protecting policyholders, even though they may also benefit23

other creditors. Some of these benefits fall more directly on

policyholders tha n others, but none are insignificant or

attenuated. In these respects, the provisions of OUILA at issue

here are indi stinguishable from the Ohio provision giving a

preference to administrative expenses in Fabe

. Thus, we hold that

these provisions were enacted for t he purpose of regulating the

business of insurance.

(2)

We must next consider whether the FAA operates to “invalidate,

supersede, or impair” OUILA--specifically those provisions vesting

exclusive original jurisdiction of delinquency proceedings in

Oklahoma state court and authorizing the court to enjoin any action

interfering with the insolvency proceedings. Munich and NAC

contend that arbitration of their dispute with Crawford would not

in any way interfere with the delinquency proceedings in Oklahoma

state court. They maintain that if they have a vested property

right to the settlement funds as salvage under the reinsurance

agreements, the funds were never an asset of the insolvent estate,

and ENIC’s creditors never had a right to any portion of the funds.

Thus, they argue, this dispute is not within the scope of the

delinquency proceedings committed to the exclusive jurisdiction of

the Oklahoma state court, and arbitration of the dispute presents

no conflicts with Oklahoma law. Alternatively, they assert that if5 Munich and NAC argue that the existence of the Oklahoma

Arbitration Act, which upholds the enforceability o f arbitration

clauses in contracts between insurance companies, see 15 Okl. Stat.

Ann. § 802, suggests that arbitration under the FAA presents no

conflict with Oklahoma law. We disagree. The Oklahoma Arbitration

Act makes no reference to arbitration of disputes with an insurance

company in delinquency proceedings. Moreover, we do not hold in

this opinion that Munich and NAC have no right to arbitration; we

only hold that the d istrict court had no authority to compel it

under the FAA. The Oklahoma state court might well decide to order

arbitration of this dispute.

24 they have only a nonvested interest in damages for breach of

contract, they would merely acquire a judgment lien and be forced

to stand in line with the rest of ENIC’s creditors. This result,

they contend, is contemplated by OUILA itself.

Munich and NAC maintain, and we agree, that whether they have

a vested property interest or nonvested contractual interest in the

settlement proceeds is a question committed to arbitration under

the reinsurance agreements. 5 We shall not, in resolving this

appeal, make our own interpretation of the agreements and thereby

deny the parties their right to have this issue ultimately decided

in arbitration. C f. Folse v. Richard Wolf Med. Instruments Corp.

,

56 F.3d 603 (5th Cir. 1995) (refusing to address dispute committed

to arbitration until final award entered, despite a cknowledged

f ailings of arbitration process). Nor need we, because neither6 We note at the outset that Munich and NAC invite us to adopt

the approach taken by the Ninth Circuit in Bennett v. Liberty Nat’l

Fire Ins. Co.

, 968 F.2d 969, 972 (9th Cir. 1992). There, in a case

very similar to the instant case, the Ninth Circuit rejected a

receiv e r’s argument that state insurance insolvency laws were

impaired by having the dispute arbitrated under the FAA. See id.

at 972-73. The court reasoned that “[o]nly if a court or

arbitrator determines that the funds belong to [the insolvent

company] does that money become part of the estate that the

liquidator will distribute” and does the receiver’s authority vest.

See id. at 972. We decline the invitation to follow B ennett

, however, because it contravenes the well established rule,

applicable to both federal and state courts, that if two competing

actions are in rem or quasi in rem , the court first assuming

jurisdiction over the property in question exercises that

jurisdiction to the exclusion of the other. S ee Penn Gen. Cas. Co.

v. Commonwealth of Pennsylvania ex rel. Schnader

, 294 U.S. 189, 195

(1935).

To the extent Munich and NAC, like the petitioner in Bennett

, claim a vested property interest in identifiable proceeds and seek

an adjudication of ownership in those proceeds, the nature of their

action is quasi in rem

. S ee Shaffer v. Heitner

, 433 U.S. 186, 199

n.17 (1977); Carney v. Sanders

, 381 F.2d 300, 302-03 (5th Cir.

1967). Likewise, the delinquency proceedings in Oklahoma state

court are in rem or quasi in rem proceedings. S ee H.H. Sumrall v.

Moody

, 620 F.2d 548, 550 (5th Cir. 1980), c ert. denied

, 450 U.S.

1026 (1981); Geeslin

, 530 F.2d at 158. Because the Oklahoma state

court first obtained jurisdiction over the proceeds in question, it

alone has the power to determine ownersh ip of those funds. S ee

United States v. Bank of New York & Trust Co.

, 296 U.S. 463, 477-79

(1936) (federal court has no jurisdiction to decide in rem action

for property involved in ongoing state court insurance co mpany

liquidation proceedings).

25 alternative leads us to the conclusion that the district court had

the power to compel arbitration under the FAA. 6

Regardless of the nature of the reinsurers’ action, ordering

it resolved in a forum other than the receivership court

nevertheless conflicts with the Oklahoma law giving the state court26

the power to enjoin any action interfering with the delinquency

proceedings. Under section 1904(B) of OUILA, a provision with

breadth similar to sections 105 and 362 of the federal bankruptcy

code, see 11 U.S.C. §§ 105 & 362, the state court is authorized to

issue any injunction “deemed necessary to prevent interference with

the Insurance Commissioner or the proceedings, or

. . . the

commencement or prosecution of any actions, or the obtaining of

preferences, judgments, attachments or other liens, or the making

of any levy against the insurer or against its assets or any part

thereof.” The Oklahoma court in this case ordered just such an

injunction, preclud ing Munich and NAC from commencing or

prosecuting an action against the receiver, ENIC, or the assets of

the insolvent estate. Munich and NAC, however, invoked the FAA to

o btain what the state court injunction expressly prohibited--an

action against ENIC’s receiver to be adjudicated in a forum outside

the Oklahoma state court. Although the precise degree to which a

state statute may be impaired so as to trigger the McCarranFerguson Act is not well-settled, see Doe v. Norwest Bank of

Minnesota

, 107 F.3d 1297, 1307-08 (8th Cir. 1997), we find

impairment sufficient to trigger it here.

IV

Finally, Munich and NAC argue that we should disregard the

state court injunction in this case because state courts have no27

power to enjoin parties from pursuing federal remedies in federal

court, citing cases such as Moses H. Cone Memorial Hosp. v. Mercury

Constr. Corp.

, 460 U.S. 1 (1983), General Atomic Co. v. Felter

, 434

U.S. 12 (1977), and Donovan v. City of Dallas

, 377 U.S. 408 (1964).

But none of these cases considered the effect of the McCarranFerguson Act or the broad power bestowed on States when acting, as

here, pursuant to a law enacted for the purpose of regulating the

business of insurance. Authority to relax the “judicially declared

rule that state courts are completely without power to restrain

federal-co u rt proceedings in in personam actions” remains, of

course, with Congress. S ee Donovan

, 377 U.S. at 412-13. Congress

has evinced a strong federal policy in favor of deferring to state

regulation of insolvent ins urance companies as reflected in the

McCarran-Ferguson Act and the express exclu sion of insurance

companies from the federal Bankruptcy Code. See Wolfson , 51 F.3d

at 147. These laws symbolize the public interest in having the

States continue to serve their traditional role as the preeminent

regulators of insurance in our federal system and ind icates the

special status of insurance in the realm of state sovereignty. S ee

Lac D’ Amiante

, 864 F.2d at 1045 (c iting L evy v. Lewis

, 635 F.2d

960, 963-64 (2d Cir. 1980)); Hartford Casualty

, 913 F.2d at 426.

The provisions of OUILA vesti ng the state court with broad

injunctive authority to prevent interference with delinquency28

proceedings grant no more power than that which Congress has deemed

necessary to the parallel disposition of bankruptcies in federal

court.

We surely are not saying that a State has the power to enjoin

a party generally from pursuing federal remedies in federal court.

Nor are we saying that Oklahoma law divested the district court of

its diversity jurisdiction. S ee Martin

, 910 F.2d at 254 (rejecting

the argument that McCarran-Ferguson Act removes diversity

jurisdiction fr om federal courts in insurance matters). What we

are saying is that, by operation of the McCarran-Ferguson Act, a

federal act that permits states to exert broad power over the

insurance industry, state laws regulating the business of insurance

may suspend federal remedies b ased on conflicting federal

statutes--here, the FAA. We therefore hold that the FAA is reverse

pre-empted under the McCarran-Ferguson Act, thereby leaving the

district court without the power to compel arbitration in this

case. Munich and NAC, however, remain free to petition the

Oklahoma state court for an order compelling arbitration of their

dispute with Crawford.

V

In summary, we hold that Burford abstention was improper

because the district court did not have discretion under the FAA to

deny Munich and NAC their right to an order compelling arbitration29

in this case. We also hold, however, that the provisions of

Oklahoma law vesting exclusive original jurisdiction of insurance

company delinquency proceedings in Oklahoma receivership court and

a uthorizing the court to enjoin any action interfering with s uch

proceedings are laws enacted for the purpose of regulating the

business of insurance and, therefore, fall within the scope of the

McCarran-Ferguson Act. As a result, dismissal of the action was

required because, by operation of the McCarran-Ferguson Act, the

FAA is reverse pre-empted to the extent it permits Munich and NAC

to bring an action against assets of a delinquent insurance company

in a forum other than the Oklahoma receivership court. For these

reasons, the judgment of the district court is

A F F I R M E D.