Revised May 24, 1999

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________

No. 98-50527

_______________

JACK M. WEBB,

Special Deputy Receiver for

Employers National Insurance Company in Receivership,

Plaintiff-Appellee,

VERSUS

B.C. ROGERS POULTRY, INC.,

and

B.C. ROGERS PROCESSORS, INC.,

Defendants-Appellants.

_________________________

Appeal from the United States District Court

for the Western District of Texas

_________________________

May 21, 1999

Before REAVLEY, POLITZ, and SMITH, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

B.C. Rogers Poultry, Inc., and B.C. Rogers Processors, Inc.

(collectively, “B.C. Rogers”), appeal a remand to state court

ordered pursuant to the Burford abstention doctrine. Concluding

that the court acted without the doctrine's strictures as defined
2

by the Supreme Court, we reverse.

I.

The State of Texas brought Employers National Insurance

Company (“ENIC”), an insurance company regulated under Texas law,

into state court, where it was declared insolvent and placed in

receivership. Pursuant to the Texas Insurance Code, the state

obtained a permanent injunction and order, appointing Jack Webb as

Special Deputy Receiver (“SDR”) for ENIC and enjoining any person

from interfering with the state receivership court proceedings or

the lawful acts of the SDR and from taking any action involving the

SDR outside of the state receivership court.

Webb, carrying out his duties as SDR, brought suit in state

court against B.C. Rogers, as ENIC policyholders, to collect

assetsSSunpaid workers' compensation premiumsSSallegedly belonging

to ENIC. Webb asserts three alternative causes of action:

(1) breach of contract, (2) quantum meruit, and (3) suit on sworn

account. He seeks $674,335 in damages, plus interest and

attorney's fees.

B.C. Rogers removed to federal court pursuant to 28 U.S.C.

§ 1441, alleging original jurisdiction based on diversity of

citizenship. See 28 U.S.C. § 1332. Webb sought remand, advancing

three grounds: (1) B.C. Rogers had failed to comply with the
1 See Burford v. Sun Oil Co., 319 U.S. 315 (1943).

3

removal statute, (2) the permanent injunction enjoined B.C. Rogers

from litigating the dispute in a forum other than the receivership

court, and (3) under the Burford abstention doctrine, the district

court should refrain from exercising jurisdiction.1 The district

court summarily rejected the first two bases but elected Burford

abstention and remanded, holding that

[a]bstention is appropriate in this case, for if this

Court were to exercise federal jurisdiction, it could

well interfere with the State of Texas' efforts to effect

a coherent policy on a matter of public concern, that is,

the collection of assets of an insolvent insurer through

a state district court receivership proceeding wherein

the state district court retains continuing jurisdiction

over the liquidation proceedings.

II.

We always must be certain that our limited jurisdiction

encompasses the appeal before us. See Castaneda v. Falcon,

166 F.3d 799, 801 (5th Cir. 1999); Jones v. Collins, 132 F.3d 1048,

1051 (5th Cir. 1998). We sua sponte requested briefing on the

issue and now clarify our jurisdiction.

The order abstaining under Burford and remanding is a final

order disposing of all issues. We have jurisdiction, therefore,

pursuant to 28 U.S.C. § 1291. See Quackenbush v. Allstate Ins.

Co., 517 U.S. 706, 715 (1996); Munich Am. Reinsurance Co. v.

Crawford, 141 F.3d 585, 589 (5th Cir. 1998), cert. denied,
4

119 S. Ct. 539 (1999).

In 28 U.S.C. § 1334(d), Congress has denied us jurisdiction

over an appeal from a decision to abstain under § 1334(c) (allowing

abstention, in the interest of comity or respect for state law,

from state law causes of action arising under, or related to,

title 11). Here, the receivership proceedings in state court arose

under the Texas Insurance Code, not the Bankruptcy Code. See Clark

v. Fitzgibbons, 105 F.3d 1049, 1051 (5th Cir. 1997) (“Insurance

companies are ineligible for the protections afforded by the

federal Bankruptcy Code. 11 U.S.C. § 109."). The district court,

therefore, did not exercise jurisdiction over the removed action

under 28 U.S.C. § 1452(a) (providing for removal of any action over

which the court has jurisdiction under 28 U.S.C. § 1334) and

28 U.S.C. § 1334(b) (providing for original jurisdiction in the

district courts “of all civil proceedings arising under title 11,

or arising in or related to cases under title 11.”). Rather, it

based its jurisdiction on diversity of citizenship, found in

28 U.S.C. § 1332. The court's decision to abstain, then, did not

fall within 28 U.S.C. § 1334(c), so § 1334(d) is inapposite.

Similarly, in 28 U.S.C. § 1447(d), Congress denied us

jurisdiction over remands pursuant to 28 U.S.C. § 1447(c), which

requires a district court to remand if it lacks subject matter

jurisdiction or if the removal was defective; conversely, § 1447(d)
2 See Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 127 (1995);

Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 345-52 (1976); see also,

e.g., Angelides v. Baylor College of Med., 117 F.3d 833, 835-36 (5th Cir. 1997);

Soley v. First Nat'l Bank of Commerce, 923 F.2d 406, 407-08 (5th Cir. 1991). Our

inability to review a § 1447(c) remand obtains even if the order was erroneous.

See Thermtron, 423 U.S. at 351; Angelides, 117 F.3d at 836.

5

does not preclude review of remands on other grounds.2 Neither

party argues that the district court lacked subject matter

jurisdiction. Rather, they dispute whether the court abused its

discretion in abstaining from exercising its jurisdiction. Section

1447(d), therefore, is also inapposite, and we have jurisdiction to

consider the appeal.

III.

The Burford doctrine allows a federal court to abstain from

exercising its jurisdiction in deference to complex state

administrative procedures. The Supreme Court has described the

Burford doctrine as follows:

Where timely and adequate state-court review is

available, a federal court sitting in equity must decline

to interfere with the proceedings or orders of state

administrative agencies: (1) when there are “difficult

questions of state law bearing on policy problems of

substantial public import whose importance transcends the

result in the case then at bar”; or (2) where the

“exercise of federal review of the question in a case and

in similar cases would be disruptive of state efforts to

establish a coherent policy with respect to a matter of

substantial public concern.

New Orleans Pub. Serv., Inc. v. Council of New Orleans ("NOPSI"),

491 U.S. 350, 361 (1989) (quoting Colorado River Water Conservation
3 See also Baran v. Port of Beaumont Navigation Dist., 57 F.3d 436, 441 (5th

Cir. 1995).

4 See also Quackenbush, 517 U.S. at 718 (recognizing that “the authority

(continued...)

6

Dist. v. United States, 424 U.S. 800, 814 (1976)).3 Essentially,

Burford instructs a district court to weigh the federal interests

in retaining jurisdiction over the dispute against the state's

interests in independent action to uniformly address a matter of

state concern, and to abstain when the balance tips in favor of the

latter. See Quackenbush, 517 U.S. at 728; NOPSI, 491 U.S. at 363;

Burford, 319 U.S. at 334. But this “balance only rarely favors

abstention.” Quackenbush, 517 U.S. at 728. Typically, “federal

courts have a virtually unflagging obligation . . . to exercise the

jurisdiction given them.” Colorado River, 424 U.S. at 821

(quotation omitted).

In Quackenbush, the Court determined that an action seeking

damages never warrants abstention. The Court examined the

foundation and history of abstention doctrines, and Burford

abstention in particular, finding that the power to abstain

originated in “the discretion federal courts have traditionally

exercised in deciding whether to provide equitable or discretionary

relief.” Quackenbush, 517 U.S. at 730. The Court disagreed with

the Ninth Circuit's limitation of abstention to equitable cases,

instead extending the doctrine “to all cases in which a federal

court is asked to provide some form of discretionary relief.” Id.

4
4(...continued)

of a court to abstain from exercising its jurisdiction extends to all cases in

which the court has discretion to grant or deny relief.”).

5 See id. at 731 (“[F]ederal courts have the power to dismiss or remand

cases based on abstention principles only where the relief being sought is

equitable or otherwise discretionary. Because this was a damages action, we

conclude that the District Court's remand was an unwarranted application of the

Burford doctrine.”). Although remanding a damages case is inappropriate, the

Court noted that a court could stay an action pending resolution in state court

of an issue relevant to the federal case if the Burford doctrine called for

abstention. Id.

7

A damages action, however, allows the court no discretion and may

not be remanded. Id. at 731.5

A.

We review an abstention for abuse of discretion. See Clark,

105 F.3d at 1051; see also Burford, 319 U.S. at 318 (describing

court's choice of whether to abstain as a matter of discretion).

The exercise of discretion must “fit[] within the narrow and

specific limits prescribed by the particular abstention doctrine

involved.” Clark, 105 F.3d at 1051 (quotation omitted). A court

necessarily abuses its discretion when it abstains outside of the

doctrine's strictures.

B.

B.C. Rogers presents a simple argument for reversal: Under

Quackenbush, a court may not remand pursuant to Burford abstention

if the plaintiff seeks damages. Webb seeks damages, so a Burford

abstention remand is not permitted.
6 This argument relies on two premises: (1) A quantum meruit claim falls

within the set of cases from which the Supreme Court has found a district court

may abstain, and (2) a court may abstain and remand an entire case, including

damages actions, so long as one cause of action falls within that set Quackenbush

approved. Because we reject the first premise, we do not reach the second.

8

Webb counters with three ultimately unsuccessful arguments.

First, he cites precedent no longer applicable after Quackenbush

and argues to support an exercise of discretion where no discretion

exists. He next incorrectly avers that the Quackenbush rule on

which B.C. Rogers relies is not ironclad. He finally contends

that, because one of his causes of action sounds in the equitable

doctrine of quantum meruit, Burford abstention is appropriate

within Quackenbush's limitations.6 We conclude that, because

Quackenbush denies the legal authority to remand, the district

court abused its discretion.

1.

Webb vigorously argues that the usual Burford considerations

support remand. The McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015,

assigns primary responsibility for regulating the insurance

industry to the states. Texas has enacted an extensive regulatory

scheme for dealing with insolvent insurers and has an interest in

applying its law to marshal efficiently all the assets of such

insurers in a uniform manner. Webb contends that the federal

government, on the other hand, has a “complete absence” of interest
7 See, e.g., Barnhardt Marine Ins., Inc. v. New England Int'l Sur. of Am.,

Inc., 961 F.2d 529, 531-32 n.4 (5th Cir. 1992) (affirming remand and noting near

unanimity among the circuit courts that Burford abstention is appropriate in

cases related to a state's administration of an insolvent insurer); Martin Ins.

Agency, Inc. v. Prudential Reinsurance Co., 910 F.2d 249 (5th Cir. 1990).

8 This is true even though Webb overstates his case in declaring the

“complete absence” of federal interest. The district court assumed removal

jurisdiction based on diversity pursuant to 28 U.S.C. § 1332. The Constitution,

in Art. III, § 2, allows for federal court jurisdiction in cases and

controversies “between Citizens of different States.” When Congress first

created lower federal courts in the Judiciary Act of 1789, Act of Sept. 24, 1789,

1 Stat. 73, it included diversity jurisdiction as one basis for original federal

court jurisdictionSSa basis that has survived since. The presupposition for

diversity jurisdiction is to provide diverse parties with a federal forum in

which an out-of-state party might escape local bias. See, e.g., Jerome B.

Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527, 546 n.6 (1995)

(noting this purpose). By this grant of jurisdiction, Congress has expressed a

federal interest in administering impartial justice to diverse parties.

9 Webb cites one case, Clark, in which we affirmed an abstention remand in

an insurance case post-Quackenbush. See Clark, 105 F.3d at 1052. Clark does not

control our outcome, because we did not confront the issue we face here. We did

not discuss whether the damages sought precluded remand under Quackenbush and,

indeed, we did not cite Quackenbush.

9

in this dispute. The causes of action sound solely in state law;

no federal statutes or interests are involved.

Webb buttresses this argument by citing several of our

decisions in which we have affirmed abstention and have mentioned

the strong interests states have in addressing insolvent insurers.7

But these cases indicate only that we probably would find the

remand to be within the court's discretion if it had acted within

the bounds of the Burford doctrine.8 The analysis ignores

B.C. Rogers's argument that the district court had no discretion.

Relatedly, Webb overlooks that these cited cases precede

Quackenbush and the limits it imposed on abstention.9 As we

explained in Munich American, we previously had approved abstention
10 Webb attempts to distinguish Munich American by comparing the alleged

lack of federal interest here to the federal interest in the Federal Arbitration

Act (“FAA”) on which the Munich American plaintiffs relied. But our discussion

of the FAA focused on the lack of discretion in the relief sought, which bars a

remand; we did not reference, even in passing, a federal interest.

11 “Ultimately, what is at stake is a federal court's decision, based on

a careful consideration of the federal interests in retaining jurisdiction over

(continued...)

10

remands in cases related to insolvent insurers involved in state

proceedings; but this changed with Quackenbush's prohibition on

remanding damages action. See Munich American, 141 F.3d at 589.

Now a court may abstain “only when the district court has

discretion to grant or deny relief.” Id. Accordingly, we found

that the court abused its discretion by invoking Burford, because

it had no discretion in the relief sought. Id. at 590.10

Webb's argument and the cited precedent would provide a sound

basis for affirming the district court's application of the Burford

doctrine if it were within its discretion. Because, however, we

find that the nature of Webb's claims precludes Burford abstention,

we do not reach whether the Burford doctrine otherwise favors

abstention on these facts.

2.

Webb's contention that Quackenbush does not impose an

ironclad, per se bar to remanding damages action lacks merit. Webb

quotes a passage11 from a section in which the Court explained the
11(...continued)

the dispute and the competing concern for the 'independence of state action,'

that the State's interests are paramount and that a dispute would best be

adjudicated in a state forum.” Quackenbush, 517 U.S. at 728 (internal citation

omitted).

12 See also id. at 730 (noting that staying a damages action is

permissible, “but we have not permitted [courts] to dismiss the action

altogether”). Webb also resourcefully quotes a decision interpreting Quackenbush

to mean “that abstention, under Burford or otherwise, may be appropriate in suits

for damages.” See DeMauro v. DeMauro, 115 F.3d 94, 98 (1st Cir. 1997). Although

true, this lends no support to Webb's position. The court further explained that

a “district court may only order a stay pending resolution of state proceedings;

it cannot invoke abstention to dismiss the suit altogether.” Id. Here, the

court did not stay the action; it remanded, the functional equivalent of

dismissal in this context.

11

roots and purpose of abstention. See Quackenbush, 517 U.S.

at 727-28. It also noted that prior caselaw does “not provide a

formulaic test for determining when dismissal [or remand] under

Burford is appropriate.” Id. at 727. But the Court had not even

begun its application of these general principles to the case

before it. When it did reach its holding, it left no exceptions:

abstention is appropriate “only where the relief being sought is

equitable or otherwise discretionary.” Id. at 731 (emphasis

added).12

3.

Webb makes the superficially appealing argument that the

“equitable nature” of quantum meruit brings the case within

Quackenbush and allows for remand. “Quantum meruit is an equitable

doctrine based on the principle that one who benefits from

another's labor and materials should not be unjustly enriched
13 See, e.g., Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39,

41 (Tex. 1992) (“Quantum meruit is an equitable theory of recovery which is based

on an implied agreement to pay for benefits received.”); Vortt Exploration Co. v.

Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex. 1990) (“Quantum meruit is an

equitable remedy which does not arise out of a contract, but is independent of

it.”); see also, e.g., Brankline v. Capuano, 656 So. 2d 1, 5 (La. App. 3d Cir. 1995)

(“Quantum meruit is an equitable remedy founded upon the principle that no one who

benefits from the labor or materials of another should be unjustly enriched at the

other's expense.”); McGee v. McGee, 648 A.2d 1128, 1133 (N.J. Super. Ct. App. Div.

1994) (describing “equitable remedies such as . . . quantum meruit,” “invocable for

equitable reasons”); Feingold v. Pucello, 654 A.2d 1093, 1094 (Pa. Super. Ct. 1995)

(“Quantum meruit is an equitable remedy.”); Castelli v. Lien, 910 S.W.2d 420, 428

(Tenn. Ct. App. 1995) (“quantum meruit is an equitable remedy” available if the

contract is no longer enforceable); Po River Water & Sewer Co. v. Indian Acres Club,

Inc., 495 S.E.2d 478, 482 (Va. 1998) (describing relief under quantum meruit theory

as equitable); Bowles v. Sunrise Home Ctr., Inc., 847 P.2d 1002, 1004 (Wyo. 1993)

(“Unjust enrichment (or quantum meruit) is an equitable remedy which implies a

contract”).

14 See Quackenbush, 517 U.S. at 728; id. at 717 (“[I]t has long been

established that a federal court has the authority to decline to exercise

(continued...)

12

thereby.” SMP Sales Management, Inc. v. Fleet Credit Corp.,

960 F.2d 557, 560 n.3 (5th Cir. 1992). Texas courts also have

noted the equitable nature of quantum meruit.

13 Because the case

includes this claim for equitable relief, the argument goes, it

falls within Quackenbush and may be remanded.

a.

Webb reads Quackenbush too simply and fails to comprehend the

complexity of quantum meruit. For Burford to apply, a federal

court must be sitting in equity with the discretion to deny relief.

See Quackenbush, 517 U.S. at 728 (explaining that the power to

abstain “derives from the discretion historically exercised by

courts of equity.”). As part of the Court's formulation of when

abstention doctrines apply, the court must be sitting in equity.14
14(...continued)

jurisdiction when it 'is asked to employ its historic powers as a court of

equity.'”) (quoting Fair Assessment in Real Estate Ass'n, Inc. v. McNary,

454 U.S. 100, 120 (1981) (Brennan, J., concurring)); NOPSI, 491 U.S. at 361

(explaining that in certain circumstances “a federal court sitting in equity must

decline to interfere with the proceedings or orders of state administrative

agencies”); see also Tribune Co. v. Abiola, 66 F.3d 12, 16 (2d Cir. 1995) (“We

find it significant that the Supreme Court [in NOPSI] traced the origin of

abstention doctrines to the federal court's discretion to withhold equitable

relief, and reformulated the Burford doctrine to require federal courts 'sitting

in equity' to abstain from exercising their jurisdiction in certain

circumstances.” (citation omitted)); id. at 15-16 (“When a federal court sits in

equity[,]” abstention may be warranted).

15 The use of “or otherwise” rather than simply “or discretionary” in

“equitable or otherwise discretionary” implies that the Court assumed that the

equitable relief to which it referred also was discretionary. See also

Quackenbush, 517 U.S. at 730 (holding abstention extends “to all cases in which

a federal court is asked to provide some form of discretionary relief”); Munich

Am., 141 F.3d at 589 (“Burford abstention is permissible only when the district

court has discretion to grant or deny relief.”).

13

In Quackenbush, the Court emphasized a court of equity's

discretion to grant or deny relief, holding that abstention based

remands or dismissals are appropriate “only where the relief being

sought is equitable or otherwise discretionary.” Quackenbush,

517 U.S. at 731.15 The source of the power to abstain confirms the

centrality of the court's sitting in equity and hence possessing

discretion in the relief afforded. See Quackenbush, 517 U.S.

at 728. That discretion allows it to deny relief; the abstention

doctrines merely add that “the exercise of this discretion must

reflect principles of federalism and comity.” Id. When a court

considers these factors, balancing state and federal interests,

discretion may favor withholding relief by way of abstention-based
16 The higher degree of interference with state proceedings that injunctive

or declaratory relief imposes, as opposed to a damages award, also favors

allowing abstention when a court sits in equity, but not in an action at law.

See Quackenbush, 517 U.S. at 717-18 (“The history of equity jurisdiction is the

history of regard for public consequences in employing the extraordinary remedy

of the injunction . . . . Few public interest have a higher claim upon the

discretion of a federal chancellor than the avoidance of needless friction with

state policies [by means of abstention] . . . .”); Tribune Co., 66 F.3d at 16

(holding that abstention is available only when the court sits in equity, because

“[i]njunctions are the most intrusive sort of judicial relief, and may directly

interfere with the proceedings or orders of state administrative agencies.”

(quotation omitted)).

14

remand or dismissal.16 

This withholding of extraordinary relief by courts having

authority to give it is not a denial of the jurisdiction

which Congress has conferred on the federal courts

. . . . On the contrary, it is but a recognition . . .

that a federal court of equity . . . should stay its hand

in the public interest when it reasonably appears that

private interests will not suffer . . . . It is in the

public interest that federal courts of equity should

exercise their discretionary power to grant or withhold

relief so as to avoid needless obstruction of the

domestic policy of the states. 

Alabama Pub. Serv. Comm'n v. Southern R.R., 341 U.S. 341, 350-51

(1951).

b.

When a court hears a claim for quantum meruit, it neither sits

in equity nor possesses discretion. Courts frequently refer to

quantum meruit as an equitable doctrine and even as seeking

equitable relief. Despite its equitable nature, however, quantum

meruit is an action at lawSSa legal cause of action seeking money

damages. Indeed, courts recognize that they do not sit in equity
17 See American Nat'l Ins. Co. v. Warnock, 114 S.W.2d 1161, 1165 (Tex.

1938) (holding that, although “courts of equity will not enforce” the statute of

frauds if doing so would work a fraud, specific performance will not be granted

for land contract barred by statute of frauds, “since the value of the

consideration may be recovered in an action at law on a quantum meruit.”); Upson

v. Fitzgerald, 103 S.W.2d 147, 150 (Tex. 1937) (same); Richardson v. Iley,

299 S.W.2d 187, 188 (Tex. App.SSSan Antonio 1957, writ ref'd n.r.e.) (same); see

also, e.g., Tompkins v. Hoge, 250 P.2d 174, 178 (Cal. Ct. App. 1952) (denying

equitable relief of specific performance because, the services being compensable

“in quantum meruit, the remedy at law is adequate”); Frontier Properties Corp.

v. Swanberg, 488 N.W.2d 146, 147 (Iowa 1992) (“[A]ctions for amounts due under

a contract or for quantum meruit recovery based on implied contract are actions

at law.”); Campbell v. Welsh, 460 A.2d 76, 82 (Md. Ct. Spec. App. 1983)

(referencing cases that permit “recovery at law, on a quantum meruit basis”); Van

Horn v. DeMarest, 77 A. 354, 367-68 (N.J. 1910) (referring to “an action at law

upon a quantum meruit”); Ogletree, Deakins, Nash, Smoak & Stewart P.C. v. Albany

Steel Inc., 663 N.Y.S.2d 313, 315 (App. Div. 1997) (rejecting categorization of

claim as equitable because a “quantum meruit action is essentially an action at

law, inasmuch as it seeks money damages in the nature of a breach of contract,

notwithstanding that the rationale underlying such causes of action is fairness

and equitable principles in a general rather than legal sense.”) (quotation

omitted); Cordrey v. Cordrey, 579 P.2d 209, 213 (Okla. Ct. App. 1978) (describing

quantum meruit action as “one at law and not equity”); Welch v. Webb, 615 P.2d

391, 393 n.3 (Or. Ct. App. 1980) (“This case, brought as a suit in equity, has

become an action at law for quantum meruit.”); Tri-State Home Improvement Co. v.

Mansavage, 253 N.W.2d 474, 479 (Wis. 1977) (“A cause of action for quantum

meruit, while equitable in nature, is an action at law” usually heard by jury,

and not by court sitting in equity).

18 See, e.g., Allen v. Peachtree Airport Park Joint Venture, 499 S.E.2d

690, 691 (Ga. Ct. App. 1998) (rejecting argument that district court lacked

jurisdiction “to determine equitable issues such as quantum meruit” because

“state courts have subject matter jurisdiction of quantum meruit claims, which

are considered actions at law”); Ordon v. Johnson, 77 N.W.2d 377, 383 (Mich.

1956) (affirming transfer of cause by chancery judge to law side to allow hearing

on quantum meruit claim); Craig v. Jo B. Gardner, Inc., 586 S.W.2d 316, 325 (Mo.

1979) (holding court of equity could hear quantum meruit claim, “a suit at law,”

but only because equity court already had “rightful possession” of case because

of equitable claim); Galloway v. Eichells, 62 A.2d 499, 502 (N.J. Super. Ct. Ch.

Div. 1948) (transferring action to Law Division because only possible relief

would be damages “at law upon quantum meruit”); Turcott v. Gilbane Bldg. Co.,

179 A.2d 491, 493 (R.I. 1962) (holding that quantum meruit action, “a remedy at

law,” must be brought “in an action at law” and not in a court of equity); Lanmor

Corp. v. B M & K Builders, Inc., 1990 Va. Cir. LEXIS 443, at *7 (Va. Cir. Ct.

Sept. 10, 1990) (denying leave to amend bill of equity to add quantum meruit,

which “involves legal principles cognizable at law, not in equity,” because

(continued...)

15

when they hear a quantum meruit claim,17 and they recognize that a

division between equity and law places quantum meruit on the law

side.18
18(...continued)

sustaining demurrer on equitable claims left no basis for equitable

jurisdiction).

19 Cf. Knebel v. Capital Nat'l Bank, 505 S.W.2d 628, 631 (Tex.

App.SSAustin) (describing the “equitable concept” of unjust enrichment, “enforced

through the common law courts as Quantum meruit,” which “obligated the common law

courts” to enforce certain implied promises) (emphasis added), aff'd in part and

rev'd in part on other grounds, 518 S.W.2d 74 (Tex. 1974).

16

Furthermore, in a quantum meruit action, the court lacks

discretion to balance interests between the state and federal

governments. Relief turns not on a weighing of the equities but on

a straightforward application of law to facts. If the facts

justify relief under the legal standardSSa question often answered

by jurySSthe court has no discretion to weigh the equities and

decide against relief.19 

Sitting at law, without discretion to deny relief, a court

cannot remand a quantum meruit claim under Quackenbush. The

state's interests must yield to the federal court's “strict duty to

exercise the jurisdiction that is conferred upon [it] by Congress.”

Quackenbush, 517 U.S. at 716. Because the district court lacked

discretion to remand these damages actions, we REVERSE and REMAND

for further proceedings consistent with this opinion.
20 Burford v. Sun Oil Co., 319 U.S. 315 (1943).

21 Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 731 (1996).

22 Supra, at ____ [majority draft, p. 12]. Cf. 5 ALAN LINTON

CORBIN, CORBIN ON CONTRACTS § 1103, at 557 (1964) (“The remedy of

(continued...)

POLITZ, Circuit Judge, dissenting:

My colleagues in the majority have issued a forceful opinion

from which I respectfully must dissent.

My colleagues conclude that the district court abused its

discretion by abstaining under Burford20 because the nature of

Webb’s claims precludes abstention. According to the Burford

abstention doctrine, a federal court may abstain and remand a case

to state court “only where the relief being sought is equitable or

otherwise discretionary.”21 After determining that Webb’s claim for

quantum meruit is an action at law – a determination that in part

spurs my dissent – the majority concludes that the district court

was not sitting in equity and did not possess discretion to grant

or deny relief. Thus, they opine, the district court acted outside

the strictures of the doctrine by abstaining. I dissent,

concluding that quantum meruit more appropriately should be

considered an equitable action, and fully convinced that the

district court’s abstention order should be affirmed. 

I.

The nature of quantum meruit is, indeed, “complex[].”22 The
22(...continued)

restitution [, a broad remedy within which quantum meruit has been

classified,] cannot properly be described as either ‘legal’ or

‘equitable’ in any narrowly restricted signification of those

terms. It was once a remedy that was created and applied by both

the Judges and the Chancellors . . . .”).

23 See supra, at _____ n.13 [majority draft, p. 11]; FDIC v.

Plato, 981 F.2d 852, 858 n.14 (5th Cir. 1993) (treating quantum

meruit damages as equitable relief); see also United States Gypsum

Co. v. National Gypsum Co., 352 U.S. 457, 478 (1957) (Black, J.,

dissenting) (hinting that quantum meruit is an action in equity by

stating that recovery under that theory runs counter to the

equitable doctrine of “unclean hands”). But see Mertens v. Hewitt

Assocs., 508 U.S. 248, 255 (1993) (“Money damages are, of course,

the classic form of legal relief.”); cf. Reich v. Continental Cas.

Co., 33 F.3d 754, 756 (7th Cir. 1994) (dictum) (In seeking

restitution,“[plaintiff] was seeking not a profit, but merely a

receipt, an insurance premium, net of some expenses; to call this

a ‘profit,’ it could be argued, would convert every suit for the

price of a contract into a suit for restitution, contrary to the

law.”).

24 Smith v. Wade, 461 U.S. 30, 93 (1983) (O’Connor, J.,

dissenting).

25 517 U.S. 706 (1996).

18

majority describes quantum meruit as an action at law – a legal

cause of action seeking money damages – and cites numerous cases in

support thereof. There is contrary jurisprudence describing

quantum meruit as an equitable action.23 “The battle of the string

citations [, however,] can have no winner.”24 Thus, reflection on

the Supreme Court’s discussion in Quackenbush v. Allstate Insurance

Company25 is appropriate. 

Congress imposed upon the federal courts a duty to exercise

their jurisdiction, but the statutes conferring jurisdiction were

enacted against a background of traditional principles that
26 Id., at 716-17.

27 Id., at 717 (internal quotations omitted).

28 Id., at 727-28.

29 It appears that courts competed for jurisdiction, see JOHN

P. DAWSON ET AL., CASES AND COMMENT ON CONTRACTS 107 (6th ed. 1993) (“Since

judges derived their income from litigants’ fees, it is not

surprising that competition for judicial business developed . . .

.”), so emphasis on the evolution of the cause of action does not

seem appropriate.

30 JAMES BARR AMES, LECTURES ON LEGAL HISTORY 156 (1913).

19

included a court’s ability to abstain in certain circumstances.26

Thus, “it has long been established that a federal court has the

authority to decline to exercise its jurisdiction when it is asked

to employ its historic powers as a court of equity.”27 And more

specifically, “the power to dismiss under the Burford doctrine . .

. derives from the discretion historically enjoyed by courts of

equity.”28 Thus, the appropriate issue to be resolved is whether

courts of equity historically heard claims of quantum meruit.

Given the Supreme Court’s historical emphasis, it is my

perception that the focus should be upon the origin of the relief

and its position at the time the federal judicial system was

created, not how the cause of action has since evolved.29 The roots

of quantum meruit are in the courts of equity;30 claims for quantum

meruit appeared in those courts before the cause of action could be

pursued at law. Claims for quantum meruit were pursued in the
31 Morton J. Horwitz, The Historical Foundations of Modern

Contract Law, 87 Harv. L. Rev. 917, 934 (1974) (“As late as the

turn of the century, it was also the prevailing practice in America

to sue in indebitatus assumptsit for an express contract and for

counts in both indebitatus and quantum meruit to be ‘usually joined

in the declaration; so that on failure of proof of an express debt

or price, the Plf. may resort ad debitum equitatis,’ that is, to an

equitable action in quantum meruit.”) (footnote omitted, italics

added) (quoting AMERICAN PRECEDENTS OF DECLARATIONS 95 (B. Perham ed.

1802).

32 See J.L. Barton, Contract and Quantum Meruit: The

Antecedents of Cutter v. Powell, 8 J. Legal Hist. 48 (1987);

Horwitz, supra note 12, at 936 (discussing the jury’s power to set

a reasonable price in quantum meruit); see also RESTATEMENT OF

RESTITUTION: QUASI CONTRACTS AND CONSTRUCTIVE TRUSTS § 4 cmt. e, at 21

(1937) (“Although ordinarily such money judgment is obtained by an

action at law, a decree for money will sometimes be rendered by a

court of equity.”).

33 Besides quantum meruit, Webb also pursued causes of action

for breach of contract and for suit on sworn account, but these

legal claims do not undermine the conclusion that the district

court was sitting in equity. Quackenbush, 517 U.S. at 730 (“We

have not strictly limited abstention to equitable cases, . . . but

rather have extended the doctrine to all cases in which a federal

court is asked to provide some form of discretionary relief.”)

(internal quotations and citations omitted).

20

courts of equity at the birth of our judicial system.31 Thus,

despite some indications, historically speaking, that quantum

meruit was a legal cause of action,32 I am not prepared to

dispositively rule that quantum meruit is a legal cause of action.

II.

Having personally concluded that a federal court sits in

equity when hearing a claim for quantum meruit,

33 I continue with

the Burford analysis. The Supreme Court describes the Burford

abstention doctrine as follows:
34 New Orleans Pub. Serv., Inc. v. Council of New Orleans, 491

U.S. 350, 361 (1989) (internal quotations and citations omitted).

35 Webb v. B.C. Rogers Poultry, Inc., No. A-98-CA-005-SS (W.D.

Tex. Feb. 19, 1998) (“Abstention is appropriate in this case, for

if this Court were to exercise federal jurisdiction, it could well

interfere with the State of Texas’ efforts to effect a coherent

policy on a matter of public concern, that is, the collection of

assets of an insolvent insurer through a state district court

receivership proceeding wherein the state district court retains

continuing jurisdiction over the liquidation proceedings. Failure

to abstain could lead to removal of cases to federal court and

possible changes of venue, leaving the receiver facing litigation

in several forums and under different circumstances. This would be

detrimental to the overall scheme of the liquidation proceedings in

Texas when an insurance company becomes insolvent.”).

36 Munich Am. Reins. Co. v. Crawford, 141 F.3d 585, 589 n.2 (5th

Cir.) (collecting cases), cert. denied, 119 S. Ct. 539 (1998).

21

Where timely and adequate state court review is

available, a federal court sitting in equity must decline

to interfere with the proceedings or orders of state

administrative agencies: (1) when there are difficult

questions of state law bearing on policy problems of

substantial public import whose importance transcends the

result in the case then at bar; or (2) where the exercise

of federal review of the question in a case and in

similar cases would be disruptive of state efforts to

establish a coherent policy with respect to a matter of

substantial public concern.34

The district court abstained under the second noted circumstance,35

and, in doing so, in my opinion, it did not abuse its discretion.

Prior to Quackenbush, this court and other courts consistently

had approved Burford abstention in actions involving an insurance

company that, in turn, was involved in ongoing state delinquency

proceedings.36 Being persuaded that the holding of Quackenbush

does not torpedo the district court’s decision to abstain, I
37 15 U.S.C. §1011 (“Congress hereby declares that the

continued regulation . . . by the several States of the business of

insurance is in the public interest . . . .”).

38 See Martin Ins. Agency, Inc. v. Prudential Reins. Co., 910

F.2d 249, 255 (5th Cir. 1990) (necessarily finding the concern

“substantial” because it was “appropriate to abstain on Burford

abstention grounds”); see also Lac D’Amiante du Quebec, Ltee v.

American Home Assurance Co., 864 F.2d 1033, 1045 (3d Cir. 1988)

(“essential state concern”).

22

briefly reflect only on the remaining analysis because of the solid

background of precedent upholding Burford abstention in similar

situations.

A.

Texas’ regulation of the insurance industry is “a matter of

substantial public concern.” Congress manifestly considers such

regulation a matter of public concern.37 Precedent teaches that

this concern is substantial.38

B.

Texas has established a coherent policy regulating the

insurance industry. It has formulated a complex and comprehensive

scheme involving numerous actors, including the Department of

Insurance, the Commissioner of Insurance, as well as the District

Court of Travis County. Under Texas law, the governor, with the

advice and consent of the senate, appoints a Commissioner of

Insurance who is charged with the primary responsibility of

administering, enforcing, and executing provisions of the Insurance
39 TEX. INS. CODE ANN. Art. 1.09(a), (b).

40 TEX. INS. CODE ANN. Art. 1.04(a).

41 TEX. INS. CODE ANN. Art. 1.09-1(a).

42 See generally TEX. INS. CODE ANN. Arts. 21.28, 21.28-A; El

Paso Elec. Co. v. Texas Dep’t of Ins., 937 S.W.2d 432, 434-35 (Tex.

1996) (“Article 21.28 of the Texas Insurance Code sets forth a

comprehensive scheme for the liquidation, rehabilitation, and

reorganization of insolvent insurers.”); see also TEX. INS. CODE ANN.

Art. 21.28 § 16 (“In the event of conflict between the provisions

of this Article and the provisions of any existing law, the

provisions of this Article shall prevail, and all laws, or parts of

law, in conflict with the provisions of this Article, are hereby

repealed to the extent of such conflict.”).

43 TEX. INS. CODE ANN. Art. 2.02.

44 TEX. INS. CODE ANN. Art. 1.10.

23

Code.39 Decisions by the Commissioner may be challenged by

interested parties in the District Court of Travis County, “and not

elsewhere.”40 The Attorney General for the State of Texas is

charged with representing and advising the Commissioner in all

legal matters.41

Texas’ comprehensive scheme also quite appropriately covers

matters concerning those insurance companies that become

insolvent.42 Particular financial considerations must be met before

an insurance company may be incorporated in Texas,43 and the

Department of Insurance is charged with monitoring the continuing

performance of insurance companies.44 If the department determines

that an insurance company’s financial position has dipped below a

prescribed level, the Commissioner must notify the company of this

determination and provide the company with a list of requirements,
45 TEX. INS. CODE ANN. Art. 21.28-A.

46 TEX. INS. CODE ANN. Art. 21.28-A.

47 TEX. INS. CODE ANN. Art. 21.28 § 2(e). 

48 TEX. INS. CODE ANN. Art. 21.28 § 2(h) (“Except as provided by

this subsection, all money collected by the receiver shall be

forthwith deposited into the Texas Treasury Safekeeping Trust

Company . . . .”).

49 TEX. INS. CODE ANN. Art. 21.28 § 2(i) (“Exclusive venue of

delinquency proceedings shall be in Travis County, Texas.”).

24

compliance with which will absolve the earlier departmental

determination.45 If, after a specified period of time, the company

has not met the requirements set forth by the Commissioner and

other criteria have not been met, the Commissioner must notify the

Attorney General who may apply to any Travis County court for

remedial action, including the appointment of a receiver.46 Texas

law charges an appointed receiver with the duty of conducting

the business of the delinquent insurer and conserving the

assets and protecting the rights of policyholders and

claimants.47 Additionally, Texas law specifies where the

proceeds collected by the receiver shall be held.48

Finally, Texas law specifies that the exclusive venue for

delinquency proceedings shall be in Travis County.49 It

is abundantly clear that Texas indeed has established a

coherent policy in this area.
50 15 U.S.C. § 1012(a) (“The business of insurance, and every

person engaged therein, shall be subject to the laws of the several

States which relate to the regulation or taxation of such

business.”). But see 15 U.S.C. § 1012(b) (“No Act of Congress

shall be construed to invalidate, impair, or supercede any law

enacted by any State for the purpose of regulating the business of

insurance . . . unless such Act specifically relates to the

business of insurance . . . .”).

51 See Burford, 319 U.S. at 325-27.

25

C.

I find no basis for suggesting that the district

court abused its discretion in concluding that federal

review of the questions presented in this case and

similar cases would be disruptive of Texas’ efforts to

effectuate its coherent policy. Congress delegated the

regulation of the business of insurance to the states,50

and Texas has created a complex and comprehensive scheme

to do exactly that. The Texas legislature has

concentrated judicial review of insurance proceedings in

Travis County, and consequently those courts, like the

Department of Insurance and the Commissioner of

Insurance, have developed a specialized knowledge

regarding these proceedings.51 In my view, reversing the

district court and allowing this case to continue in

federal court inappropriately “usurp[s]” Texas’ control
52 Barnhardt Marine Ins., Inc. v. New England Int’l Surety of

Am., Inc., 961 F.2d 529, 532 (5th Cir. 1992).

53 TEX. INS. CODE ANN. Art. 21.28 § 2(e) (emphasis added).

54 Munich Am. Reins. Co., 141 F.3d at 593 (“[C]onsolidation

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.”).

26

over the liquidation proceeding.52

Finally, Texas requires the receiver to “take such

steps as may be necessary to conserve the assets . . .

for the purpose of liquidating . . . the affairs of the

insurer.”53 By holding that the federal district court

possessed jurisdiction over this case, the majority

potentially sacrifices one of the chief purposes of the

Texas regulatory scheme by effectively requiring the

“dissipation of the insolvent company’s funds”54 likely to

result from litigation conducted outside Travis County

and away from the court with the responsibility for this

insurance company salvage operation. 

Splintering a portion of this on-going proceeding and

insisting on jurisdiction herein for the federal district

court unduly threatens the scheme enacted by Texas as

specifically authorized by Congress. As our courts have
55 Martin Ins. Agency, Inc., 910 F.2d at 254 (quoting Grimes

v. Crown Life Ins. Co., 857 F.2d 699, 703 (10th Cir. 1988)); cf.

Sierra Club v. City of San Antonio, 112 F.3d 789, 796 (5th Cir.

1997) (“Burford abstention is particularly appropriate where by

proceeding the district court would have risked reaching a

different answer than the state institutions with greater interest

in and familiarity with such matters.”) (internal quotations and

citations omitted). True, the district court noted that “the case

at bar may be a simple determination of what, if any, premium is

owed by the defendants to the receiver acting through his appointed

authority.” Webb v. B.C. Rogers Poultry, Inc., No. A-98-CA-005-SS

(W.D. Tex. Feb. 19, 1998). Our precedent, nonetheless, reveals

that “disruption” may stem either from unsettled law or from the

application of settled law to complex, local facts. Wilson v.

Valley Elec. Membership Corp., 8 F.3d 311, 314-15 (5th Cir. 1993).

And on the record before this court, I cannot conclude that the

district court abused its discretion in abstaining. 

27

so forcefully noted: “‘in instances, where states have

. . . formulat[ed] complex and specialized administrative

and judicial schemes to regulate insurers, especially the

liquidation of insolvent insurers,’ the federal court

should abstain from exercising jurisdiction in disputes

occurring in the larger context of state liquidation

proceedings.”

55 I am in absolute agreement with this

statement.

III.

In sum, we should conclude that quantum meruit

historically was, and therefore should be deemed to be,

an equitable action and that the district court did not

abuse its discretion in abstaining under Burford. I
28

would affirm the judgment appealed.