Interactive Federalism and the Certification of State Law Questions in Diversity Cases

On August 29, 2005, Hurricane Katrina struck Louisiana and Mississippi. In the aftermath of the hurricane, the city of New Orleans flooded when levees along three major canals ruptured. At one point, approximately eighty percent of New Orleans was under water. Homeowners, renters and commercial property owners suffered tremendous property damage as a result of the New Orleans flood. Because insurance policies typically contain exclusions for damage caused by "flood," however, many of these property owners and renters were denied coverage. Despite the flood exclusions in their insurance policies, many of those who were denied coverage sued to recover their losses. One set of these consolidated cases, In re Katrina Canal Breaches Litigation, recently reached the U.S. Court of Appeals for the Fifth Circuit. In that set of cases, the plaintiffs argued that "the massive inundation of water into [New Orleans] was the result of the negligent design, construction, and maintenance of the levees and that the policies' flood exclusions in this context were ambiguous because they [did] not clearly exclude coverage for an inundation of water induced by negligence." They asserted that "because their policies [were] ambiguous, [the Fifth Circuit] must construe them in their favor to effect coverage for their losses." The parties agreed that Louisiana substantive law applied to the cases. The Fifth Circuit recognized, however, that the Louisiana Supreme Court had "not interpreted a flood exclusion in the context of breached levees." Although several of the plaintiffs filed motions asking the Fifth Circuit to certify to the Louisiana Supreme Court the question of whether the flood exclusions in their policies were ambiguous, in a footnote the Fifth Circuit denied the motions. In doing so, the court acknowledged that it would have to "make an Erie guess and determine, in [its] best judgment," how the Louisiana Supreme Court would decide the issue. The Fifth Circuit ultimately held that the policies were unambiguous, that the damage caused by the New Orleans flood was excluded from coverage, and that the plaintiffs were not entitled to recover. The plaintiffs whose motions to certify had been denied then filed petitions for writs of certiorari in the Supreme Court. The sole question raised by the petitions was whether the Fifth Circuit erred when it failed to certify the state law question before it to the Louisiana Supreme Court. In their petitions, the plaintiffs pointed out that at the time the Fifth Circuit denied their motions to certify, numerous state district courts had already ruled differently than the Fifth Circuit and that at least one of those cases was on appeal. Nevertheless, the Supreme Court denied the petitions. Thirteen years ago, a federal judge stated: "Federal courts evince no clear understanding of when . . . to certify." This Article argues that federal courts today still do not demonstrate a clear understanding of certification and addresses the question of when a federal court should certify an unclear question of state law and when it should decide the issue itself. The United States Supreme Court has said that the certification of unsettled state law questions by federal courts "may 'hel[p] build a cooperative judicial federalism.'" The Court, however, has not provided the lower federal courts with any real guidance regarding how or when they should use certification to foster intersystemic collaboration. Thus, in the diversity context, the circuit courts have developed a variety of approaches to certification. This Article first examines whether these approaches in fact exemplify cooperative judicial federalism in action. This Article concludes that while some circuits may use certification cooperatively, several circuits approach certification as an exercise in dualist federalism. This Article asks whether cooperative or dualist federalism is the appropriate federalism lens through which to view certification. Employing a series of articles written by Professor Robert A. Schapiro, this Article argues that certification today can best advance the goals of federalism and achieve other important benefits if it is viewed as an exercise in interactive, rather than cooperative or dualist, federalism. Using the values of interactive federalism, this Article proposes a new functional standard for the certification of state law questions by federal courts in diversity cases. Part II discusses dualist, cooperative and interactive approaches to federalism. Part III explains intersystemic adjudication and argues that the interpretation of state law by federal courts can be a positive good rather than a necessary evil. This part also explains how Professor Schapiro has applied the theory of interactive federalism to dual state and federal constitutional challenges that are brought in federal court. Part IV discusses certification and analyzes the differing approaches the federal appellate courts take to certification. Part V classifies the circuit courts' approaches to certification as representative of either cooperative or dualist federalism and explains why, from an interactive approach to federalism, these approaches are flawed. Part V then sets forth a new approach to certification based on Professor Schapiro's theory of interactive federalism and applies this approach to the Katrina Canal Breaches Cases. Part V concludes that, from an interactive perspective, the Fifth Circuit correctly denied the motions to certify in those cases.