Opinion ID: 707607
Heading Depth: 2
Heading Rank: 1

Heading: jurisdiction

Text: 10 On appeal, Wausau renews its challenge to the jurisdiction of the district court. We must address such a challenge upon proper suggestion. Silver Star Enters., Inc. v. M/V Saramacca, 19 F.3d 1008, 1013 n. 6 (5th Cir.1994); Sarmiento v. Texas Bd. of Veterinary Medical Examiners, 939 F.2d 1242, 1245 (5th Cir.1991). The essence of Wausau's argument is that the statute creating the Facility provides for administrative remedies for employers that are exclusive of remedies such as the kind sought by Northwinds, and that Northwinds was required to exhaust those remedies before seeking redress in a judicial forum. 11 Wausau argues that Tex.Ins.Code Ann. art. 5.76-2 provides exclusive administrative remedies for employers. First, the statute grants authority for the creation of exclusive procedures for employers to secure and maintain insurance. Section 2.04(a) states: 12 Subject to the approval of the [State Board of Insurance (the Board) ], the facility may adopt, amend and repeal bylaws, rules, and regulations necessary to implement this article. Section 2.05(b) then provides: 13 After the rules adopted under Section 2.04 of this article have been approved by the board, the procedures and remedies established under this article shall be the exclusive procedure for any applicant to the facility to secure or maintain the insurance available under this article. 14 Second, the statute creates both general and particularized procedures through which employers may contest acts and decisions of the Facility. Section 2.08 establishes a general grievance procedure: 15 (a) An applicant for insurance, an insured, or an insurer aggrieved by an act or decision of the facility may appeal to the board not later than the 30th day after the affected party had actual notice that the act occurred or the decision was made..... 16 (d) A decision of the board under this section is subject to judicial review in the manner provided in the Administrative Procedure and Texas Register Act.... 17 The Texas Administrative Code expressly establishes a procedure for appeals to the Board. Tex.Admin.Code tit. 28, Sec. 1.51(b). The Texas Government Code provides for the procedures for judicial review of the Board's decision. Tex.Gov't Code Ann. Secs. 2001.171-.178. Specific cases of fraud and violations of the Insurance Code are referred to the Texas Workers' Compensation Commission (the Commission) under Sec. 2.05(d) of the statute: 18 The facility shall refer all cases of suspected fraud and violations of this code relating to workers' compensation insurance to the commission to: 19 (1) perform investigations; 20 (2) conduct administrative violation proceedings; and 21 (3) assess and collect penalties and restitution. 22 Section 4.05(d) authorizes a procedure for the Facility to review high EMRs at an employer's request. 3 23 Finally, Wausau asserts that, because the Texas Legislature has prescribed the exclusive rights, procedures, and remedies available to an employer insured by the Facility, those statutory remedies must be exhausted before seeking judicial review. Wausau cites both statutory and case law to this effect. Tex.Gov't.Code Ann. Sec. 2001.171; Texas Catastrophe Property Ins. Ass'n v. Council of Co-Owners of Saida II Towers Condominium Ass'n, 706 S.W.2d 644, 645-46 (Tex.1986); Testoni v. Blue Cross & Blue Shield of Texas, Inc., 861 S.W.2d 387, 390 (Tex.App.--Austin 1992, no writ); Stephanou v. Texas Medical Liab. Ins. Underwriting Ass'n (JUA), 792 S.W.2d 498, 500 (Tex.App.--Houston [1st Dist.] 1990, writ denied). 24 Northwinds counters that the doctrines of exclusive jurisdiction and exhaustion of administrative remedies do not apply because the Facility, the Board, and the Commission are not empowered to award Northwinds monetary damages for injuries that were a consequence of past tortious actions by Wausau. Rather, Northwinds contends that the doctrine of primary jurisdiction applies and that this court can utilize the ultimate findings regarding the fraudulent nature of the contested workers' compensation claims to adjudicate Northwinds's damages claims against Wausau. 25 Northwinds draws an analogy between the present case and our decision in Penny v. Southwestern Bell Tel. Co., 906 F.2d 183 (5th Cir.1990). In Penny, the plaintiffs alleged that the phone company had charged their business at telephone rates that were higher than their competitors' rates and that this disparate rate application had impeded their ability to compete and eventually forced them out of business. Id. at 184-85. The plaintiffs pursued administrative review of the allegedly discriminatory rates. Id. at 184. At the same time, however, they also brought a claim against the phone company in state district court seeking recovery under the Texas Deceptive Trade Practices Act for damages suffered by their business due to the disparate rates. Id. at 184-85. The phone company removed the case to federal district court on diversity grounds. Id. at 185. The district court dismissed the case for lack of jurisdiction because the plaintiffs had failed to exhaust their administrative remedies. Id. 26 On appeal, we held that the doctrine of exhaustion of remedies did not apply because the agency in question did not have the power to provide the remedy sought by the plaintiffs. Id. at 186. First, we noted that the agency's exclusive jurisdiction over the regulation and application of rates did not necessarily translate into exclusive jurisdiction over tort claims against a phone company. Id. We then distinguished the power to regulate rates from the power to remedy past wrongs. Specifically, we noted that the agency was not explicitly authorized by statute to grant relief for tort actions: 27 [W]here the claim is not for future compliance but for damages based on past acts, the exhaustion of administrative remedies doctrine may not apply. Th[is] notion is based on the absence of a statute authorizing the Public Utility Commission to fix or adjudicate claims for damages. 28 Id. (internal quotations and citations omitted). Therefore, we held that the agency did not have exclusive jurisdiction over the claims brought against the telephone company and that the plaintiffs were not required to exhaust their administrative remedies before filing an action for damages. 29 Instead, we found that this was an appropriate case in which to apply the doctrine of primary jurisdiction. Id. at 186-87. This doctrine comes into play whenever enforcement of the claim requires the resolution of issues [which, under a regulatory scheme, have been placed] within the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views. Id. at 187 (internal quotations and citations omitted). In particular, we found that it was appropriate to defer to the Public Utility Commission's findings regarding whether the rates charged were discriminatory because such findings were corollary to the determination of whether the phone company had violated the Deceptive Trade Practices Act. Id. Accordingly, we remanded the case to the district court, instructing it to hold the case in abeyance until such findings were made. Id. at 189. 30 Northwinds urges a similar result here. As in Penny, Northwinds notes that Tex.Ins.Code Ann. art. 5.76-2 does not vest either the Facility, the Board, or the Commission with the authority to adjudicate tort and contract claims or to award damages. Rather, these entities only have authority to regulate the payment of claims and the assignment of EMRs. Because Northwinds can only obtain the relief it seeks in a judicial forum, it contends that the district court has original jurisdiction of the case. 31 Northwinds further points out that it has pursued its administrative remedies with respect to the review of the claims that it alleges were mishandled. Indeed, in response to Wausau's 12(b)(1) Motion to Dismiss for Lack of Jurisdiction, Northwinds submitted evidence that it had obtained findings from the Commission that two workers that Wausau had agreed to pay had not suffered compensable on-the-job injuries. Northwinds also submitted evidence that the Texas Department of Insurance had directed Wausau to correct Northwinds's EMR to account for the findings that two of the contested claims were not compensable. Because such findings are relevant to the claims that Northwinds has asserted against Wausau in this lawsuit, Northwinds suggests that the doctrine of primary jurisdiction applies; that is, the district court should hold its proceedings in abeyance until the completion of administrative findings regarding all of the alleged fraudulent workers' compensation claims, including judicial review of those administrative findings. 4 At that point, the district court can then adjudicate Northwinds's common law and statutory claims for relief. 32 We agree with Northwinds's assertion that Penny controls this case; moreover, we find Wausau's arguments to be inapposite. First, Wausau's citation of the exclusive procedures and remedies provision in Sec. 2.05(b) clearly does not apply to Northwinds's claims. That section states that the procedures and remedies established under this article shall be the exclusive procedure for any applicant to the facility to secure or maintain the insurance available under this article. Tex.Ins.Code Ann. art. 5.76-2, Sec. 2.05(b) (emphasis added). Northwinds is not bringing this action to secure or maintain its workers' compensation coverage; rather, it seeks to recover damages for injuries it allegedly suffered due to the past actions of Wausau. 33 Second, the general grievance procedure authorized under Sec. 2.08 does not pertain to these claims. The remedy under that procedure is that the Board will affirm, reverse, or modify the act of the facility that is the subject of the appeal to the board. Id. Sec. 2.08(b). In the case sub judice, the acts of which Northwinds complains are the payment of allegedly fraudulent claims and the increase in its EMR. Under the statute, the most relief that the Board and the Commission could afford Northwinds would be to find that the claims should not have been paid and to adjust Northwinds's EMR accordingly, which apparently has been done in at least two instances. Still, such relief does not compensate Northwinds for the damages it suffered as a consequence of the acts being appealed. The Board and the Commission can only remedy acts of the Facility, not the consequences of those acts. 34 Third, the specific procedures for addressing cases of fraud and Insurance Code violations, and for reviewing high EMRs, also appear to be inapplicable. With respect to fraud and code violations, Sec. 2.05(d) refers these cases to the Commission to perform investigations, to conduct administrative proceedings, and to assess and collect penalties and restitution. If these remedies even apply to claims for damages which are the consequence of fraud and code violations--and it is not clear that they do 5 --they would not provide Northwinds with any relief because the penalties and restitution do not redound to the benefit of the aggrieved party. Rather, any restitution collected is deposited in the rejected risk fund. Id. Sec. 2.05(f). Any penalties collected are credited to the account of the Commission. Id. Sec. 2.05(g). Also, the provision for review of high EMRs apparently only contemplates that the Facility will exclude an employer from the extraordinary risk provisions of the rating plan in appropriate cases. Id. Sec. 4.05(d). 35 Finally, there is no statutory provision that expressly gives the Facility, the Board, or the Commission the authority to adjudicate common law or statutory tort actions or to award damages. By contrast, the cases cited by Wausau that required exhaustion of administrative remedies all involved agencies vested with the authority to adjudicate the claims asserted and to award the relief requested. 36 Our analysis of the statute suggests that this case falls squarely within Penny 's holding that, where an agency has no power to provide the remedy sought, then, exclusive jurisdiction cannot rest in that body. Penny, 906 F.2d at 186. Moreover, the claims asserted by Northwinds, which are in the nature of common law tort and statutory remedies for damages, are cognizable in a federal district court in a diversity case. Accordingly, we hold that the district court has original jurisdiction of the claims asserted by Northwinds. See id. 37 Although we hold that the district court properly exercised jurisdiction over these claims, we must still consider whether application of the primary jurisdiction doctrine is appropriate in this case. In Penny, we held that this doctrine applies where: (1) the court has original jurisdiction over the claim before it; (2) the adjudication of that claim requires the resolution of predicate issues or the making of preliminary findings; and (3) the legislature has established a regulatory scheme whereby it has committed the resolution of those issues or the making of those findings to an administrative body. See id. at 187. 38 We have already held that the district court has original jurisdiction in this case. As to the second prong, it is clear that Northwinds's damages claims against Wausau depend upon a finding that the contested workers' compensation claims were fraudulent and that Wausau improperly paid these claims without investigating them. If the claims were properly paid, Northwinds would have no ground for relief against Wausau. With respect to the third prong, our analysis of the relevant provisions of the Texas Insurance Code reveals that the Texas Legislature has committed the making of such findings to the Facility, the Board, and the Commission. These findings in turn are subject to judicial review in Travis County district court. Tex.Gov't Code Ann. Sec. 2001.176; Tex.Ins.Code Ann. art. 5.76-2, Sec. 2.08(d). Because the Texas Legislature has vested these entities with the authority to make these findings, and because the special expertise of these entities makes them uniquely qualified to make such findings, it is more appropriate that the district court defer to this procedure rather than to make these necessary determinations in the first instance. Specifically, under the doctrine of primary jurisdiction as outlined in Penny, the district court should have abstained from resolving the damages claims asserted by Northwinds until the administrative and judicial review procedures prescribed by the Texas Insurance Code had yielded final determinations on the issue of whether Wausau improperly paid the contested workers' compensation claims. Because the district court did not do this, we remand the case to the district court with instructions that it hold the case in abeyance until these final determinations have been made.