Court Opinion

ID: 37884
Source: CourtListenerOpinion
Date Created: 2010-04-25 19:59:42+00
Date Added: 2024-06-11T08:12:54.971086
License: Public Domain

United States Court of Appeals
                                                                Fifth Circuit
                                                             F I L E D
                  UNITED STATES COURT OF APPEALS
                           FIFTH CIRCUIT                     March 16, 2005

                                                         Charles R. Fulbruge III
                            No. 04-30085                         Clerk

        MARYLYN MELDER; ANGINETTE WILLIAMS, wife of/and;
   ROBERT WILLIAMS; TRINA MERRIDY; IRIS WILLIAMS, wife of/and;
 ERIC WILLIAMS; LESLIE FAYE SANDERS; WILLIE J. NEAPOLLIOUN, JR.;
   DIANA BARNES, wife of/and; EUGENE BARNES; KIMBERLY SANDERS,
    wife of/and; DALE J. SANDERS; NICOLE LEWIS, wife of/and;
   KENDALL LEWIS; GLORIA JACKSON, wife of/and; VINCENT JACKSON;
    LAVERNE MCGILL; TAMICA CRYER, wife of/and; LIONEL CRYER;
         LILLIE BUNCH, individually and on behalf of all
               those individuals similarly situated,

                                             Plaintiffs-Appellants,
                               versus

 ALLSTATE CORP.; ALLSTATE INSURANCE CO.; ALLSTATE INDEMNITY CO.;
    ALLSTATE LIFE INSURANCE CO.; STATE FARM MUTUAL AUTOMOBILE
     INSURANCE CO.; STATE OF LOUISIANA, through the Louisiana
                   Insurance Rating Commission,

                                              Defendants-Appellees.

           Appeal from the United States District Court
               for the Eastern District of Louisiana

Before BARKSDALE, GARZA, and DeMOSS, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

      For this 28 U.S.C. § 1292(b) interlocutory appeal from a

remand-denial, where diversity-jurisdiction removal was premised on

claimed fraudulent joinder, at issue is whether there is any

reasonable basis for predicting the non-diverse defendant could be

liable under Louisiana law and, therefore, not fraudulently joined.

(Our court now refers to “fraudulent joinder” as “improper joinder”.
See Smallwood v. Illinois Central Railroad Co., 385 F.3d 568 n.1

(5th Cir. 2004)(en banc).)   AFFIRMED and REMANDED.

                                  I.

     Plaintiffs, all Louisiana residents, individually and on behalf

of a putative class of homeowner and automobile policyholders, filed

this action in Louisiana state court, primarily claiming:      non-

resident defendants State Farm and Allstate violated Louisiana law

and the Louisiana Constitution in setting insurance rates using

credit-scoring formulas that had a discriminatory impact based on

race and/or the economic condition of the area in which the property

to be insured is located; and resident defendant Louisiana Insurance

Rating Commission (LIRC) failed in its duty to regulate insurance

rates by allowing State Farm and Allstate to use those formulas.

Allstate and State Farm removed this action to federal court under

28 U.S.C. § 1441, claiming complete diversity pursuant to 28 U.S.C.

§ 1332 because the sole non-diverse defendant, LIRC, is improperly

joined.   Plaintiffs moved for remand to state court, claiming lack

of subject matter jurisdiction.    Following a hearing, the district

court denied the motion, ruling Plaintiffs did not establish the

requisite possibility of liability for LIRC.

                                  II.

     For this 28 U.S.C. § 1292(b) appeal, we review de novo the

remand-denial.   E.g., S.W.S. Erectors, Inc. v. Infax, Inc., 72 F.3d
489, 492 (5th Cir. 1996).    The removing party has the burden of

                                   2
establishing improper joinder by showing:         Plaintiffs’ inability to

establish a claim under state law against the non-diverse defendant;

or actual fraud in pleading jurisdictional facts.                Smallwood, 385
F.3d at 573 (citing Travis v. Irby, 326 F.3d 644, 646-47 (5th Cir.

2003)).     Defendants do not claim the latter.         Therefore, at issue

is whether Defendants have established there is no reasonable basis

Plaintiffs might be able to recover under Louisiana state law

against the non-diverse defendant, LIRC.          See id.    (Contrary to the

dissent, in making this determination for the claim against LIRC,

we   do   not   consider    the   Eleventh   Amendment      or    questions   of

jurisdiction that do not bear on whether a claim can be established

under state law against LIRC.       Obviously, to do otherwise would fly

in the face of the purpose, and controlling law, for not allowing

improper joinder to defeat federal jurisdiction.             See 28 U.S.C. §

1441(b) (removal permitted if “none of the parties in interest

properly joined ... is a citizen of the State in which such action

is brought”; emphasis added). As discussed below, only Allstate and

State Farm were “properly joined”.)

      For   this   issue,   two   points   bear   on   Plaintiffs’     possible

recovery: whether, as required, they exhausted their administrative

remedies provided by the Louisiana Insurance Code; and whether LIRC

is entitled to state law immunity for discretionary acts for the

rate setting functions at issue here.             (For the latter point,

Plaintiffs assert that, even if LIRC is entitled to immunity on

                                      3
damages,    the   immunity    statute         does    not    apply       to   claims   for

injunctive and declaratory relief.                   A review of the pleadings,

however,    reveals     Plaintiffs      did      not        request      injunctive      or

declaratory relief against LIRC. In any event, for the reasons that

follow, we need not decide whether LIRC is entitled to immunity.

The   failure-to-exhaust      issue     was      properly          raised     (obviously,

contrary to the dissent, it was not necessary to assert it pre-

removal    in   state   court)    and   is      the    most       definite     basis   for

determining improper joinder.)

      “For reasons stated on the record”, the district court relied

on discretionary immunity in denying Plaintiffs’ remand motion.

Melder v. Allstate, No. 03-2499 (E.D. La. 11 December 2003).                           Oral

argument on the remand motion also included, inter alia, failure to

exhaust administrative remedies.              (Allstate also raised it in its

Rule 12(b)(6) motion to dismiss.)                Neither the district court’s

certification     for   interlocutory          appeal       nor    our   court’s   order

granting it specify a controlling question.                       The failure to do so

does not restrict the scope of our review, however, of the remand-

denial order.      For an appeal under 28 U.S.C. § 1292(b), we may

“address any issue fairly included within the certified order

because it is the order that is appealable, and not the controlling

question identified by the district court”.                       Yamaha Motor Corp.,

U.S.A. v. Calhoun, 516 U.S. 199, 205 (1996)(internal quotation

omitted)(first     emphasis      added;       second    emphasis         in   original).

                                          4
Therefore, because exhaustion of administrative remedies was raised

in district court and State Farm and Allstate presented the point

in their briefs here, we may consider it.

     The Louisiana Constitution vests the Louisiana Commissioner of

Insurance with authority to regulate the business of insurance. LA.

CONST. art. IV. Authority over insurance rates, regulations, and all

other insurance matters is vested in the Department of Insurance

under the Commissioner.     See LA. REV. STAT. § 36:381 et seq.     The

Commissioner is charged with “protection of the public interest in

the realm of insurance”.   Doerr v. Mobile Oil Corp., 774 So. 2d 119,

134 (La. 2000) (citing LA. CONST. art. IV; LA. REV. STAT. § 22:2).

     The    Louisiana   Administrative   Code   provides   a   detailed

administrative process through which parties may seek relief for

violations of Louisiana insurance statutes and regulations. See LA.

ADMIN. CODE tit. 37, § 1101 et. seq.      The practice and procedure

rules, for example, provide for a hearing before the Commissioner,

following a written petition or complaint, § 1103; at the hearing,

parties may be represented by counsel, present evidence, and examine

witnesses, §§ 1125-1133; the Commissioner has the power to issue

subpoenas to obtain witnesses or documentary evidence necessary for

the hearing, § 1121; within 30 days following the hearing, the

Commissioner is to enter a written decision and order, § 1139; and

that decision is appealable to a designated state district court,

§ 1143.    The Commissioner is also authorized, without petition or

                                  5
application    by    any   insured,     to   investigate    and     punish   unfair

practices     in    the    business     of     insurance,    including       unfair

discrimination in setting rates.             LA. REV. STAT. § 22:1214(7)(b).

      The Louisiana legislature established LIRC, which is under the

control and direction of the Commissioner, who serves as its ex

officio chairperson.        § 22:1401.       LIRC was created “to promote the

public welfare by regulating insurance rates to the end that they

shall not be excessive, inadequate or unfairly discriminatory”.                   §

22:1402 (emphasis added).           (Insurance rates are discriminatory, of

course, through risk factors such as age and gender.                 For example,

it is common knowledge that, in general, automobile insurance rates

for   teenaged      boys    are     higher    than   for    middle-aged      women.

Accordingly,       the    statute    mandates    rates     not    being   unfairly

discriminatory.) Rates include the premium to be charged, including

any related fees, or the elements and factors forming the basis for

the determination of the premium.             § 22:1404.

      Insurers are required to file insurance rates with LIRC; it

reviews them to determine whether they are reasonable and not

unfairly discriminatory. Id. Insurers are prohibited from charging

a rate other than one approved by the LIRC.                      § 22:1406(a). An

insured may challenge a rate applicable to his home or automobile

by filing a written complaint with the LIRC, requesting a hearing.

§ 22:1408(D).       Further, consistent with the earlier description of

the Commissioner’s authority, the Commissioner may investigate rates

                                         6
at any time; his authority is not “circumscribed and limited to

functions which do not affect rates.     Rates are the function and

concern of both the [LIRC] and the commissioner”.          Employees-

Commercial Union Ins. v. Bernard, 303 So. 2d 728, 732-33 (La. 1974).

       Plaintiffs allege they were charged automobile and homeowners

insurance rates based on a formula that has a discriminatory impact.

They assert that, because the formula includes credit scoring

information, it has a discriminatory impact on the basis of race

and/or the economic condition of the area in which the property to

be insured is located.      Because these allegations involve rate-

setting, they are within the area LIRC was created to regulate. The

record does not reflect that Plaintiffs have filed a complaint with

either the Commissioner or the LIRC. Citing the Louisiana Insurance

Code, Louisiana Administrative Procedures Act, and case law, State

Farm   and   Allstate   contend:   Louisiana   provides   an   adequate

administrative remedy; and, because Plaintiffs’ claims relate to

rate-making, they cannot seek judicial relief until after they have

exhausted their administrative remedies.   Plaintiffs do not respond

to the exhaustion issue, except to claim erroneously it is not

properly before us.

       Steeg v. Lawyers Title Insurance Corporation, 329 So. 2d 719,

722 (La. 1976), provides that “disputes as to matters within the

administrative regulation and expertise should ordinarily first be

                                   7
addressed    for    determination      to     the    administrative       tribunals

legislatively intended to decide them rather than to the courts”.

Steeg concerned a challenge to rates charged by a title insurance

company.    Because the administrative remedies were not shown to be

inadequate, and plaintiffs failed to exhaust them, their complaint

was dismissed.      Id.    The Steeg court was “unwilling to hold that a

judicial    claim    ...    is    necessarily       available   ...   [when]    an

administrative action or rate [is] alleged to be invalid or illegal”

and an adequate administrative remedy is available.                 Id.      Here,

as in Steeg, Plaintiffs have an adequate administrative remedy for

addressing insurance-rate grievances.               As discussed, the Louisiana

Administrative Code provides a detailed procedure for petitioning

the Commissioner for review of alleged violations of rate-making

regulations and for judicial review of the Commissioner’s decision.

LIRC, under the direction of the Commissioner, is charged with

responsibility      for    preventing,       and    is   uniquely   qualified   to

regulate, unfair trade practices in rate making, including unfair

discrimination in setting rates.          LA. REV. STAT. § 22:1214; see also,

Employees-Commercial Union Ins., 303 So. 2d at 733.

     Given this administrative remedy, Plaintiffs must exhaust it

before seeking judicial review.          Steeg, 329 So. 2d at 722; LA. ADMIN.

CODE tit. 37, § 1143.            Requiring Plaintiffs to do so does not

permanently deprive them of judicial review of LIRC’s or the

Commissioner’s decisions.           Rather, it allows the administrative

                                         8
agency   statutorily   authorized,       and   best   equipped,   to   address

Plaintiffs’ claims to do so before a court exercises jurisdiction.

     Because they have not exhausted the adequate administrative

remedies provided by Louisiana law, there is no reasonable basis

Plaintiffs might be able to recover in this action against the sole

non-diverse defendant, LIRC. Therefore, LIRC is improperly joined;

and, accordingly, the remand motion was properly denied.

                                III.

     For the foregoing reasons, the remand-denial is AFFIRMED; and

this matter is REMANDED to district court for further proceedings

consistent with this opinion.

                                          AFFIRMED and REMANDED

ENDRECORD

                                     9
DeMOSS, Circuit Judge, dissenting:

       The primary question before this Court is whether, looking at

Plaintiffs’ petition in state court, original federal jurisdiction

exists to permit removal of this action. Then, only if this primary

question is answered in the affirmative should the Court reach the

question whether any reasonable basis exists for predicting that

LIRC could be liable to Plaintiffs under Louisiana law, such that

LIRC is improperly joined, federal removal diversity jurisdiction

exists, and the district court’s opinion affirmed.   See Smallwood,
385 F.3d at 573. I respectfully dissent because the majority relies

upon a narrow question of administrative exhaustion, not evident

from the pleadings in state court and not fully presented to or

considered by the district court.1   In so doing, the majority fails

to address the fundamental problem in this matter, that is, whether

the original federal jurisdiction that permits removal exists at

all.

       1
      The majority opinion does not cite (and my research has not
found) any prior published case in which this Circuit ruled that a
party was improperly joined to prevent diversity removal
jurisdiction on the grounds that the plaintiff failed to exhaust
administrative remedies against that party. The failure to exhaust
administrative remedies is a matter which either LIRC, for the
State of Louisiana, or the Defendant insurers could have
appropriately raised in the state court prior to removal; and if
either of them had so moved and the state court had granted such
motion, the proceedings in state court would have been dismissed or
stayed pending exhaustion of administrative remedies. But none of
these Defendants made any such assertion in state court.        The
remedy which I propose in this dissent would, of course, remand the
matter to the state court and permit the Defendants to assert this
contention in state court – the jurisdictional tribunal best
informed and experienced to apply the Louisiana law of exhaustion
of administrative remedies.
     Then, having more correctly framed the question before us, my

analysis reaches a result different from that of the district court

and the majority.    I find the district court should have remanded

the cause, under 28 U.S.C. § 1447(c), on the basis that it was never

initially removable under 28 U.S.C. § 1332 and because of the

Eleventh Amendment’s bar to federal jurisdiction.           The district

court’s order should accordingly, in my view, be reversed, with

instructions to remand the cause to the courts of Louisiana.

                                      I.

     On July 1, 2003, Plaintiffs sued the “State of Louisiana

through the Louisiana Insurance Rating Commission,”2 as well as

Defendant insurers, Allstate and State Farm.         Plaintiffs alleged

violations of state law only and sought declaratory judgment,

injunctive relief, and damages. Plaintiffs complained the Defendant

insurers used an undisclosed formula to discriminate against them

and others similarly situated on the basis of race or the economic

condition of the area in which the property sought to be insured is

located.    Plaintiffs complained that LIRC failed in its statutory

duties and, in doing so, contributed to the disparate impact of the

insurers’ practices.

     All Defendants were served.           The Defendant insurers alone

removed the action on September 3, 2003, to the Eastern District of

Louisiana   under   28   U.S.C.   §    1332,   claiming   that   diversity

     2
      Plaintiffs’ petition filed in state court so named the first
Defendant. For brevity, I refer to this defendant as LIRC.

                                      11
jurisdiction       exists   because   non-diverse      Defendant     LIRC   was

improperly joined. See Jernigan v. Ashland Oil, Inc., 989 F.2d 812,

815 (5th Cir. 1993), cert. denied, 510 U.S. 868 (1993).               Prior to

this removal, LIRC had filed no pleadings of any kind in state

court.    LIRC did not join in the removal, but appeared in district

court upon removal.         Plaintiffs filed a motion to remand in the

district court, arguing that LIRC’s joinder was proper and that

federal courts lacked jurisdiction to hear their claim.

      Pending before the district court at the time it took up the

motion to remand were additional Rule 12 motions, including LIRC’s

motion to challenge venue and LIRC’s motions to dismiss for failure

to state a claim and for lack of jurisdiction.               In the motion

regarding venue, LIRC agreed with Plaintiffs that the federal courts

lacked jurisdiction over the complaint and argued that the only

proper venue was the East Baton Rouge Parish state court because

that was the location of the performance of the state agency’s

ministerial duties, the actions challenged by Plaintiffs’ complaint.

See LA. REV. STAT. ANN. § 13:5104(A). Under Rule 12, LIRC challenged:

(1) the district court’s jurisdiction to hear Plaintiffs’ claim on

the   basis   of   Eleventh   Amendment    sovereign    immunity;3    and   (2)

Plaintiffs’ ability to state their claim, on the ground that

      3
      “The Judicial power of the United States shall not be
construed to extend to any suit in law or equity, commenced or
prosecuted against one of the United States by Citizens of another
State, or by Citizens or Subjects of any Foreign State.”      U.S.
CONST. amend. XI.

                                      12
Louisiana statutory immunity for discretionary functions precluded

LIRC’s liability, see LA. REV. STAT. ANN. § 9:2798.1.4          But the

district court did not rule on these pending motions, even though

it noted that “LIRC will never be in federal court because of the

Eleventh Amendment.”

     At the hearing on December 10, 2003, the court took up the

motion to remand and argument of improper joinder. No written order

issued after this hearing. Instead, the district court ruled orally

from the bench, finding LIRC improperly joined because, due to

Louisiana statutory immunity, no reasonable basis existed             for

predicting that Plaintiffs could recover against LIRC.         For that

precise reason, the court denied the motion to remand.        Then, the

     4
      Entitled “Policymaking or discretionary acts or omissions of
public entities or their officers or employees,” section 9:2798.1
provides in relevant part:

     B. Liability shall not be imposed on public entities or
     their officers or employees based upon the exercise or
     performance or the failure to exercise or perform their
     policymaking or discretionary acts when such acts are
     within the course and scope of their lawful powers and duties.

     C. The provisions of Subsection B of this Section are not
     applicable:

     (1) To acts or omissions which are not reasonably related
     to the legitimate governmental objective for which the
     policymaking or discretionary power exists; or

     (2) To acts or omissions which constitute criminal,
     fraudulent, malicious, intentional, willful, outrageous,
     reckless, or flagrant misconduct.

LA. REV. STAT. ANN. § 9:2798.1 (B)-(C).

                                  13
court indicated its inclination to grant a request for interlocutory

appeal on the ruling.5     Accordingly, Plaintiffs appealed, arguing

the district court erred in ruling that no reasonable basis existed

for predicting that Plaintiffs could recover against LIRC on their

complaint.

                                     II.

     This    case   presents   a   problem   of   federal   subject   matter

jurisdiction that, although not addressed by the majority, must be

considered. See Ziegler v. Champion Mortgage Co., 913 F.2d 228, 229

(5th Cir. 1990). Plaintiffs’ complaint filed in state court alleged

only state law claims and included as Defendant, “the State of

Louisiana through [LIRC],” one of its agencies.

     The law is settled that “[i]n an action where a state is a

party, there can be no federal jurisdiction on the basis of

diversity of citizenship because a state is not a citizen for

purposes of diversity jurisdiction.” Texas Dep’t of Hous. and Cmty.

Affairs v. Verex Assurance, Inc., 68 F.3d 922, 926 (5th Cir. 1995);

see also Tradigrain, Inc. v. Mississippi State Port Auth., 701 F.2d
1131, 1132 (5th Cir. 1983); Batton v. Georgia Gulf, 261 F. Supp. 2d
575, 593-96 (M.D. La. 2003) (Dalby, M.J.). Thus, where, as here, the

absence of a federal question is undisputed and the state is joined

     5
      The record does not precisely define the question as to which
interlocutory appeal was requested or granted by the court or
accepted by this Court, but Plaintiffs’ motion requesting the
certification relies upon the issue of Louisiana statutory
immunity.

                                     14
as a defendant, the only possible ground for removal is the improper

joinder   of    LIRC   that,   once     corrected,   creates   diversity

jurisdiction.    See Verex, 68 F.3d at 926.     This district court so

determined, but without considering that removal was precluded.

     In my view, the fundamental question of original jurisdiction,

as the basis for removal, ought to be resolved first by district

courts.   Then, and only if the case were initially removable under

28 U.S.C. § 1441, should the district courts reach the question of

the propriety of joinder.        This approach has the benefit of

requiring the district courts to first address the limits of their

Article III jurisdiction prior to passing on questions that require

the court to consider the potential merits of a claim, as is

required under our current framework for consideration of improper

joinder. See Smallwood, 385 F.3d at 573. Even if it cannot be said

that Article III jurisdiction is always an antecedent question to

any other judicial review, the federal courts should issue rulings

in an order that best prevents reaching substantive questions when

jurisdiction is in doubt. Steel Co. v. Citizens For A Better Env’t,

523 U.S. 83, 101 (1998).       “Much more than legal niceties are at

stake here. The statutory and (especially) constitutional elements

of jurisdiction are an essential ingredient of separation and

equilibration of powers, restraining the courts from acting at

certain times. . . .”    Id. (citations omitted).

                                   15
     Consideration of removal jurisdiction requires, by the terms

of the governing statute, consideration of original jurisdiction.

See 28 U.S.C. § 1441(a) (permitting removal of civil actions over

which   the     United   States   district   courts   “have   original

jurisdiction”).     In this case, the district courts of the United

States would not have had original jurisdiction for two reasons.

     First, original jurisdiction is lacking because the State of

Louisiana, not a citizen, was named as a defendant.     Therefore, no

diversity jurisdiction is possible.     28 U.S.C. § 1332(a)(1); Moor

v. County of Alameda, 411 U.S. 693, 717 (1973); Tradigrain, 701 F.2d

at 1132.     The first requirement under the removal statute is that

there be a “civil action . . . of which the district courts of the

United States have original jurisdiction.”      28 U.S.C. § 1441(a).

“The existence of subject-matter jurisdiction over an action is a

prerequisite to its removal to federal court.” Bromwell v. Michigan

Mut. Ins. Co., 115 F.3d 208, 212 (3d Cir. 1997) (citing 28 U.S.C.

§ 1441).   Thus, under the express language of § 1441(a), removal to

the federal courts was barred in this action, and the district court

should have remanded the cause upon initial review of Plaintiffs’

complaint.

     Even if we ignore that here Plaintiffs named the State of

Louisiana as Defendant, and look instead to LIRC, the agency through

which they claim against the state, diversity jurisdiction still

fails to obtain.    There can be no diversity jurisdiction where suit

                                   16
is brought against a state agency that is merely an alter ego of the

state.     Tradigrain, 701 F.2d 1132.             Under our Circuit’s law, the

determination of whether an agency is an alter ego of the state or

is a citizen of the state requires analysis, under the governing

state’s    law,    of   factors     that    indicate    the    character   of   the

particular agency.       Verex, 68 F.3d at 926 (quoting Tradigrain, 701
F.2d at 1132-33).       Among other factors, the court should consider

primarily “whether the state is the real party in interest in the

lawsuit.” Tradigrain, 701 F.2d at 1132. Virtually identical to the

analysis    required     for    a   determination       of    Eleventh   Amendment

immunity, this determination requires a court to consider the

agency’s powers and characteristics as defined by state law.                    Id.

     Because I find that removal was precluded based upon the

inclusion of the State of Louisiana, there is no need to engage in

the analysis of whether LIRC is more akin to the sovereign or to a

citizen of the state.          But, I note that under Louisiana law LIRC

should be viewed as an alter ego of the state, and thus not a

citizen for diversity purposes.                 LIRC is a creation of statute,

comprising seven members: the commissioner of insurance and six

additional members appointed by the governor.                 LA. REV. STAT. ANN. §

22:1401(A).       LIRC’s purpose is statewide: “to promote the public

welfare by regulating insurance rates.”                Id. § 22:1402.      LIRC is

subject to Louisiana’s Department of Insurance, id. § 36:686(C)(1),

                                           17
and   while   it   has    certain,   express    policymaking   powers,   its

“functions and activities” are subject to the state’s insurance

department.    Id. § 22:1401(E).      An agency that retains the ability

to make hiring decisions and other “generally recognized corporate

powers” is a citizen for purposes of diversity.            Tradigrain, 701
F.2d at 1132 (citation omitted).           But in this case, the Louisiana

legislature did not give this power to LIRC, and instead vests such

powers in the state’s insurance department.           LA. REV. STAT. ANN. §

22:1401(E).    Both the commissioner and the Department of Insurance

are provided immunity from liability by the Louisiana legislature.

Id. § 22:2036.11.        This retention of immunity, in combination with

the statutory provisions for LIRC’s powers and functioning, weighs

strongly in favor of considering LIRC, a division of the Department

and an arm of the state, rather than a separate citizen.          Finally,

LIRC’s powers and characteristics differ significantly from the

agency deemed a citizen of Texas in Verex.              There, the agency

enjoyed authority to hold and use property, to sue and be sued in

its corporate name, to enter contracts, and to make its own hiring

decisions.    Verex, 68 F.3d at 928.           The Texas agency also bore

responsibility, separate from the state, for its own debts.              Id.

Here, Louisiana has not granted such generalized corporate powers

to LIRC, and thus LIRC’s status is better characterized as an alter

ego of the state, rather than a citizen thereof.               But on this

                                      18
record, the question need not be definitively resolved, given that

the sovereign itself is a named Defendant.

     Secondly,       the    federal    courts’    original    jurisdiction      over

Plaintiffs’    cause       here   is   barred    because,    under   the    Eleventh

Amendment and absent certain exceptions not relevant here,6 a

federal district court may not have original jurisdiction of “any

suit in law or equity, commenced or prosecuted against one of the

United States,” by citizens of the same state.7                U.S. CONST. amend.

XI; Higgins v. Mississippi, 217 F.3d 951, 954 (7th Cir. 2000)

(distinguishing       the    Supreme    Court’s    treatment    of   an     Eleventh

Amendment defense as a personal jurisdiction bar in Wisconsin Dep’t

of Corrections v. Schacht, 524 U.S. 381, 388-89 (1998), and instead

concluding that courts may raise sua sponte an Eleventh Amendment

defense, thereby acknowledging, at a minimum, the subject matter

jurisdiction element of the Eleventh Amendment’s bar).

     Note     that    the     Eleventh     Amendment’s       language      prohibits

“commencement” or “prosecution” of such a suit and does not contain

     6
      Recognized exceptions to sovereign immunity include: a
state’s waiver of sovereign immunity, see Idaho v. Coeur d’Alene
Tribe, 521 U.S. 261, 267 (1997); suits for declaratory and
injunctive relief against state officials in their individual
capacities, see Ex parte Young, 209 U.S. 123 (1908); or
congressional abrogation of immunity under § 5 of the Fourteenth
Amendment, see Fitzpatrick v. Bitzer, 427 U.S. 445, 456 (1976).
     7
      See Fed. Mar. Comm’n v. South Carolina State Ports Auth., 535
U.S. 743, 777 (2002) (Breyer, J. dissenting) (reading “Citizens of
another State” as if it also said “citizen of the same State”)
(citing Hans v. Louisiana, 134 U.S. 1 (1890)).

                                          19
any provision about the state being a “proper party for joinder” nor

any language that asks whether any recovery can ultimately be made

against the state.     The prohibition is blanket.         If Plaintiffs here

had filed the same complaint in federal district court that they

filed in state court, their complaint in federal court would have

been dismissed under the Eleventh Amendment.           Here, LIRC raised the

Eleventh   Amendment   bar   to   federal      jurisdiction,      on    the   first

occasion possible, when it moved for Rule 12 dismissal in federal

court after the removal precipitated by the insurance defendants.

There is absolutely nothing in Plaintiffs’ petition as filed in

state court that raises a claim under the U.S. Constitution,

treatises, or statutes that would have permitted the suit in federal

court under 28 U.S.C. § 1331's provision for federal question

jurisdiction.     While I recognize that the statute under which cases

may be removed from state court to federal court, 28 U.S.C. §

1441(b), is not coterminous with the statute defining original

diversity jurisdiction, 28 U.S.C. § 1332, nothing in the removal

statute permits the removal of a suit filed in a state court by a

citizen of that state against that same state or an agency thereof.

       Because of the primary requirement that removal is conditioned

upon   original   jurisdiction,    it     is   my   view   that   the    Eleventh

Amendment, in addition to a lack of diversity jurisdiction due to

the state’s inclusion as a party, renders Plaintiffs’ suit here non-

removable on its face as lacking original federal jurisdiction

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without any further inquiry as to the propriety of joinder of the

state     defendant   or    the      potential    for   ultimate    recovery.      I

appreciate that this approach requires the district court to first

address original jurisdiction, before reaching the question of

improper joinder.        But that is precisely what the language of the

removal statute requires, and on this record — where the state is

named as a Defendant and the state has moved for dismissal under the

Eleventh Amendment — it is more prudent to resolve the possibility

that the federal courts entirely lack jurisdiction, thus precluding

removal, before reaching the possible merits of Plaintiffs’ claims

under our improper joinder analysis.

         Consequently,     in   my    judgment,    when    the   removal     petition

appeared in federal district court, the court should have promptly

entered a remand order because it did not have original jurisdiction

of the complaint as filed in state court.                 There is nothing in the

removal statute to permit the commencement or prosecution of such

suit against the State of Louisiana in the federal district court.

As   I    indicated   earlier,       LIRC    asserted     this   lack   of   federal

jurisdiction in its first filing in the federal district court after

removal.     This process of requiring the district courts, on such a

record, to first address original jurisdiction before reaching the

question of improper joinder enjoys the advantage of better tracking

the language of § 1441(a) and of requiring courts to examine

fundamental jurisdictional questions before reaching merits-based

review.

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For these reasons, I respectfully dissent.

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