United States District Court, D. Minnesota
N. ERICKSEN UNITED STATES DISTRICT JUDGE
United States brought this action against Mike Rothman,
Commissioner of the Minnesota Department of Commerce
(“the Commissioner”), in his capacity as
liquidator of the Minnesota Surety and Trust Company
(“MS&T”), seeking a declaration that
MS&T's liability on 62 breached immigration bonds
attached at the time the bonds were executed, not when they
were breached. The Commissioner moved to dismiss or stay, and
the United States moved for a judgment on the pleadings. For
the reasons set forth below, both motions are denied.
operated as a surety on federal immigration bonds until its
state-ordered liquidation on November 22, 2011. At the time
of its liquidation, MS&T had roughly 800 open immigration
bonds with the Department of Homeland Security
(“DHS”) totaling $6.9 million. In April 2012, the
Commissioner mailed proof-of-claim forms to creditors and
federal agencies, including DHS, notifying them that any
claims against MS&T had to be received by November 1,
2012. DHS did not submit a claim to the liquidator on any of
the MS&T bonds prior to that deadline, electing instead
to seek the return of each alien bonded by MS&T.
See ECF No. 22 at 8-9. The overwhelming majority of
those aliens were delivered to DHS. However, in 62 cases, the
alien was not returned, and DHS considered these bonds
breached. In April 2016, DHS filed a claim with the
state's special deputy liquidator for $483, 735.25,
representing the face value of the 62 breached bonds ($467,
900) plus interest and fees.
November 2016, the special deputy denied DHS's claim. The
special deputy concluded that the bonds had been canceled as
of December 23, 2011, pursuant to Minn. Stat. § 60B.22,
under which “insurance policies or similar contracts of
coverage” expire 30 days from the date of liquidation.
DHS requested reconsideration of the special deputy's
decision in January 2017, but the Commissioner affirmed the
initial ruling. The Commissioner then moved for summary
judgment in the state liquidation proceeding to affirm his
denial. DHS moved to stay the state case. With both state
motions pending, the United States filed this action, seeking
a declaration that MS&T's liability on the 62
immigration bonds attached at the time the bonds were issued
- a judgment that would, according to the United States,
prevent MS&T's obligations from being canceled by
§ 60B.22. The state court judge granted the United
States' motion to stay, pending this Court's decision
on the bond liability attachment question. ECF No. 40 at 6-9.
motion to dismiss or a motion for judgment on the pleadings
is appropriately granted “only when there is no dispute
as to any material facts and the moving party is entitled to
judgment as a [m]atter of law.” Greenman v.
Jessen, 787 F.3d 882, 887 (8th Cir. 2015) (citation
omitted). To survive a Rule 12 motion, “a complaint
must contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its
face.'” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)); Haney v. Portfolio Recovery
Assocs., LLC, 837 F.3d 918, 924 (8th Cir.
2016), as amended (Dec. 27, 2016).
Motion to Dismiss or Stay
Commissioner's motion to dismiss or stay turns on two
principal arguments. First, he contends that the
McCarran-Ferguson Act precludes the federal government from
interfering with Minnesota's laws regulating the business
of insurance - and, in particular, the 30-day expiration
provision under Minn. Stat. § 60B.22. Second, he urges
the Court to abstain from issuing a declaratory judgment
under several abstention doctrines. As set forth below,
neither argument is sufficiently strong to justify a
dismissal or stay, particularly in light of the state
court's decision to stay those proceedings pending this
Court's resolution of the underlying question of
McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015,
protects states from federal interference in insurance
regulation. Under the statute, no “Act of
Congress” can “invalidate, impair, or
supersede” any state statute that has been enacted
“for the purpose of regulating the business of
insurance, ” unless the federal statute specifically
relates to the business of insurance itself. 15 U.S.C. §
1012(b). In general, then, states enjoy the somewhat unique
power of “reverse preemption” when it comes to
the regulation of insurance. However, McCarran-Ferguson does
not require the federal government to “cede the field
of insurance regulation to the States.” Humana Inc.
v. Forsyth, 525 U.S. 299, 308 (1999). The mere fact that
the federal claims “relate to the insurance business in
the abstract” is not enough to trigger
McCarran-Ferguson protection. Ludwick v. Harbinger Grp.,
Inc., 854 F.3d 400, 405 (8th Cir. 2017). The federal
claims being made must bring forth “case-specific
intrusion and interference.” Id.
the Commissioner argues that McCarran-Ferguson prevents the
United States from superseding Minn. Stat. § 60B.22 and
its cancelation of MS&T's obligations on the 62
contested bonds. However, the Commissioner does not point to
any specific federal statute - i.e., an “Act of
Congress” - that impairs the state's liquidation
law. Instead, he contends that McCarran-Ferguson applies
because there is a conflict between § 60B.22 and the
“argument” that the United States makes regarding
the timing of MS&T's liability. Def.'s Reply Mem.
5. But that “argument” is not an “Act of
Congress, ” as McCarran-Ferguson requires. To the
contrary, it is an argument that involves federal contract
law. Further, the United States expressly concedes that it is
not seeking to preempt § 60B.22, and nowhere does the
United States rely on a federal statute to support its
arguments regarding MS&T's liability. Therefore,
because there is no “Act of Congress” interfering
with the state's regulatory scheme, McCarran-Ferguson
does not apply.
Commissioner next argues that the Court should exercise its
discretion over declaratory judgments and abstain from
issuing a decision. Specifically, the Commissioner contends
that “[t]here is no doubt that the liquidation
proceeding in state court will fully resolve the dispute
between the parties.” Def.'s Mem. Supp. Mot.
Dismiss 10. Therefore, the Commissioner concludes, permitting
the state court to fully ventilate all of the issues is more
economical than having this Court resolve only one question
of federal law. Def.'s Mem. 11.
a federal district court must exercise its jurisdiction over
a claim unless there are exceptional circumstances for not
doing so.” Scottsdale Ins. Co. v. Detco Indus.,
Inc., 426 F.3d 994, 996 (8th Cir. 2005) (internal
quotation omitted); see Colo. River Water Conservation
Dist. v. United States, 424 U.S. 800, 817-18 (1976).
However, courts enjoy “unique and substantial”
discretion in declaratory judgment actions. Wilton v.
Seven Falls Co., 515 U.S. 277, 286 (1995). The extent of
that discretion largely turns on whether there is a parallel
state court action pending. Scottsdale, 426 F.3d at
999. When such an action is pending, the court's
discretion is broad, and guided largely by ...