Emory Bankruptcy Developments Journal

Finding the Right Insurance Policy: A Uniform Set of Guidelines for Applying the Burford Abstention Doctrine in Cases Involving State Insurance Insolvency Proceedings
Benjamin A. Ries  Benjamin Ries, Notes & Comments Editor, Emory Bankruptcy Developments Journal; J.D. Candidate, Emory University School of Law (2018); B.A., cum laude, Vanderbilt University College of Arts & Science (2013). I would like to thank Asa Griggs Candler Professor of Law Robert Schapiro, who provided strong guidance as my comment advisor. I would also like to thank Ryan Saharovich, who gave me support and feedback throughout the writing process as my Notes & Comments Editor, as well as former Editor-in-Chief Jake Jumbeck and current Editor-in-Chief John Green for continuing to make the Emory Bankruptcy Developments Journal a reality.

Abstract

When a party moves for a federal court to invoke the Burford abstention doctrine to stay a case or remand it to state court, the court must determine if hearing the case will substantially disrupt a state’s efforts to achieve a goal of public importance through a complex administrative scheme. Federal courts often reject motions to abstain from hearing a case on Burford grounds due to the compelling nature of mandatory jurisdiction. Accordingly, the United States Supreme Court has characterized the doctrine of abstention as “an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it.”

However, there is one area of law where courts often apply Burford abstention: cases involving a party undergoing a state insurance insolvency proceeding. This tendency for federal courts to stay or remand cases in deference to state proceedings in the insurance insolvency context derives from a longstanding Congressional policy of allowing states to regulate the insurance industry as embodied by the McCarran-Ferguson Act and the exclusion of insurance companies from the Bankruptcy Code.

This Comment will examine the processes used by different courts to determine whether to invoke Burford abstention and propose the adoption of a formula that builds upon a set of factors developed by the Tenth Circuit Court of Appeals to also address additional concerns. The proposed formula draws from case law and the policy goals underlying Burford abstention while emphasizing the role of avoiding the disruption of a state’s efforts to establish insolvency proceedings for insurance companies. Through a six-part test, Courts can properly navigate the application of the “troublesome and enigmatic” Burford abstention doctrine.

Introduction

Imagine that you are badly injured following a serious car accident and desperately need the coverage that you are entitled to under your health insurance policy. Unfortunately, your insurance company, which is based in Georgia, is undergoing a state insolvency proceeding following financial difficulty. The Georgia Life & Health Guaranty Association covers a maximum of $300,000 per individual when an insurance company cannot provide coverage due to insolvency,  1Ga. Code Ann. § 33-38-7 (LEXIS Through the 2016 Regular Session). but you need significantly more than that to pay your medical bills. Suddenly, a third party files a lawsuit in federal court against your insurance company through diversity jurisdiction. If the case proceeds, a verdict for the plaintiff could jeopardize the ability of your insurance company to provide for your expenses. However, there is a solution: the federal court could apply the rarely-invoked Burford abstention doctrine, dismissing the lawsuit or staying it until the insolvency proceeding has ended, which potentially frees up the funds necessary to pay for your expenses.

The Supreme Court established the Burford abstention doctrine in 1943,  2Burford v. Sun Oil Co., 319 U.S. 315 (1943). but for many years courts rarely invoked it.  3Georgene M. Vairo, Making Younger Civil: The Consequences of Federal Court Deference to State Court Proceedings – A Response to Professor Stravitz, 58 Fordham L. Rev. 173, 180–81 (1989) (discussing how Burford abstention was rarely invoked until a “renaissance” in the lower courts in the 1980s as exemplified by a federal court’s invocation of the doctrine in the context of a state insurance insolvency proceeding in Law Insurance Co. v. Corcoran, 807 F.2d 38 (2d Cir. 1986), cert. denied, 481 U.S. 1017 (1987)); see Leonard Birdson, Comity and Our Federalism in the Twenty-First Century: The Abstention Doctrines Will Always Be With Us - Get Over It!!, 36 Creighton L. Rev. 375, 419 (noting that between 2000 and 2003, Burford abstention was only invoked in three of the twelve federal appellate courts cases where it was considered). However, there is an exception: federal courts often apply Burford abstention in cases involving an insurance company undergoing a state insolvency proceeding.  4See, e.g., Levy v. Lewis, 635 F.2d 960 (2d Cir. 1980); Corcoran v. Ardra Ins. Co., 842 F.2d 31 (2nd Cir. 1988) (abrogated in part by Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 710 (1996)); Clark v. Fitzgibbons, 103 F.3d 1049 (5th Cir. 1997); Lentz v. Trinchard, 730 F. Supp. 2d 567 (E.D. La. 2010); cf. Brandenburg v. Seidel, 859 F.2d 1179, 1191 (1988) (the risk of disrupting a complex state scheme for the insolvency of state-charted savings and loan associations “presents a classic situation for Burford abstention”). But see, e.g., Bilden v. United Equitable Ins. Co., 921 F.2d 822 (8th Cir. 1990). One factor favoring federal abstention in this context is the McCarran-Ferguson Act, which provides that the states handle the regulation of “the business of insurance.”  515 U.S.C. § 1011 (2012). Another factor is the exclusion of insurance companies from the Bankruptcy Code, which reinforces the significance of the development and administration of insolvency-related insurance regulation by the states.  611 U.S.C. §§ 109(b)(2), (d) (2012). Nonetheless, different federal courts often use different approaches to determine whether to abstain from hearing a case involving a party undergoing a state insurance insolvency proceeding on Burford grounds.  7Compare Fragoso v. Lope, 991 F.2d 878, 885–86 (1st Cir. 1993) (declining to apply Burford abstention in the context of a state insolvency proceeding), with Lac D’Amiante Du Quebec, Ltee v. Am. Home Assur. Co., 864 F.2d 1033, 1048 (3d Cir. 1988) (finding Burford abstention so clearly warranted in a case involving a party to an insurance insolvency proceeding as to reverse a district court’s decision not to invoke it).

To address the problematic inconsistency resulting from the application of these alternate methodologies, this Comment proposes that federal courts deciding whether to abstain on Burford grounds apply a set of factors that builds upon the formula used by the Tenth Circuit Court of Appeals in Grimes v. Crown Life Ins. Co. to address diversity and equity concerns. This approach entails the evaluation of six questions: (1) whether the cause of action is entirely federal; (2) whether resolving the suit requires the court to interfere with state policies related to insurance insolvency proceedings; (3) whether the state procedures indicate the presence of a state forum to adjudicate these issues; (4) whether difficult or unusual state laws are at issue; (5) whether the court is sitting in equity; and (6) whether, in a case brought to a federal court through diversity jurisdiction, the state that would hear it on a remand has a vested interest in its specific outcome.

I. Background

A. Insurance Regulation on the State Level

In 1869, the Supreme Court first adopted the view that states are responsible for regulating the insurance industry in Paul v. Virginia8See Willy E. Rice, Federal Courts and The Regulation of The Insurance Industry: An Empirical and Historical Analysis Of Courts’ Ineffectual Attempts To Harmonize Federal Antitrust, Arbitration, and Insolvency Statutes With the Mccarran Ferguson Act-1941-1993, 43 Cath. U.L. Rev. 1 399, 399–400 (1994); Paul v. Virginia 75 U.S. 168, 183–86 (1869); see also Sims v. Fid. Assurance Ass’n, 129 F.2d 442, 448 (4th Cir. 1942) (noting that insurance companies are exempted from the Bankruptcy Act of 1898, 30 Stat. 544 (1898) (superseded by 95 Pub. L. No. 598 (1978)), aff’d, 318 U.S. 608 (1943)). Seventy-five years later, the Supreme Court changed direction in United States v. South-Eastern Underwriters Ass’n, holding that the business of insurance constituted interstate commerce subject to federal regulation.   9See Rice, supra note 8, at 400; United States v. South-Eastern Underwriters Ass’n. 322 U.S. 533 (1944); see also U.S. Const. art. I, § 8, cl. 3 (“Congress shall have the Power . . . to regulate Commerce . . . among the several States . . . .”). In response to the threat of federal antitrust actions against insurance companies brought about by this holding, the National Association of Insurance Commissioners helped formulate and successfully push for Congress to pass the McCarran-Ferguson Act to keep the regulation of the insurance industry at the state level.  10Herbert H. Naujoks, Eight Years After S.E.U.A. – Present Status of the Regulation of Insurance as Commerce, 35 Marq. L. Rev. 339, 348 (1952); Proceedings of the NAIC, 75th Sess. 226 (1944); Proceedings of the NAIC, 76th Sess. 250 (1945); 15 U.S.C. § 1011 (2012). The McCarran-Ferguson Act reads:

Declaration of policy - The Congress hereby declares that the continued regulation and taxation by the several States of the business of insurance is in the public interest, and that silence on the part of the Congress shall not be construed to impose any barrier to the regulation or taxation of such business by the several States.  1115 U.S.C. § 1011 (2012).

Despite some calls to repeal the McCarran-Ferguson Act to allow for more federal regulation,  12See, e.g., Jere W. Glover, Should Congress Repeal McCarran-Ferguson?: It’s Time toRepeal McCarran-Ferguson, 1 Antitrust 31, 33 (1987). its embodiment of Congress’s policy of leaving states to regulate “the business of insurance” remains intact.  13See, e.g., Wolfson v. Mutual Benefit Life Ins. Co., 51 F.3d 141, 147 (8th Cir. 1995) (noting in a decision to invoke Burford abstention that “[t]here is a strong federal policy of deferring to state regulation of the insurance industry . . . .”).

Judicial interpretations of the savings clause of the Employee Retirement Income Security Act of 1974 (“ERISA”)  14Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001–1461 (2012). illustrate how the courts have acknowledged Congress’s policy to have states control the regulation of the insurance industry.  15See Karen A. Jordan, ERISA Preemption: Integrating FABE into the Savings Clause Analysis, 27 Rutgers L.J. 273, 274–77 (1996). ERISA includes notoriously complex pre-emption provisions declaring that it supersedes conflicting state laws,  16See 29 U.S.C. § 1144(a) (2012). but it also contains a savings clause ensuring that “nothing in this title shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities.”  17Id. § 1144(b)(2)(A). However, referencing language from the McCarran-Ferguson Act,  1815 U.S.C. § 1011 (2012) (“Congress hereby declares that the continued regulation and taxation by the several States of the business of insurance is in the public interest . . . .”). ERISA prohibits certain employee benefit plans from qualifying as engaged in the “business of insurance” and thus are exempt from pre-emption.  1929 U.S.C. § 1144(b)(2)(B) (2012).

The Supreme Court construed the ERISA savings clause broadly in Metropolitan Life Insurance Co. v. Massachusetts, establishing the use of three criteria for determining if a particular practice falls within the “business of insurance” for the purposes of the McCarran-Ferguson Act. These factors relate to whether the practice (1) transfers or spreads a policyholder’s risk, (2) is an integral part of the insurer-insured policy relationship, and (3) is limited to entities in the insurance industry.  2015 U.S.C. § 1011 (2012); Metropolitan Life Ins. Co. v. Mass., 471 U.S. 724, 743 (1985) (quoting Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129 (1982)). This relatively rigid framework fits with the narrow interpretations of the “business of insurance” for the purposes of ERISA preemption exemptions in several earlier Supreme Court cases.  21See Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205 (1979); Union Labor Life Ins. Co. v. Pireno 458 U.S. 119 (1982).

Over twenty years after Metropolitan Life, however, the Supreme Court revised its approach, making “a clean break from the McCarran-Ferguson factors.”  22Kentucky Ass’n of Health Plans v. Miller, 538 U.S. 329, 341 (2003). Instead, the Supreme Court held that a state law qualifies for an ERISA pre-emption exemption on insurance grounds if it is: (1) specifically directed towards entities engaged in insurance, and (2) substantially affects the risk pooling arrangement between the insurer and the insured.  23Id. at 341–42. This open-ended, two-step process not only follows Congress’s desire to have the states regulate insurance companies, but demonstrates the Supreme Court “loosening the tight grip on what is considered a state insurance regulation.”  24Matthew G. Vansuch, Not Just Old Wine in New Bottles: Kentucky Ass‘n of Health Plans, Inc. v. Miller Bottles a New Test for State Regulation of Insurance, 38 Akron L. Rev. 253, 265 (2005).

B. Exclusion of Insurance Companies from the Federal Rules of Bankruptcy

Historically, there has been no original or exclusive mention of insurance companies in the Federal Rules of Bankruptcy Procedure or the Code. Congress’s power to regulate bankruptcy originates in the Constitution, which declares that Congress shall have the power to establish “uniform Laws on the subject of Bankruptcies throughout the United States.”  25U.S. Const. art. I, § 8, cl. 4. After several short-lived and ineffective attempts at establishing uniform federal bankruptcy provisions, Congress passed the Bankruptcy Act of 1867 in the turmoil that followed the Panic of 1857 and the American Civil War.  26See Charles Jordan Tabb, The History Of The Bankruptcy Laws In The United States, 3 AM. Bankr. Inst. L. Rev. 5, 19 (1995); Act of March 2, 1867, ch. 176, 14 Stat. 517, repealed by Act of June 7, 1878, ch. 160, 20 Stat. 99 (1878). The Bankruptcy Act of 1867 applied to insurance companies,  27Act of March 2, 1867, ch. 176, 14 Stat. 517, repealed by Act of June 7, 1878, ch. 160, 20 Stat. 99 (1878). but the 1898 Bankruptcy Act’s reworking of bankruptcy law did not include insurance companies in its list of eligible businesses and corporations.  28See Laura S. McAlister, The Inefficiencies of Exclusion: the Importance of Including Insurance Companies in The Bankruptcy Code, 24 Emory Bankr. Dev. J. 129, 135 (2008); Bankruptcy Act of 1898, ch. 541, 30 Stat. 544 (repealed 1978).

Twelve years later, a 1910 amendment added language allowing insurance companies to be eligible to file for bankruptcy.  29See McAlister, supra note 28; Act of June 25, 1910, ch. 412, 36 Stat. 838 (1910). Bankruptcy laws were revised yet again in the 1938 Chandler Act, which established the chapters that categorized types of bankruptcy over the next forty years.  30See Tabb, supra note 26, at 29; Act of June 22, 1938, 52 Stat. 840 (1938). The next major relevant development occurred in 1944’s United States v. South-Eastern Underwriters Ass’n, where the Supreme Court reversed Paul v. Virginia  31Paul v. Virginia, 75 U.S. (8 Wall.) 168 (1869). to hold that the insurance industry is engaged in interstate commerce.  32South-Eastern Underwriters Ass’n., 322 U.S. 533.

The decision to hold insurance industry practices as interstate commerce prompted the National Association of Insurance Commissioners to push for the passage of the McCarran-Ferguson Act.  33See Naujoks, supra note 10; 75 NAIC, supra note 10; 76 NAIC, supra note 10; 15 U.S.C. § 1011 (2012). In reversing Paul v. Virginia, the Supreme Court revisited the earliest argument in favor of excluding insurance companies from federal regulation: that insurance contracts are not an item in commerce.  34See Frank P. Darr, Federal Claims in Insurance Insolvencies, 25 Tort & Ins. L.J. 601, 604 (1989–1990); Paul, 75 U.S. (8 Wall.) 168. By holding that insurance contracts are interstate commerce in United States v. South-Eastern Underwriters Ass’n, the Supreme Court upheld the validity of criminal indictments made against two hundred companies and twenty-seven individuals for violations of the Sherman Antitrust Act,  3515 U.S.C. §§ 1–7 (1890). allowing the Act to apply to insurance company practices.  36South-Eastern Underwriters Ass’n., 322 U.S. at 534. Both insurance companies and state insurance regulators rallied in opposition to the decision. Insurance companies rallied to avoid antitrust liability and state insurance regulators wanted to retain power in notwithstanding the ruling.  37See 15 U.S.C. § 1011 (2012); Darr, supra note 34.

The Congressional record indicates that in passing the McCarran-Ferguson Act, Congress aimed to avoid interference with state policy and believed that states were better equipped to handle the localized nature of the insurance industry because states already maintained appropriate regulatory systems.  38See Linda M. Lent, McCarran-Ferguson in Perspective, 48 Ins. Counsel J. 411, 412 (1981). While Congress may have been more concerned with the effects of federal antitrust enforcement than maintaining state regulatory authority,  39See Darr, supra note 34, at 607. the law that it passed still broadly declared that “the continued regulation and taxation by the several States of the business of insurance is in the public interest.”  4015 U.S.C. § 1011 (2012). Notably, the McCarran-Ferguson Act only gave states control over the regulation of “the business of insurance.”  41See Lent, supra note 38, at 413; South-Eastern Underwriters Ass’n. 322 U.S. 533 (discussing how the limitations of “the business of insurance” imply that Paul v. Virginia may not be entirely overruled); see also SEC v. Nat’l Sec., 393 U.S. 453, 460 (1969) (“Statutes aimed at protecting or regulating this relationship, directly or indirectly, are laws regulating the business of insurance.”)

Finally, the Bankruptcy Reform Act of 1978  42Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549, §101 (1978). established national bankruptcy guidelines that, with plenty of amendments and revisions, prevail today as the Code.  4311 U.S.C. §§ 101–1532 (2012). See generally Kenneth N. Klee, Legislative History of The New Bankruptcy Law, 28 DePaul L. Rev. 941 (1979). The Code excludes insurance companies, but does so in a roundabout manner.  44See generally 11 U.S.C. § 109 (2012). For example, the Code lists insurance companies as ineligible for chapter 7 liquidation proceedings.  45Id. § 109 (b)(2). Insurance companies do not fit the qualifications for bankruptcy under chapter 9, which is intended for municipalities.  46Id. § 109 (c)(1). Because an insurance company is not a railroad, a person that may be a debtor under chapter 7, an uninsured state member bank, or a corporation under 25A of the Federal Reserve Act, it is not eligible for bankruptcy under chapter 11.  47Id. § 109 (d). Similarly, insurance companies do not meet the requirements for eligibility under chapters 12 (for farmers or fishermen) or 13 (for individuals with regular income).  48Id. §§ 109 (f), (e).

With insurance companies entirely excluded from the Code, each state has its own insurance regulatory scheme to address their insolvencies.  49See Karl L. Rubinstein, The Legal Standing of an Insurance Insolvency Receiver: When the Shoe Doesn’t Fit, 10 Conn. Ins. L.J. 309, 317 (2004). States often develop these schemes to resemble models created by the National Association of Insurance Commissioners.  50See id. The various statutes require that a Commissioner be appointed to oversee the insolvent company’s estate in unique processes parallel to yet those proscribed by the Code.  51See id. at 317–18; e.g., Cal. Ins. Code §1037 (2016); O.C.G.A. § 33-37-13 (2016); see also McAlister, supra note 28, at 130–36 (describing typical state insurance insolvency proceedings).

C. The Burford Abstention Doctrine

Abstention doctrines are exceptions to otherwise mandatory federal jurisdiction requirements that determine when a federal court should refrain from hearing a case in favor of allowing the dispute to resolve in a state proceeding.  52Gordon G. Young, Federal Court Abstention and State Administration Law from Burford to Ankenbrandt: Fifty Years of Judicial Federalism under Burford v. Sun Oil Co. and Kindred Doctrines, 42 DePaul L. Rev. 859, 862–63 (1993). The term “abstention” was first applied in this context in 1941 in Railroad Commission of Texas v. Pullman Company53Railroad Comm’n of Tex. v. Pullman Co., 312 U.S. 496, 501 (1941) (“These cases reflect a doctrine of abstention appropriate to our federal system whereby the federal courts, exercising a wise discretion, restrain their authority because of scrupulous regard for the rightful independence of the state governments and for the smooth working of the federal judiciary.”) (internal quotation marks omitted); see Young, supra note 52, at 863.Burford abstention is merely one of “four primary abstention doctrines” that “[t]he Supreme Court has recognized,”  54Michael Ashley Stein, The Domestic Relations Exception To Federal Jurisdiction: Rethinking An Unsettled Federal Courts Doctrine, 36 B.C.L. Rev. 669, 694–95 (1994–1995) (identifying Pullman, Burford, Younger, and Colorado River abstention as the most prominent abstention doctrines recognized by the Supreme Court); see Young, supra note 52, at 868 (citing the same four “major varieties of abstention” and adding a fifth, Thibodaux abstention). and certain federal codes even address abstention directly.  5528 U.S.C. § 1334(c)(2) (2012) (addressing mandatory abstention); 28 U.S.C. § 1452(b) (2012) (addressing equitable abstention). Note that both provisions address situations not related to Buford abstention in the context of insurance insolvency proceedings, as both statutes apply to situations covered by the Code.Burford abstention allows a federal court to abstain from exercising its jurisdiction in deference to complex state administrative procedures.  56See Stephen W. Sather, Resolving Conflicts Between Bankruptcy and Administrative Law, 11 Tex. Tech. Admin. L.J. 267, 272 (2010). Due to its complicated interpretation and application, the doctrine has been called “troublesome and enigmatic.”  57Young, supra note 52, at 863.

The genesis of the Buford abstention doctrine arises from a dispute over a state’s issuance of oil drilling permits. The Supreme Court heard Burford v. Sun Oil after an appeal of a decision by the Railroad Commission of Texas to grant the right to drill four oil wells to a small oil company.  58Burford, 319 U.S. 315. Sun Oil Co. alleged that the Railroad Commission violated their due process rights under the Fourteenth Amendment by unfairly denying them the right to drill the wells, and brought the suit to federal court through federal question and diversity of citizenship.  59Id. at 315. The Court cited “confusion,” “[d]elay, misunderstanding of local law, and needless conflict with state policy” as resulting from a federal court’s intrusion into a “well organized system of regulation and review which the Texas statutes provide.”  60Id. at 329. The Court concluded that given these factors and the expertise of the state agency, “a sound respect for the independence of state action requires the federal equity court to stay its hand.”  61Id. at 334. The Court abstained from hearing the case, despite the fact that, as the Court noted thirty-three years later, “the reasonableness of the permit . . . was not of transcendent importance.”  62Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976).

The Burford abstention doctrine has been commented on and altered by the Supreme Court in several subsequent decisions.  63See County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 188–89 (1959); Colorado River Water Conservation Dist., 424 U.S. at 813–19 (1976); New Orleans Pub. Serv., Inc. v. Council of New Orleans, 491 U.S. 350, 361 (1989); Quackenbush, 517 U.S. at 728. In County of Allegheny v. Frank Mashuda Co., the Court generally limited the reach of abstention doctrines:

The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it. Abdication of the obligation to decide cases can be justified under this doctrine only in the exceptional circumstances where the order to the parties to repair to the state court would clearly serve an important countervailing interest.  64County of Allegheny, 360 U.S. at 188–89.

The Court incorporated the “extraordinary and narrow exception” language from Allegheny into its holding in Colorado River Water Conservation Dist. v. United States65Colorado River Water Conservation Dist., 424 U.S. 800. In Colorado River, the Court held that no previously recognized abstention doctrine fit with the facts of the case, but that principles of avoiding duplicitous litigation and wisely allocating judicial resources merited creating and applying a new one.  66Id. at 813–19.

The Court continued to alter its approach to Burford abstention. In New Orleans Public Service, Inc. v. Council of New Orleans (hereinafter “NOPSI”), the Court refused to apply Burford abstention on the grounds that the case did not involve a state law claim or the assertion of a federal claim being entangled with a state claim.  67New Orleans Pub. Serv., Inc. v. Council of New Orleans, 491 U.S. 350 (1989). The Court incorporated language from Colorado River to create a new definition of Burford abstention:

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.”  68Id. at 361 (quoting Colorado River Water Conservation Dist., 424 U.S. at 813–15); see also Henry Melvin Hart, Jr. and Herbert Wechsler, The Federal Courts and the Federal System, 1077–79 (6th. Ed. 2009) (suggesting that the court’s Burford formulation applies when a state court works as a de facto partner of a state administrative agency in developing regulatory policy).

While some courts have interpreted the NOPSI decision as sharply limiting the applicability of the Burford doctrine, other courts disagree.  69See Sevigny v. Emp’rs. Ins. of Wausau, 411 F.3d 24, 27 (1st Cir. 2005) (“NOPSI also contains a general reformulation of Burford, often quoted, that can be read expansively or narrowly and is ultimately ambiguous”). Compare Fragoso, 991 F.2d at 882 (1st Cir. 1993) (“NOPSI cabins the operation of the Burford doctrine. Post-NOPSI Burford applies only in narrowly circumscribed situations where deference to a state’s administrative processes for the determination of complex, policy-laden, state-law issues would serve a significant local interest and would render federal-court review inappropriate.”), and University of Md. v. Peat Marwick Main & Co., 923 F.2d 265, 272 (“It is clear that, after NOPSI, federal courts should be more wary of extending the scope of Burford abstention.”), with Clark v. Fitzgibbons, 105 F.3d 1049 (5th Cir. 1997) (holding that the NOPSI decision does not abrogate the rule favoring Burford abstention in deference to state insurance insolvency proceedings). Lastly, in Quackenbush v. Allstate Insurance Co., the Supreme Court directly applied language from Allegheny and Colorado River to characterize Burford abstention as only an “extraordinary and narrow exception to a district court’s duty to adjudicate a controversy properly before it.”  70Quackenbush, 517 U.S. at 728 (1996) (quoting Colorado River Water Conservation Dist., 424 U.S. at 813) (quoting County of Allegheny, 360 U.S. at 188–89). Thus, the NOPSI definition, qualified by Quackenbush, governs the application of the Burford abstention doctrine today.  71See New Orleans Pub. Serv., Inc., 491 U.S. 350; Quackenbush, 517 U.S. at 728 (1996) (quoting Colorado River Water Conservation Dist., 424 U.S. at 813) (quoting County of Allegheny, 360 U.S. at 188–89).

D. Burford Abstention in the Equity Context

In Burford v. Sun Oil, the majority opinion specified that under the circumstances of the case, “sound respect for the independence of state action requires the federal equity court to stay its hand.”  72Burford, 319 U.S. at 334 (emphasis added). Courts have debated whether the presence of a “federal equity court” in this sentence cabins Burford abstention to instances where the court can only provide equitable remedies.  73Compare Lac D’Amiante du Quebec, Ltee, 864 F.2d at 1045 (Burford abstention appropriate in case seeking declaratory relief), and Brandenburg, 859 F.2d at 1192 n.17 (Burford abstention appropriate in action for damages), and Wolfson, 51 F.3d at 147 (same), with Fragoso, 991 F.2d at 882 (Burford abstention inappropriate in a torts action), University of Md., 923 F.2d at 272 (citing New Orleans Pub. Serv., Inc., 491 U.S. 350) (NOPSI limits the application of Burford abstention when the court is not sitting in equity), and Baltimore Bank for Coops. v. Farmer’s Cheese Coop., 583 F.2d 104, 111 (3rd Cir. 1978). The Supreme Court addressed this issue extensively in the context of various abstention doctrines in Quackenbush74Quackenbush, 517 U.S. at 721–27. The Court summarized its conclusion as follows:

We have thus held that in cases where the relief being sought is equitable in nature or otherwise discretionary, federal courts not only have the power to stay the action based on abstention principles, but can also, in otherwise appropriate circumstances, decline to exercise jurisdiction altogether by either dismissing the suit or remanding it to state court. By contrast, while we have held that federal courts may stay actions for damages based on abstention principles, we have not held that those principles support the outright dismissal or remand of damages actions.  75Id. at 721.

Thus, the Court in Quackenbush clarified that a federal court sitting in equity can invoke an abstention doctrine to decline to exercise jurisdiction, dismiss a suit, or remand the suit to a state forum. By contrast, a federal court in a damages action may stay an action on abstention grounds, but not dismiss or remand one. This basic framework functions as a foundation for more complex cases featuring claims for both equitable relief and monetary damages, where the prominence of the equitable claim favors abstaining and the prominence of monetary damages supports not abstaining.  76See, e.g., Wolfson, 51 F.3d at 147 (“No doubt abstention is less apt to be appropriate when the federal plaintiff seeks money damages, but we do not read the Supreme Court’s abstention jurisprudence as completely foreclosing abstention in money damage cases.”); see also General Glass Indus. Corp. v. Monsour Med. Found., 973 F.2d 197 (3rd. Cir. 1992) (in a case involving monetary damages and a party involved in a state insurance insolvency proceeding, vacating a lower court’s decision to dismiss and remand on Burford grounds, but imposing a stay on Burford grounds).

II. Analysis

This section will explore the necessity of a uniform set of criteria for determining when it is appropriate to apply the Burford abstention doctrine. The first subsection will identify the significance of Burford abstention to state insurance insolvency proceedings. The second subsection will dispute claims that NOPSI and Quackenbush have limited the scope of Buford abstention. The third subsection will examine competing formulas for determining the application of Burford abstention developed by the Fifth Circuit and the Tenth Circuit. The fourth subsection will propose a formulation for judges to consider when determining whether or not to abstain on Burford grounds that echoes and expands upon the concerns expressed by the Court of Appeals for the Tenth Circuit in Grimes77Grimes v. Crown Life Ins. Co., 857 F.2d 699, 705 (10th Cir. 1988). This fourth subsection will examine the proposed criteria as they relate to the policy concerns behind the Burford abstention doctrine, the reasons for the exclusion of insurance companies from the Code, and the text of relevant laws and codes. The fourth subsection will also contrast the proposed set of factors with sets developed by other courts, particularly the Fifth Circuit’s Wilson formulation.  78Wilson v. Valley Elec. Membership Corp., 8 F.3d 311, 314–16 (5th Cir. 1993).

A. The Role of States in Bankruptcy and Burford in the State Insurance Insolvency Context

Before the ratification of the Constitution, the States (as they existed at the time) passed a wide variety of short-term bankruptcy laws of varying types and effectiveness.  79See Bruce H. Mann, Republic of Debtors: Bankruptcy in the Age of American Independence, 59–61 (2002) (describing pre-Constitution bankruptcy laws in New York, Rhode Island, and Connecticut); Thomas E. Plank, The Constitutional Limits of Bankruptcy, 63 Tenn. L. Rev. 487, 518–26 (1996) (discussing the different approaches adopted by all thirteen states before the adoption and ratification of the Constitution). The language of the Constitution appears to counter this disparate situation by granting widespread power to the federal government to legislate in the area of bankruptcy, as it allows Congress to establish “uniform Laws on the subject of Bankruptcies throughout the United States.”  80U.S. Const. art. I, § 8, cl. 4 (emphasis added). However, federal bankruptcy laws have historically carved out areas where the state retains control,  81See Plank, supra note 79, at 558 (“The concern about uniformity is nonsense. Under both the Bankruptcy Act of 1898 and the Bankruptcy Code of 1978, debtors could exempt certain items of their property from the claims of creditors. These exemptions are based on the law of the debtors’ state. These state law exemptions were and are wildly different.”). and the Supreme Court has affirmed these exceptions against claims that they violated the federal government’s power to set uniform laws on the subject.  82See, e.g., Hanover Nat’l Bank v. Moyses, 186 U.S. 181 (1902); Regional Rail Reorganization Act Cases, 419 U.S. 102 (1974). Today, the clear exclusion of insurance companies from the Code indicates a policy of allowing states to maintain control over their insolvency proceedings.  8311 U.S.C. § 109 (2012). The Code may abstractly indicate a Congressional desire for uniformity in most circumstances, but, in practice, the results of filings for bankruptcy have often varied enormously depending on the state.  84See generally Daniel A. Austin, Bankruptcy and the Myth of “Uniform Laws”, 42 Seton Hall L. Rev. 1081 (2012) (discussing how the state and local laws prevent the U.S. Bankruptcy Code and Congress from establishing truly uniform bankruptcy laws); see also Ryan Mallone, When Opting Out is the Only Option: Protecting Small Business Debtors in Bankruptcy, 4 Wm. & Mary Bus. L. Rev. 745, 747–49 (2013) (describing how many states have adopted unique sets of exemptions and “opted out” of the exemptions list in 11 U.S.C. § 522 of the Code). The preservation of state control over insurance insolvency proceedings through the application of Burford abstention fits within this fractured framework.

Nonetheless, the adoption of a unified formula for choosing when to apply Burford abstention would provide desirable predictability, especially if such a formula emphasized the policy goals behind the doctrine. Nowhere would such a framework be more helpful than in the realm of federal cases involving a party undergoing a state insurance insolvency proceeding, where similar facts have often resulted in different decisions regarding Burford abstention.  85Compare, e.g., Clark, 105 F.3d 1049, with Fragoso, 991 F.2d 878. As the Court of Appeals for the Fifth Circuit pointed out in Callon Petroleum Co. v. Frontier Insurance Co., “Although Burford abstention is generally considered the exception rather than the rule, the insurance insolvency context presents the classic example of the doctrine’s goal of preventing ‘needless conflict with state policy.’”  86Callon Petroleum Co. v. Frontier Ins. Co., 351 F.3d 204, 209 (5th Cir. 2003) (quoting Burford, 319 U.S. at 327). See generally Michael A. Knoerzer, Flagging The Obligation: Federal Courts’ Abstention in Favor of State Rehabilitation And Liquidation Proceedings, 28 Tort & Ins. L.J. 837 (1993) (discussing how abstention is unusual in cases where a party is not an insolvent insurer or its statutory representative).

Arguments about the appropriateness of Burford abstention arise so often in the context of cases involving a party undergoing a state insurance insolvency proceeding that the Court of Appeals for the Eighth Circuit sorted them into three specific categories.  87Wolfson, 51 F.3d at 145. The first consists of suits filed by an insolvent insurer’s policyholders against a third party where a verdict against the third party could somehow impede the ability of the receiver of the insolvent insurer (often intervening in the case) to recover on behalf of the insurer’s estate.  88Id.; see, e.g., General Glass Indus. Corp., 973 F.2d 197 (Burford abstention appropriate where a verdict against defendant insurance company would disrupt insolvent insurer receiver’s efforts to recover funds). The second includes cases filed by an insolvent insurer or its receiver where recovery would benefit the insolvent’s estate.  89Wolfson, 51 F.3d at 145. The third category consists of cases filed by creditors, including policyholders and policy beneficiaries, against an insolvent insurance company.  90Id. Despite delineating these categories, the Court of Appeals for the Eight Circuit emphasized the importance of eschewing “discrete mechanical tests” in favor of carefully balancing “considerations of federalism, comity, and judicial administration” as “[a]bstention is inherently a fact-specific inquiry.”  91Id.

B. Burford Post-NOPSI and Quackenbush

1. Burford and NOPSI

The Supreme Court’s decisions in NOPSI and Quackenbush have raised questions about the viability of the Burford abstention doctrine.  92New Orleans Pub. Serv., Inc., 491 U.S. 350; Quackenbush, 517 U.S. 706. The immensely complex facts of NOPSI relate to a dispute between respondent New Orleans City Council and several jointly-owned companies, including petitioner New Orleans Public Service, Inc.  93New Orleans Pub. Serv., Inc., 491 U.S. at 352–53. The New Orleans City Council denied Petitioner’s request for a rate increase that would have offset payments that the Federal Energy Regulatory Commission had forced petitioner to make to help fund a nuclear reactor.  94Id. at 350. A series of lawsuits followed, all dismissed on the grounds of ripeness, Burford abstention, or a different abstention doctrine.  95Id. at 352–58.

When the dispute finally reached the Supreme Court, Justice Scalia, writing for a unanimous Court,  96Justices Rehnquist, Marshall, Blackmun, and Brennan filed or joined concurring opinions. found no abstention doctrine to apply and reversed.  97New Orleans Pub. Serv., Inc., 491 U.S. at 373. Scalia refused to apply Younger abstention on the grounds that that doctrine, which originated in a criminal case, did not extend to the type of actions taken by the New Orleans City Council.  98Id. at 367–68 (“Respondents’ case for abstention . . . requires, however, that the Council proceeding be the sort of proceeding entitled to Younger treatment. We think it is not.”). As to Burford, the Court introduced a new definition for the Burford doctrine  99Id. at 361 (“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.’”) (quoting Colorado River Conservation Dist., 424 U.S. at 814).; see Quackenbush, 517 U.S. at 726–27 (quoting the same passage). and then refused to apply it on the grounds that the facts of the case required an inquiry only into the “four corners of the Council’s retail rate order.”  100New Orleans Pub. Serv., Inc., 491 U.S. at 362–63. Such an inquiry would not, the Court argued, “disrupt state resolution of distinctively local regulatory facts or policies.”  101Id. at 363–64.

Justice Blackmun’s concurrence in NOPSI marks the first of many concerns about the majority opinion’s definition of Burford abstention limiting its scope.  102Id. at 374 (Blackmun, J., concurring). As Justice Blackmun wrote, “I find, however, that the majority’s understanding of Burford abstention is much narrower than my own in respects not relevant to the disposition of this case.”  103Id. (Blackmun, J., concurring). Four years later, the Court of Appeals for the First Circuit, while declining to apply Burford abstention, expressed similar concerns: “NOPSI cabins the operation of the Burford doctrine. Post-NOPSI Burford applies only in narrowly circumscribed situations where deference to a state’s administrative processes for the determination of complex, policy-laden, state-law issues would serve a significant local interest and would render federal-court review inappropriate.”  104Fragoso, 991 F.2d at 882. On the other hand, the Court of Appeals for the Fifth Circuit argued that NOPSI “has not abrogated the rule favoring abstention in deference to state insurance insolvency or liquidation proceedings” and invoked Burford abstention in a case involving an insurance company undergoing a state insolvency proceeding.  105Clark, 105 F.3d 1049 (holding that the NOPSI decision does not abrogate the rule favoring Burford abstention in deference to state insurance insolvency proceedings).

The First Circuit, in Sevigny v. Employers Insruance of Wausau, best addresses the actual definition presented in NOPSI: “NOPSI also contains a general reformulation of Burford, often quoted, that can be read expansively or narrowly and is ultimately ambiguous.”  106Sevigny, 411 F.3d at 27. Indeed, the NOPSI definition does little to limit Burford’s scope. The initial policy concerns expressed in Burford v. Sun Oil related not just to the mere set of facts immediately before the court, but to the larger goal of avoiding the establishment of a precedent of federal courts second-guessing the decisions of the highly specialized Texas Railroad Commission.  107See Burford, 319 U.S. at 332–34 (“Conflicts in the interpretation of state law, dangerous to the success of state policies, are almost certain to result from the intervention of the lower federal courts.”). If parties knew that a decision by the Commission could be promptly reversed by a federal court lacking the Commission’s expert knowledge, then the policy goals of the State of Texas in the substantially important arena of determining the issuance of oil well drilling permits would be impeded.  108See id. (“These questions of regulation of the industry by the state administrative agency, whether involving gas or oil prorationing programs or Rule 37 cases, so clearly involves basic problems of Texas policy that equitable discretion should be exercised to give the Texas courts the first opportunity to consider them.”)

Ultimately, the NOPSI definition encapsulates these concerns by noting that Burford is appropriate for cases involving either questions not only of state law, but also that “transcend the result in the case then at bar” or situations where federal review would disrupt a state’s attempt to “establish a coherent policy with respect to a matter of substantial public concern.”  109New Orleans Pub. Serv., Inc., 491 U.S. at 361. The administrative efforts undertaken by each state to create a system that handles insurance insolvency proceedings represent precisely the kind of “coherent policy with respect to a matter of substantial public concern” described in NOPSI110Id.; see also Clark, 105 F.3d at 1052 (dismissing party’s argument that NOPSI curtails Burford abstention in the context of insurance insolvency).

2. Burford and Quackenbush

In Quackenbush v. Allstate Insurance Co., the California Insurance Commissioner sued Allstate Insurance Company for damages from an alleged breach of reinsurance agreements.  111Quackenbush, 517 U.S. at 709. After Allstate removed the case to federal court, the California Insurance Commissioner argued to the District Court that the case should be remanded to state court under Burford abstention due to the significance of the case to California’s regulation of the insurance industry.  112Id. After the District Court invoked Burford abstention, Allstate appealed to the Court of Appeals for the Ninth Circuit, which vacated the District Court’s decision on the grounds that Burford abstention only applies to equitable, rather than damages, actions.  113Id. at 711–12.

The first issue before the Supreme Court was whether a district court’s decision to invoke Burford abstention was immediately appealable as a final order.  114Id. at 730–31 (“Because this was a damages action, we conclude that the District Court’s remand order was an unwarranted application of the Burford doctrine.”). In a unanimous decision,  115Justices Scalia and Kennedy filed concurring opinions, with Justice Kennedy arguing that the possibility of invoking Burford abstention in a damages action should be left open and Scalia responding that the majority decision precluded such a possibility. Id. at 731–34. the Court held that the Burford abstention was appealable, but that Burford abstention cannot be invoked to dismiss or remand in a damages action (though it can be invoked to stay a damages action).  116Id. at 730–31 (holding that “ . . . given the situation the District Court faced in this case, a stay order might have been appropriate . . . ” but “federal courts have the power to dismiss or remand cases based on abstention principles only where the relief being sought is equitable or otherwise discretionary.”). Most significantly, Quackenbush characterized Burford abstention as only an “extraordinary and narrow exception to a district court’s duty to adjudicate a controversy properly before it.”  117Id. at 728 (quoting Colorado River Water Conservation Dist., 424 U.S. at 813) (quoting County of Allegheny, 360 U.S. at 188–89).

Like NOPSI, Quackenbush appears on its surface to limit the scope of Burford abstention, but it largely only serves to clarify it. While finally applying the “extraordinary and narrow exception”  118Id. language to the Burford doctrine solidifies its status as the exception rather than the rule, this language has been connected to abstention doctrines since 1959.  119See County of Allegheny, 360 U.S. at 188–89. Further, the Court’s holding in Quackenbush that Burford abstention can only be used to stay, rather than dismiss or remand, a damages action appears at first to be a significantly more severe limitation than it actually has proven to be in practice.  120See Daniel C. Norris, The Final Frontier of Younger Abstention: The Judiciary’s Abdication of the Federal Court Removal Jurisdiction Statute, 31 Fla. St. U.L. Rev. 193, 210–14 (2003) (arguing that there is little practical difference between a dismissal and a stay). Because the issues resolved on the state level typically resemble those that a party wishes to have heard in a federal court, issue preclusion and claim preclusion often prevent a “stayed” federal case from being heard following the resolution of state proceedings.  121See id. at 211–12. Thus, while Quackenbush draws clear boundaries around Burford abstention, these lines only intrude slightly into the legal realm that Burford had previously inhabited.

C. Circuit Courts and Burford Tests

In various decisions, circuit courts have developed ad-hoc analytical tests to determine whether to invoke the Burford abstention doctrine.  122See, e.g., Corcoran, 842 F.2d 31; Law Enforcement Ins. Co. v. Corcoran, 807 F.2d 38 (2nd Cir. 1986); Bilden v. United Equitable Ins. Co., 921 F.2d 822 (8th Cir. 1990). In addition, two prominent factor-based tests have been developed on the Court of Appeals level: the Wilson factors and the Grimes factors.

1. The Wilson Factors

In Wilson v. Valley Electric Membership Corp., the Court of Appeals for the Fifth Circuit developed a five-factor test that was later applied in the insurance insolvency context by the District Court for the Eastern District of Illinois in Lentz v. Trinchard123Wilson, 8 F.3d 311; Lentz, 730 F. Supp. 2d 567. This test requires an analysis of:

1) Whether the cause of action arises under federal or state law 2) whether the case requires inquiry into unsettled issues of state law, or into local facts 3) the importance of the state interest involved 4) the state’s need for a coherent policy in that area and 5) the presence of a special state forum for judicial review.  124Wilson, 8 F.3d at 314–17.

The facts of Wilson relate to a Louisiana statute that exempted the electric power rates of certain rural cooperatives from the regulatory purview of Louisiana Public Service Commission.  125Id. at 312–13. After eleven years of the exemption preventing the Louisiana Public Service Commission from regulating these cooperatives, the Supreme Court of Louisiana held the exemption to be unconstitutional.  126Id. at 313; see Cajun Elec. Power Coop., Inc. v. La. Pub. Serv. Comm’n, 544 So. 2d 362 (La.) (1989), cert. denied, 493 U.S. 991 (1989). A class action lawsuit was commenced against ten rural electric cooperatives in Louisiana, with the proposed class consisting of customers, shareholders, and members of the cooperatives.  127Wilson, 8 F.3d at 312–13. See generally Wilson v. Valley Elec. Membership Corp., 1992 U.S. Dist. LEXIS 13493 (1992). The class sought refunds of money spent on increased power rates that the cooperatives charged due to the Louisiana Public Service Commission’s failure to regulate them based on its adherence to the newly unconstitutional statute.  128Wilson, 8 F.3d at 313. The defendant cooperatives removed the case to federal court.  129Id.

The defendant cooperatives moved for summary judgment on the grounds that the decision invalidating the statute  130See Cajun Elec. Power Coop., Inc., 544 So. 2d 362. should only apply prospectively.  131Wilson, 8 F.3d at 313. At this point, the Louisiana Public Service Commission began a review of the rates charged by one of the cooperatives.  132Id. The plaintiff class moved for the court to invoke Burford abstention to allow the state commission to complete its rate review before ruling on the motion for summary judgment and proceeding with the case.  133Id. The district court did abstain on Burford grounds, leading the defendant to appeal.  134Id.

In evaluating whether Burford abstention should apply, the Court of Appeals for the Fifth Circuit drew from a variety of sources to establish the five-factor test.  135Id. at 314–16. The court cited NOPSI for its first factor, whether or not the cause of action arises under federal or state law.  136Id. at 314 (citing New Orleans Pub. Serv., Inc., 491 U.S. at 361). Next, the court drew primarily from Burford v. Sun Oil for the remaining four factors: whether the case requires inquiry into unsettled issues of state law or local facts, the importance of the state interest involved, the state’s need for a coherent policy in that area, and the presence of a special state forum for judicial review.  137Id. (citing Burford., 319 U.S. 315); see Alabama Pub. Serv. Comm’n v. S. R. Co., 341 U.S. 341 (1951).

The Court of Appeals for the Fifth Circuit applied the factors to the case.  138Id. at 314–16. The court held that the issues, whether the decision striking down the statute should apply retroactively and, if so, whether it invalidates prior rate increases, were purely of state law.  139Id. at 314. As to the second factor, the court noted that deciding the case would require delving into an area of state law that is reasonably settled, but also highly complex and localized.  140Id. at 315 (noting that this state law analysis would be “highly localized, specialized, judgmental, and perhaps partisan”). The court found the importance of the state interest to also favor abstention, given that utility regulation is a significant state function.  141Id. (quoting New Orleans Pub. Serv., Inc. 491 U.S. at 365) The court also determined that the state does have a need for coherent policy in the area of retroactive application of regulation of rural cooperatives, strengthening the case against federal intervention.  142Id. at 315–16. Finally, the court held that Louisiana had a special forum for rate cases, resulting in the final factor also supporting abstention.  143Id. at 316. With all five factors favoring Burford abstention, the Fifth Circuit Court of Appeals ultimately affirmed the lower court decision to invoke it.  144Id.

a. Application of the Wilson Factors

In Lentz v. Trinchard, the District Court for the Eastern District of Louisiana incorporated the Wilson factors for Burford abstention into an analysis of a case in the insurance insolvency context.  145Lentz, 730 F. Supp. 2d 567. The facts of the case relate to a detective, Gary Hale, who was insured by American Druggists Insurance Company (ADIC).  146Id. at 571. ADIC was insured by Northwestern National Insurance Company (NNIC), which assumed responsibility for Hale’s policy when ADIC became insolvent.  147Id. In 1991, an individual sued Hale on the basis of a wrongful murder conviction.  148Id. The resulting multi-million dollar judgment forced Hale into involuntary bankruptcy in 2001.  149Id. at 571–72. The trustee appointed to oversee Hale’s bankruptcy estate sued NNIC under Louisiana law citing alleged violations of NNIC’s duty of good faith and fair dealing to Hale.  150Id. at 572.

The case remained unresolved as of 2009 when NNIC entered into insolvency proceedings in Wisconsin.  151Id. Several new defendants, referred to as the “AK defendants,” were also added to the case.  152Id. at 571–72 (describing the “AK defendants” as “Armco Insurance Group, Inc., Armco Financial Services Corporation, AFSG Holdings Company, Inc., AKS Investments, Inc., and AK Steel Corporation”). The Hale estate’s trustee amended the complaint to claim that NNIC and the AK defendants were merely “all alter egos of each other” and are all liable for damages against Hale.  153Id. at 572. Hale’s estate also sought to annul a transfer of funds pursuant to the order of a Wisconsin state court between NNIC and one of the AK defendants.  154Id. at 573. The AK defendants filed motions to dismiss the plaintiff’s complaints and, alternatively, to stay plaintiff’s claims pending the resolution of NNIC’s state court rehabilitation proceedings with ADIC in Wisconsin.  155Id.

The Louisiana Eastern District Court denied NNIC’s motions to dismiss and instead opted to analyze the issue under the Burford abstention doctrine.  156Id. at 585 (“Accordingly, NNIC’s Rule 12(b)(6) motion and the AK defendants’ Rule 12(b)(1) motion are DENIED. Such concerns are better addressed through an analysis of the Burford abstention doctrine.”). The court determined not to abstain under Burford through application of the Wilson factors.  157Id. at 587–91; see Wilson, 8 F.3d at 314–16. The court found the first factor to favor Burford abstention on the ground that the case involved only issues of Wisconsin state law.  158Lentz, 730 F. Supp. 2d at 587. However, the second factor weighed against Burford abstention because NNIC failed to demonstrate that the case involved any unsettled issue of state law.  159Id. Third, as to the importance of the state interest involved, the court determined that while an important and complex state administrative scheme existed, it would not be frustrated by the resolution of this case.  160Id. at 588.

Additionally, the court found the fourth factor to also weigh against invocation of the Burford doctrine because hearing the case would not disrupt the state’s goal of a implementing a coherent policy for the regulation of insolvent insurers.  161Id. at 589. Notably, the court held that the plaintiff was not attempting to “leapfrog ahead” of other claimants stopped by the state equivalent of an automatic stay and was merely creating one additional claim against an insolvent insurance company.  162Id. at 590. Finally, the court noted that the state had a special forum for judicial review in place, favoring abstention.  163Id. Based on this analysis, the court decided not to abstain on Burford grounds. The court decided not to abstain because, even though courts in this context often abstain on Burford grounds, adjudication of this particular case would not substantially interfere with the administration of NNIC’s assets by Wisconsin state authorities through its insolvency proceedings.  164Id. at 590–91.

2. The Grimes Factors

The second formulation bears some similarities to the Wilson test, but also directly addresses the significance of state control over insurance regulation. The Court of Appeals for the Fifth Circuit developed a four-part approach for determining when to invoke Burford abstention in Grimes v. Crown Life Insurance Co. that looks at:

Whether (1) the suit is based on a cause of action which is entirely federal, (2) the suit requires the court to determine issues which are directly relevant to the liquidation proceeding or state policy in the regulation of the insurance industry, (3) state procedures indicate a desire to create special state forums to regulate and adjudicate these issues, and (4) difficult or unusual state laws are at issue.   165Grimes, 857 F.2d at 704–05 (internal citations omitted) (abrogated in part by statute on grounds unrelated to Burford in 36 Okl. St. § 1928 (2016)).

In Grimes, Gerald Grimes, the Oklahoma Insurance Commissioner, acted as the liquidator of the United Equity Life Insurance Company (UELIC) to realize an agreement between UELIC and Crown Life Insurance Company.  166Id. at 700. The agreement allowed UELIC to transfer some of its insurance liability to Crown Life Insurance Company, and the case hinged on the agreement’s meaning and legality.  167Id. at 700–01. After the lower court sided with Crown Life Insurance Company, Gerald appealed to the Tenth Circuit Court of Appeals on the grounds that the court lacked jurisdiction and, if it had jurisdiction, should have abstained.  168Id. at 701. After dismissing the jurisdiction argument, the Court of Appeals for the Tenth Circuit approached the issue from the perspective of abstention.  169Id. at 703. The court held Burford to be the most potentially applicable abstention doctrine.  170Id.

The court noted the McCarran-Ferguson Act and a traditional deference provided to state receivership proceedings before formulating the set of factors for determining whether to invoke Burford abstention.  171Id. at 703–04. Citing a variety of federal decisions,   172See, e.g., United Servs. Auto. Asso. v. Muir, 792 F.2d 356 (3rd Cir. 1986); Board of Educ. v. Bosworth, 713 F.2d 1316 (7th Cir. 1983). the court decided to determine the Burford issue based on (1) whether the suit derives from a federal cause of action, (2) whether the suit requires the court to determine issues directly relevant to state insurance liquidation proceedings or regulations, (3) whether the state procedures indicate a desire to create special state forums to regulate and adjudicate, and (4) whether difficult or unusual questions of state law are at issue.  173Grimes, 857 F.2d at 704–05.

After evaluating the facts based on the four factors, the court held that the claim was not grounded in any federal cause of action, the facts strongly related to state regulation of state insolvency proceedings, Oklahoma had designated a forum to oversee the proceedings, and complex state laws and regulations were central to resolving the dispute.  174Id. at 705. Thus, the court invoked Burford abstention and remanded the case to the designated state court.  175Id. at 706–07.

D. A Uniform Set of Factors

The factors for determining the application of Burford abstention developed by the Tenth Circuit in Grimes present an ideal foundation for navigating the post-NOPSI, post-Quackenbush framework. Tellingly, federal courts in cases involving a party undergoing an insurance insolvency proceeding have cited this approach positively and applied it.  176See Hartford Cas. Ins. Co. v. Borg-Warner Corp., 913 F.2d 419, 425–26 (7th Cir. 1990); Barnhardt Marine Ins., Inc. v. New England Int’l Sur., Inc., 961 F.2d 529, 254 (5th Cir. 1992) (discussing the court’s reasoning in Grimes); see also Overflow Energy, L.L.C. v. Bd. of Cty. Comm’rs of the Cty. of Roger Mills, No. CIV-13-1136-HE, 2014 U.S. Dist. LEXIS 12860, at *5–6 (W.D. Okla. Feb. 3, 2014) (“Although, as noted below, there is some basis for concluding Grimes may have viewed Burford abstention too broadly, it continues to provide useful guidance as to factors to be weighed.”). But see Melahn v. Pennock Insurance, Inc. 965 F.2d 1497, 1507 (8th Cir. 1992) (“The district court’s reliance on the holding in Grimes is misplaced because Grimes was based mainly on Second Circuit authority which ‘adopted a broad view of abstention’. . .NOPSI does not permit a broad view of abstention.”) (quoting Smith v. Metropolitan Prop. & Liability Ins. Co., 629 F.2d 757, 760 (2nd Cir. 1980)).

However, courts continue to dispute the appropriateness of Burford abstention in crucial areas not addressed by the Tenth Circuit in Grimes177Compare Wolfson, 51 F.3d at 147 (Burford abstention appropriate in a damages action), with University of Md., 923 F.2d at 272 (citing New Orleans Pub. Serv., Inc., 491 U.S. 350) (NOPSI limits the application of Burford abstention when the court is not sitting in equity). Thus, a need for clarification in evaluating the relevance of the Burford abstention doctrine necessitates a broader set of factors that encompasses these additional concerns. This Comment proposes that courts considering Burford abstention adopt a set of factors that address both the policy considerations behind Burford abstention and the exclusion of insurance companies from the Code while still functioning within the parameters set by bankruptcy law, the McCarran-Ferguson Act, and legal precedent.

The proposed factors (the first four of which draw from the formulation developed by the Court of Appeals for the Tenth Circuit in Grimes178Grimes, 857 F.2d at 704–05. are as follows: (1) whether the cause of action is entirely federal; (2) whether the resolution of the suit requires the court to interfere with state policies related to insurance insolvency proceedings; (3) whether state policies or procedures designate a particular state forum for the regulation and adjudication of issues central to the litigation; (4) whether difficult or unusual state laws are at issue; (5) whether the court is sitting in equity; and (6) whether the state that would hear a remanded case has a direct interest in the specific outcome of the litigation in a case brought to a federal court through diversity jurisdiction.

This section will examine these factors in light of the policy considerations behind the McCarran-Ferguson Act and Congress’ exclusion of insurance companies from the Code, the text of the Code and the McCarran-Ferguson Act, and the policy considerations that led to the development of the Burford abstention doctrine. Finally, the proposed factors will be illustrated by applying them to a hypothetical, and then concerns that they may favor Burford abstention excessively will be addressed.

1. The Policy Considerations Behind the McCarran-Ferguson Act and the Exclusion of Insurance Companies from the Code

The McCarran-Ferguson Act clearly expresses the intent of Congress to leave regulations regarding “the business of insurance” to the states.  17915 U.S.C. § 1011 (2012). Congress’s motivation in passing the McCarran-Ferguson Act appears to be that Congress did not want to interfere with states that were better-equipped to handle the localized nature of much of the insurance industry because they had appropriate regulatory systems in place already.  180See Darr, supra note 34, at 607. The Code (somewhat confusingly) conveys the same policy by closing all avenues of filing for bankruptcy off to insurance companies.  181See generally 11 U.S.C. § 109 (2012). While some commentators have found the justifications that spurred the passage of the McCarran-Ferguson Act to be outdated,  182See Rice, supra note 8, at 404–07 (describing arguments for and against the repeal of the McCarran-Ferguson Act); see also Hon. Samuel L. Bufford, Suggestion For The National Bankruptcy Review Commission And Congress: Increasing Scope Of Bankruptcy Code, 4 Am. Bankr. Inst. L. Rev. 500 (1996) (“I think that the most important systemic defect in the present United States bankruptcy system is that it excludes the insolvencies of insurance companies, banks and other financial institutions. I would recommend that the Bankruptcy Review Commission propose that the Bankruptcy Code be expanded to include these institutions.”). the goal of keeping the business of insurance insolvency with the states remains embodied by standing law.  18315 U.S.C. § 1011 (2012); see also Employee Retirement Income Security Program, 29 U.S.C. § 1144(b)(2) (2012) (excluding pre-emption provisions from applying to laws regulating the business of insurance). The proposed factors fall in line with these goals. The proposed factors not only address the need to avoid unwarranted federal intrusion on cases involving unusual issues of state law that could be resolved in a designated state forum (the Wilson factors essentially do the same), but also specifically designate the presence of state insurance regulation and insolvency proceedings as favoring abstention.  184See Grimes, 857 F.2d at 704–05.

2. The Text of the Code and the McCarran-Ferguson Act

Policy arguments aside, the text of the standing law regarding insurance insolvency proceedings favors the relatively broad parameters on Burford abstention set by the proposed formulation. The McCarran-Ferguson Act declares that “the continued regulation and taxation by the several States of the business of insurance is in the public interest.”  185See 15 U.S.C. § 1011 (2012); see generally 11 U.S.C. § 109 (2012). The Code simply excludes insurance companies from filing for bankruptcy under federal law.  186See 15 U.S.C. § 1011 (2012); see generally 11 U.S.C. § 109 (2012). The fact that states are the only remaining entities capable of handling the liquidation and insolvency procedures of insurance companies reinforces the significance of preventing unwarranted federal intrusion into these processes. Thus, criticisms levied against courts using formulations that grant relatively broad purview to Burford abstention  187See Overflow Energy, L.L.C., 2014 U.S. Dist. LEXIS 12860, at *5–6; cf. Melahn, 965 F.2d at 1507. are misguided, as the text of current bankruptcy law favors abstention in appropriate circumstances. If Congress finds federal courts to be invoking Burford abstention too often, then Congress can certainly repeal the McCarran-Ferguson Act or amend the Code.

3. The Future of the McCarran-Ferguson Act

The House of Representatives has made two efforts in recent years to repeal the McCarran-Ferguson Act.  188See Health Insurance Industry Fair Competition Act of 2017, H.R. 617, 115th Cong. (2017); Competitive Health Insurance Reform Act Of 2017, H.R. 372, 115th Cong. (2017). The first passed in 2010 by a vote of 406 in favor and 19 against.  189See H.R. 617, 115th Cong. (“The vote was taken by electronic device, and there were-yeas 406, nays 19, not voting 8”). However, it was never voted on in the Senate. The second passed in 2017 by a vote of 416 in favor and 7 against.  190See Jennifer Webb, House Passes McCarran-Ferguson Repeal Bill, Indep. Agent Mag. (Mar. 23, 2017), http://www.iamagazine.com/news/read/2017/03/23/house-passes-mccarran-ferguson-repeal-bill. The Senate could conceivably vote on a similar repeal during the current legislative session, and President Donald J. Trump has indicated that he would sign such a repeal into law.  191See Donald J. Trump, Healthcare Reform (Mar. 3, 2016), https://assets.donaldjtrump.com/HCReformPaper.pdf (stating as one of seven goals “Modify existing law that inhibits the sale of health insurance across state lines.”).

The repeal bill passed by the House of Representatives has the stated purpose “[t]o restore the application of the Federal antitrust laws to the business of health insurance to protect competition and consumers.”  192H.R. 372, 115th Cong. The bill functions to modify the McCarran-Ferguson act such that “[n]othing contained in this Act shall modify, impair, or supersede the operation of any of the antitrust laws with respect to the business of health insurance . . . .”  193Id. Notably, the bill applies the repeal to dental insurance but not to life insurance, property insurance, or casualty insurance. Thus, if the bill passed into law, only health insurance and dental insurance would be affected. All other forms of insurance would not be affected.

This repeal, if passed, would have only a negligible effect on the proposed factors test. If the repeal bill goes into law, then the McCarran-Ferguson Act would cease to support one factor (the second) in the proposed formula for applying the Burford abstention doctrine only in cases involving the insolvencies of health and dental insurance companies. Note, however, that policy concerns and the exclusion of insurance companies from the Code would still continue to support Burford abstention in cases involving all insurance companies undergoing state insolvency proceedings.

4. The Policy Considerations Behind Burford Abstention: Considering Each Factor in the Proposed Test

In this section, each factor in the proposed test will be examined and its relevance explained.

a. Whether the Suit is Based on an Entirely Federal Cause of Action

The Supreme Court in Burford v. Sun Oil sought to prevent a court from exercising its jurisdiction in a way that would interfere with complex state administrative procedures.  194Burford, 319 U.S. at 332–34. The Court expressed concern over a federal court second-guessing the decisions made by a specialized state administrative body on matters grounded in state policy.  195Id. at 332 (“These questions of regulation of the industry by the state administrative agency, whether involving gas or oil prorationing programs or Rule 37 cases, so clearly involves basic problems of Texas policy that equitable discretion should be exercised to give the Texas courts the first opportunity to consider them.”). The first proposed factor, whether the suit is based on an entirely federal cause of action, effectively addresses these policy concerns.  196Grimes, 857 F.2d at 704–05. Under this formula, a case grounded in state law favors abstention, whereas a case grounded in federal law disfavors abstention.  197See Overflow Energy, L.L.C., 2014 U.S. Dist. LEXIS 12860, *5–6 (holding that the centrality of state law issues to the case favors Burford abstention under the Grimes formula). By weighing the presence of federal issues in the cause of action (for example, federal question subject matter jurisdiction) the first factor satisfies the goal from Burford v. Sun Oil of avoiding undue interference with state policies.  198See Burford, 319 U.S. at 332.

By contrast, the first factor from the Wilson formula, whether the cause of action arises under federal or state law, narrows the reach of Burford too excessively when taking into account the Court of Appeals for the Fifth Circuit’s interpretation of NOPSI199Wilson, 8 F.3d at 314 (applying NOPSI). The policy goals from Burford v. Sun Oil are better fulfilled by examining if the cause of action arises entirely under federal law, because the avoidance of federal intrusion on a complex state policy goal through Burford abstention could potentially be merited in any case with a cause of action that is not entirely federal. Burford abstention may be an “extraordinary and narrow”  200Quackenbush, 517 U.S. at 728 (quoting Colorado River Water Conservation Dist., 424 U.S. at 813) (quoting County of Allegheny, 360 U.S. at 188–89); see also Wolfson, 51 F.3d at 147 (noting “the strong presumption in favor of exercising federal jurisdiction”). exception to a federal court’s constitutional duty to hear certain cases,  201See Willcox v. Consolidated Gas Co., 212 U.S. 19, 40 (1909) (“When a Federal court is properly appealed to in a case over which it has by law jurisdiction, it is its duty to take such jurisdiction.”) (citation omitted). but it should remain an option so long as the cause of action is not entirely federal.

b. Whether the Resolution of the Suit Requires the Court to Interfere with State Policies Related to Insurance Insolvency Proceedings  202If the bill partially repealing the McCarran-Ferguson Act that has passed in the House is also passed in the Senate and ultimately becomes law, then this factor will be modified to more strongly favor abstention in cases involving insolvent property, life, and casualty insurance companies than cases involving insolvent health and dental insurance companies. See H.R. 372, 115th Cong.

The second proposed factor, whether the resolution of the suit requires the court to interfere with state policies related to insurance insolvency proceedings, is central to its success in following the policy goals behind Burford abstention.  203Grimes, 857 F.2d at 704–05. As courts have noted,  204See Callon Petroleum Co., 351 F.3d at 209. Burford abstention was designed to avoid federal interference with precisely the kind of complex state policy goals that the regulation of insurance companies and their insolvencies represents.  205See Clark, 105 F.3d at 1052 (“permitting the Texas plaintiffs to proceed in federal court would undermine the comprehensive apparatus established by the state of Arizona for the orderly disposition of claims against insolvent insurance companies.”). See generally Knoerzer, supra note 86. A state’s regulation of insurance companies and their insolvency proceedings is a long-reaching and important administrative task over an industry that, since 2011, has experienced annual revenue of over $1.2 trillion.  206See Sean Millard, An investor’s guide to the insurance business, Market Realist (Feb. 11, 2015, 5:07 PM), http://marketrealist.com/2015/02/us-insurance-industry-largest-world/.

With its goal of avoiding undue federal influence in complex state administrative schemes, Burford abstention is appropriate in cases that might disrupt a state’s efforts to regulate insurance companies.  207See Knoerzer, supra note 86, at 840 (“Because it expressly contemplates an ongoing state proceeding implicating important state regulatory issues, the Burford doctrine is particularly well-suited for consideration of whether to abstain in favor of state rehabilitation or liquidation proceedings.”). Unlike the Wilson factors, the proposed formulation specifically references avoiding interference with state insurance insolvency regulations in an accurate reflection of the strong power given to the States in this area.  208Compare Grimes, 857 F.2d at 704–05, with Wilson, 8 F.3d at 314–16.

c. Whether State Policies or Procedures Designate a Particular State Forum for the Regulation and Adjudication of Issues Central to the Litigation

The third proposed factor, whether state policies or procedures designate a particular state forum for the regulation and adjudication of issues central to the litigation, reflects a central tenet of the Court’s decision in Burford v. Sun Oil209Burford, 319 U.S. 315. The Court sought to give “Texas courts the first opportunity to consider” the regulatory questions before it, demonstrating a preference for the matter to be decided in an appropriate state forum.  210Id. at 332. Furthermore, the Court described how the Texas legislature had “established a system of thorough judicial review by its own state courts” of orders issued by the Texas Railroad Commission.  211Id. at 325. The third proposed factor thus follows the Burford doctrine’s goals by favoring abstention when a state forum exists to hear the matter, especially when the procedures indicate the state’s desire for the matter to be heard in that forum.  212See Grimes, 857 F.2d at 704–05. Although the fifth criteria of the Wilson formula, “the presence of a special state forum for judicial review,” parallels this goal, it does so on general terms. Those general terms fail to address the Burford Court’s reliance on the fact that Texas had established a specific system for reviewing the Commission’s decisions in its state courts.  213Wilson, 8 F.3d at 314–17; Burford, 319 U.S. at 325.

d. Whether Difficult or Unusual State Laws Are at Issue

The fourth proposed factor, whether difficult or unusual state laws are at issue, ties into the initial facts of Burford v. Sun Oil214Burford, 319 U.S. 315. In Burford, a crucial element of the Court’s reasoning was the presence of an extremely complex set of state laws and issues.  215Id. at 318–19. The Texas Railroad Commission issued an order based off its analysis of a forty-mile-long oil field in which over 26,000 wells had been drilled.  216Id. This order was part of a regulatory scheme meant to manage Texas’s massive oil industry.  217Id. at 319–20. Moreover, the Texas Railroad Commission came into existence under a statute passed “for the protection of public and private interests against such evils by prohibiting waste and compelling ratable production.”  218Id. at 320. As the Court held, “These questions of regulation of the industry by the state administrative agency, whether involving gas or oil prorationing programs or Rule 37 cases, so clearly involves basic problems of Texas policy that equitable discretion should be exercised to give the Texas courts the first opportunity to consider them.”  219Id. at 332; see also Ohio Valley Envt’l Coalition v. River Cities Disposal, LLC, No. 15-47-DLB-EBA, 2016 U.S. Dist. LEXIS 40791, at *24 n.12 (E.D. Ky Mar. 29, 2016) (invoking Burford abstention where “[n]ot only would federal review at this juncture be disruptive of Kentucky’s efforts to establish a coherent policy with respect to solid waste facilities and air quality standards, but the resolution of OVEC’s claims are likely to involve difficult questions of state law.”). The proposed formula adequately incorporates this concern by favoring abstention in cases that involve “difficult or unusual state laws.”  220Grimes, 857 F.2d at 704–05. A clear sign that this factor should be applied to favor Burford abstention is the involvement of a state administrative agency well-equipped to carry out a complex task of importance.  221See generally Burford, 319 U.S. 315. See also Sierra Club v. Chesapeake Operating, LLC, No. CIV-134-F, 2017 U.S. Dist. LEXIS 90913, at *31 (W.D. Okla. April 4, 2017) (invoking Burford abstention where “it is plain that the Oklahoma Corporation Commission has brought to bear a level of technical expertise that this court could not hope to match.”).

e. Whether the Court is Sitting in Equity

Ever since the Supreme Court established Burford abstention in the context of an equity proceeding,  222Burford, 319 U.S. at 334 (“sound respect for the independence of state action requires the federal equity court to stay its hand.”). courts have debated whether or not to apply it in a damages action.  223See supra Section I, Subsection D. Most notably, the Supreme Court in Quackenbush held that a court can only stay a case on Burford grounds in a damages action, but the court can also dismiss or remand if it is sitting in equity.  224Quackenbush, 517 U.S. at 721; see also Feige v. Sechrest, 90 F.3d 846, 850–51 (3rd Cir. 1996) (a court may stay, but not dismiss or remand, a damages action on Burford grounds). Elsewhere, courts have generally held that the fact that a court is sitting in equity favors Burford abstention,  225See, e.g., University of Md., 923 F.2d at 272 (rejecting an argument that Burford abstention is equally applicable at law or in equity). but courts have reached different conclusions regarding the extent to which the presence of a damages action forecloses Burford abstention as a possibility.  226Compare Wolfson, 51 F.3d at 147 (“No doubt abstention is less apt to be appropriate when the federal plaintiff seeks money damages, but we do not read the Supreme Court’s abstention jurisprudence as completely foreclosing abstention in money damage cases.”), with Fragoso, 991 F. 2d at 882 (Burford abstention inappropriate in a torts action), and Garamendi v. Allstate Ins. Co., 47 F.3d 350, 356 (9th Cir. 1995) (“a district court may not abstain under Burford when the plaintiff seeks only legal relief”).

A bright-line rule on the significance of whether a court is sitting in equity defies the relevant case law and legal precedent, as illustrated by the detailed analysis of the complexities of the administrative tasks of the Texas Railroad Commission in Burford v. Sun Oil227Burford, 319 U.S. at 339–41; see Wolfson, 51 F.3d at 145 (“Abstention is inherently a fact-specific inquiry.”). Instead, the proposed factor of whether the court is sitting in equity, with an equity action favoring abstention and a different type of action disfavoring abstention, clearly follows the policy goals behind the Burford doctrine. As the Eighth Circuit Court of Appeals in Wolfson v. Mutual Benefit Life Ins. Co. noted:

We think it unwise to make rigid distinctions between legal and equitable claims in the merged federal system, particularly for claims such as those under ERISA whose historical antecedents are unclear . . . . No doubt abstention is less apt to be appropriate when the federal plaintiff seeks money damages, but we do not read the Supreme Court’s abstention jurisprudence as completely foreclosing abstention in money damage cases.  228Wolfson, 51 F.3d at 147 (citations omitted).

Both the Wilson and Grimes formulations fail to include an examination of whether a court is sitting in equity in determining the applicability of Burford abstention.  229See Wilson, 8 F.3d at 313–15; Grimes, 857 F.2d at 704–05. The centrality of the equitable nature of the relief sought in Burford v. Sun Oil illustrates the significance of this omission.  230Burford, 319 U.S. at 334 (“a sound respect for the independence of state action requires the federal equity court to stay its hand”). In the Supreme Court’s re-examination of the doctrine in Quackenbush, the ruling emphasized the applicability of Buford abstention to suits of equitable and non-equitable natures while clarifying that “while we have held that federal courts may stay actions for damages based on abstention principles, we have not held that those principles support the outright dismissal or remand of damages actions.”  231Quackenbush, 517 U.S. at 721. This distinction, and the preference it embodies for the application of Burford abstention in equitable actions (while limiting, but not eliminating, its application in damages actions) necessitates the consideration of the nature of the case in an ideal Burford formulation. More broadly, the unique, discretionary powers of a court of equity support the relevance of concerns for public policy embodied by the Burford abstention doctrine’s goal of avoiding interference with a complex state administrative scheme.  232See generally Garamendi, 47 F.3d at 354–56. By contrast, judicial discretion to renounce jurisdiction has less support in the context of actions at law.  233See Fair Assessment in Real Estate Ass’n v. McNary, 454 U.S. 100, 120–21 (1981) (“There is little room for the ‘principle of comity’ in actions at law where, apart from matters of administration, judicial discretion is at a minimum.”) (Brennan, J., dissenting).

f. Whether the State that Would Hear a Remanded Case Has a Direct Interest in the Specific Outcome of the Litigation in an Action Brought to a Federal Court through Diversity Jurisdiction

The sixth proposed factor, whether the state that would hear a remanded case has a direct interest in the specific outcome of the litigation in an action brought to a federal court through diversity jurisdiction, addresses an easily-overlooked consequence of a remand resulting from a court invoking Burford abstention in the context of diversity jurisdiction. Diversity jurisdiction originated from Article III of the Constitution’s grant of federal judicial power to cases “between Citizens of different States.”  234U.S. Const. art. III, § 2, cl. 1. Among the most-cited justifications for the existence of diversity jurisdiction is a fear of bias against out-of-state litigants from state court judges and juries.  235James M. Underwood, The Late, Great Diversity Jurisdiction, 57 Case W. Res. L. Rev. 179, 182 (2006). These concerns underlie one facet of why the doctrine of abstention constitutes only “an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it.”  236County of Allegheny, 360 U.S. at 188. And these concerns manifest themselves in a remanded action where the state that will hear the case has a strong interest in its outcome, as a state judge or jury may be biased (or at least may create the appearance of bias) as a result.  237See Baltimore Bank for Coops., 583 F.2d 104.

For example, in Baltimore Bank for Cooperatives v. Farmer’s Cheese Cooperative, the Court of Appeals for the Third Circuit noted the intervention as a party defendant of the Commonwealth of Pennsylvania in a case brought through diversity jurisdiction that, if remanded on Burford grounds, it would be heard in Pennsylvania.  238Id. at 111–13. The court held that this weakened the argument for abstention.  239Id. The presence of the state as a defendant in a case with an out-of-state plaintiff raised the same set of concerns that were behind the inception of diversity jurisdiction, thus leading the Court of Appeals for the Third Circuit to reject Burford abstention in favor of hearing the case in a federal forum.  240Id. The proposed formula adopts a factor that addresses these considerations such that the presence of a state that (A) has an interest in the specific outcome of the litigation that may create bias or the appearance of bias and (B) would also hear a remanded case disfavors Burford abstention.

A state’s interest in the specific outcome of litigation as described by this factor should be differentiated from a state’s broad interest in achieving policy goals through a complex state administrative scheme. Central to Burford abstention is an overriding goal of avoiding the disruption of a state’s administrative efforts to achieve a goal of public importance, and the presence of such a potential disruption certainly favors invoking Burford abstention. By contrast, a state’s clear and immediate interest in the outcome of a specific case favorable to a particular party does not elicit the same policy concerns.

5. Applying the Factors—A Hypothetical

a. The Facts

A hypothetical lawsuit involving one party arguing in favor of Burford abstention can help to illustrate the proper application, as well as the utility, of the factors proposed here. In this scenario, Live-Long Life Insurance Company is undergoing an insolvency proceeding in its state of incorporation, Maine. Live-Long is also the fourth-largest employer in Maine, employing thousands of citizens whose job prospects are jeopardized by the insolvency. An ad company, Stanley Hooper, files a lawsuit against Live-Long a year after Live-Long’s insolvency proceedings began. The lawsuit seeks $1,000,000 for contract damages or, in the alternative (if the court finds no contract exists), unjust enrichment.  241See June Roberts Agency v. Venture Props., 676 A.2d 46, 49 n.1 (Me. 1996) (explaining that while the existence of a contract precludes recovery on a theory of unjust enrichment, a party “is not precluded from pleading both theories because a factfinder may find that no contract exists and may still award damages on the theory of unjust enrichment.”). See generally Evergreen W. Bus. Ctr., LLC v. Emmert, 323 P.3d 250 (2014) (discussing, under an Oregon state statute, the validity of alternative legal claims for damages and equitable relief). Stanley Hooper is based in Delaware and files the lawsuit in federal court, claiming diversity jurisdiction on the grounds that the parties are incorporated in different states and the amount sought exceeds $75,000.  242See 28 U.S.C. § 1332 (2012). After Stanley Hooper files the lawsuit, Live-Long argues that the court should abstain from hearing the case on Burford grounds.

b. Applying The Proposed Factors

The federal court would then examine the facts of the case in light of the six factors presented here: (1) whether the cause of action is entirely federal, (2) whether the resolution of the suit requires the court to interfere with state policies related to insurance insolvency proceedings, (3) whether state policies or procedures designate a particular state forum for the regulation and adjudication of issues central to the litigation, (4) whether difficult or unusual state laws are at issue, (5) whether the court is sitting in equity, and (6) whether the state that would hear a remanded case has a direct interest in the specific outcome of the litigation brought to a federal court through diversity jurisdiction.

c. Whether the Cause of Action is Entirely Federal

The first factor, whether the cause of action is entirely federal, supports abstention on these facts. Had the issue been brought to the federal court under federal question jurisdiction or partially on the basis of the application of a federal law, the case for Burford abstention would be weakened. Here, however, Stanley Hooper’s damages claim derives from contract law, which is governed by states. Further, Stanley Hooper’s alternative claim for unjust enrichment is not entirely grounded in federal law.  243See, e.g., June Roberts Agency, 676 A.2d at 49 n.1 (evaluating an unjust enrichment claim in a state court).

d. Whether the Resolution of the Suit Requires the Court to Interfere with State Policies Related to Insurance Insolvency Proceedings

The second factor, whether the resolution of the suit requires the court to interfere with state policies related to insurance insolvency proceedings, weighs in favor of abstention. The amount of the claim, $1,000,000, is high enough that a verdict for the plaintiff could potentially disrupt Maine’s efforts to manage Live-Long’s insolvency. Policyholders seeking payment, and creditors of Live-Long, may have the distribution of funds to them from Live-Long’s estate interrupted and lessened as a result. The state equivalent of an automatic stay, which would serve to protect the estate of Live-Long Insurance Company,  244See Me. Rev. Stat. Ann. tit. 24-A, ch. 57, § 4449 (2017) (describing a stay of all proceedings against a delinquent insurer). would be impeded by a ruling in federal court against it.

Crucially, a court could plausibly determine that Stanley Hooper is attempting to “leapfrog ahead” of other creditors, given that Stanley Hooper filed the lawsuit after the insurance insolvency proceedings began.  245See Lentz, 730 F. Supp. 2d at 589–90; Clark v. Underwriters Mgmt. Corp., 2003 U.S. Dist. LEXIS 8378, at *21–22 (N.D. Ill. 2003). Courts have expressed concerns that allowing such cases to proceed can create a “race to the courthouse” that encourages claimants and creditors to sue insolvent insurance companies in federal courts.  246See Lentz, 730 F. Supp. 2d at 589–90; Underwriters Mgmt. Corp., 2003 U.S. Dist. LEXIS 8378, at *21–22. By contrast, had Stanley Hooper filed before the insolvency proceedings began or seemed imminent, no attempt to “leapfrog ahead” of other claimants would be necessary.

e. Whether State Policies or Procedures Designate a Particular State Forum for the Regulation and Adjudication of Issues Central to the Litigation

The third factor, whether state policies or procedures designate a particular state forum for the regulation and adjudication of issues central to the litigation, depends on the state policies and procedures. In Lentz v. Trinchard, the Louisiana Eastern District Court applied a similar factor from Wilson to hold that the presence of a local circuit court as a rehabilitation court fulfilled this factor, favoring abstention.  247Lentz, 730 F. Supp. 2d at 590. Here, Maine’s Insurance Code gives original jurisdiction over delinquency proceedings to the Maine Superior Court and designates that venue shall be appropriate in a state court in the county of the insurer’s principal place of business.  248Me. Rev. Stat. Ann. tit. 24-A, ch. 57, § 4354 (2017) (note that venue for an insurance company with its principal place of business in another state is selected differently). Thus, under Maine law, the applicable state court for delinquency proceedings would likely also serve as a venue for addressing the case within the context of the relevant codes for insurance insolvency proceedings. The presence of a state forum for adjudication of the issue thus functions to support abstention.

f. Whether Difficult or Unusual State Laws Are at Issue

The fourth factor, whether difficult or unusual state laws are at issue, disfavors abstention. No difficult or unusual state law appears to exist, unless the relevant contract provisions are atypically perplexing.  249Reducing the potential complexity of the contract law is the fact that Maine has adopted all but one article of the Uniform Commercial Code. Me. Rev. Stat. Ann. tit. 11, §§ 1-101–10-108 (2017). Additionally, Maine has also established three clear factors to use when evaluating the alternative claim of unjust enrichment.  250See ERA-Northern Assocs. v. Border Tr. Co., 662 A.2d 243, 245 (Me. 1995) (describing three factors for determining whether an activity conferred an unjust enrichment on a party: (1) it conferred a benefit on the party, (2) the party had appreciation or knowledge of the benefit, and (3) the party’s acceptance or retention of the benefit was under such circumstances as to make it inequitable for the party to retain the benefit without payment of its value).

g. Whether the Court Is Sitting in Equity

The fifth factor, whether the court is sitting in equity, neither favors nor disfavors abstention. On the one hand, Stanley Hooper’s first claim is for damages, a legal remedy. However, Stanley Hooper’s alternative claim is for unjust enrichment, an equitable remedy. Therefore, this factor neither supports nor weakens the case for Burford abstention on its face.  251The comparative plausibility of the two alternative claims could be relevant here. If a contract clearly existed, then this factor would disfavor abstention. If a contract almost certainly did not exist, then the equitable remedy of unjust enrichment would play a central role in the case, favoring abstention.

h. Whether the State that Would Hear a Remanded Case Has a Direct Interest in the Specific Outcome of the Litigation in an Action Brought to a Federal Court through Diversity Jurisdiction

The sixth factor, whether the state that would hear a remanded case initially brought to federal court through diversity jurisdiction has a direct interest in the case’s outcome, disfavors abstention due to the specific facts of the hypothetical. The goal of avoiding potential bias in a state court proceeding against an out-of-state party, that serves as a foundation for diversity jurisdiction, applies here. Stanley Hooper could justifiably fear bias from a state judge or state jury in a lawsuit in a Maine state court. An out-of-state plaintiff suing one of Maine’s leading employers will be precariously positioned while undergoing an insolvency proceeding. Since Maine has an interest in an outcome favoring Live-Long Insurance, this last factor weakens the case for abstention.

i. Conclusion of the Hypothetical Analysis

A court would consider these six factors in light of the “extraordinary and narrow exception” language used in Quackenbush to characterize Burford abstention.  252Quackenbush, 517 U.S. at 728 (quoting Colorado River Water Conservation Dist., 424 U.S. at 813) (quoting County of Allegheny, 360 U.S. at 188–89). Here, the fourth factor disfavors abstention due to the lack of any difficult or unusual state laws in the case, and the sixth factor disfavors abstention due to the state interest in the specific outcome. The first, second, and third factors support abstention due the lack of grounding of the causes of action in federal law, the resolution of the case potentially interfering with state policies related to insurance insolvency proceedings, and the presence of a state forum for adjudicating the dispute.

Overall, Burford abstention would be justified in this case. Since the presence of complex state policies related to oil well drilling was central the Supreme Court’s reasoning in Burford v. Sun Oil253Burford, 319 U.S. 315. the lack of complex state laws in this hypothetical case would normally cause a court to refuse to invoke Burford abstention. However, the large scale of the disruption to a state’s efforts to regulate the business of insurance, that would be brought about by a potential $1,000,000 verdict against a party undergoing an insurance insolvency proceeding, serves here to override that concern and favor Burford abstention.  254Additionally, a court could examine the comparative likelihoods of success of the alternative contract damages claim and unjust enrichment claim. Given the equitable nature of unjust enrichment claims, the case for Burford abstention would be greater if this claim was significantly more plausible than the damages claim.

6. Avoiding Overreach

While this hypothetical exhibits a relatively liberal approach to Burford abstention, that results from drawing from the Tenth Circuit’s Grimes factors, this approach is tempered by the additional considerations of diversity jurisdiction and equitable remedies. In determining the applicability of Burford abstention in Overflow Energy, L.L.C. v. Board of County Commissioners of the County of Roger Mills, the District Court for the Western District of Oklahoma referred to both the Grimes factors and “the more narrow formulation of Quackenbush and NOPSI” to reach the same result of abstaining.  255Overflow Energy, L.L.C, 2014 U.S. Dist. LEXIS 12860, at *9–10. The court noted that “there is some basis for concluding Grimes may have viewed Burford abstention too broadly . . . .”  256Id. at *5. The Court of Appeals for the Eight Circuit also noted in Melahn v. Pennock Insurance, Inc. that a lower court’s reliance on Grimes was “misplaced because Grimes was based mainly on Second Circuit authority which ‘adopted a broad view of abstention.’”  257Melahn, 965 F.2d at 1507 (citing Smith, 629 F.2d at 760).

The formula presented here, while embracing a less stringent view of the effects of NOPSI and Quackenbush on Burford abstention than that held by the courts in Overflow Energy or Melahn, addresses these concerns through its additions to the Grimes factors. The considerations embodied by the final two factors assuage fears of unfettered application of Burford abstention in violation of the federal court’s duty to hear cases brought properly before it.  258See Quackenbush, 517 U.S. at 728 (The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is “an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it.”) (quoting Colorado River Water Conservation Dist., 424 U.S. at 813) (quoting County of Allegheny, 360 U.S. at 188–89). By examining whether a court is sitting in equity, the proposed formula discourages the invocation of Burford abstention in actions seeking compensatory, punitive, statutory, and reliance damages in a manner that the Grimes formula by itself would not address. Similarly, by examining whether the state would hear a remanded case brought to federal court through diversity jurisdiction has a direct interest in the specific outcome of the litigation, the proposed formula discourages Burford abstention in a manner that upholds the original justifications behind diversity jurisdiction.  259See Underwood, supra note 235, at 182 (noting the often-cited justification behind diversity jurisdiction of avoiding bias against an out-of-state party). By guiding the process of evaluating the appropriateness Burford abstention, the proposed formula aptly follows the constitutional and policy considerations behind the doctrine’s development.

Conclusion

The proposed formula will help navigate the competing concerns behind the “troublesome and enigmatic” Burford abstention doctrine.  260Young, supra note 52, at 863. Applied properly, the doctrine serves an essential purpose of preventing harmful intrusion by federal courts into state matters that can undermine important regulatory goals. State insolvency procedures can be rendered ineffective if parties know that they can concoct a way to sue an insurance company undergoing an insolvency proceeding in federal court. Such actions would disrupt the state’s ability to establish coherent policy in this area. Courts should recognize that NOPSI and Quackenbush served primarily to clarify the scope of Burford while only narrowing its parameters slightly, if at all.  261New Orleans Pub. Serv., Inc., 491 U.S. 350; Quackenbush, 517 U.S. 706.

As a result, the proposed formula remains the ideal way to apply this difficult doctrine in order to ensure that the policy goals set out by the Supreme Court in Burford v. Sun Oil, the McCarran-Ferguson Act, and the Code are satisfied.  262Burford, 319 U.S. 315; 15 U.S.C. § 1011 (2012); 11 U.S.C. §§ 101–1532 (2012). Despite the role of state insurance guarantee organizations, Burford abstention in the appropriate circumstances protects the insured from the risk of a federal lawsuit disrupting an insolvency procedure and preventing coverage payments. Despite the duty held by each federal court to hear cases brought to it under mandatory jurisdiction, sometimes the proper course of action is for a court to “stay its hand.”  263Burford, 319 U.S. at 334.

Footnotes

1Ga. Code Ann. § 33-38-7 (LEXIS Through the 2016 Regular Session).

2Burford v. Sun Oil Co., 319 U.S. 315 (1943).

3Georgene M. Vairo, Making Younger Civil: The Consequences of Federal Court Deference to State Court Proceedings – A Response to Professor Stravitz, 58 Fordham L. Rev. 173, 180–81 (1989) (discussing how Burford abstention was rarely invoked until a “renaissance” in the lower courts in the 1980s as exemplified by a federal court’s invocation of the doctrine in the context of a state insurance insolvency proceeding in Law Insurance Co. v. Corcoran, 807 F.2d 38 (2d Cir. 1986), cert. denied, 481 U.S. 1017 (1987)); see Leonard Birdson, Comity and Our Federalism in the Twenty-First Century: The Abstention Doctrines Will Always Be With Us - Get Over It!!, 36 Creighton L. Rev. 375, 419 (noting that between 2000 and 2003, Burford abstention was only invoked in three of the twelve federal appellate courts cases where it was considered).

4See, e.g., Levy v. Lewis, 635 F.2d 960 (2d Cir. 1980); Corcoran v. Ardra Ins. Co., 842 F.2d 31 (2nd Cir. 1988) (abrogated in part by Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 710 (1996)); Clark v. Fitzgibbons, 103 F.3d 1049 (5th Cir. 1997); Lentz v. Trinchard, 730 F. Supp. 2d 567 (E.D. La. 2010); cf. Brandenburg v. Seidel, 859 F.2d 1179, 1191 (1988) (the risk of disrupting a complex state scheme for the insolvency of state-charted savings and loan associations “presents a classic situation for Burford abstention”). But see, e.g., Bilden v. United Equitable Ins. Co., 921 F.2d 822 (8th Cir. 1990).

515 U.S.C. § 1011 (2012).

611 U.S.C. §§ 109(b)(2), (d) (2012).

7Compare Fragoso v. Lope, 991 F.2d 878, 885–86 (1st Cir. 1993) (declining to apply Burford abstention in the context of a state insolvency proceeding), with Lac D’Amiante Du Quebec, Ltee v. Am. Home Assur. Co., 864 F.2d 1033, 1048 (3d Cir. 1988) (finding Burford abstention so clearly warranted in a case involving a party to an insurance insolvency proceeding as to reverse a district court’s decision not to invoke it).

8See Willy E. Rice, Federal Courts and The Regulation of The Insurance Industry: An Empirical and Historical Analysis Of Courts’ Ineffectual Attempts To Harmonize Federal Antitrust, Arbitration, and Insolvency Statutes With the Mccarran Ferguson Act-1941-1993, 43 Cath. U.L. Rev. 1 399, 399–400 (1994); Paul v. Virginia 75 U.S. 168, 183–86 (1869); see also Sims v. Fid. Assurance Ass’n, 129 F.2d 442, 448 (4th Cir. 1942) (noting that insurance companies are exempted from the Bankruptcy Act of 1898, 30 Stat. 544 (1898) (superseded by 95 Pub. L. No. 598 (1978)), aff’d, 318 U.S. 608 (1943)).

9See Rice, supra note 8, at 400; United States v. South-Eastern Underwriters Ass’n. 322 U.S. 533 (1944); see also U.S. Const. art. I, § 8, cl. 3 (“Congress shall have the Power . . . to regulate Commerce . . . among the several States . . . .”).

10Herbert H. Naujoks, Eight Years After S.E.U.A. – Present Status of the Regulation of Insurance as Commerce, 35 Marq. L. Rev. 339, 348 (1952); Proceedings of the NAIC, 75th Sess. 226 (1944); Proceedings of the NAIC, 76th Sess. 250 (1945); 15 U.S.C. § 1011 (2012).

1115 U.S.C. § 1011 (2012).

12See, e.g., Jere W. Glover, Should Congress Repeal McCarran-Ferguson?: It’s Time toRepeal McCarran-Ferguson, 1 Antitrust 31, 33 (1987).

13See, e.g., Wolfson v. Mutual Benefit Life Ins. Co., 51 F.3d 141, 147 (8th Cir. 1995) (noting in a decision to invoke Burford abstention that “[t]here is a strong federal policy of deferring to state regulation of the insurance industry . . . .”).

14Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001–1461 (2012).

15See Karen A. Jordan, ERISA Preemption: Integrating FABE into the Savings Clause Analysis, 27 Rutgers L.J. 273, 274–77 (1996).

16See 29 U.S.C. § 1144(a) (2012).

17Id. § 1144(b)(2)(A).

1815 U.S.C. § 1011 (2012) (“Congress hereby declares that the continued regulation and taxation by the several States of the business of insurance is in the public interest . . . .”).

1929 U.S.C. § 1144(b)(2)(B) (2012).

2015 U.S.C. § 1011 (2012); Metropolitan Life Ins. Co. v. Mass., 471 U.S. 724, 743 (1985) (quoting Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129 (1982)).

21See Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205 (1979); Union Labor Life Ins. Co. v. Pireno 458 U.S. 119 (1982).

22Kentucky Ass’n of Health Plans v. Miller, 538 U.S. 329, 341 (2003).

23Id. at 341–42.

24Matthew G. Vansuch, Not Just Old Wine in New Bottles: Kentucky Ass‘n of Health Plans, Inc. v. Miller Bottles a New Test for State Regulation of Insurance, 38 Akron L. Rev. 253, 265 (2005).

25U.S. Const. art. I, § 8, cl. 4.

26See Charles Jordan Tabb, The History Of The Bankruptcy Laws In The United States, 3 AM. Bankr. Inst. L. Rev. 5, 19 (1995); Act of March 2, 1867, ch. 176, 14 Stat. 517, repealed by Act of June 7, 1878, ch. 160, 20 Stat. 99 (1878).

27Act of March 2, 1867, ch. 176, 14 Stat. 517, repealed by Act of June 7, 1878, ch. 160, 20 Stat. 99 (1878).

28See Laura S. McAlister, The Inefficiencies of Exclusion: the Importance of Including Insurance Companies in The Bankruptcy Code, 24 Emory Bankr. Dev. J. 129, 135 (2008); Bankruptcy Act of 1898, ch. 541, 30 Stat. 544 (repealed 1978).

29See McAlister, supra note 28; Act of June 25, 1910, ch. 412, 36 Stat. 838 (1910).

30See Tabb, supra note 26, at 29; Act of June 22, 1938, 52 Stat. 840 (1938).

31Paul v. Virginia, 75 U.S. (8 Wall.) 168 (1869).

32South-Eastern Underwriters Ass’n., 322 U.S. 533.

33See Naujoks, supra note 10; 75 NAIC, supra note 10; 76 NAIC, supra note 10; 15 U.S.C. § 1011 (2012).

34See Frank P. Darr, Federal Claims in Insurance Insolvencies, 25 Tort & Ins. L.J. 601, 604 (1989–1990); Paul, 75 U.S. (8 Wall.) 168.

3515 U.S.C. §§ 1–7 (1890).

36South-Eastern Underwriters Ass’n., 322 U.S. at 534.

37See 15 U.S.C. § 1011 (2012); Darr, supra note 34.

38See Linda M. Lent, McCarran-Ferguson in Perspective, 48 Ins. Counsel J. 411, 412 (1981).

39See Darr, supra note 34, at 607.

4015 U.S.C. § 1011 (2012).

41See Lent, supra note 38, at 413; South-Eastern Underwriters Ass’n. 322 U.S. 533 (discussing how the limitations of “the business of insurance” imply that Paul v. Virginia may not be entirely overruled); see also SEC v. Nat’l Sec., 393 U.S. 453, 460 (1969) (“Statutes aimed at protecting or regulating this relationship, directly or indirectly, are laws regulating the business of insurance.”)

42Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549, §101 (1978).

4311 U.S.C. §§ 101–1532 (2012). See generally Kenneth N. Klee, Legislative History of The New Bankruptcy Law, 28 DePaul L. Rev. 941 (1979).

44See generally 11 U.S.C. § 109 (2012).

45Id. § 109 (b)(2).

46Id. § 109 (c)(1).

47Id. § 109 (d).

48Id. §§ 109 (f), (e).

49See Karl L. Rubinstein, The Legal Standing of an Insurance Insolvency Receiver: When the Shoe Doesn’t Fit, 10 Conn. Ins. L.J. 309, 317 (2004).

50See id.

51See id. at 317–18; e.g., Cal. Ins. Code §1037 (2016); O.C.G.A. § 33-37-13 (2016); see also McAlister, supra note 28, at 130–36 (describing typical state insurance insolvency proceedings).

52Gordon G. Young, Federal Court Abstention and State Administration Law from Burford to Ankenbrandt: Fifty Years of Judicial Federalism under Burford v. Sun Oil Co. and Kindred Doctrines, 42 DePaul L. Rev. 859, 862–63 (1993).

53Railroad Comm’n of Tex. v. Pullman Co., 312 U.S. 496, 501 (1941) (“These cases reflect a doctrine of abstention appropriate to our federal system whereby the federal courts, exercising a wise discretion, restrain their authority because of scrupulous regard for the rightful independence of the state governments and for the smooth working of the federal judiciary.”) (internal quotation marks omitted); see Young, supra note 52, at 863.

54Michael Ashley Stein, The Domestic Relations Exception To Federal Jurisdiction: Rethinking An Unsettled Federal Courts Doctrine, 36 B.C.L. Rev. 669, 694–95 (1994–1995) (identifying Pullman, Burford, Younger, and Colorado River abstention as the most prominent abstention doctrines recognized by the Supreme Court); see Young, supra note 52, at 868 (citing the same four “major varieties of abstention” and adding a fifth, Thibodaux abstention).

5528 U.S.C. § 1334(c)(2) (2012) (addressing mandatory abstention); 28 U.S.C. § 1452(b) (2012) (addressing equitable abstention). Note that both provisions address situations not related to Buford abstention in the context of insurance insolvency proceedings, as both statutes apply to situations covered by the Code.

56See Stephen W. Sather, Resolving Conflicts Between Bankruptcy and Administrative Law, 11 Tex. Tech. Admin. L.J. 267, 272 (2010).

57Young, supra note 52, at 863.

58Burford, 319 U.S. 315.

59Id. at 315.

60Id. at 329.

61Id. at 334.

62Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976).

63See County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 188–89 (1959); Colorado River Water Conservation Dist., 424 U.S. at 813–19 (1976); New Orleans Pub. Serv., Inc. v. Council of New Orleans, 491 U.S. 350, 361 (1989); Quackenbush, 517 U.S. at 728.

64County of Allegheny, 360 U.S. at 188–89.

65Colorado River Water Conservation Dist., 424 U.S. 800.

66Id. at 813–19.

67New Orleans Pub. Serv., Inc. v. Council of New Orleans, 491 U.S. 350 (1989).

68Id. at 361 (quoting Colorado River Water Conservation Dist., 424 U.S. at 813–15); see also Henry Melvin Hart, Jr. and Herbert Wechsler, The Federal Courts and the Federal System, 1077–79 (6th. Ed. 2009) (suggesting that the court’s Burford formulation applies when a state court works as a de facto partner of a state administrative agency in developing regulatory policy).

69See Sevigny v. Emp’rs. Ins. of Wausau, 411 F.3d 24, 27 (1st Cir. 2005) (“NOPSI also contains a general reformulation of Burford, often quoted, that can be read expansively or narrowly and is ultimately ambiguous”). Compare Fragoso, 991 F.2d at 882 (1st Cir. 1993) (“NOPSI cabins the operation of the Burford doctrine. Post-NOPSI Burford applies only in narrowly circumscribed situations where deference to a state’s administrative processes for the determination of complex, policy-laden, state-law issues would serve a significant local interest and would render federal-court review inappropriate.”), and University of Md. v. Peat Marwick Main & Co., 923 F.2d 265, 272 (“It is clear that, after NOPSI, federal courts should be more wary of extending the scope of Burford abstention.”), with Clark v. Fitzgibbons, 105 F.3d 1049 (5th Cir. 1997) (holding that the NOPSI decision does not abrogate the rule favoring Burford abstention in deference to state insurance insolvency proceedings).

70Quackenbush, 517 U.S. at 728 (1996) (quoting Colorado River Water Conservation Dist., 424 U.S. at 813) (quoting County of Allegheny, 360 U.S. at 188–89).

71See New Orleans Pub. Serv., Inc., 491 U.S. 350; Quackenbush, 517 U.S. at 728 (1996) (quoting Colorado River Water Conservation Dist., 424 U.S. at 813) (quoting County of Allegheny, 360 U.S. at 188–89).

72Burford, 319 U.S. at 334 (emphasis added).

73Compare Lac D’Amiante du Quebec, Ltee, 864 F.2d at 1045 (Burford abstention appropriate in case seeking declaratory relief), and Brandenburg, 859 F.2d at 1192 n.17 (Burford abstention appropriate in action for damages), and Wolfson, 51 F.3d at 147 (same), with Fragoso, 991 F.2d at 882 (Burford abstention inappropriate in a torts action), University of Md., 923 F.2d at 272 (citing New Orleans Pub. Serv., Inc., 491 U.S. 350) (NOPSI limits the application of Burford abstention when the court is not sitting in equity), and Baltimore Bank for Coops. v. Farmer’s Cheese Coop., 583 F.2d 104, 111 (3rd Cir. 1978).

74Quackenbush, 517 U.S. at 721–27.

75Id. at 721.

76See, e.g., Wolfson, 51 F.3d at 147 (“No doubt abstention is less apt to be appropriate when the federal plaintiff seeks money damages, but we do not read the Supreme Court’s abstention jurisprudence as completely foreclosing abstention in money damage cases.”); see also General Glass Indus. Corp. v. Monsour Med. Found., 973 F.2d 197 (3rd. Cir. 1992) (in a case involving monetary damages and a party involved in a state insurance insolvency proceeding, vacating a lower court’s decision to dismiss and remand on Burford grounds, but imposing a stay on Burford grounds).

77Grimes v. Crown Life Ins. Co., 857 F.2d 699, 705 (10th Cir. 1988).

78Wilson v. Valley Elec. Membership Corp., 8 F.3d 311, 314–16 (5th Cir. 1993).

79See Bruce H. Mann, Republic of Debtors: Bankruptcy in the Age of American Independence, 59–61 (2002) (describing pre-Constitution bankruptcy laws in New York, Rhode Island, and Connecticut); Thomas E. Plank, The Constitutional Limits of Bankruptcy, 63 Tenn. L. Rev. 487, 518–26 (1996) (discussing the different approaches adopted by all thirteen states before the adoption and ratification of the Constitution).

80U.S. Const. art. I, § 8, cl. 4 (emphasis added).

81See Plank, supra note 79, at 558 (“The concern about uniformity is nonsense. Under both the Bankruptcy Act of 1898 and the Bankruptcy Code of 1978, debtors could exempt certain items of their property from the claims of creditors. These exemptions are based on the law of the debtors’ state. These state law exemptions were and are wildly different.”).

82See, e.g., Hanover Nat’l Bank v. Moyses, 186 U.S. 181 (1902); Regional Rail Reorganization Act Cases, 419 U.S. 102 (1974).

8311 U.S.C. § 109 (2012).

84See generally Daniel A. Austin, Bankruptcy and the Myth of “Uniform Laws”, 42 Seton Hall L. Rev. 1081 (2012) (discussing how the state and local laws prevent the U.S. Bankruptcy Code and Congress from establishing truly uniform bankruptcy laws); see also Ryan Mallone, When Opting Out is the Only Option: Protecting Small Business Debtors in Bankruptcy, 4 Wm. & Mary Bus. L. Rev. 745, 747–49 (2013) (describing how many states have adopted unique sets of exemptions and “opted out” of the exemptions list in 11 U.S.C. § 522 of the Code).

85Compare, e.g., Clark, 105 F.3d 1049, with Fragoso, 991 F.2d 878.

86Callon Petroleum Co. v. Frontier Ins. Co., 351 F.3d 204, 209 (5th Cir. 2003) (quoting Burford, 319 U.S. at 327). See generally Michael A. Knoerzer, Flagging The Obligation: Federal Courts’ Abstention in Favor of State Rehabilitation And Liquidation Proceedings, 28 Tort & Ins. L.J. 837 (1993) (discussing how abstention is unusual in cases where a party is not an insolvent insurer or its statutory representative).

87Wolfson, 51 F.3d at 145.

88Id.; see, e.g., General Glass Indus. Corp., 973 F.2d 197 (Burford abstention appropriate where a verdict against defendant insurance company would disrupt insolvent insurer receiver’s efforts to recover funds).

89Wolfson, 51 F.3d at 145.

90Id.

91Id.

92New Orleans Pub. Serv., Inc., 491 U.S. 350; Quackenbush, 517 U.S. 706.

93New Orleans Pub. Serv., Inc., 491 U.S. at 352–53.

94Id. at 350.

95Id. at 352–58.

96Justices Rehnquist, Marshall, Blackmun, and Brennan filed or joined concurring opinions.

97New Orleans Pub. Serv., Inc., 491 U.S. at 373.

98Id. at 367–68 (“Respondents’ case for abstention . . . requires, however, that the Council proceeding be the sort of proceeding entitled to Younger treatment. We think it is not.”).

99Id. at 361 (“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.’”) (quoting Colorado River Conservation Dist., 424 U.S. at 814).; see Quackenbush, 517 U.S. at 726–27 (quoting the same passage).

100New Orleans Pub. Serv., Inc., 491 U.S. at 362–63.

101Id. at 363–64.

102Id. at 374 (Blackmun, J., concurring).

103Id. (Blackmun, J., concurring).

104Fragoso, 991 F.2d at 882.

105Clark, 105 F.3d 1049 (holding that the NOPSI decision does not abrogate the rule favoring Burford abstention in deference to state insurance insolvency proceedings).

106Sevigny, 411 F.3d at 27.

107See Burford, 319 U.S. at 332–34 (“Conflicts in the interpretation of state law, dangerous to the success of state policies, are almost certain to result from the intervention of the lower federal courts.”).

108See id. (“These questions of regulation of the industry by the state administrative agency, whether involving gas or oil prorationing programs or Rule 37 cases, so clearly involves basic problems of Texas policy that equitable discretion should be exercised to give the Texas courts the first opportunity to consider them.”)

109New Orleans Pub. Serv., Inc., 491 U.S. at 361.

110Id.; see also Clark, 105 F.3d at 1052 (dismissing party’s argument that NOPSI curtails Burford abstention in the context of insurance insolvency).

111Quackenbush, 517 U.S. at 709.

112Id.

113Id. at 711–12.

114Id. at 730–31 (“Because this was a damages action, we conclude that the District Court’s remand order was an unwarranted application of the Burford doctrine.”).

115Justices Scalia and Kennedy filed concurring opinions, with Justice Kennedy arguing that the possibility of invoking Burford abstention in a damages action should be left open and Scalia responding that the majority decision precluded such a possibility. Id. at 731–34.

116Id. at 730–31 (holding that “ . . . given the situation the District Court faced in this case, a stay order might have been appropriate . . . ” but “federal courts have the power to dismiss or remand cases based on abstention principles only where the relief being sought is equitable or otherwise discretionary.”).

117Id. at 728 (quoting Colorado River Water Conservation Dist., 424 U.S. at 813) (quoting County of Allegheny, 360 U.S. at 188–89).

118Id.

119See County of Allegheny, 360 U.S. at 188–89.

120See Daniel C. Norris, The Final Frontier of Younger Abstention: The Judiciary’s Abdication of the Federal Court Removal Jurisdiction Statute, 31 Fla. St. U.L. Rev. 193, 210–14 (2003) (arguing that there is little practical difference between a dismissal and a stay).

121See id. at 211–12.

122See, e.g., Corcoran, 842 F.2d 31; Law Enforcement Ins. Co. v. Corcoran, 807 F.2d 38 (2nd Cir. 1986); Bilden v. United Equitable Ins. Co., 921 F.2d 822 (8th Cir. 1990).

123Wilson, 8 F.3d 311; Lentz, 730 F. Supp. 2d 567.

124Wilson, 8 F.3d at 314–17.

125Id. at 312–13.

126Id. at 313; see Cajun Elec. Power Coop., Inc. v. La. Pub. Serv. Comm’n, 544 So. 2d 362 (La.) (1989), cert. denied, 493 U.S. 991 (1989).

127Wilson, 8 F.3d at 312–13. See generally Wilson v. Valley Elec. Membership Corp., 1992 U.S. Dist. LEXIS 13493 (1992).

128Wilson, 8 F.3d at 313.

129Id.

130See Cajun Elec. Power Coop., Inc., 544 So. 2d 362.

131Wilson, 8 F.3d at 313.

132Id.

133Id.

134Id.

135Id. at 314–16.

136Id. at 314 (citing New Orleans Pub. Serv., Inc., 491 U.S. at 361).

137Id. (citing Burford., 319 U.S. 315); see Alabama Pub. Serv. Comm’n v. S. R. Co., 341 U.S. 341 (1951).

138Id. at 314–16.

139Id. at 314.

140Id. at 315 (noting that this state law analysis would be “highly localized, specialized, judgmental, and perhaps partisan”).

141Id. (quoting New Orleans Pub. Serv., Inc. 491 U.S. at 365)

142Id. at 315–16.

143Id. at 316.

144Id.

145Lentz, 730 F. Supp. 2d 567.

146Id. at 571.

147Id.

148Id.

149Id. at 571–72.

150Id. at 572.

151Id.

152Id. at 571–72 (describing the “AK defendants” as “Armco Insurance Group, Inc., Armco Financial Services Corporation, AFSG Holdings Company, Inc., AKS Investments, Inc., and AK Steel Corporation”).

153Id. at 572.

154Id. at 573.

155Id.

156Id. at 585 (“Accordingly, NNIC’s Rule 12(b)(6) motion and the AK defendants’ Rule 12(b)(1) motion are DENIED. Such concerns are better addressed through an analysis of the Burford abstention doctrine.”).

157Id. at 587–91; see Wilson, 8 F.3d at 314–16.

158Lentz, 730 F. Supp. 2d at 587.

159Id.

160Id. at 588.

161Id. at 589.

162Id. at 590.

163Id.

164Id. at 590–91.

165Grimes, 857 F.2d at 704–05 (internal citations omitted) (abrogated in part by statute on grounds unrelated to Burford in 36 Okl. St. § 1928 (2016)).

166Id. at 700.

167Id. at 700–01.

168Id. at 701.

169Id. at 703.

170Id.

171Id. at 703–04.

172See, e.g., United Servs. Auto. Asso. v. Muir, 792 F.2d 356 (3rd Cir. 1986); Board of Educ. v. Bosworth, 713 F.2d 1316 (7th Cir. 1983).

173Grimes, 857 F.2d at 704–05.

174Id. at 705.

175Id. at 706–07.

176See Hartford Cas. Ins. Co. v. Borg-Warner Corp., 913 F.2d 419, 425–26 (7th Cir. 1990); Barnhardt Marine Ins., Inc. v. New England Int’l Sur., Inc., 961 F.2d 529, 254 (5th Cir. 1992) (discussing the court’s reasoning in Grimes); see also Overflow Energy, L.L.C. v. Bd. of Cty. Comm’rs of the Cty. of Roger Mills, No. CIV-13-1136-HE, 2014 U.S. Dist. LEXIS 12860, at *5–6 (W.D. Okla. Feb. 3, 2014) (“Although, as noted below, there is some basis for concluding Grimes may have viewed Burford abstention too broadly, it continues to provide useful guidance as to factors to be weighed.”). But see Melahn v. Pennock Insurance, Inc. 965 F.2d 1497, 1507 (8th Cir. 1992) (“The district court’s reliance on the holding in Grimes is misplaced because Grimes was based mainly on Second Circuit authority which ‘adopted a broad view of abstention’. . .NOPSI does not permit a broad view of abstention.”) (quoting Smith v. Metropolitan Prop. & Liability Ins. Co., 629 F.2d 757, 760 (2nd Cir. 1980)).

177Compare Wolfson, 51 F.3d at 147 (Burford abstention appropriate in a damages action), with University of Md., 923 F.2d at 272 (citing New Orleans Pub. Serv., Inc., 491 U.S. 350) (NOPSI limits the application of Burford abstention when the court is not sitting in equity).

178Grimes, 857 F.2d at 704–05.

17915 U.S.C. § 1011 (2012).

180See Darr, supra note 34, at 607.

181See generally 11 U.S.C. § 109 (2012).

182See Rice, supra note 8, at 404–07 (describing arguments for and against the repeal of the McCarran-Ferguson Act); see also Hon. Samuel L. Bufford, Suggestion For The National Bankruptcy Review Commission And Congress: Increasing Scope Of Bankruptcy Code, 4 Am. Bankr. Inst. L. Rev. 500 (1996) (“I think that the most important systemic defect in the present United States bankruptcy system is that it excludes the insolvencies of insurance companies, banks and other financial institutions. I would recommend that the Bankruptcy Review Commission propose that the Bankruptcy Code be expanded to include these institutions.”).

18315 U.S.C. § 1011 (2012); see also Employee Retirement Income Security Program, 29 U.S.C. § 1144(b)(2) (2012) (excluding pre-emption provisions from applying to laws regulating the business of insurance).

184See Grimes, 857 F.2d at 704–05.

185See 15 U.S.C. § 1011 (2012); see generally 11 U.S.C. § 109 (2012).

186See 15 U.S.C. § 1011 (2012); see generally 11 U.S.C. § 109 (2012).

187See Overflow Energy, L.L.C., 2014 U.S. Dist. LEXIS 12860, at *5–6; cf. Melahn, 965 F.2d at 1507.

188See Health Insurance Industry Fair Competition Act of 2017, H.R. 617, 115th Cong. (2017); Competitive Health Insurance Reform Act Of 2017, H.R. 372, 115th Cong. (2017).

189See H.R. 617, 115th Cong. (“The vote was taken by electronic device, and there were-yeas 406, nays 19, not voting 8”).

190See Jennifer Webb, House Passes McCarran-Ferguson Repeal Bill, Indep. Agent Mag. (Mar. 23, 2017), http://www.iamagazine.com/news/read/2017/03/23/house-passes-mccarran-ferguson-repeal-bill.

191See Donald J. Trump, Healthcare Reform (Mar. 3, 2016), https://assets.donaldjtrump.com/HCReformPaper.pdf (stating as one of seven goals “Modify existing law that inhibits the sale of health insurance across state lines.”).

192H.R. 372, 115th Cong.

193Id.

194Burford, 319 U.S. at 332–34.

195Id. at 332 (“These questions of regulation of the industry by the state administrative agency, whether involving gas or oil prorationing programs or Rule 37 cases, so clearly involves basic problems of Texas policy that equitable discretion should be exercised to give the Texas courts the first opportunity to consider them.”).

196Grimes, 857 F.2d at 704–05.

197See Overflow Energy, L.L.C., 2014 U.S. Dist. LEXIS 12860, *5–6 (holding that the centrality of state law issues to the case favors Burford abstention under the Grimes formula).

198See Burford, 319 U.S. at 332.

199Wilson, 8 F.3d at 314 (applying NOPSI).

200Quackenbush, 517 U.S. at 728 (quoting Colorado River Water Conservation Dist., 424 U.S. at 813) (quoting County of Allegheny, 360 U.S. at 188–89); see also Wolfson, 51 F.3d at 147 (noting “the strong presumption in favor of exercising federal jurisdiction”).

201See Willcox v. Consolidated Gas Co., 212 U.S. 19, 40 (1909) (“When a Federal court is properly appealed to in a case over which it has by law jurisdiction, it is its duty to take such jurisdiction.”) (citation omitted).

202If the bill partially repealing the McCarran-Ferguson Act that has passed in the House is also passed in the Senate and ultimately becomes law, then this factor will be modified to more strongly favor abstention in cases involving insolvent property, life, and casualty insurance companies than cases involving insolvent health and dental insurance companies. See H.R. 372, 115th Cong.

203Grimes, 857 F.2d at 704–05.

204See Callon Petroleum Co., 351 F.3d at 209.

205See Clark, 105 F.3d at 1052 (“permitting the Texas plaintiffs to proceed in federal court would undermine the comprehensive apparatus established by the state of Arizona for the orderly disposition of claims against insolvent insurance companies.”). See generally Knoerzer, supra note 86.

206See Sean Millard, An investor’s guide to the insurance business, Market Realist (Feb. 11, 2015, 5:07 PM), http://marketrealist.com/2015/02/us-insurance-industry-largest-world/.

207See Knoerzer, supra note 86, at 840 (“Because it expressly contemplates an ongoing state proceeding implicating important state regulatory issues, the Burford doctrine is particularly well-suited for consideration of whether to abstain in favor of state rehabilitation or liquidation proceedings.”).

208Compare Grimes, 857 F.2d at 704–05, with Wilson, 8 F.3d at 314–16.

209Burford, 319 U.S. 315.

210Id. at 332.

211Id. at 325.

212See Grimes, 857 F.2d at 704–05.

213Wilson, 8 F.3d at 314–17; Burford, 319 U.S. at 325.

214Burford, 319 U.S. 315.

215Id. at 318–19.

216Id.

217Id. at 319–20.

218Id. at 320.

219Id. at 332; see also Ohio Valley Envt’l Coalition v. River Cities Disposal, LLC, No. 15-47-DLB-EBA, 2016 U.S. Dist. LEXIS 40791, at *24 n.12 (E.D. Ky Mar. 29, 2016) (invoking Burford abstention where “[n]ot only would federal review at this juncture be disruptive of Kentucky’s efforts to establish a coherent policy with respect to solid waste facilities and air quality standards, but the resolution of OVEC’s claims are likely to involve difficult questions of state law.”).

220Grimes, 857 F.2d at 704–05.

221See generally Burford, 319 U.S. 315. See also Sierra Club v. Chesapeake Operating, LLC, No. CIV-134-F, 2017 U.S. Dist. LEXIS 90913, at *31 (W.D. Okla. April 4, 2017) (invoking Burford abstention where “it is plain that the Oklahoma Corporation Commission has brought to bear a level of technical expertise that this court could not hope to match.”).

222Burford, 319 U.S. at 334 (“sound respect for the independence of state action requires the federal equity court to stay its hand.”).

223See supra Section I, Subsection D.

224Quackenbush, 517 U.S. at 721; see also Feige v. Sechrest, 90 F.3d 846, 850–51 (3rd Cir. 1996) (a court may stay, but not dismiss or remand, a damages action on Burford grounds).

225See, e.g., University of Md., 923 F.2d at 272 (rejecting an argument that Burford abstention is equally applicable at law or in equity).

226Compare Wolfson, 51 F.3d at 147 (“No doubt abstention is less apt to be appropriate when the federal plaintiff seeks money damages, but we do not read the Supreme Court’s abstention jurisprudence as completely foreclosing abstention in money damage cases.”), with Fragoso, 991 F. 2d at 882 (Burford abstention inappropriate in a torts action), and Garamendi v. Allstate Ins. Co., 47 F.3d 350, 356 (9th Cir. 1995) (“a district court may not abstain under Burford when the plaintiff seeks only legal relief”).

227Burford, 319 U.S. at 339–41; see Wolfson, 51 F.3d at 145 (“Abstention is inherently a fact-specific inquiry.”).

228Wolfson, 51 F.3d at 147 (citations omitted).

229See Wilson, 8 F.3d at 313–15; Grimes, 857 F.2d at 704–05.

230Burford, 319 U.S. at 334 (“a sound respect for the independence of state action requires the federal equity court to stay its hand”).

231Quackenbush, 517 U.S. at 721.

232See generally Garamendi, 47 F.3d at 354–56.

233See Fair Assessment in Real Estate Ass’n v. McNary, 454 U.S. 100, 120–21 (1981) (“There is little room for the ‘principle of comity’ in actions at law where, apart from matters of administration, judicial discretion is at a minimum.”) (Brennan, J., dissenting).

234U.S. Const. art. III, § 2, cl. 1.

235James M. Underwood, The Late, Great Diversity Jurisdiction, 57 Case W. Res. L. Rev. 179, 182 (2006).

236County of Allegheny, 360 U.S. at 188.

237See Baltimore Bank for Coops., 583 F.2d 104.

238Id. at 111–13.

239Id.

240Id.

241See June Roberts Agency v. Venture Props., 676 A.2d 46, 49 n.1 (Me. 1996) (explaining that while the existence of a contract precludes recovery on a theory of unjust enrichment, a party “is not precluded from pleading both theories because a factfinder may find that no contract exists and may still award damages on the theory of unjust enrichment.”). See generally Evergreen W. Bus. Ctr., LLC v. Emmert, 323 P.3d 250 (2014) (discussing, under an Oregon state statute, the validity of alternative legal claims for damages and equitable relief).

242See 28 U.S.C. § 1332 (2012).

243See, e.g., June Roberts Agency, 676 A.2d at 49 n.1 (evaluating an unjust enrichment claim in a state court).

244See Me. Rev. Stat. Ann. tit. 24-A, ch. 57, § 4449 (2017) (describing a stay of all proceedings against a delinquent insurer).

245See Lentz, 730 F. Supp. 2d at 589–90; Clark v. Underwriters Mgmt. Corp., 2003 U.S. Dist. LEXIS 8378, at *21–22 (N.D. Ill. 2003).

246See Lentz, 730 F. Supp. 2d at 589–90; Underwriters Mgmt. Corp., 2003 U.S. Dist. LEXIS 8378, at *21–22.

247Lentz, 730 F. Supp. 2d at 590.

248Me. Rev. Stat. Ann. tit. 24-A, ch. 57, § 4354 (2017) (note that venue for an insurance company with its principal place of business in another state is selected differently).

249Reducing the potential complexity of the contract law is the fact that Maine has adopted all but one article of the Uniform Commercial Code. Me. Rev. Stat. Ann. tit. 11, §§ 1-101–10-108 (2017).

250See ERA-Northern Assocs. v. Border Tr. Co., 662 A.2d 243, 245 (Me. 1995) (describing three factors for determining whether an activity conferred an unjust enrichment on a party: (1) it conferred a benefit on the party, (2) the party had appreciation or knowledge of the benefit, and (3) the party’s acceptance or retention of the benefit was under such circumstances as to make it inequitable for the party to retain the benefit without payment of its value).

251The comparative plausibility of the two alternative claims could be relevant here. If a contract clearly existed, then this factor would disfavor abstention. If a contract almost certainly did not exist, then the equitable remedy of unjust enrichment would play a central role in the case, favoring abstention.

252Quackenbush, 517 U.S. at 728 (quoting Colorado River Water Conservation Dist., 424 U.S. at 813) (quoting County of Allegheny, 360 U.S. at 188–89).

253Burford, 319 U.S. 315.

254Additionally, a court could examine the comparative likelihoods of success of the alternative contract damages claim and unjust enrichment claim. Given the equitable nature of unjust enrichment claims, the case for Burford abstention would be greater if this claim was significantly more plausible than the damages claim.

255Overflow Energy, L.L.C, 2014 U.S. Dist. LEXIS 12860, at *9–10.

256Id. at *5.

257Melahn, 965 F.2d at 1507 (citing Smith, 629 F.2d at 760).

258See Quackenbush, 517 U.S. at 728 (The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is “an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it.”) (quoting Colorado River Water Conservation Dist., 424 U.S. at 813) (quoting County of Allegheny, 360 U.S. at 188–89).

259See Underwood, supra note 235, at 182 (noting the often-cited justification behind diversity jurisdiction of avoiding bias against an out-of-state party).

260Young, supra note 52, at 863.

261New Orleans Pub. Serv., Inc., 491 U.S. 350; Quackenbush, 517 U.S. 706.

262Burford, 319 U.S. 315; 15 U.S.C. § 1011 (2012); 11 U.S.C. §§ 101–1532 (2012).

263Burford, 319 U.S. at 334.

Benjamin Ries, Notes & Comments Editor, Emory Bankruptcy Developments Journal; J.D. Candidate, Emory University School of Law (2018); B.A., cum laude, Vanderbilt University College of Arts & Science (2013). I would like to thank Asa Griggs Candler Professor of Law Robert Schapiro, who provided strong guidance as my comment advisor. I would also like to thank Ryan Saharovich, who gave me support and feedback throughout the writing process as my Notes & Comments Editor, as well as former Editor-in-Chief Jake Jumbeck and current Editor-in-Chief John Green for continuing to make the Emory Bankruptcy Developments Journal a reality.