Timothy Venable v. Hilcorp Energy Company ( 2013 )


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  •     Case: 12-30965   Document: 00512484265    Page: 1   Date Filed: 12/30/2013
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE FIFTH CIRCUIT
    United States Court of Appeals
    Fifth Circuit
    FILED
    No. 12-30965                     December 30, 2013
    Lyle W. Cayce
    Clerk
    TIMOTHY R. VENABLE; JULIA MARIE CLOTEAUX VENABLE,
    Plaintiffs−Appellants
    Cross Appellees,
    versus
    LOUISIANA WORKERS’ COMPENSATION CORPORATION,
    Defendant−Appellee
    Cross Appellant.
    Appeals from the United States District Court
    for the Eastern District of Louisiana
    Before SMITH, PRADO, and ELROD, Circuit Judges.
    JERRY E. SMITH, Circuit Judge:
    Timothy and Julia Venable appeal a summary judgment in favor of the
    Louisiana Workers’ Compensation Corporation (“LWCC”), which cross-appeals
    the denial of its motion to dismiss for want of subject-matter jurisdiction.
    Because the district court lacked subject-matter jurisdiction, we reverse the
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    No. 12-30965
    summary judgment and render a judgment of dismissal.
    I.
    While employed by Greene’s Energy Company, LLC (“Greene’s”), Timo-
    thy Venable suffered a heart attack at work in Louisiana waters aboard the
    Stingray drilling barge, which was owned and operated by Hillcorp Energy
    Company (“Hillcorp”). LWCC, Greene’s insurance carrier for purposes of the
    Longshore and Harbor Workers’ Compensation Act (“LHWCA”), immediately
    began providing Venable medical and indemnity benefits pursuant to that act.
    The Venables sued Hillcorp for negligence in federal court, alleging that
    an unreasonable delay in obtaining medical care had resulted in further harm. 1
    After extensive pre-trial litigation related to the issue of indemnity, the parties
    participated in a settlement conference. Although LWCC was not yet a party,
    its representative was present. 2 Hillcorp and the Venables tentatively agreed
    to settle for $350,000. The Venables contend that, during the settlement con-
    ference, the representative for LWCC expressed that LWCC would consent to
    the proposed amount. The district court conditionally dismissed the Venables’
    claim based on the understanding that it had been settled.
    After the settlement conference, however, LWCC refused to sign the
    1   The district court found that it had admiralty and maritime jurisdiction.
    2   Under the LHWCA, Venable would forfeit any future benefit from LWCC if he settled
    his claims against Hillcorp without receiving written approval of the settlement from LWCC
    on a Department of Labor-issued form, as required by statute. See 33 U.S.C. § 933(g)(1)
    (2012) (“If the person entitled to compensation . . . enters into a settlement with a third person
    . . . for an amount less than the compensation to which the person . . . would be entitled under
    this chapter, the employer shall be liable for compensation as determined under subsection (f)
    of this section only if written approval of the settlement is obtained from the employer and
    the employer’s carrier, before the settlement is executed, and by the person entitled to com-
    pensation . . . . The approval shall be made on a form provided by the Secretary and shall be
    filed in the office of the deputy commissioner within thirty days after the settlement is
    entered into.”).
    2
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    LS-33 form that the Venables’ counsel had forwarded to LWCC’s attorney. At
    some point after the settlement conference, LWCC learned that Venable would
    likely need a heart transplant, meaning that LWCC would be left liable for
    significant future exposure even with the settlement of third-party claims.
    Because LWCC refused to sign, the district court vacated the conditional
    dismissal. The Venables then joined LWCC as a party to enforce LWCC’s pur-
    ported consent to the settlement, asking the court to order LWCC to execute
    the LS-33 form and otherwise to approve the third-party settlement with Hill-
    corp. In the alternative, the Venables requested the court to find that LWCC
    had waived § 933(g)’s written-approval requirement by consenting to the set-
    tlement, such that no written approval was required. LWCC moved to dismiss
    for lack of subject-matter jurisdiction, but the court determined that the waiva-
    bility of the § 933(g) written-approval requirement raised a substantial federal
    issue that conferred federal-question jurisdiction.
    The Venables then moved for partial summary judgment.             In turn,
    LWCC filed a cross-motion for summary judgment, contending that the written
    approval requirement of § 933(g) is not waivable, and even if it can be waived,
    the conduct of LWCC’s representative did not constitute a waiver. The district
    court granted summary judgment for LWCC and dismissed the complaint with
    prejudice, holding that LWCC’s decision to withhold consent on the settlement
    was a proper exercise of its power under the LHWCA. The Venables appeal
    that order, and LWCC cross-appeals the denial of its motion to dismiss for lack
    of jurisdiction.
    II.
    We review a ruling on subject-matter jurisdiction de novo. See PCI
    Transp., Inc. v. Fort Worth & W. R.R. Co., 
    418 F.3d 535
    , 540 (5th Cir. 2005)
    (quoting Hoskins v. Bekins Van Lines, 
    343 F.3d 769
    , 772 (5th Cir. 2003)). “As
    3
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    a court of limited jurisdiction, a federal court must affirmatively ascertain
    subject-matter jurisdiction before adjudicating a suit.” 3 A district court should
    dismiss where “it appears certain that the plaintiff cannot prove a plausible
    set of facts that establish subject-matter jurisdiction.” 4 The plaintiff has the
    burden of establishing jurisdiction. 5
    The district court incorrectly found that it had federal-question jurisdic-
    tion under 28 U.S.C. § 1331. Because the federal issue raised does not satisfy
    the well-pleaded-complaint rule, the court lacked such jurisdiction.
    Section 1331 vests lower federal courts with jurisdiction over “all civil
    actions arising under the Constitution, laws, or treaties of the United States.”
    An action can arise under federal law for purposes of § 1331 in two ways: In a
    well-pleaded complaint (1) the party has asserted a federal cause of action, see
    Am. Well Works Co. v. Layne & Bowler Co., 
    241 U.S. 257
    , 260 (1916), or (2) the
    party has asserted a state cause-of-action claim that “necessarily raise[s] a
    stated federal issue, actually disputed and substantial, which a federal forum
    may entertain without disturbing any congressionally approved balance of fed-
    eral and state judicial responsibilities,” see Grable & Sons Metal Prods., Inc. v.
    Darue Eng’g & Mfg., 
    545 U.S. 308
    , 314 (2005).
    First, the Venables have not asserted any federal cause of action against
    LWCC and instead only point to state causes of action in their amended
    3 Sawyer v. Wright, 471 F. App’x 260, 261 (5th Cir.) (per curiam), cert. denied, 
    133 S. Ct. 615
    (2012); see also Ashcroft v. Iqbal, 
    556 U.S. 662
    , 671 (2009).
    4Castro v. United States, 
    560 F.3d 381
    , 386 (5th Cir. 2009), vacated on other grounds,
    
    608 F.3d 266
    (5th Cir. 2010).
    5  Ramming v. United States, 
    281 F.3d 158
    , 161 (5th Cir. 2001) (“The burden of proof
    for a Rule 12(b)(1) motion to dismiss is on the party asserting jurisdiction. Accordingly, the
    plaintiff constantly bears the burden of proof that jurisdiction does in fact exist.” (citations
    omitted)).
    4
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    complaint. 6 The Venables cannot rely on § 933, which does not create a private
    cause of action. 7
    Because state law, and not federal law, creates the causes of action at
    issue, we turn to 
    Grable, 545 U.S. at 314
    , under which a federal court can
    exercise federal-question jurisdiction over a state-law claim if (1) the state-law
    claim raises a substantial federal issue; (2) the parties actually dispute the
    federal issue; and (3) exercising jurisdiction over the particular category of
    cases will not disturb any “congressionally approved balance of federal and
    state judicial responsibilities.” The district court found it had subject-matter
    jurisdiction because it determined that the state-law claims satisfied Grable. 8
    A federal court can exercise jurisdiction only where the case satisfies the
    well-pleaded-complaint rule, according to which, to assess whether the case
    arises under federal law, the court must look only to “what necessarily appears
    6  The amended complaint includes the following counts: (1) “LWCC should be ordered
    to execute the LS-33 or judgment should be entered providing that written consent to the
    settlement is unnecessary”; (2) “The parties to this litigation detrimentally relied on the
    assurances of LWCC that the amount and other terms of the settlement being negotiated
    would be approved by LWCC and its consent would be given”; (3) intentional misrepresenta-
    tion; (4) making impossible a condition of the settlement; and (5) abuse of rights. During oral
    argument, the Venables’ counsel indicated that he was relying on federal common law. In
    his view, one “could supplement or inform the district court’s discretion by using analogous
    situations under state law.” Therefore, counsel “gave [the district court] concepts in Louisi-
    ana law that would be helpful to inform [the court of its] discretion.” Counsel, however,
    acknowledged that his pleadings had not mentioned this reliance on federal common law.
    Moreover, this theory of federal-question jurisdiction does not appear in the briefing, so it is
    waived. See United States v. Thibodeaux, 
    211 F.3d 910
    , 912 (5th Cir. 2000).
    7See McLaurin v. Noble Drilling (U.S.) Inc., 
    529 F.3d 285
    , 291–92 (5th Cir. 2008)
    (“Importantly, § 933 recognizes that a covered employee may have tort remedies against third
    parties under federal or state law. Section 933 preserves and codifies a maritime worker’s
    common law right to pursue a negligence claim against a third party that is not the employer
    or a coworker; it does not create a cause of action nor establish a third party’s liability for
    negligence.” (citations omitted)).
    8 In its order, the district court noted that it was “persuaded that the proper inter-
    pretation of the settlement provision of the LHWCA presents a substantial question of federal
    law whose resolution is crucial to the state law claims at issue.”
    5
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    in the plaintiff’s statement of his own claim . . . unaided by anything alleged in
    anticipation of avoidance of defenses which it is thought the defendant may
    interpose.” Taylor v. Anderson, 
    234 U.S. 74
    , 75–76 (1914). Federal courts lack
    jurisdiction “over a case in which the complaint presents a state-law cause of
    action, but also asserts that federal law deprives the defendant of a defense he
    may raise, or that a federal defense the defendant may raise is not sufficient
    to defeat the claim.” Franchise Tax Bd. of State of Cal. v. Constr. Laborers
    Vacation Trust for S. Cal., 
    463 U.S. 1
    , 10 (1983) (citations omitted).
    Furthermore, although the parties may ultimately litigate a federal
    issue in their case, that fact does not “show that the suit, that is, the plaintiff’s
    original cause of action, arises under the Constitution” or the laws of the
    United States. See Louisville & Nashville R.R. Co. v. Mottley, 
    211 U.S. 149
    ,
    152 (1908). “[A] right or immunity created by the Constitution or laws of the
    United States must be an element, and an essential one, of the plaintiff’s cause
    of action.” Gully v. First Nat’l Bank in Meridian, 
    299 U.S. 109
    , 112 (1936).
    The federal issue the district court relied upon—whether a party can
    waive the written-consent requirement under § 933—anticipates LWCC’s pro-
    spective defense. That issue would otherwise come up in litigation in the fol-
    lowing hypothetical situation: First, without obtaining LWCC’s written con-
    sent, the Venables entered into the settlement agreement with Hillcorp. In
    response, LWCC terminated benefits. After that, the Venables sought judicial
    intervention to have the benefits reinstated. At that point, LWCC would argue
    that the Venables had not complied with § 933’s written-consent requirements.
    The Venables would then reply as they have here (and would urge, among
    other reasons) that LWCC had waived § 933’s requirements). In line with this
    hypothetical, the district court’s assessment demonstrates that the Venables
    6
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    raised this federal issue in anticipation of LWCC’s defense. 9
    Furthermore, none of the Venables’ claims requires proving a federal
    issue as an element of the claim. To the extent they have asserted valid Loui-
    siana claims, the Venables have not shown that those state-law claims require
    proving a substantial federal issue. Certainly, none of them would require
    proving that LWCC had waived § 933’s written-consent requirement.
    Even assuming arguendo the district court was correct that the issue of
    waiver under § 933 raises a substantial federal issue for purposes of Grable,
    the well-pleaded-complaint rule forecloses federal-question jurisdiction. We
    therefore do not need to address whether the § 933 written-consent require-
    ment poses a “substantial” federal issue.
    III.
    We still must examine whether the Venables have established any other
    basis for federal jurisdiction. As a threshold matter, they do not posit that
    § 933 itself vests federal-court jurisdiction over their claims. Instead, they offer
    a myriad of other theories to demonstrate that the district court had subject-
    matter jurisdiction: (1) diversity jurisdiction under 28 U.S.C. § 1332; (2) sup-
    plemental jurisdiction under 28 U.S.C. § 1367; (3) admiralty and maritime jur-
    isdiction under 28 U.S.C. § 1333; and (4) jurisdiction under the district court’s
    “inherent power to enforce [] settlement[s].”
    As to the first theory, § 1332 requires “the matter in controversy [to]
    exceed[] the sum or value of $75,000, exclusive of interest and costs, and [be]
    9 The district court’s order notes, “If a § 933(g) is enforced as written then Plaintiffs
    cannot prevail on their state law claims because the LHWCA will necessarily control and
    preempt any state law to the contrary.” If § 933(g)’s written-consent requirement would nec-
    essarily preempt any contrary state law, LWCC would raise this issue as an affirmative
    defense.
    7
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    between . . . citizens of different States . . . .” 10 Both the Venables and LWCC,
    however, are citizens of Louisiana.
    As to the second theory, § 1367 “grants supplemental jurisdiction over
    other claims that do not independently come within the jurisdiction of the dis-
    trict court but form part of the same Article III ‘case or controversy.’” State
    Nat’l Ins. Co. v. Yates, 
    391 F.3d 577
    , 579 (5th Cir. 2004). “[I]n any civil action
    of which [a] district court [has] original jurisdiction, [that] court[] shall have
    supplemental jurisdiction over all other claims that are so related to claims in
    the action . . . that they form part of the same case or controversy . . . .” 28
    U.S.C. § 1367(a) (2012). 11 A claim forms part of the same case or controversy
    if the “claim[ is] so related to the original claims that [it] derive[s] from a com-
    mon nucleus of operative fact.” Bella v. Davis, 531 F. App’x 457, 459 (5th Cir.
    2013) (per curiam).
    The claims the Venables assert against LWCC in their amended com-
    plaint do not derive from the same nucleus of operative facts as does their neg-
    ligence claim against Hillcorp. LWCC’s potential waiver of § 933(g)’s written-
    consent requirement occasioned by its conduct during and after a settlement
    conference depends on facts that are completely different from those related to
    any torts committed by Hillcorp years before. The district court therefore could
    not have exercised supplemental jurisdiction over the claims the Venables
    bring against LWCC.
    As to the third theory, § 1333 vests exclusive federal jurisdiction involv-
    ing “[a]ny civil case of admiralty or maritime jurisdiction, saving to suitors in
    10 28 U.S.C. § 1332 (2012); see also Mumfrey v. CVS Pharmacy, Inc., 
    719 F.3d 392
    , 397
    (5th Cir. 2013).
    11Even if the claim falls within § 1367(a), the exceptions specified in § 1367(b) and (c)
    may apply. Because § 1367(a) does not apply, however, we do not need to determine whether
    an exception nevertheless precludes jurisdiction.
    8
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    all cases all other remedies to which they are otherwise entitled.” 28 U.S.C.
    § 1333 (2012). “[A] party seeking to invoke federal admiralty jurisdiction pur-
    suant to 28 U.S.C. § 1333(1) over a tort claim must satisfy conditions both of
    location and of connection with maritime activity.” Jerome B. Grubart, Inc. v.
    Great Lakes Dredge & Dock Co., 
    513 U.S. 527
    , 534 (1995). The locality test
    assesses “whether the tort occurred on navigable water or whether injury suf-
    fered on land was caused by a vessel on navigable water.” 
    Id. The connection
    test requires two showings:
    A court, first, must assess the general features of the type of inci-
    dent involved, to determine whether the incident has a potentially
    disruptive impact on maritime commerce. Second, a court must
    determine whether the general character of the activity giving rise
    to the incident shows a substantial relationship to traditional mar-
    itime activity.
    
    Id. (citations and
    internal quotation marks omitted).
    The Venables’ claims against LWCC do not satisfy the locality test. 12
    The Venables conflate the district court’s jurisdiction over their negligence
    claim―the basis of which appears to have occurred on navigable water―with
    the claims they assert against LWCC. They allege that LWCC committed var-
    ious state-law torts by its conduct during or after the settlement conference.
    But none of that conduct occurred on navigable waters, nor were these alleged
    torts caused by a vessel on navigable water. 13 Therefore, the Venables cannot
    claim admiralty jurisdiction as the basis for subject-matter jurisdiction.
    As to their fourth and final theory, the Venables assert that the district
    12 We therefore do not need to address whether the Venables’ claims satisfy the con-
    nection test.
    13See Miller v. Griffin-Alexander Drilling Co., 
    873 F.2d 809
    , 812 (5th Cir. 1989) (“We
    see no reason for expanding admiralty jurisdiction to cases with such scant involvement of
    maritime locations.”).
    9
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    court could exercise jurisdiction over these claims by its “inherent power to
    enforce [] settlement[s].” They appear to suggest that the court could exercise
    its ancillary-enforcement jurisdiction as a basis for subject-matter jurisdiction.
    In Kokkonen v. Guardian Life Insurance Co. of America, 
    511 U.S. 375
    (1994), the Court explained when a federal court can retain jurisdiction over a
    settlement agreement by exercising this ancillary enforcement jurisdiction.
    There, Guardian Life Insurance Company (“Guardian”) terminated Kokkon-
    en’s general agency agreement, prompting Kokkonen to sue in state court,
    whereupon Guardian removed to federal court. See 
    id. at 376.
    Before jury
    deliberations, “the parties arrived at an oral agreement settling all claims and
    counterclaims, the substance of which they recited, on the record, before the
    District Judge in chambers.” 
    Id. Although the
    judge was aware of the settle-
    ment, the dismissal order made no reference to the settlement agreement. 
    Id. at 377.
    Thereafter, the parties disagreed as to Kokkonen’s obligation to return
    certain files, and Guardian moved to enforce the agreement. 
    Id. In determining
    whether a federal court could exercise its inherent juris-
    diction, the Kokkonen Court first explained that state law governs the enforce-
    ment of contracts, including settlement agreements that result in the dismissal
    of federal suits. See 
    id. at 378.
    The Court therefore held that an action to
    enforce a settlement agreement “is more than just a continuation or renewal
    of the dismissed suit, and hence requires its own basis for jurisdiction.” 
    Id. Having established
    that federal courts require an independent jurisdic-
    tional basis to enforcement settlement agreements, the Court then described
    two general situations in which a federal court can exercise independent “ancil-
    lary jurisdiction”: “(1) to permit disposition by a single court of claims that are,
    in varying respects and degrees, factually interdependent; and (2) to enable a
    court to function successfully, that is, to manage its proceedings, vindicate its
    authority, and effectuate its decrees.” 
    Id. at 379–80
    (citations omitted). As
    10
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    was the case in Kokkonen, the first basis does not generally apply in the instant
    context because the terms of a settlement agreement usually will not be “fac-
    tually interdependent” with the claims underlying the original lawsuit. 14 The
    Court further noted that the second basis did not apply to the circumstances
    we face here because (1) the district court, in its order, had not expressly
    retained jurisdiction over the settlement agreement, and (2) the order did not
    incorporate the settlement agreement. 15
    Applying Kokkonen, we likewise require one of those two showings for a
    district court to exercise ancillary jurisdiction in enforcing a settlement agree-
    ment. 16 The Venables do not have a settlement agreement that they seek to
    enforce but instead want a federal court to compel LWCC to consent to their
    tentative agreement with Hillcorp. Under Kokkonen, a district court cannot
    exercise ancillary jurisdiction to compel a third party’s consent to a proposed,
    but not final, settlement agreement; none of the slew of cases cited by the
    14 
    Kokkonen, 511 U.S. at 380
    (“[T]he facts underlying respondent’s dismissed claim for
    breach of agency agreement and those underlying its claim for breach of settlement agree-
    ment have nothing to do with each other; it would neither be necessary nor even particularly
    efficient that they be adjudicated together.”).
    15Id. at 381 (“The situation would be quite different if the parties’ obligation to comply
    with the terms of the settlement agreement had been made part of the order of dismissal—
    either by separate provision (such as a provision ‘retaining jurisdiction’ over the settlement
    agreement) or by incorporating the terms of the settlement agreement in the order. In that
    event, a breach of the agreement would be a violation of the order, and ancillary jurisdiction
    to enforce the agreement would therefore exist.”).
    16  See, e.g., Hospitality House, Inc. v. Gilbert, 
    298 F.3d 424
    , 430–31 (5th Cir. 2002);
    Woolwine Ford Lincoln Mercury v. Consol. Fin. Res., Inc., No. 00-60314, 
    245 F.3d 791
    (table),
    
    2000 WL 1910184
    , at *2 (5th Cir. Dec. 27, 2000) (per curiam) (unpublished). See generally
    Andrew S. Hanen & Jeffrey M. Benton, The Enforceability of Settlement Agreements, 40 THE
    ADVOC. (TEX.) 69, 70 (2007) (“It is clear after Kokkonen . . . that a party wishing to preserve
    a district court’s jurisdiction over a settlement agreement can only do so in one of two ways:
    (1) through an express retention of jurisdiction by the court or (2) by incorporation of the
    settlement agreement into the judgment.”).
    11
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    Venables suggests as much. 17 Therefore, they have not demonstrated that the
    district court could exercise ancillary jurisdiction.
    Because the district court lacked subject-matter jurisdiction over the
    state claims the Venables brought against LWCC, we need not decide whether
    the court correctly determined that LWCC’s decision to withhold consent on
    the settlement was a proper exercise of its power under the LHWCA. The
    summary judgment is REVERSED, and a judgment of dismissal for want of
    jurisdiction is RENDERED.
    17The Venables principally rely on Bell v. Schexnayder, 
    36 F.3d 447
    (5th Cir. 1994),
    decided shortly after Kokkonen. In Bell, however, the parties had entered into a settlement
    agreement, and the district court’s order expressly retained jurisdiction over the settlement
    agreement. See 
    id. at 449
    (“On October 14, the court signed a sixty day order of dismissal.
    The order states that the court, ‘having been advised by counsel for the parties that the above
    action has been settled,’ was dismissing the case ‘without prejudice to the right, upon good
    cause shown within sixty (60) days, to reopen it if settlement is not consummated and seek
    summary judgment enforcing the compromise.’”). Bell does not apply where the parties have
    not entered into a settlement agreement.
    12