Remand to State Court: Howery v. Allstate Ins. [US 5th ]

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Remand to State Court: Howery v. Allstate Ins. [US 5th ]

Postby Administrator » Mon Oct 03, 2005 6:20 am

Howery v. Allstate Ins. Co.
243 F.3d 912
C.A.5 (Tex.),2001.

Insured brought state breach of contract and bad faith suit against homeowners' insurer after it denied fire claim on basis of suspected arson. Insurer removed action based on federal question jurisdiction. After insured's motions to remand and to amend complaint were denied, the United States District Court for the Southern District of Texas, Melinda Harmon, J., entered summary judgment for insurer on bad faith claim and entered judgment on jury verdict sustaining insurer's defense of arson to breach of contract claim. Insured appealed. The Court of Appeals, Patrick E. Higginbotham, Circuit Judge, held that: (1) claim under Texas deceptive trade practices statute did not rise to federal question sufficient to support federal question jurisdiction, and (2) record evidence was insufficient to show insurer's principal place of business and thus to show diversity of parties.
Vacated and remanded with instructions.

Federal jurisdiction is sustainable then only if Howery's DTPA claim requires resolution of a substantial question of federal law. Allstate must show that (1) a federal right is an essential element of Howery's state claim, (2) interpretation of the federal right is necessary to resolve the case, and (3) the question of federal law is substantial. Allstate fails all three prongs of the test. First, no federal right is an essential element of Howery's DTPA claim. The DTPA forbids a wide range of conduct, prohibiting "[f]alse, misleading, or deceptive acts or practices in the conduct of any trade or commerce" [Tex. Bus. & Com.Code § 17.46(a).]and enumerating a long list of specific practices that violate the DTPA. Tex. Bus. & Com.Code § 17.46(b). The private right of action under the DTPA is limited to recovery for injuries caused by conduct listed in this subsection. See Tex. Bus. & Com.Code § 17.50. Conduct that violates the FCRA could possibly fall within the broad scope of the DTPA. But a violation of the FCRA is not an element of the DTPA; the statute itself explicitly disclaims such a construction. "A violation of a provision of law other than this subchapter [the DTPA] is not in and of itself a violation of this subchapter." Tex. Bus. & Com.Code § 17.43.

Second, interpretation of a federal right is not necessary to this case. Since no federal right is an element of Howery's state claim, no federal right needs to be interpreted. Even if a violation of the FCRA were an element of a DTPA claim, Howery's complaint alleges that the FCRA violation is one of many alternate grounds for finding a violation of the DTPA. As an alternate theory supporting a single claim, the federal question is not a necessary element of the state claim, and thus does not create federal question jurisdiction. The Supreme Court has employed this reasoning in the patent context in Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 809-10, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988).
David A. Szwak
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