# Opposition Brief — Crown Life Insurance v. Grimes

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1989
- **Citation:** 489 U.S. 1096

## Text

Ss -——.

Supreme Court. US.
No. 88-1155 ELLED
ast MAR } 1989

a

Supreme Court of the United B SPANIOL, up.

CLERK
Ocroser TERM, 1988

CROWN LIFE INSURANCE COMPANY,
Petitioner,
a |

GERALD GRIMES, Insurance Commissioner of the
State of Oklahoma, Receiver for the United Equity Life
Insurance Company; and OKLAHOMA LIFE
AND HEALTH GUARANTY ASSOCIATION,

Respondents.

RESPONSE TO PETITION FOR CERTIORARI

Kerr, IRVINE & RHODES

Don J. GUTTERIDGE, JR.

Counsel of Record

James W. RHODES

Horace G. RHODES

Attorneys for The Oklahoma Life
and Health Insurance
Guaranty Association

600 Bank of Oklahoma Plaza

Bert E. MARSHALL Oklahoma City, Oklahoma 73102
General Counsel, (405) 272-9221

Oklahoma Insurance Department
P.O. Box 53408

Oklahoma City, Oklahoma 73152-3408
Attorney for Respondent
Gerald Grimes

Februarv 28, 1989

TABLE OF CONTENTS
Page
A. CASES
SEAT Mes OF Tiss CASE ..... 2.2.6.6. .ss, ]
SUMMA! OF ARGUMENT .................. 3
ARGUMENT AND AUTHORITY .............. 3

POINT 1: FAILURE TO RAISE ABSTENTION
IN THE FEDERAL DISTRICT
COURT DOES NOT WAIVE AN
g APPELLANT’S RIGHT TO ARGUE
: THE DOCTRINE ON APPEAL ...... 3

POINT 2: IN THIS CASE ABSTENTION WAS
WARRANTED TO PREVENT
INTERFERENCE BY THE FEDERAL
COURT IN OKLAHOMA'S
STATUTORY INSURANCE
INSOLVENCY PROCEDURE ....... 4

POINT 3: THE FACT THAT RESPONDENTS
DID NOT RAISE THE ISSUE OF
ABSTENTION IN THIS ACTION
UNTIL THE APPELLATE LEVEL IS
jt oy 4 0 * Oe anal ar ara <

BE EOE REP De 2

RIE ol ee ees or ey ce 1]

TABLE OF AUTHORITIES

Page
A.F.A. Distributing Co. Inc. v. Pearl Brewing

Co., 470 F.2d 1210 (4th Cir. 1973)...... Saas 4
Aims Enterprises, Inc. v. Muir, 609 F.Supp. 257

RT ss kg wn wa tune ccs n eu kaw 6, Sn
Baird v. Bellotti, 393 F.Supp. 847 (D. Mass.

EO enh Ry oe er 3n
Bellotti v. Baird, 428 U.S. 132 (1976) ........... 3
Blackhawk Heating and Plumbing Co. v. Geeslin,

ee ee cee Crem Gar. TOTO)... .... 3.5 ee 5n
Brown v. Link Belt Division of FMC Corp., 666

oo Se ae | “7 6
Burford v. Sun Oil Co., 319 U.S. 315 (1943)..... passim
Central States, Southeast-Southwest Areas Health

and Welfare Fund v. Old Security Life

Insurance Company, 600 F.2d 677 (7th Cir.

Ny se aed ee eS 6,7
City of Houston v. Hill, 482 U.S. 451 (1987)..... 3, 4
Colorado River Water Conservation District v.

United States, 424 U.S. 800, 814 (1976) ....... 8, 10n
Constantineau v. Grager, 302 F.Supp. 861 (E.D.

Es eT ee sk de so 3n
Corcoran v. Ardra Insurance Co. Ltd., 842 F.2d

a ee 5
Corcoran v. Ardra Insurance Co. Ltd., 637

EE BS 8. Oe aD yt on

es

iv

Page
Cummings Wholesale Electric Company Inc. v.

Home Owners Insurance Co., 492 F.2d 268

(7th Cir. 1974), cert. den. 419 U.S. 833....... 6
England v. Louisiana State Board of Medical

Examiners, 375 U.S. 411 (1964).............. 4n
Grimes v. Crown Life Ins. Co., 857 F.2d 699.... 7
In re Texas Turn-Key Operators, Inc., 70 BR 193

(ERO Dude. BM, BOE soc ene cede eae 7
Independent Petrochemical Corp. v. Aetna

Casualty and Surety Co., 672 F.Supp. 1

(D.D.C. 1986), affd 784 F.2d 1131 .......... 6
Lac D’Amiante Du Quebec, Ltee. v. American

Home Assurance Co., 864 F.2d 1033 (3rd Cir.

RN So Ooi eee en ee raha cas ees wees 5
Law Enforcement Insurance Co., Ltd. v.

Corcoran, 807 F.2d 38 (2nd Cir. 1986). cert.

ek Se Se EE ree ea kan dees Pe 5
Law Enforcement Insurance Co., Ltd. v.

Corcoran, 666 F.Supp. 271 (S.D.N.Y. 1986) ... 6n
Levy v. Lewis, 635 F.2d 960 (2nd Cir. 1980) .... 6
Louisiana Power and Light Co. v. City of

Thibodaux, 360 U.S. 25 (1959)............ | 4n
Mathias v. Lennon, 474 F.Supp. 949 (S.D.N.Y.

a er CL ohare, a een eh. ? 6, 8n
Matter of All-Star Insurance Corporation, 484

F.Supp. G25 (E.D. Wise. 1960) .............. 6
Mazanec v. North Judson-San Pierre School

Corporation, 763 F.2d 845, (7th Cir. 1985). ... 9. 10

Metropolitan Life Insurance Co. v. Board of
Directors 572 F.Supp. 460 (W.D. Wisc. 1983) . 6, 8n

Page
Middlesex County Ethics Commission v. Garden

State Bar Association, 457 U.S. 423 (1982)..... 8
Motlow v. Southern Holding and Securities

Corp., 95 F.2d 721 (8th Cir. 1938), Cert. den.

ES Or rere sere ery 5n
New Mexico v. Molydenum Corporation of

America, 570 F.2d 1364 (10th Cir. 1978)...... 10
Ohio Bureau of Employment Services v. Hodory,

ME Wee Ee UR ks es soe eee 8, 9, 10
Old Security Life Insurance Company v.

Continental Illinois National Bank and Trust

Co. of Chicago, 740 F.2d 1384 (7th Cir. 1984). 6
Pennsylvania General Casualty Co. v.

Pennsylvania, 294 U.S. 189 (1935)............ 5n
Pennzoil v. Texaco, 481 U.S. 1 (1987) .......... 9
Railroad Commission of Texas v. Pullman Co..,

ae UG: GI CEek cs ee ee ees 3,9
Serpas v. Schmidt, 827 F.2d 23, (7th Cir. 1987) .. 9, 10
Stoller v. Baldwin United Corp., (S.D. Ohio,

Sept. 19, 1984) Fed. Sec. L. Rep., (CCH) 1984

Transfer Binder, Paragraph 91,678, pg. 99,422 7
United States v. Bank of New York and Trust

Ca... Sie US, 4s CI oe ee as 5n

Urbano v. Board of Managers of New Jersey State
Prison, 415 F.2d 247 (3rd Cir. 1969), cert. den.
eT Es a hn a epee ee 4

\

vi

Page

Waldron v. McAtee, 723 F.2d 1348 (7th Cir.

ell ERIE P aera erat Silman SOM tian DR a oat 4
Wisconsin v. Constantineau, 400 U.S. 433 (1971). 3, 4n
Younger v. Harris, 401 U.S. 37 (1971) .......... 8,9
B. STATUTES
36 O.S. §1901 et seq. (The Uniform Insurer

DE PONED hss Gc on ns wan ne a ease Rea 1, 4,7
I CR so th "ae ee ee ve ee 4
15 U.S.C. §1011 et seq. (The McCarran-Ferguson

re eae a ais Cr ne oe ee ee eh S$. Sa, 7
er 78, ON > 0 at ie ee ee ee ee 5n
Le. Ronit SL aia eat SR RENeL Beis Met ane Pas SR 5n
C. OTHER AUTHORITIES
Federal Practice and Procedure; Miller and

ee. ee ee 4n

Federal Practice And Procedure: Miller and
See, OAIE CUEE ) a c so dene i ics a ee 8n

No. 88-1155

IN THE

Supreme Court of the United States

OcroBer TERM, 1988

CROWN LIFE INSURANCE COMPANY,
Petitioner,
coe OF, cme

GERALD GRIMES, Insurance Commissioner of the
State of Oklahoma, Receiver for the United Equity Life
Insurance Company; and OKLAHOMA LIFE
AND HEALTH GUARANTY ASSOCIATION,

Respondents.

RESPONSE TO PETITION FOR CERTIORARI

STATEMENT OF THE CASE

This action originated out of insurance insolvency proceedings
instituted against United Equity Life Insurance Company (“United
Equity”) by Oklahoma Insurance Commissioner Gerald Grimes
(“Commissioner”) in the Oklahoma District Court of Oklahoma
County pursuant to the Uniform Insurer Liquidation Act (36 O.S.
§1901 et seq., hereinafter “Liquidation Act”). On May 24, 1984,
the Commissioner filed a petition in the said Court as United
Equity’s receiver seeking Declaratory Judgment against Crown
Life Insurance Company (“Crown”) based upon a reinsurance

agreement Crown had entered into with United Equity in 1983.
The Commissioner was joined by the Oklahoma Life and Health
Insurance Guaranty Association (“Guaranty Association”), a
statutory entity charged with the payment of claims by United
Equity’s policyholders.

On June 22, 1984 Crown had the action removed to the
Federal District Court for the Western District of Oklahoma
based on diversity of citizenship. The Commissioner and the
Guaranty Association vigorously objected to such removal, argu-
ing that the state court had exclusive jurisdiction under the
Liquidation Act and that federal courts had traditionally refused
to take jurisdiction over matters involving insurance receiver-
ships. On August 30, 1984 the Court denied Plaintiffs’ Motion
to Dismiss and accepted jurisdiction. The Plaintiffs renewed their
Motion repeatedly throughout the subsequent proceedings but
the Court continued to deny it.

The Court at the Pretrial Conference bifurcated the pro-
ceedings. The initial stage consisted of a trial to the Court regar-
ding the interpretation of the terms of the Reinsurance Agree-
ment. The factual issues of misrepresentation which had been
raised by Crown were temporarily set aside for later trial. This
second stage was never reached because the Court’s ruling on
the interpretation of the contract was dispositive. On May 19,
i986, in a one day proceeding, the Court heard evidence on the
interpretation of the rights, duties and obligations of the respec-
tive parties to the Reinsurance Agreement and found in favor
of Crown. This was reflected in an Order of the Court, dated
June 9, 1986.

The Plaintiffs appealed the trial court’s order to the Court
of Appeals for the Tenth Circuit. In an order entered on
September 16, 1988 the Court of Appeals reversed the District
Court. holding the court should have abstained and left this mat-
ter to the state court (The Circuit Court’s opinion was attached
to Crown's Petition to this Court at Appendix A and is reported
at 857 F.2d 699). Crown immediately filed a petition for rehear-
ing which was denied by the Circuit Court on October 14. 1988.
On January 10. 1989 Crown filed a Petition for a Writ of Cer-
tiorari with this Court.

el

SUMMARY OF ARGUMENT

Abstention is not waived )y a failure to assert it at trial. The
doctrine can be raised on appeal by a party or by the court on
its own motion. In this case Respondents’ failure to raise absten-
tion in the district court is immaterial. The law and evidence
clearly mandated abstention under the branch of the doctrine
first described by this Court in Burford v. Sun Oil Co., 319 U.S.
315 (1943). There is no reason to grant certiorari in this matter.

ARGUMENT AND AUTHORITY

POINT 1: FAILURE TO RAISE ABSTENTION IN THE
FEDERAL DISTRICT COURT DOES NOT
WAIVE AN APPELLANT'S RIGHT TO
ARGUE THE DOCTRINE ON APPEAL.

In the case of Wisconsin v. Constantineau, 400 U.S. 433 (1971),
this Court considered and rejected the applicability of absten-
tion under Railroad Commission of Texas v. Pullman Co., 312
U.S. 496 (1941) to a constitutional challenge of a Wisconsin
statute despite the fact that abstention had not been raised in
the lower court! and was not raised by the state on appeal. The
Court followed the Constantineau precedent in Bellotti v. Baird,
428 U.S. 132 (1976), wherein it stated: “The fact that the full
arguments in favor of abstention may not have been asserted
in the District Court does not bar this Court’s consideration of
the issue” (at note 10). The Court in Bellotti considered and ap-
plied Pullman abstention even though it had not been properly
asserted below.’

More recently, in the case of City of Houston v. Hill, 482 U.S.
451 (1987), this Court again relied on Constantineau in apply-
ing Pullman abstention to an action challenging the constitu-
tionality of a city ordinance despite the fact that the Defendant
had “given its acquiescence for more than three years to

' See Constantineau v. Grager, 302 F.Supp. 861 (E.D. Wise. 1969)

* See Baird v. Bellotti, 393 F.Supp. 847 (D. Mass. 1975).

ee

tederal adjudication of the merits. . °* While the Court termed
the failure to assert the argument below “remarkabie’, it con-
cluded, “These circumstances undercut the force of the Citv’s
argument, but do not bar us from considering it.” (at note 16).

The Circuit Courts have also held that abstention may be
raised for the first time on appeal, Waldron v. McAtee, 723 F.2d
1348 (7th Cir. 1983), A.F.A. Distributing Co. Inc. v. Pearl Brew-
ing Co., 470 F.2d 1210 (4th Cir. 1973), Urbano v. Board of
Managers of New Jersey State Prison, 415 F.2d 247 (3rd Cir.
1969), Cert. den. 397 U.S. 948. The failure to raise abstention
at the district court level clearly does not constitute a waiver
of a party’s right to assert it on appeal’.

POINT 2: IN THIS CASE ABSTENTION WAS WAR-
RANTED TO PREVENT INTERFERENCE
BY THE FEDERAL COURT IN OKLaA-
HOMAS STATUTORY INSURANCE IN-
SOLVENCY PROCEDURE.

The Uniform Insurer Liquidation Act provides Oklahoma
with a coherent and comprehensive procedure for liquidating
insolvent insurance companies. The Act provides a forum for
the adjudication of all disputes involving the liquidation in the
Oklahoma District Court of Oklahoma County. (36 O.S. §1901).
Such a well-organized regulatory scheme coupled with a
thorough judicial review in the state courts as well as Oklahoma's
strong interest in protecting policyholders, combined to man-
date abstention by the district court under this Court’s holding
in Burford v. Sun Oil Co., supra. This mandate was reinforced
by the express federal! policy of non interference with insurance

‘In the instant action there has been no such acquiescence. See Point 3, infra.

* There is in fact no requirement that the issue even be raised by a party at
all as the court may do so sua sponte. Wisconsin v. Constantineau, supra. See
for example: England v. Louisiana State Board of Medical Examiners, 375
U.S. 411 (1964) and Louisiana Power and Light Co. v. City of Thibodaux,
360 U.S. 25 (1959) wherein the district courts abstained on their own motions.
See generally Wright, Miller. and Cooper, Federal Practice and Procedure \7A
$4245.

ui

matters embodied in the McCarran-Ferguson Act (15 U.S.C.
§1011 et seq.)§ and the traditional policy of non interference by
the federal courts with matters affecting insurance receiverships.*

Federal Courts have almost universally found Burford to man-
date abstention in cases involving matters which pertain to in-
surance insolvency proceedings. Decisions holding that absten-
tion is proper include: Lac DAmiante Du Quebec, Ltee. v.
American Home Assurance Co., 864 F.2d 1033 (3rd Cir. 1988)
(The court reversed as an abuse of discretion the district court’s
decisicn not to abstain in an action to recover against an insol-
vent insurer); Corcoran v. Ardra Insurance Co. Ltd., 842 F.2d
31 (2nd Cir. 1988) (The court sustained the district court’s deci-
sion to abstain in an action by the New York Superintendent
of Insurance, as receiver for an insolvent insurer, to recover rein-
surance proceeds from a foreign reinsurer)’; Law Enforcement
Insurance Co., Ltd. v. Corcoran, 807 F.2d 38 (2nd Cir. 1986),
cert. den. 481 U.S. 1017 (The court sustained, based on Burford,
the district court’s decision to abstain, based on another branch
of the abstention doctrine, from an action on reinsurance

* The Act reads in part as follows:

§ 1011, Congress declares that the continued regulation and tax-
ation by the several states of the business of insurance is in the
public interest. . .

§ 1012, (a) The business of insurance, and every person engaged
therein, shall be subject to the laws of the several states which
relate to the regulation or taxation of such business. (b) No Act
of Congress shall be construed to invalidate, impair. or supersede
any law enacted by a State for the purpose of regulating the
business of insurance. . .

* See e.g.: Pennsylvania General Casualty Co. v. Pennsylvania, 294 U.S. 189
(1935); United States v. Bank of New York and Trust Co., 296 U.S. 463 (1936):
Motlow v. Southern Holding and Securities Cerp., 95 F.2d 721 (8th Cir. 1938),
Cert. den. 305 U.S. 609: Blackhawk Heating and Plumbing Co. v. Geeslin.
530 F.2d 154 (7th Cir. 1976):

’ The district court's decision is reported at Corcoran v. Ardra Insurance Co.
Ltd., 657 F.Supp. 1223 (S.D.N.Y. 1987).

policies issued by insolvent insurer)*; Brown v. Link Belt Divi-
sion of FMC Corp., 666 F.2d 110 (5th Cir. 1982) (The court
upheld the district court’s decision to abstain in an indemnity
claim against an insolvent insurer); Levy v. Lewis, 635 F.2d 960
(2nd Cir. 1980) (The court sustained the district court’s dismissal
for failure to state a claim in an action under ERISA against
insolvent insurer. Instead of deciding on the merits, the circuit
court held abstention was proper.); Cummings Wholesale Elec-
tric Company Inc. v. Home Owners Insurance Co., 492 F.2d
268 (7th Cir. 1974), cert. den. 419 U.S. 833 (The court upheld
a dismissal of an action by holders of a surety bond issued by
an insolvent insurer); Independent Petrochemical Corp. v. Aetna
Casualty and Surety Co., 672 F.Supp. 1 (D.D.C. 1986), affd 784
F.2d 1131 (The court abstained from an action involving an in-
demnity claim against an insolvent insurer); Aims Enterprises,
Inc. v. Muir, 609 F.Supp. 257 (E.C. Pa. 1985) (The court ab-
stained in an action by the Delaware Insurance Commissioner
as receiver for an insolvent insurer to recover assets held by the
Pennsylvania Insurance Commissioner); Metropolitan Life In-
surance Co. v. Board of Directors 572 F.Supp. 460 (W.D. Wisc.
1983) (The court abstained in a declaratory judgment action
against a guaranty association by an assessed member insurer
in connection with the insolvency of another insurer); Matter
of All-Star Insurance Corporation, 484 F.Supp. 623 (E.D. Wisc.
1980) (The court remanded to state court an action to collect
a debt by the receiver of an insolvent insurance company which
had been removed by the Defendants); Mathias v. Lennon, 474
F.Supp. 949 (S.D.N.Y. 1979) (The Court abstained in an action
by the Illinois Director of Insurance against the rehabilitator
of an insolvent New York insurer).

The only cases in which federal courts have addressed the issue
and refused to abstain have been those dealing with exclusive
federal remedies. Courts refusing to apply abstention include:
Old Security Life Insurance Company v. Continental Illinois
National Bank and Trust Co. of Chicago, 740 F.2d 1384 (7th
Cir. 1984) (Involving claims under ERISA). Central States,

* The district court’s decision is reported at Law Enforcement Insurance Co.,
Ltd. v. Corcoran, 666 F.Supp. 271 (S.D.N.Y., 1986).

a |

Southeast-Southwest Areas Health and Welfare Fund v. Old
Security Life Insurance Company, 600 F.2d 677 (7th Cir. 1979)
(same). Stoller v. Baldwin United Corp., (S.D. Ohio, Sept. 19,
1984) Fed. Sec. L. Rep., (CCH) 1984 Transfer Binder, Paragraph
91,678, pg. 99,422 (Involving claims under 1934 Securities and
Exchange Act); In re Texas Turn-Key Operators, Inc., 70 BR 193
(Banker S.D. Tx, 1986) (Interpleader action involving a debtor
in bankruptcy.) Because the instant case involves no federal
remedies, these cases have no applicability.

The Uniform Insurer Liquidation Act provides a complex ad-
ministrative and judicial system for liquidating an insolvent in-
surer. There is an express federal policy of non interference
reflected in the McCarran-Ferguson Act. Therefore, abstention
under Burford v. Sun Oil Co., was clearly appropriate in this
action. There is no argument to the contrary and indeed Crown
has advanced none.

The Court of Appeals stated the matter succinctly in its opin-
ion as follows:

Allowing the district court to exercise jurisdiction in
this case would disrupt the ability of the state officers
of Oklahoma in conjunction with the Oklahoma
County District Court to devise and efficiently operate
a complex system of administrative and judicial in-
terrelationships which makes up the statutory scheme
for liquidating insolvent insurers in Oklahoma. (857
F.2d at 706)

POINT 3: THE FACT THAT RESPONDENTS DID
NOT RAISE THE ISSUE OF ABSTENTION
IN THIS ACTION UNTIL THE AP-
PELLATE LEVEL IS IMMATERIAL.

As discussed above (see Point 1) failure to raise abstention at
the district court level does not necessarily bar its consideration
on appeal. The Petitioner asserts however that Respondents’
failure to raise the issue at trial amounted to a waiver. This is
simply not the case. ill

In Ohio Bureau of Employment Services v. Hodory, 431 U.S.
471 (1977) this Court held that a state may waive abstention
under the line of cases following Younger v. Harris, 401 U.S.
37 (1971) by voluntarily choosing to submit itself to a federal
forum. Respondents in this action made no such choice. They
vigorously resisted the removal of the action from the state court
and hotly disputed the issue of the federal court’s jurisdiction
below.’

Moreover, this case involves abstention under Burford, not
under Younger. Younger abstention is applicable where “vital
state interests” are concerned and there is an ongoing state pro-
ceeding with the opportunity to present constitutional
challenges. Middlesex County Ethics Commission v. Garden
State Bar Association, 457 U.S. 423 (1982). Burford abstention
on the other hand is only appropriate when: “[T]he 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.” Colorado River
Water Conservation District v. United States, 424 U.S. 800, 814
(1976).

Burford abstention is thus more limited in its application.
Abstention under Younger is grounded on general concerns of
federalism." Burford abstention is based on the very specific need

* The Court of Appeals case noted in its opinion “the -elevance of many of
the jurisdictional arguments raised below to the abstention issue” (at Note
8). Indeed the issues involved are extremely similar as both arguments turn
on fact that the federal court was interfering with Oklahoma's liquidation
scheme by assuming jurisdiction over this action.

® Some federal district courts have applied Younger as well as Burford absten-
tion to actions involving insolvent insurers. See e.g. Aims Enterprises Inc. v.
Muir, supra; Metropolitan Life Insurance Co. v. Board of Directors, supra:
Matthias v. Lennon, supra. No circuit court appears to have followed suit.

" In fact, Justice Black in his opinion in Younger referred to the doctrine as
“Our Federalism”, a term which has continued to be applied by some courts
and commentators. See generally Wright, Miller and Cooper, Federal Prac-
tice and Procedure, 17A $4251.

to prevent federal intrusion into complex state regulatory
schemes when the mere exercise of jurisdiction by the federal!
courts would be disruptive. Waiver would obviously seem less
appropriate in such situations. As far as can be determined, no
court has ever held that abstention under Burford can be waived.
In this case the Court of Appeals applied abstention under
Burford, not Younger and the concept of voluntary waiver which
this Court established in Hodory is not relevant here.

In its Petition for Certiorari, Crown relies primarily on two
cases from the Court of Appeals for the Seventh Circuit; Serpas
v. Schmidt, 827 F.2d 23, (7th Cir. 1987) and Mazanec v. North
Judson-San Pierre School Corporation, 763 F.2d 845, (7th Cir.
1985). These cases relate to the presumption against abstention
in that circuit once a case has gone to trial. They do not apply
in this case for several reasons.

In the first place, both of the Seventh Circuit cases involved
a willing submission to the federal forum by the defendant state
entities.” In both cases the states answered complaints filed in
federal court without objecting to the court’s jurisdiction or seek-
ing abstention until after the trial had been held.” This volun-
tary conduct brings these cases into line with this Court’s holding
in Ohio Bureau of Employment Services v. Hodory, supra, and
distinguishes them from the case at bar in which the Respondents
strongly resisted the removal of the action to federal court.

In the second place, both of the cases involved Pullman absten-
tion. In the case of Pennzoil v. Texaco, 481 U.S. 1 at note 9 (1987)
this Court noted that Pullman and Younger abstention involve

2 In Mazanec the Court noted: “{T ]hese state officials were willing (to litigate
the case in federal court), until the case was two years old and had been
tried...” (763 F.2d at 849). In Serpas the Court observed: “{T]he defendants
are state officials who raised no objection to having the claims against them
litigated in Federal Court until this court itself raised the abstention issue.”
(827 F.2d at 27, nt. 2)

* In Mazanec abstention was initially asserted but dropped when Plaintiffs
filed an amended complaint. (763 F.2d at 847).

,

10

similar considerations. Again this brings the Seventh Circuit cases
into line with Hodory but distinguishes them from the instant
case where the court applied abstention under Burford. Under
Burford, a court must consider more than the delay and interests
of judicial economy urged by the Petitioner. In this case the mere
fact that the federal court accepted jurisdiction constituted in-
terference with the orderly conduct of United Equity’s liquida-
tion. While abstention after the district court’s one day trial in
this action may constitute a waste of judicial resource, this is
a small price to pay for preventing federal intrusion into the
orderly administration of Oklahoma’s liquidation procedure.

Furthermore, Serpas and Mazanec deal with only a presump-
tion that abstention is not warranted once an action has gone
to trial. The presumption is rebuttable. Mazanec v. North
Judson-San Pierre School Corp., supra at 847, Serpas v. Schmidt,
supra at nt. 2. In this case it cannot be disputed that absten-
tion under Burford was appropriate (See Point 2). Any presump-
tion against abstaining would be overwhelmingly rebutted by
the vast amount of law and evidence supporting it.

Nor is there any conflict, as Petitioner suggests, between the
Tenth and Seventh Circuits in this area. The Court of Appeals
in this action noted that it had also held abstention was inap-
propriate when not raised at trial in the case of New Mexico
v. Molydenum Corporation of America, 570 F.2d 1364 (10th Cir.
1978)." It explained however that: “[B]urford abstention is con-
cerned with preventing the disruption of state efforts to establish
a coherent policy with respect to a matter of substantial public
policy. ... The policy underlying Burford. . .is not affected by
a determination on the merits by a federal district court.” (857
F.2d at 707). There is no conflict between this holding and the
Seventh Circuit cases cited by petitioner. Further, even if a con-
flict did exist, this case, where abstention is so clearly mandated,
would not be a proper vehicle for resolving it.

* Declining to apply abstention under Colorado River.

11

CONCLUSION

For the foregoing reasons, this Court should deny the peti-
tion filed herein and refuse to issue a writ of certiorari in this
matter.

Respectfully submitted,

KERR, IRVINE & RHODES
Don J. GuTTERIDGE, Jr.
Counsel of Record
James W. RHODES
Horace G. RHODES

600 Bank of Oklahoma Plaza
Oklahoma City, Oklahoma 73102
(405) 272-922]

Attorneys for Oklahoma Life and
Health Insurance Guaranty
Association

Bert E. MARSHALL

General Counsel, Oklahoma Insurance Department
P.O. Box 53408

Oklahoma City, Oklahoma 73152-3408

Attorney for Respondent Gerald Grimes

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385002_0733%3A2. Public record. Not legal advice.