The State of Louisiana sponsors the “Road Home Program,” whereby it advances substantial sums to its citizens whose homes were damaged or destroyed by Hurricanes Katrina and Rita. Under the program, Louisiana forwards up to $150,000 to homeowners in exchange for an assignment of claims against the homeowner’s insurer. The attorney general of Louisiana filed a putative class action in state court on behalf of the state and these homeowners against over 200 insurers that allegedly failed to honor their contracts to which the State is partial assignee under the Road Home Program. The attorney general and other putative class plaintiffs asserted claims for breach of contract, breach of the covenant of good faith and fair dealing, and breach of fiduciary duty.
Several defendant insurers removed the case to federal court under CAFA. Louisiana moved to remand, arguing that CAFA does not apply to states and, furthermore, removal to federal court offended its sovereign immunity. The district court, Judge Stanwood Duval, Jr., denied the state’s motion to remand. The Fifth Circuit affirmed.
The Fifth Circuit first held that CAFA applies to states, even though states are not “persons.” Further, while avoiding a decision on whether sovereign immunity would bar removal if Louisiana brought the case on its own, the court held that Louisiana waived any sovereign immunity it may have had by joining itself with a putative class of its citizens. The court reasoned that Louisiana, while frustrated with Congress’s decision to give the defendant insurers access to federal court, could not “pull its citizens under its claimed umbrella” of immunity. Allowing it to do so, the court continued, would countermand the very basis for diversity jurisdiction – to avoid what is “known then and now to the trial bar as ‘home cooking.’”