Facts of the Case

The California Insurance Commissioner filed a state court action against Allstate Insurance Co. seeking damages for Allstate's alleged breach of reinsurance agreements in an effort to gather the assets of the defunct Mission Insurance companies. Allstate removed the action to federal court on diversity grounds and filed a motion to compel arbitration under the Federal Arbitration Act. The Commissioner sought to remand the case to state court, arguing that the court should abstain from hearing the case, under Burford v. Sun Oil Co., because its resolution might interfere with California's regulation of insurance insolvencies and liquidations. The District Court agreed, concluded that an abstention was appropriate, and remanded the case to state court without ruling on Allstate's arbitration motion. After determining the appealability of the District Court's remand order, the Court of Appeals vacated the decision and ordered the case sent to arbitration. The court held that abstention was inappropriate in this damages action because a Burford abstention is limited to equitable actions.

Question

Is an abstention-based remand order appealable as a final order? Can the abstention doctrine recognized in Burford v. Sun Oil Co. be applied in a suit for damages?

Conclusion

Yes and no. In a unanimous opinion delivered by Justice Sandra Day O'Connor, the Court held that an abstention-based remand order is appealable because the "remand order here falls within that narrow class of collateral orders that are immediately appealable." Further, the Court held that the "federal courts have the power to dismiss or remand cases based on abstention principles only where the relief sought is equitable or otherwise discretionary," and because "this was a damages action, the District Court's remand order was an unwarranted application of the Burford doctrine." Justices Antonin Scalia and Anthony M. Kennedy wrote concurring opinions.