10th Cir.: Remand order under McCarran-Ferguson Act isn’t appealable

When an insurer becomes insolvent, state law (not federal bankruptcy law) controls the proceedings. A Utah insurer became insolvent, and the liquidator sued several affiliate companies in state court to recover funds that the insurer transferred to them before going belly up.

The defendants removed to federal court, asserting that diversity jurisdiction existed. The receiver moved to remand the case to state court under the McCarran-Ferguson Act, which preempts federal laws that interfere with state insurance laws (this is called “reverse preemption”). The receiver argued that the exercise of federal jurisdiction would interfere with the Utah insurance receivership law’s provision allowing recovery from the affiliates.

The argument doesn’t sound very plausible — a federal court should be just as capable as a state court in administering a Utah statute — but the district court agreed with it, and remanded the case.

The affiliates appealed, but in an opinion by Chief Judge Briscoe, the Tenth Circuit held that a remand order that is based on the McCarran-Ferguson is based on a lack of subject matter jurisdiction, and 28 U.S.C. § 1447(d) prohibits appellate courts from exercising jurisdiction over orders based on a purported lack of subject-matter jurisdiction. See Western Insurance Co. v. A&H Insurance, Inc. (April 24, 2015).

Thus, even if the district court’s order were wrong, it can’t be appealed.

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