Interactive Federalism and the Certification of State Law Questions in Diversity Cases

Abstract

On August 29, 2005, Hurricane Katrina struck Louisiana and Mississippi. In aftermath of hurricane, city of New Orleans flooded when levees along three major canals ruptured. At one point, approximately eighty percent of New Orleans was under water. Homeowners, renters and commercial property owners suffered tremendous property damage as a result of New Orleans flood. Because insurance policies typically contain exclusions for damage caused by flood, however, many of these property owners and renters were denied coverage. Despite flood exclusions in their insurance policies, many of those who were denied coverage sued to recover their One set of these consolidated cases, In re Katrina Canal Breaches Litigation, recently reached U.S. Court of Appeals for Fifth Circuit. In that set of cases, plaintiffs argued that the massive inundation of water into [New Orleans] was result of negligent design, construction, and maintenance of levees and that policies' flood exclusions in this context were ambiguous they [did] clearly exclude coverage for an inundation of water induced by negligence. They asserted that because their policies [were] ambiguous, [the Fifth Circuit] must construe them in their favor to effect coverage for their losses. The parties agreed that Louisiana substantive law applied to cases. The Fifth Circuit recognized, however, that Louisiana Supreme Court had not interpreted a flood exclusion in context of breached levees. Although several of plaintiffs filed motions asking Fifth Circuit to certify to Louisiana Supreme Court question of whether flood exclusions in their policies were ambiguous, in a footnote Fifth Circuit denied motions. In doing so, court acknowledged that it would have to make an Erie guess and determine, in [its] best judgment, how Louisiana Supreme Court would decide issue. The Fifth Circuit ultimately held that policies were unambiguous, that damage caused by New Orleans flood was excluded from coverage, and that plaintiffs were entitled to recover. The plaintiffs whose motions to certify had been denied then filed petitions for writs of certiorari in Supreme Court. The sole question raised by petitions was whether Fifth Circuit erred when it failed to certify state law question before it to Louisiana Supreme Court. In their petitions, plaintiffs pointed out that at time Fifth Circuit denied their motions to certify, numerous state district courts had already ruled differently than Fifth Circuit and that at least one of those cases was on appeal. Nevertheless, Supreme Court denied petitions. Thirteen years ago, a federal judge stated: Federal courts evince no clear understanding of when . . . to certify. This Article argues that federal courts today still do demonstrate a clear understanding of certification and addresses question of when a federal court should certify an unclear question of state law and when it should decide issue itself. The United States Supreme Court has said that certification of unsettled state law questions by federal courts 'hel[p] build a cooperative judicial federalism.' The Court, however, has provided lower federal courts with any real guidance regarding how or when they should use certification to foster intersystemic collaboration. Thus, in diversity context, circuit courts have developed a variety of approaches to certification. This Article first examines whether these approaches in fact exemplify cooperative judicial federalism in action. This Article concludes that while some circuits may use certification cooperatively, several circuits approach certification as an exercise in dualist federalism. This Article asks whether cooperative or dualist federalism is appropriate federalism lens through which to view certification. Employing a series of articles written by Professor Robert A. Schapiro, this Article argues that certification today can best advance goals of federalism and achieve other important benefits if it is viewed as an exercise in interactive, rather than cooperative or dualist, federalism. Using values of interactive federalism, this Article proposes a new functional standard for certification of state law questions by federal courts in diversity cases. Part II discusses dualist, cooperative and interactive approaches to federalism. Part III explains intersystemic adjudication and argues that interpretation of state law by federal courts can be a positive good rather than a necessary evil. This part also explains how Professor Schapiro has applied theory of interactive federalism to dual state and federal constitutional challenges that are brought in federal court. Part IV discusses certification and analyzes differing approaches federal appellate courts take to certification. Part V classifies circuit courts' approaches to certification as representative of either cooperative or dualist federalism and explains why, from an interactive approach to federalism, these approaches are flawed. Part V then sets forth a new approach to certification based on Professor Schapiro's theory of interactive federalism and applies this approach to Katrina Canal Breaches Cases. Part V concludes that, from an interactive perspective, Fifth Circuit correctly denied motions to certify in those cases.