Quackenbush v. Allstate Ins. Co.

The Supreme Court said a federal court's order sending a case back to state court because of abstention (a decision to step aside) can be appealed. It also said Burford abstention could not be used here to avoid hearing this insurance insolvency dispute because the case sought money damages.

The Court ruled 9-0, with Justice O'Connor writing for a unanimous Court joined by Rehnquist, Stevens, O'Connor, Scalia, Kennedy, Souter, Thomas, Ginsburg, and Breyer.

“Abstention was inappropriate in this damages action.”

The decision limits when federal judges can refuse to hear damages cases just because related state-law issues are pending in state court. That matters for insurers, policyholders, and other businesses that want access to federal court in complex state regulatory disputes.

The case goes back to the lower courts for further proceedings consistent with the Supreme Court's decision. Lower courts must hear similar damages suits unless abstention fits the narrow situations the Court recognized.

The dispute was over whether a federal court could send a damages case back to state court by using abstention. The Court said that remand order could be appealed and abstention was improper here.

Parties in federal damages cases involving state regulatory systems are most affected. For example, insurers or claimants in insolvency disputes may keep their cases in federal court.

The lower courts must take the case back up under the Supreme Court's rule. Judges and litigants must now treat abstention-based remand orders in damages cases as appealable.