USCA1 Opinion

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT
____________________
No. 92-1853
JUAN ANTONIO GARCIA, ETC.,
Plaintiff, Appellee,
v.
ISLAND PROGRAM DESIGNER, INC.,
Defendant, Appellee.
v.
UNITED STATES OF AMERICA,
Intervenor, Appellant.
__________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
_______________
No. 92-1889
IN RE:
UNITED STATES OF AMERICA,
Petitioner.
___________
ON PETITION FOR WRIT OF MANDAMUS
_____________________
[Hon. Gilberto Gierbolini, U.S. District Judge]
___________________
____________________
Before
Breyer, Chief Judge,
___________
Torruella and Cyr, Circuit Judges.
______________

____________________

Steven W. Parks, Attorney, Tax Division, Department of Justi

________________
with whom James A. Bruton, Acting Assistant Attorney General, Gary
_______________
____
Allen and Bruce R. Ellisen, Attorneys, Tax Division, Department
_____
_________________
Justice, were on brief for United States of America.
Carlos J. Morales-Bauza with whom Jesus R. Rabell-Mendez
________________________
_______________________
Rossello-Rentas & Rabell-Mendez were on brief for Juan Antonio Garc
_______________________________
in his capacity as Insurance Commissioner of Puerto Rico.
____________________
September 14, 1993
____________________

BREYER, Chief Judge.

___________
resolve a conflict
federal

between 1) a federal

tax claims first

assets, 31

U.S.C.

This appeal requires

3713,

priority to a

statute that gives

bankrupt company's

and 2) a Puerto

company liquidation" statute with

us to

Rico "insurance

filing deadlines that can

force those federal claims to the end of the priority queue.

P.R.

Laws Ann.,

statute, governing
laws, 15 U.S.C.

tit. 26,

4019(2).

federal pre-emption

A special
of state

1012(b), would require us

federal
insurance

to resolve the

conflict in

favor of Puerto

federal statute applies.

interpreting
apply.
(1993).
federal

Rico's law -- if

But,

a recent Supreme Court case,

that special law,

indicates that it

Department of Treasury
_______________________
Hence, given

that special

v. Fabe,
____

113 S.

does not
Ct. 2202

ordinary pre-emption principles, the

statute governs.

We

reverse

district

court

determination to the contrary.

I
Background
__________
Puerto

Rico's

law

Insurance

Commissioner to act

insurance

company, to

deadline

for

assets.

P.R.

permits

the

Commonwealth's

as trustee for

liquidate its assets,

the filing
Laws Ann.,

of

"proofs

tit.
-22

26,

an insolvent
and to

of claim"

to

4002,

4019.

set a
those
In

February 1987, the Insurance Commissioner began proceedings,

in a Commonwealth
Program

Designer,

organization.

court, to liquidate the

Inc.

("IPD"),

assets of Island

health

maintenance

The Insurance Commissioner set May 19, 1988,

as the filing deadline for "proofs of claim."

On
deadline,

June 1, 1989, about

the federal Internal

the Insurance

Commissioner a

one year after the filing

Revenue Service

formal "proof"

filed with

of its

claim

against IPD for $53,000 (representing federal tax liens that

the IRS, between 1982 and 1985, had asserted, and perfected,
on IPD's assets).
Commonwealth
7424.
gave

In May 1991, the

court liquidation

IRS intervened in

proceedings.

It asked for the $53,000, as

it first

tells us that,

priority.

31

the

26 U.S.C.

to which a federal law

U.S.C.

3713.

without a first priority, it

It

also now

will be unable

to collect any of the money owed.

The Insurance
on the ground

Commissioner opposed the

that the IRS

had missed the

deadline for filing formal proofs

that

Puerto Rico's

says

that claims

deadline shall
_____
have been

insurance
for

not be
___ __

"paid in

which

of claim.

(May 19,

proofs

are filed

P.R.

statute

after
_____

all timely-filed

full with interest."

1988)

He pointed out

company liquidation

paid until
____

-33

IRS claim

the

claims

Laws Ann.,

tit.

26,

4019(2).

And,

in

his view,

Puerto

Rico's

priority system trumps the federal statute.

At this point, the IRS removed the case to federal
court.

28

U.S.C.

1441(b),

Commissioner

asked the

deciding the

legal issues,

Commonwealth

court.

opinion

The

court

The

to "abstain"

and to remand
district

Insurance

the case

court

then

from
to the

wrote

an

deciding the basic question and holding that Puerto

Rico's priority
governs.
court.

district

1444.

It

law,

not

the

also remanded

The IRS now asks

federal

the

case to

priority

statute,

the Commonwealth

us to review, and to reverse,

the

remand order.

II
Appeal or Mandamus?
___________________
We are
court,
decided

not completely

having decided
to

remand

it.

certain

the major
It

may

why the

legal issue in
have

done

district
the case,

so

as

an

administrative matter,
enter

final

controversy

to permit the Commonwealth

judgment;

involved

or

other

because

legal

it

court to

believed

issues

that it

the

should

"abstain"

from deciding; or simply because "remand" was the

form

relief

of

that

the

Insurance

Commissioner

had

-44

requested.

Whatever the reason, the fact of remand raises a

technical question
simply appeal

about the form

the remand order

of review:

or must

Can

the IRS

it seek a

writ of

mandamus?
The

problem arises out

Thermtron Products, Inc. v.

__________________________
(1976),

in

which

statute, 28 U.S.C.
review

of all

statute's

the

Hermansdorfer,
_____________
considered

Court case,
423

U.S. 336

the scope

of

1447(d), that appeared to bar appellate

remand

"review

Court

of a Supreme

bar"

orders.
applies

The
only

Court
to

held that
a

the

statutorily-

limited, previously-mentioned set of remand orders,

those in

which remand

proceeding.

rests upon a

See 28 U.S.C.
___

defect in

1447(c).

namely,

the removal

The Court, referring

to an 1875 case, Railroad Co. v. Wiswall, 90 U.S. (23 Wall.)

____________
_______
507

(1875), also

reviewable, were

held
not

that
"final"

reviewable only through

of the Supreme

remand

orders,

while

and

therefore

were

orders

mandamus.

order in this case falls

"review bar."

other

Id. at 508.
__

The remand

outside the scope of the statutory

But, it would

seem to fall within the

Court's holding that review

scope

must take place

through mandamus, not appeal.

The
have

IRS points

created an exception

out

that several

appeals courts

to Thermtron for
_________

(and permitted

-55

appeal

of)

reviewable

remand

orders

that

amount

to

"collateral orders."

See,
___

e.g., McDermott Int'l Inc.

____ _____________________

v.

Lloyds Underwriters of London, 944 F.2d 1199, 1204 (5th Cir.

_____________________________
1991)

(permitting appeal of remand order based on separable

issue presented

by a contract's "forum

cert. denied, 113 S. Ct.

_____________

selection" clause),

2442 (1993); Foster v. Chesapeake

______
__________

Ins. Co., Ltd., 933 F.2d 1207, 1211 & n.6 (3d
______________
cert. denied, 112 S. Ct.
____________

Cir.) (same),

302 (1991); Karl Koch Erecting Co.

______________________

v. New York Convention Ctr. Dev. Corp., 838 F.2d 656, 658-59
___________________________________
&

n.1 (2d Cir.

1988) (same); Pelleport Investors, Inc. v.

__________________________

Budco Quality Theatres, Inc., 741 F.2d 273, 277-78 (9th Cir.
____________________________
1984) (same).

It adds that we should recognize an exception

permitting appeal here.

We are aware of arguments advanced
or

finding exceptions

to,

Thermtron.
_________

argued that the Supreme Court should have

for modifying,

Commentators

have

departed from its

earlier, nineteenth-century practice and found remand orders

"final" (hence,

in principle,

appealable) because

1) they

finally dispose of the federal proceedings; and, 2) there is

_______
little practical reason not to permit appeal of those remand
orders

that fall outside

section 1447(d)'s

15A Charles A. Wright, Arthur

Federal Practice and Procedure

statutory bar.

R. Miller & Edward H. Cooper,

3914.11, at 702-18

(2d ed.

______________________________
-66

1991).
for

Critics have

example,

that

abstain pending

also pointed to
a federal

resolution of

district

anomalies.
court,

Corp., 460
_____

wishing to

state proceedings,

its decision in a stay of federal proceedings.

appealable.

Suppose,

embodies

The stay is

Moses H. Cone Memorial Hosp. v. Mercury Constr.

____________________________
_______________
U.S. 1,

8-10 (1983).

embodies its decision in a

reserves the right to

Suppose that

same court

remand (and, say, the

return to federal court, see

___

plaintiff
England
_______

v. Louisiana State Bd. of Medical Examiners, 375 U.S.

__________________________________________

411

(1964)).

but

The parties would have no appeal as of right,

would have to seek

Cf. Roche v.
__ _____

"discretionary" review through mandamus.

Evaporated Milk Ass'n, 319 U.S.

_____________________

21, 25 (1943)

(mandamus

is

discretionary).

The result

Corcoran v.
________

Ardra Ins. Co., Ltd., 842

_____________________

Cir. 1988).

And, one can find other

review
court

difficulties,

particularly

couples dismissal

of a

is

anomalous.

F.2d 31,

34-35 (2d

examples of practical
when, say,

removed

district

federal claim

with

remand of pendent state claims. 15A Wright, Miller & Cooper,

supra,
_____

3914.11, at 710-18;

see also In re Amoco Petroleum

________ _____________________

Additives Co., 964 F.2d 706 (7th Cir. 1992).

_____________
Despite
can

these difficulties, we

find an exception that fits the

do not believe we

present case.

For one

thing, the Supreme Court's language is rather absolute.

It

-77

says clearly that a remand order is not

rests

its

decision

apparently then-common

upon

older

practice of

cases

"final."
that

The Court

reflect

appellate courts

the
using

mandamus, rather than appeal, to

lower court's

refusal to

remand is one variety).

review the lawfulness of a

assert jurisdiction

a vehicle for review.

Cohill, 484 U.S.

______

343, 355-56

even

with anomalies,

when faced

Supreme Court

Wiswall, 90 U.S. (23 Wall.) at 508.

_______

The Court, more recently, has approved circuit

mandamus as

(of which

meant what

court use of

Carnegie-Mellon Univ. v.
_____________________

(1988).

And, lower

have

it said.

courts,

concluded that

the

In re Amoco Petroleum
______________________

Additives Co., 964 F.2d at 713; Corcoran, 842 F.2d at 34-35.

_____________
________
For another thing,
to apply

we do not believe

a "collateral order"

cited at pp.

5-6, supra.
_____

it possible

exception here.

See
___

The "collateral order"

cases

doctrine

permits parties to appeal (as "final decisions," 28 U.S.C.

1291) orders that "determine"
issue "separate from

the merits of

"effectively unreviewable"
Lybrand v.
_______

remaining issues
confidence

on a

Livesay, 437 U.S.

_______

here does not set

a "disputed" and

the action," which

are

later appeal.

Coopers &
__________

463, 468 (1978).

The record

forth the relation

in sufficient

"important"

of the remand to

detail for

us to

any

say with

that the remand order rests on the determination

-88

of an issue "separate from the merits of

more importantly, Thermtron
_________

and Wiswall themselves

_______

involve

"collateral

orders."

reviewed

(through

mandamus)

In
a

the case to

ground

court

the state

expeditiously.

That

important, separate,
have

been reviewed

Wiswall,
_______

Thermtron,
_________
district

(erroneously) remanding
that

the action."

a state

would handle

remand

decision

disputed issue that

later through

appeal.

But,

seem to

the

Court

court

order

court on
the

the

case more

determined
could not

an

easily

Similarly,

in

the Court reviewed (through mandamus, prior to the

enactment of

1447(d)) a lower court's important, separate,

disputed decision

to remand

jurisdictional reasons.
"collateral

the

case to

state court

for

The upshot is that we cannot find a

order" exception large

enough to fit

our case

that does not also swallow up (and thereby simply disregard)

the general rule.
Finally, and perhaps most importantly, we need not

further

complicate

because

the case before

the

issuance of

involves the

law

with

additional

us meets Thermtron's
_________

mandamus.

This

case,

"traditional use of the writ

aid of appellate
exercise"

the

jurisdiction to compel" a

exceptions
criteria for

like

Thermtron,
_________

[of mandamus] in
lower court "to

its jurisdictional "authority when it is its duty

-99

to do so."
U.S. at 352.

Roche, 319 U.S. at 26, quoted in

_____
_________
Mandamus

not a substitute

here, like mandamus in Thermtron, is

_________

for appeal, cf. Roche, 319

__ _____

Will v. United States, 389

____
_____________
v. Holder,
______
blocks

379 U.S. 104,

immediate

Thermtron, 423
_________

U.S. at 26-31;

U.S. 90, 97 (1967); Schlagenhauf

____________
110 (1964), for

appeal; and

Thermtron itself
_________

eventual appeal

through the

Commonwealth

court

meaningful review

system

does

of the federal

not

promise

the

IRS

district court's critical

legal determination.
Of course, even
"power" to

where a court of appeals

issue mandamus, that relief

16 Charles A.

is "discretionary."

Wright, Arthur R. Miller, Edward

H. Cooper &

Eugene Gressman, Federal Practice and Procedure

_______________________________
213

(1977).

discretion

Appellate
only

Pearson, 990
_______

in

courts

somewhat

F.2d 653, 656

IRS's

F.2d at

right to

decision in

656.

relief

3933, at

exercise

instances,

(1st Cir. 1993), and

and indisputable."

Life & Cas. Co. v. Holland, 346

_______________
_______
Pearson, 990
_______

typically

unusual

petitioner's rights are "clear

this

In
re
_______
where the
Bankers
_______

U.S. 379, 384 (1953); In re

_____

Nonetheless,

here,

has the

after

the

in our
Supreme

Fabe, supra, is reasonably clear;

____ _____

view, the
Court's

its need for

relief is fairly urgent; and, the fact that the remand falls
outside

1447(d)'s

review

bar itself
-1010

helps to

make the

remand unusual.

Taken together, these circumstances justify

exercising our "discretion" in favor of issuing the writ.

-1111

III
Pre-emption
___________
The
not

IRS argues that

to retain

the case

because

federal

payment.

The

U.S.C.

law

the federal court

and order

governs the

federal law

in

payment of
case

and

question is

was wrong
the $53,000

requires that
a statute,

31

3713, which says:

A claim of the United States Government
shall be paid first when . . . a person
indebted to the Government is insolvent
and . . . an act of bankruptcy is
committed.

The Insurance
entitle

Commissioner agrees that

the United States

this statute

to priority (and,

would

apparently to

payment) were it not for a Commonwealth statute that governs

insurance

company liquidations.

That statute, as

we have

said, instructs the Insurance Commissioner to set a deadline

for presenting proofs of claims, and it adds:
Proofs of claim may be filed subsequent
to the date specified, but no such claim
_____________
shall share in the distribution of the
________________________________________
assets until all allowed claims, proofs
________________________________________
of which have been filed before said
________________________________________
date, have been paid in full
with
________________________________________
interest.
________
P.R. Laws Ann., tit. 26,

4019(2) (emphasis added).

-1212

These two statutes conflict.

the federal statute

We cannot

with the Commonwealth statute

reconcile
(say, by

reading it as limited to instances of compliance with

state

procedures),
the

for the

federal

courts have

statute

requirements of

as

the sort

overriding

appropriate notice

e.g., Brown
____ _____

v. Coleman, 566
_______

United States
_____________

(estate representative
of

United States
_____________
(under
long

by state

550 (E.D.

with actual, but not

Mo. 1987)

claim first);

F. Supp. 189 (E.D.

predecessor statute, United

law);

formal, notice

must pay that

v. Snyder, 207
______

See,
___

1989) (federal

or impaired
___________

federal government's claim

where a

claims).

A.2d 1091 (Md.

675 F. Supp.

procedural

(at least

of federal

be superseded
v. Boots,
_____

state

here at issue

trustee has

priority cannot

consistently interpreted

Pa. 1962)

States could file claim

after distribution of estate in probate court); United

______

States v.
______
14,491)

Backus, 24 F.
______

(under predecessor

statutes were not

pre-emption
governs.

Cas. 932 (C.C.D. Mich.

statute, state

binding on United

principles

apply,

Gibbons v. Ogden,
_______
_____

then

proof

States).
the

1855) (No.

If

federal

22 U.S. 1 (1824);

of claim
ordinary
statute

U.S. Const.

Art. VI, cl.2.

The pre-emption inquiry
however,

here is more complicated,

because the Insurance Commissioner argues that the

-1313

Commonwealth's law regulates insurance companies and (as

shall assume for
company.

argument's sake) that IPD

we

is an insurance

A special federal statute says:

No Act of Congress shall be construed to
invalidate, impair, or supersede any law
enacted by any State for the purpose of
regulating the business of insurance . .
. unless such Act specifically relates
to the business of insurance . . . .

McCarran-Ferguson Act
This

2(b), 15 U.S.C.

statute, if it

1012(b).

were to apply,

would compel

the opposite result: the Commonwealth's priority system, not

the federal system,

would govern.

before us, then, is whether or

The basic legal question

not the statute applies.

the Commonwealth's procedurally-linked priority rule a

enacted . .

The

district

Circuit's holding in

F.2d

"law

. for the purpose of regulating the business of

insurance"?

question

Is

was "yes."

341 (6th

Cir.

court,

relying

Fabe, decided that the

____
Fabe v.
____
1991).

on

the

Sixth

answer to this

Department of Treasury, 939

_______________________
The

Supreme Court,

however,

granted certiorari in
decision

that leads

Fabe.
____
us

And, that Court

to

reverse

the

has reached a

district

court.

Department of Treasury v. Fabe, supra.

______________________
____ _____
The Supreme Court, in Fabe, considered
____
individual

provisions

in

liquidation

statute, which

state

separately

insurance-company-

provisions provided

sequential

-1414

priority for
claims; (3)

(1) administrative costs;

policyholders' claims;

claims; and (5) government claims.

of

these priority provisions

(2) specified

(4) general

wage

creditors'

The Court held that some

____

(all comprising parts

of the

larger statute) amounted to laws "enacted for the purpose of

regulating the business

of insurance," but others

did not.

It said that "to the extent" a priority provision "regulates

policyholders," it

"is a

law enacted

for

the purpose

of

regulating the business of insurance."

2212.

But to "the extent that it is designed to further the

interests of other
for

Fabe, 113 S. Ct. at

____

creditors, . . . it is not a law enacted

the purpose of

regulating the business

of insurance."

Id.
__
The Court
first

priority

then

for

"the

insolvency

proceeding"

provision.

It

necessary to

said

found that
expense
was

that

the

further the goal of

because, without
even commence."

such a
Id.
__

the
of

an

state

administering

provision

"is

general

provisions.

Id.
__

creditors"

were

reasonably

protecting policyholders"
could not

the Court found that the

"preferences conferred upon employees [for wage

other

the

insurance-regulating

provision, "liquidation

In contrast,

statute's

claims] and

not

insurance-regulating

The Court said that

such preferences "do

-1515

not

escape

pre-emption

because

their

connection

ultimate aim of insurance is too tenuous."

The
conclude

Court's

that

Commonwealth's

the

federal

Id.
__

and examples
statute

lead

claims)

(with its penalty of

cannot

be

said

to

us to

pre-empts

filing-deadline-related priority

The filing deadline

late

reasoning

to the

the

provision.

subordination for

directly

"regulate[]

policyholders," for it is neither directed at, nor necessary

for, the protection of policyholders, as the Court required.
The

provision helps policyholders

only to the

extent that

(and in the same way as) it helps all creditors.

say, by penalizing
may

bring

late-filers, the Commonwealth

about

proceedings,

That is to

more

thereby

speedy,

(perhaps)

orderly

reducing

provision
liquidation

the

risks

(and

costs) of extending credit to the company.

Nor can
deadline

provision

policyholders.

policyholders,
liquidation

but,

the Commonwealth's

necessary

was

because

the

protection

necessary

without

might never occur.

here, however,

Without it,

for

filing
of

Fabe found that a priority for

____

expense[s]"

at issue

liquidation.

is

that

The Court in

"administrative

deadline

one say

The

such

protect
priority,

Commonwealth's filing

is not

liquidation
-1616

to

necessary for
would still

prove

manageable.
slightly

At

worst,

the

more difficult.

trustee's

He

job

would have

example, the United States with

would

become

to provide,

for

a first priority as long as

he had, say, actual notice (or "constructive" notice through

recording)
notice

of the

through a

liquidation
Relieving

the

speculative

the

"proof of

proceeding.

recorded liens

far too

claim, even

trustee

the

burden

tenuous to prevent

special federal

Normal pre-emption

of

pre-emption.

rules do apply.

searching

for

indirect,

Fabe Court found

____
We

statute

in the

p. 12, supra.
_____

with only

kind that the

pre-emption

have formal

directly

cases cited at

provides policyholders

benefit of the

did not

claim" filed

See
___
of

if he

conclude that

does not

apply.

And, federal

law must

makes

further

govern.
The
argument.

He

Insurance
says that,

Commissioner
even if

one

the district

court was

wrong about federal

to

remand the

pre-emption, the court was

case.

He

says the

district court's authority to

still right

remand rested

upon the

"abstain" from exercising its

jurisdiction in

order to

allow the

conduct further

insurance company

Commonwealth court

to

liquidation proceedings.

See Burford v. Sun Oil Co., 319 U.S. 315 (1943); Gonzalez v.
___ _______
___________
________
Media Elements, Inc.,
______________________

946

F.2d

157

(1st

Cir.

1991)

-1717

(abstaining

to

liquidation

permit

proceeding, of

resolution,

in

Commonwealth

a tort claim

against insolvent

insurance company).
The
before us.
where

problem with this argument lies in the record

Burford holds that federal courts should abstain

_______

further

"difficult"

federal proceedings

state

law

question

would
or

would

likely

decide a

disrupt

state

efforts to
Burford,
_______

establish coherent and

319 U.S.

at 331

important state

& n.28;

Bath Memorial Hosp. v.

____________________

Maine Health Care Fin. Comm'n, 853 F.2d 1007,

______________________________
Cir. 1988); see also Fragoso
________ _______
(1st Cir. 1993).

or why, further

such

problems.

1013-14 (1st

v. Lopez, 991 F.2d 878, 882-85

_____

Nothing in the record

how,

policy.

before us explains

federal proceedings would

Thus, it offers

create any

no justification for court

abstention based on Burford.

_______
For
the

petition

these reasons,

the appeal is

for

setting

mandamus,

court's remand order, is

Granted.
________

-1818

aside

dismissed, and
the

district