The question presented to the Court was “whether federal law has opened the door for state law to ‘reverse preempt’ the diversity jurisdiction statute.” The McCarran-Ferguson Act was enacted by Congress to prevent federal laws from interfering with state insurance regulation. The Liquidator sought to expand the existing McCarran-Ferguson “reverse preemption” framework to prevent the Defendant from exercising their right of removal pursuant to 28 U.S.C. § 1441. The Court determined that application of the Kentucky Insurers Rehabilitation and Liquidation Law (“IRLL”) had exclusive jurisdiction over the matter, which “would directly conflict with federal law” and “therefore, the IRLL jurisdiction provision must be preempted by the federal removal and diversity subject matter jurisdiction statute.”

Having established subject-matter jurisdiction necessary to adjudicate the dispute, the Court declined to abstain from exercising its jurisdiction under the Colorado River doctrine, as the Liquidator included a demand for common law contract damages, and there was no longer a parallel state proceeding. The Court requested additional briefing on the issue of whether the FAA can apply in light of the parties’ “Governing Law” agreement that restricted the Court to the law of Kentucky.

H. Brian Maynard, Liquidator of Kentucky Health Cooperative, Inc. v. CGI Technologies and Solutions, Inc., 3:16-cv-00037 (USDC E.D. Ky. Jan 3, 2017)