Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 24 (1996)

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Cite as: 517 U. S. 706 (1996)

Opinion of the Court

tion agreements. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U. S. 614, 631 (1985) (FAA reflects "emphatic federal policy in favor of arbitral dispute resolution"); cf. Moses H. Cone, 460 U. S., at 25-26 (in deciding whether to defer to state court adjudication under the Colorado River doctrine, "the presence of federal-law issues must always be a major consideration weighing against surrender"). With regard to the state interests, however, the case appears at first blush to present nothing more than a run-of-the-mill contract dispute. The Commissioner seeks damages from Allstate for Allstate's failure to perform its obligations under a reinsurance agreement. What differentiates this case from other diversity actions seeking damages for breach of contract, if anything, is the impact federal adjudication of the dispute might have on the ongoing liquidation proceedings in state court: The Commissioner claims that any recovery by Allstate on its setoff claims would amount to an illegal "preference" under state law. This question appears now to have been conclusively answered by the California Supreme Court, see Prudential Reinsurance Co. v. Superior Court of Los Angeles Cty., 3 Cal. 4th 1118, 842 P. 2d 48 (1992) (permitting reinsurers to assert setoff claims in suits filed by the Commissioner in the Mission insolvency), although at the time the District Court ruled this question was still hotly contested.

The Ninth Circuit concluded that the District Court's remand order was inappropriate because "Burford abstention does not apply to suits seeking solely legal relief." 47 F. 3d, at 354. Addressing our abstention cases, the Ninth Circuit held that the federal courts' power to abstain in certain cases is "locat[ed] . . . in the unique powers of equitable courts," and that it derives from equity courts' " 'discretionary power to grant or withhold relief.' " 47 F. 3d, at 355 (quoting Alabama Pub. Serv. Comm'n v. Southern R. Co., 341 U. S., at 350-351). The Ninth Circuit's reversal of the District Court's abstention-based remand order in this case therefore


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