The opinion
Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
2-24-1995
Liberty Mutual v Ward Trucking
Precedential or Non-Precedential:
Docket 94-3377
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 94-3377
___________
LIBERTY MUTUAL INSURANCE COMPANY
and
LIBERTY MUTUAL FIRE INSURANCE COMPANY,
Petitioners
vs.
WARD TRUCKING CORP.,
Respondent
and
THE HONORABLE GUSTAVE DIAMOND,
District Judge, United States District Court
for the Western District of Pennsylvania
Nominal Respondent
___________
Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil No. 94-cv-00559)
___________
Argued
November 8, 1994
Before: BECKER, MANSMANN and ALITO, Circuit Judges.
(Filed February 24, 1995)
___________
Edward A. Greenberg, Esquire (ARGUED)
Daller, Greenberg & Dietrich
7111 Valley Green Road
Valley Green Corporate Center
Fort Washington, PA 19034
Counsel for Petitioners
Arlin M. Adams, Esquire (ARGUED)
Carl A. Solano, Esquire
Schnader, Harrison, Segal & Lewis
1600 Market Street
Suite 3600
Philadelphia, PA 19103-4252
Daniel D. Harshman, Esquire
Pietragallo, Bosick & Gordon
One Oxford Centre
38th Floor
Pittsburgh, PA 15219
Counsel for Respondent
___________
OPINION OF THE COURT
__________
MANSMANN, Circuit Judge.
This case comes to us by way of a petition for writ of
mandamus filed by the defendants Liberty Mutual Insurance Company
and Liberty Mutual Fire Insurance Company (collectively, "Liberty
Mutual"). Faced with Liberty Mutual's second notice of removal
based on diversity jurisdiction, the United States District Court
for the Western District of Pennsylvania granted Plaintiff Ward
Trucking Company's ("Ward") motion for remand without giving
Liberty Mutual an opportunity to respond. Liberty Mutual asserts
that in doing so, the district court acted without authority, and
asks for our review. We are, therefore, once again required to
address the parameters of a district court's statutorily defined
power to remand under 28 U.S.C. § 1447(c) and the scope of
Congress' prohibition on appellate review of remand orders set
forth in 28 U.S.C. § 1447(d).
I.
On May 11, 1993, Ward instituted a civil action by writ
of summons in the Court of Common Pleas of Allegheny County,
Pennsylvania against Liberty Mutual, its insurers.1 Thereafter,
Ward filed a seven-count complaint in assumpsit and tort,
asserting that Liberty Mutual mishandled claims, reserves and
premiums under various insurance policies. Paragraph 52 of the
complaint stated that "the amount of damages resulting from the
breach of duty and/or breach of contract are presently unknown
. . .", and the addendum clause in six of the seven counts
requested an unspecified amount in damages in excess of the
jurisdictional limits of the Arbitration Division of the Court of
Common Pleas, currently $25,000.
Count III of the complaint set forth a claim under
Pennsylvania's Bad Faith Statute, 42 Pa. C.S.A. § 8371, which
authorizes an action for an insurer's bad faith toward its
insured and allows for an award of interest on the claim at issue
in the amount equal to the prime rate of interest plus 3%,
punitive damages and the assessment of attorneys fees. Count
III's addendum clause requested "an amount exceeding the
jurisdictional limits of [the Court of Common Pleas], inclusive
of interest equal to prime plus 3%, punitive damages, costs and
attorneys fees."
1
. The parties are engaged in two other lawsuits. On May
24, 1991, Ward commenced an equity action in the Court of Common
Pleas of Blair County, Pennsylvania against Liberty Mutual,
alleging breach of fiduciary and contractual duties, and seeking
an accounting and a declaration of the amount of premiums, if
any, Ward owes to Liberty Mutual. This action has since been
transferred to Allegheny County, Pennsylvania. On June 11, 1993,
Liberty Mutual commenced an action against Ward in the United
States District Court for the Eastern District of Pennsylvania,
alleging that Ward failed to pay a past-due insurance premium.
On July 7, 1993, Liberty Mutual filed a notice of
removal with the United States District Court for the Western
District of Pennsylvania, alleging federal diversity jurisdiction
under 28 U.S.C. § 1332. While both the writ and the complaint,
which were attached to the notice of removal, stated that Ward is
a Pennsylvania citizen and Liberty Mutual is a citizen of
Massachusetts, neither document showed that Ward's damages exceed
$50,000, the amount in controversy requirement of federal
diversity jurisdiction. Consequently, in an attempt to establish
this monetary threshold, Liberty Mutual attached counsel's
affidavit to its removal notice, setting forth his personal
belief that Ward's damages were greater than $50,000.
On July 19, 1993, Ward filed a motion to remand, which
was subsequently amended on August 2, 1993, challenging, inter
alia, Liberty Mutual's failure to show the requisite amount of
damages for diversity jurisdiction. On July 28, 1993, Liberty
Mutual filed a response to Ward's original remand motion and on
August 20, 1993, responded to Ward's amended motion. On November
3, 1993, the district court issued a memorandum opinion and
order, granting Ward's amended motion to remand and returning the
case to state court. Citing to our decision in Foster v. Mutual
Life Marine & Island Ins. Co., 986 F.2d 48 (3d Cir. 1993),2 the
2
. In Foster, after affirming a remand order which was
based on the doctrines of abstention and comity, we took the
opportunity to resolve the question as to when the thirty-day
period for removal in the first paragraph of 28 U.S.C. § 1446(b)
is triggered. We decided that the time limit for removal is
triggered when a writ of summons, praecipe or complaint provides
adequate notice to the defendant of federal jurisdiction. 986
F.2d at 54.
district court rejected counsel's affidavit as evidence of Ward's
damages, and held that because the writ and complaint included in
Liberty Mutual's notice of removal did not establish the amount
in controversy necessary to support federal jurisdiction, remand
was in order.
In the course of subsequent discovery, Liberty Mutual
obtained Ward's response to a document request which stated that
Ward incurred $156,045.89 in attorneys fees arising out of its
dispute with Liberty Mutual for the years 1987 to 1993.3
On April 6, 1994, Liberty Mutual filed a second notice
of removal, attaching Ward's discovery response regarding
attorneys fees for the purpose of establishing the required
federal jurisdictional monetary amount. On April 28, 1994, Ward
followed with a motion to remand, asserting, inter alia, that
Liberty Mutual's second removal notice failed to establish that
Ward's damages exceed $50,000. Without giving Liberty Mutual an
opportunity to respond, the district court granted Ward's motion.
In a memorandum opinion and order dated May 9, 1994, the district
court again cited to Foster, 986 F.2d at 48, and concluded that
Ward's discovery response could not be used to demonstrate the
amount in controversy requirement of diversity jurisdiction.
Referring to its prior remand opinion, the district court found
3
. By asking for the amount of fees Ward incurred over a
number of years prior to the 1993 commencement of the Allegheny
County, Pennsylvania, action, the discovery request apparently
was not limited to this action. In its brief, Ward clarifies
that the $156,045.89 represents fees incurred in all three of the
parties' lawsuits. See n.1, supra.
that Liberty Mutual's second removal suffered from the same
deficiency as the first, and concluded that remand was required.
Thus, the district court issued an order returning the case to
the state Court of Common Pleas.
Liberty Mutual then filed a petition for writ of
mandamus, requesting that we direct the district court to vacate
the May 9, 1994 remand order; reinstate the case and permit
Liberty Mutual an opportunity to respond to Ward's remand motion;
and find that Ward's discovery response constitutes "other paper"
under the second paragraph of section 1446(b) which may establish
removability. Ward, in turn, filed a motion for damages for
frivolous appeal pursuant to Fed. R. App. P. 38.
II.
The threshold question before us is whether we have
jurisdiction to review the district court's remand order. We
must determine whether the district court's decision to remand
which was made without giving Liberty Mutual the opportunity to
respond to Ward's motion may be considered in light of the bar to
appellate review of remand orders set forth in section 1447(d).
We turn first to the removal statutes, particularly the
history of section 1447(d).
A.
Congress enacted a comprehensive statutory scheme for
the removal of state court actions to federal court. 28 U.S.C.
§§ 1441-1452. Section 1441(a) provides in pertinent part:
Except as otherwise expressly provided by Act
of Congress, any civil action brought in a
State court of which the district courts of
the United States have original jurisdiction,
may be removed by the defendant or the
defendants, to the district court of the
United States for the district and division
embracing the place where such action is
pending.
Section 1446 sets forth the procedure for removing a
case to federal court, and section 1447 covers procedure after
removal has occurred. Section 1447(c) specifically provides for
the remand of a case that has been removed under section 1446 and
delineates two categories for removal: (1) a "defect in the
removal procedure" and (2) the absence of subject matter
jurisdiction:
(c) A motion to remand the case on the
basis of any defect in removal procedure must
be made within 30 days after the filing of
the notice of removal under section 1446(a).
If at any time before final judgment it
appears that the district court lacks subject
matter jurisdiction, the case shall be
remanded.
Section 1447(d), which speaks to the reviewability of
remand orders, severely circumscribes our authority to review by
providing that except for civil rights cases removed pursuant to
28 U.S.C. § 1443, "[a]n order remanding a case to the State court
from which it was removed is not reviewable on appeal or
otherwise. . . ." By adopting section 1447(d) and its statutory
predecessors, Congress sought to make the judgment of a district
court remanding a case final and conclusive in order to avoid the
delay caused by appellate review of remand decisions. United
States v. Rice, 327 U.S. 742, 751-52 (1946). In keeping with
this policy, until 1976, section 1447(d) was construed to
prohibit review of all remand orders without exception. In re
TMI Litigation Cases Consolidated II, 940 F.2d 832, 840 (3d Cir.
1991), cert. denied, ___ U.S.___, 112 S. Ct. 1262 (1992).
In 1976, the Supreme Court decided Thermtron Prod.,
Inc. v. Hermansdorfer, 423 U.S. 336 (1976). There, the district
court had remanded a case removed from state court on the basis
of an overcrowded docket. The plaintiffs sought a writ of
mandamus from the Court of Appeals for the Sixth Circuit
compelling the district court to exercise jurisdiction over the
action. The court of appeals denied the petition, relying on the
bar to review in section 1447(d).
Reversing, the Supreme Court concluded that section
1447(d) operates to preclude review of only those remand orders
which rely on the grounds contained in the controlling statute,
section 1447(c). The Court held that sections 1447(c) and
1447(d) must be read together and that "only remand orders issued
under § 1447(c) and invoking the grounds specified therein . . .
are immune from review under § 1447(d)." Id. at 346.
Acknowledging that it had declared an exception to the seemingly
absolute prohibition to review in section 1447(d), the Court
stated:
There is no doubt that in order to
prevent delay in the trial of remanded cases
by protracted litigation of jurisdictional
issues, . . . Congress immunized from all
forms of appellate review any remand order
issued on the grounds specified in § 1447(c),
whether or not that order might be deemed
erroneous by an appellate court. But we are
not convinced that Congress ever intended to
extend carte blanche authority to the
district courts to revise the federal
statutes governing removal by remanding cases
on grounds that seem justifiable to them but
which are not recognized by the controlling
statute. That justice may move more slowly
in some federal courts than in their state
counterparts is not one of the considerations
that Congress has permitted the district
courts to recognize in passing on remand
issues. Because the District Judge remanded
a properly removed case on grounds that he
had no authority to consider, he exceeded his
statutorily defined power; and issuance of
the writ of mandamus was not barred by §
1447(d).
Id. at 351 (citation omitted). Further, the Court recognized
that mandamus was the "appropriate remedy to require the District
Court to entertain the remanded action." Id. at 352.
One year later, the Supreme Court revisited the issue
of section 1447(d)'s prohibition on appellate review of remand
orders in Gravitt v. Southwestern Bell Tel. Co., 430 U.S. 723
(1977). In Gravitt, the plaintiffs, some of whom were citizens
of Texas, filed an action in a Texas state court. After the
plaintiffs dropped all claims against the only defendant alleged
to be a Texas citizen, the remaining defendants removed the case
to federal court on the basis of diversity jurisdiction.
Following extensive discovery and pretrial activity, the
plaintiffs uncovered a pleading that one of the defendants,
Southwestern Telephone Company, an allegedly Missouri citizen,
had submitted in an unrelated state court proceeding. In that
pleading, Southwestern had averred that it was a Texas citizen.
The plaintiffs filed a motion for remand, asserting that complete
diversity did not exist. Refusing to hear contrary evidence from
Southwestern and citing to the doctrine of judicial estoppel, the
district court held that Southwestern was estopped to allege its
Missouri citizenship as a basis for diversity jurisdiction, and
granted the plaintiffs' motion to remand on the grounds that
subject matter jurisdiction was lacking. Southwestern commenced
a mandamus proceeding to compel the district court to retain the
case.
Concluding that a remand based on the doctrine of
judicial estoppel was not contemplated by section 1447(c), the
Court of Appeals for the Fifth Circuit held that the Supreme
Court's decision in Thermtron permitted review. The court noted
that the district court relied exclusively on the doctrine of
judicial estoppel to grant the remand without examining whether
Southwestern was a Texas citizen, and held that the doctrine
could not be used to defeat Southwestern's statutory right to a
federal forum. Accordingly, the court issued a writ of mandamus
ordering the district court to determine whether the parties were
in fact diverse. In a subsequent opinion, the panel determined
that the district court was not required to inquire further into
the diversity issue inasmuch as the plaintiffs did not challenge
Southwestern's Missouri citizenship as a factual matter, but
stood squarely on the estoppel theory as a matter of law to bar
Southwestern from asserting diverse citizenship. Sitting en
banc, the court concluded that the use of doctrine of judicial
estoppel was erroneous, and issued a writ of mandamus directing
that the remand order be vacated.
In a tersely worded, two-page per curiam opinion, the
Supreme Court reversed, not mentioning the doctrine of judicial
estoppel. Gravitt, 430 U.S. at 724. The Court stated that
"[t]he District Court's remand order was plainly within the
bounds of § 1447(c) and hence was unreviewable by the Court of
Appeals, by mandamus or otherwise", and re-emphasized the rule
set down in Thermtron that remands issued pursuant to section
1447(c) are not reviewable, "whether erroneous or not". Id. at
723; Thermtron, 423 U.S. at 343.
B.
Since Thermtron and Gravitt, we have analyzed the
prohibitive reach of section 1447(d) in a wide variety of
circumstances. At the outset, however, in order to address the
specific reviewability issue presented here and determine which
of our cases speak most clearly to the issue, we must decide the
precise nature of the district court's May 9, 1994 remand order.
While Ward characterizes the order as "jurisdictional", Liberty
Mutual describes it as based on a "defect in removal procedure".
In Liberty Mutual's view, the district court remanded under the
first sentence of section 1447(c) merely because it objected to
the discovery response Liberty Mutual attached to its notice of
removal; not under section 1447(c)'s second sentence because it
found that subject matter jurisdiction was lacking. Liberty
Mutual contends that the district court never grappled with the
question of jurisdiction, pointing to the absence of a finding
regarding the amount in controversy between the parties as proof
of its position.
Since the district court found that Liberty Mutual's
two removal notices were similarly deficient and incorporated the
reasoning enunciated in its first opinion into its second
opinion, we consider the court's November 3, 1993 and May 9, 1994
opinions together to determine the basis for the court's May 9,
1994 remand decision. We initially observe that the court began
its November 3, 1993 analysis by noting that the statute
authorizing removal provides that an action is removable only if
it could have initially been brought in a federal court and that
the party desiring removal bears the burden of establishing the
requirements of diversity jurisdiction. The issue the district
court confronted in each opinion was whether the papers that
Liberty Mutual placed before it established the amount in
controversy requirement of diversity jurisdiction. Despite
Liberty Mutual's position to the contrary, the court found that
Liberty Mutual's notices of removal did not show that Ward's
damages exceed $50,000. While it is true that the court refused
to consider the information set forth in the discovery response
attached to Liberty Ward's second removal notice in reaching its
May 9, 1994 decision, the court did not remand because it
concluded that Liberty Mutual violated one of the formalities
related to the removal process by including an inappropriate
document in the notice. Rather, the court remanded because it
concluded that Liberty Mutual failed to establish the threshold
monetary amount essential to the court's jurisdiction. We thus
conclude that the court's May 9, 1994 remand order rested on
jurisdictional grounds. See Baris v. Sulpicio Lines Inc., 932
F.2d 1540, 1544 (5th Cir.), cert. denied, ___ U.S.___, 112 S. Ct.
430 (1991) ("As used in [section 1447(c)], a `procedural' defect
is any defect that does not go to the question of whether the
case originally could have been brought in federal district
court. . .").4
C.
Having concluded that the district court's remand was
jurisdictional, we turn for guidance to our cases which address
the reviewability under section 1447(d) of a remand order based
on a district court's determination that subject matter
jurisdiction was lacking. In In re TMI Litigation Cases
Consolidated II, 940 F.2d 832 (3d Cir. 1991), cert. denied, ___
U.S.___, 112 S. Ct. 1262 (1992), the plaintiffs commenced actions
in a Pennsylvania state court for personal and economic injuries
arising out of an incident at the Three Mile Island nuclear
4
. In discussing the alternative grounds for remand set
forth in section 1447(c), Professor Moore has explained that
section 1447(c) "makes a distinction between formal defects in
removal procedure . . . [and] lack of subject matter
jurisdiction", and has noted that "[a] motion to remand [under
the first sentence of section 1447(c)] must be made within 30
days after removal, if the objections are of a character that can
be waived, such as formal and modal matters pertaining to the
procedure for removal or the non-removability of a proceeding
otherwise within federal jurisdiction." 1A J. Moore & B. Ringle,
Moore's Federal Practice § 0.168[4.-1] at 642, 644 (2d ed. 1993)
(footnotes omitted).
facility. The defendants removed, asserting that since the
plaintiffs' claims arose under the Price-Anderson Amendments Act
of 1988, 42 U.S.C. § 2011 et seq., those claims must be tried in
federal court. The plaintiffs filed a motion for remand claiming
that despite Congress' explicit statement to the contrary in the
Act, their claims did not "arise under" federal law. The
district court remanded for lack of federal subject matter
jurisdiction. The remand order was triggered by the court's
holding that the Act, which contained the grant of federal
jurisdiction upon which the defendants relied for removal, was
itself unconstitutional.
In determining the threshold question concerning our
jurisdiction, we reviewed the legislative and judicial history of
section 1447(d) in great detail, and held that the remand order
was subject to our review. In doing so, we concluded that
because "the jurisdictional determination of the district court,
resting as it did upon the conclusion that the entire statutory
scheme authorizing removal is unconstitutional, was not the type
of federal subject matter jurisdiction decision intended to be
governed by the terms of or the policy underlying section
1447(c)", section 1447(d) had no application. Id. at 845. In
other words, since the ruling which triggered the remand order
was not the routine type of jurisdictional determination
involving the presence of diversity or a federal question which
Congress entrusted to the district courts, our review was not
prohibited by section 1447(d). Id. at 844.
Likewise, in Aliota v. Graham, 984 F.2d 1350 (3d Cir.),
cert. denied, ___U. S.___, 114 S. Ct. 68 (1993), we analyzed the
reach of section 1447(d) in connection with an order remanding a
removed case to a state court on the grounds that federal
jurisdiction was lacking. There a defamation action had been
filed in a Pennsylvania state court against five federal
employees in their individual capacities. After the case was
removed to federal court under section 2679(d) of the Westfall
Act, 28 U.S.C. § 2671 et seq., the United States Attorney for the
Western District of Pennsylvania, exercising the authority
delegated by the Attorney General of the United States, certified
that the five individual defendants were acting within the scope
of their employment. The United States was then substituted as
the sole defendant. The plaintiffs filed a motion to remand and
a motion to strike the substitution of the United States, arguing
that the individual defendants had not been acting within the
scope of their employment when they allegedly made the defamatory
comments. After conducting an evidentiary hearing, the district
court entered an order striking the substitution and remanding
the case to the state court. The United States filed a notice of
appeal,5 as well as a petition for mandamus seeking review of the
remand.
5
. We concluded that the district court's order
resubstituting the originally named defendants in place of the
United States was reviewable by way of an appeal under 28 U.S.C.
§ 1291. 984 F.2d at 1352-54.
In deciding whether the remand order was reviewable, we
initially analyzed the Westfall Act and its provisions regarding
removal, and determined that when a tort suit is filed in a state
court and the Attorney General certifies that the employee was
acting within the scope of his employment and removes the case,
the district court does not have authority to remand on the
grounds that the Attorney General's certification was erroneous.
Id. at 1356. This determination was dictated by the terms of the
Westfall Act which express Congress' intent that subject matter
jurisdiction is conclusively established upon the Attorney
General's certification. Id. We concluded that the district
court exceeded its statutorily defined powers in section 1447(c)
in remanding the case because there was no jurisdictional
question before it, and held that section 1447(d) did not bar
review. Id. at 1357.
Before we decided the merits of the dispute, we noted,
however, that this case stood in "marked contrast to the normal
jurisdictional decisions made in connection with remand . . .
thus . . . fall[ing] outside the types of cases section 1447(d)
was intended to cover", and cautioned that "[i]t [did] not follow
from our decision that anytime the district court misinterprets a
jurisdictional statute we have the authority to review the remand
decision . . . [since] [s]uch an exception would obviously
swallow the rule." Id. Thus, our holding was limited to the
"narrow situation where the district court has relied on a factor
in its jurisdictional analysis that Congress intended to exclude
from consideration of the jurisdictional issue." Id.6
We again had the opportunity to examine the limits of
section 1447(d) in connection with a jurisdictional remand order
in Carr v. American Red Cross, 17 F.3d 671 (3d Cir. 1994). Carr
had commenced a personal injury action in the state courts to
recover damages from Red Cross and the Osteopathic Medical Center
of Philadelphia arising out of an HIV-injected blood transfusion
he received during an operation. Red Cross invoked its federal
charter and filed a notice of removal to the district court.
Acting sua sponte, the district court remanded the case to the
state court, rejecting Red Cross' contention that its charter
automatically conferred federal jurisdiction over civil actions
to which it is a party. After remand, Carr filed an amended
complaint. In its answer, Osteopathic asserted a cross-claim for
contribution and indemnity against Red Cross. Following the
Supreme Court's decision in American Nat. Red Cross v. S.G., ___
U.S. ___, 112 S. Ct. 2465 (1992), which held that the Red Cross
charter confers jurisdiction over civil cases to which Red Cross
is a party, Red Cross again removed the action to the district
court. Carr then filed a motion to dismiss Red Cross from the
case and a motion for remand to the state court, asserting that
6
. Guided by our decision in Aliota, we subsequently held
in Powers v. Southland Corp. 4 F.3d 223 (3d Cir. 1993), that
section 1447(d) did not bar our review of a portion of a district
court's jurisdictional remand order granting the plaintiff a
relation back amendment because it was separate from and
logically preceded the remand decision. Id. at 226-30.
the district court no longer had jurisdiction as a result of a
joint tortfeasor release that Carr had given Red Cross. The
district court granted Carr's motions for dismissal and remand on
the basis that once Red Cross entered into the release with Carr,
federal subject matter jurisdiction no longer existed.
Osteopathic filed an appeal7 and a petition for writ of mandamus
directing the district court to vacate the remand order.
In considering whether section 1447(d) permitted our
review, we cited our holdings in TMI Litigation and Aliota that
section 1447(d) bars review of remand orders based on the routine
jurisdictional determinations that Congress intends for the
district courts to make. Id. at 682. Recognizing that we were
presented with a "garden-variety, routine jurisdictional
determination", we nonetheless expanded our remand reviewability
principles and announced that "where a separable and final
determination has been made by the district court, whether
substantive or jurisdictional, which determination triggers
remand, we will review both the underlying final order and the
remand order itself." Id. at 682-83. Our decision to address
the remand was based upon our serious concern that unless the
remand order were reviewed, Osteopathic would not have been able
to obtain review of the district court's preceding order of
dismissal, and the state court would have been obligated to give
7
. We concluded that the district court's order dismissing
Red Cross was reviewable under 28 U.S.C. § 1291. 17 F.3d at 675-
79.
full faith and credit to the unappealed decision of the federal
court. Id. at 683.
III.
With the principles enunciated in Thermtron, Gravitt
and our own cases interpreting the reach of section 1447(d) in
mind, we turn to the remand order before us. To determine
whether we have the authority to review despite section 1447(d)'s
prohibition, we consider two interrelated questions: first, was
the district court's order of the type that Congress intended to
shield from appellate review under section 1447(d); and second,
did the district court act consistently with its statutory
authority defined in section 1447(c).
The district court's decision regarding Liberty
Mutual's failure to establish the monetary amount essential to
diversity jurisdiction is precisely the type of routine and
regular jurisdictional decision that we determined in TMI and in
Aliota Congress expected the district courts to make in removal
cases and intended to insulate from challenge by enacting section
1447(d). Further, the district court's remand order was not made
in the context of a separable and final determination, so that
the addition to reviewability that we announced in Carr does not
apply. In our view, this case is most analogous to and
controlled by Gravitt. As in Gravitt, the district court here
determined that a basic element of diversity jurisdiction was
lacking, and issued a remand order that falls "plainly within the
grounds of § 1447(c)". 430 U.S. at 723. Therefore, under
Thermtron, the court's order is shielded from review by section
1447(d). 423 U.S. at 336. See Bregman v. Alderman, 955 F.2d 660
(11th Cir. 1992) (even where the district court's remand order
was issued without a finding as to whether diversity of
citizenship in fact existed and could have been mistaken,
appellate review was barred by section 1447(c) since the order
was based on a lack of subject matter jurisdiction, not a defect
in removal procedures).
IV.
Additionally, we conclude that section 1447(c)
authorizes the district court to remand as it did, without
affording Liberty Mutual an opportunity to respond to Ward's
motion. As we must, we start with the plain language of the
statute -- "[i]f at any time before final judgment it appears
that the district court lacks subject matter jurisdiction, the
case shall be remanded" -- and note that it allows and indeed
compels a district court to address the question of jurisdiction,
even if the parties do not raise the issue. Moreover, the
general rule that federal courts have an ever-present obligation
to satisfy themselves of their subject matter jurisdiction and to
decide the issue sua sponte applies equally in removal cases.
Steel Valley Auth. v. Union Switch and Signal Div., 809 F.2d
1006, 1010 (3d Cir. 1987), cert. dismissed, 484 U.S. 1021 (1988).
See also American Policyholders Ins. Co. v. Nyacol Products,
Inc., 989 F.2d 1256, 1258-59 (1st Cir. 1993), cert. denied,
___U.S.___, 114 S. Ct. 682 (1994); Ziegler v Champion Mortg. Co.,
913 F.2d 228, 229 (5th Cir. 1990). Thus, since a motion and
response are not required (i.e., are not the basis) for
jurisdictional remand orders under section 1447(c), the district
court did not exceed its statutory authority by not waiting for a
response from Liberty Mutual. Stated alternatively, the absence
of Liberty Mutual's response did not deprive the district court
of its statutory power to remand once it determined that subject
matter jurisdiction was lacking.
In support of reviewability, however, Liberty Mutual
contends that the district court exceeded its section 1447(c)
authority by breaching rules of fundamental fairness in not
permitting it to respond. Assuming arguendo that the process by
which the district court remanded was unfair and also violative
of established legal principles, it does not follow that Liberty
Mutual's argument prevails, for it essentially equates error with
unauthorized action. Were this so, then every erroneous remand
decision would be reviewable, and section 1447(d) would have no
meaning. If Thermtron and Gravitt teach nothing else, they
instruct that when a district court exercises its power to remand
under section 1447(c), section 1447(d) allows a district court to
err; it necessarily follows that section 1447(d) also allows a
district court to be procedurally unfair. Just as section
1447(d) prohibits our review of the merits of a remand order that
falls within the parameters of section 1447(c), it prohibits our
review of the manner by which such an order was rendered.
Furthermore, our decision is in keeping with the policy
of minimizing delay which underlies the section 1447(d) bar to
review. If, despite section 1447(d)'s prohibition, parties
opposing remand are permitted to invoke appellate review upon
claims of a district court's unfairness, the potential for
disruption and delay, which Congress sought to minimize by
enacting section 1447(d), would be far-reaching.
Thus, we hold that review of the district court's
remand order in this case is barred by section 1447(d). No
matter how faulty we might consider the district court's
reasoning or methods, section 1447(d) prohibits us from reviewing
an action the district court was empowered to take, and one that
Congress intended to be final. The dissent correctly points out
that our opinion does not require a district court to grant a
motion for remand on jurisdictional grounds without waiting for a
response; and indeed, our decision should not be read as an
imprimatur on the district court's actions. This is a matter of
applying Congress' intent in enacting the removal statutes, and
it is here where we and the dissent part ways. Accordingly,
having determined that we do not have jurisdiction to review, we
will not address the substance of the questions presented in
Liberty Mutual's petition.
V.
Ward requests that we impose damages under Federal Rule
of Appellate Procedure 38 against Liberty Mutual for having filed
the petition for writ of mandamus. Ward characterizes the
petition as frivolous and asserts that the issue Liberty Mutual
raises is completely lacking in merit .
Rule 38 states:
Damages for Delay
If a Court of Appeals shall determine
that an appeal is frivolous, it may award
just damages and single or double costs to
the appellee.
Fed. R. App. P. 38.
We employ an objective standard in determining whether
an appeal is frivolous. Hilmon Co. (V.I.) v. Hyatt Int'l, 899
F.2d 250, 253 (3d Cir. 1990). We impose damages under Rule 38
only when an appeal is frivolous. Mellon Bank Corp. v. First
Union Real Estate Equity and Mortg., 951 F.2d 1399, 1413 (3d Cir.
1991). We find that Liberty Mutual raised a novel question in
its petition regarding the parameters of sections 1447(c) and
1447(d), and presented a meritorious argument in favor of
reviewability. Thus, we will not impose Rule 38 damages against
Liberty Mutual.
VI.
Because we do not have jurisdiction to review under 28
U.S.C. § 1447(d), we will dismiss Liberty Mutual's petition for
writ of mandamus. Having determined that Liberty Mutual's
petition was not frivolous, we will deny Ward's motion for
damages pursuant to Fed. R. App. P 38.
Liberty Mutual Ins. Co. & Liberty Mutual Fire Ins. Co. v. Ward
Trucking Corp. & The Hon. Gustave Diamond, No. 94-3377
BECKER, Circuit Judge, dissenting.
Nothing is more central to the regime of federal civil
procedure than the principle of notice and opportunity to be
heard. This appeal is from an order of the district court that
granted defendant's motion to remand a removed case back to the
state court on the ground that the plaintiff had not demonstrated
sufficient damages to support subject matter jurisdiction,
without affording plaintiff notice and an opportunity to be
heard, even by a simple letter memorandum, on the question
whether a dispute existed as to the existence of jurisdictional
amount.8 The majority blesses this procedure. I cannot.
Section 1447(c) authorizes such remand where "it
appears that the district court lacks subject matter
jurisdiction." I do not see how a deficiency can "appear" unless
the party opposing the remand can say at least something about
the matter, and hence I read section 1447(c) as requiring at
least minimal notice and opportunity to be heard. In my view,
the majority's crabbed and rigid reading of section 1447(c),
which gives rise to an egregious departure from bedrock
principle, is unsustainable. The majority's defensive statement
that section 1447(d) also "allows a district court to be
8
. I agree with the majority opinion's conclusion that the
remand order at issue here was "jurisdictional," rather than one
based on a "defect in removal procedure." Maj. Op. at 13.
procedurally unfair," Maj. Op. at 21, is as startling as it is
distressing.
Nor do I think that we would violate section 1447(d) by
reviewing this remand order. Our opinion in Air-Shields, Inc. v.
Fullam, 891 F.2d 63 (3d Cir. 1989), holds that when the district
court does not comply with the requisites of section 1447(c),
section 1447(d) does not shelter a remand order from review. If,
as I believe, section 1447(c) requires an opportunity to respond
before remand may be ordered, then that is as much one of "the
parameters of a district court's statutorily defined power to
remand under 28 U.S.C. § 1447(c)," Maj. Op. at 2, as the holding
of Air-Shields that sua sponte remands cannot be ordered after
the 30 day time limit. In short, I cannot conceive that either
the district court's admittedly broad remand power under section
1447(c) or the delay avoidance policy of section 1447(d) renders
a district court's ex parte determination that it lacks subject
matter jurisdiction, made without notice or opportunity to be
heard, inviolate and unreviewable. This is especially so in a
case such as this where the district court is remanding for the
second time.
Because the district court did not offer notice and an
opportunity to be heard, even minimally, it acted in excess of
its authority in entering the remand order, and as a result,
section 1447(d) does not bar review thereof.9 I would therefore
9
. The majority opinion makes much of Aliota v. Graham, 984 F.2d
1350 (3d Cir.), cert. denied, 114 S. Ct. 68 (1993), and Carr v.
grant Liberty Mutual's petition for writ of mandamus and direct
the district court to allow Liberty Mutual to respond to Ward
Trucking's remand motion before ruling upon it. These views are
informed not merely by my sense of the fundaments of our judicial
polity, but also by a venerable history, with which I begin.
I. § 1447(c) AND THE REQUIREMENT OF NOTICE AND
OPPORTUNITY TO BE HEARD
A. Origins of the Statutory Remand Power
The remand power currently embodied in section 1447(c)
originally required district courts in all cases to give the
affected parties notice and an opportunity to be heard before
remanding for a lack of jurisdiction. Section 1447(c) had its
genesis in the Judiciary Act of 1875. Section 5 of the Act
provided:
That if, in any suit commenced in a circuit court or
removed from a State court to a circuit court of the
United States, it shall appear to the satisfaction of
said circuit court, at any time after such suit has
been brought or removed thereto, that such suit does
not really and substantially involve a dispute or
controversy properly within the jurisdiction of said
circuit court, or that the parties to said suit have
(..continued)
American Red Cross, 17 F.3d 671 (3d Cir. 1994). The discussion
of these cases, however, is besides the point. No one argues
that the remand order at issue here was was anything but a
jurisdictional remand based on a non-constitutional, non-
severable determination that the requisite amount in controversy
had not been established. The real question is whether the
district court entered its remand order in a manner authorized by
section 1447(c), in which case the reviewability bar of section
1447(d) applies, or whether the district court exceeded its
authority by remanding without first offering to Liberty Mutual
notice and an opportunity to be heard, in which case we may
review the remand order. Thus, Air-Shields is the controlling
precedent, as explained infra Part II.
been improperly or collusively made or joined, either
as plaintiffs or defendants, for the purpose of
creating a case cognizable or removable under this act,
the said circuit court shall proceed no further
therein, but shall dismiss the suit or remand it to the
court from which it was removed as justice may require,
and shall take such order as to costs as shall be just;
but the order of said circuit court dismissing or
remanding said cause to the State Court shall be
reviewable by the Supreme Court on writ or error or
appeal, as the case may be.
Act of March 3, 1875, ch. 137, § 5, 18 Stat. 472 (emphasis
supplied). At that time circuit courts were federal trial
courts, and so, under this act, the trial court was directed to
remand an action if, inter alia, "it shall appear to [its]
satisfaction . . . that such suit does not really and
substantially involve a dispute or controversy properly within
the jurisdiction of" the court.10
That this provision should be interpreted as containing
a requirement that the trial court hear from the affected parties
before remanding is shown by the Supreme Court's opinion in
Morris v. Gilmer, 129 U.S. 315, 9 S. Ct. 289 (1889). That case
involved an appeal from the circuit court for the Middle District
of Alabama. The plaintiff, a recent Alabama citizen and resident
claiming to be a Tennessee citizen, had filed suit against
defendants who were citizens of Alabama. The defendants moved to
dismiss, arguing that the court lacked jurisdiction because the
10
. The court might also dismiss, since this provision governed
both removed actions and ones originally filed in the circuit
courts.
plaintiff was actually an Alabama citizen. After considering
affidavit and deposition testimony, "and after argument by
counsel for the respective parties," the court denied the motion.
Id. at 321, 9 S. Ct. at 291 (emphasis supplied). When the
plaintiff prevailed on final judgment, the defendants appealed.
Not reaching other, substantive questions presented by
the appeal, the Supreme Court concluded that the circuit court
should have dismissed the case under section five of the
Judiciary Act of 1875. Id. at 324-25, 9 S. Ct. at 292. The
court explained that if the plaintiff had not changed his state
of citizenship to Tennessee, the circuit court was obliged to
dismiss the suit for lack of jurisdiction. Interpreting the
statute, the Court explained that
this duty arose only when it appeared to the
satisfaction of the court that the suit was not one
within its jurisdiction. But if the record discloses a
controversy of which the court cannot properly take
cognizance, its duty is to proceed no further, and to
dismiss the suit; and its failure or refusal to do
what, under the law applicable to the facts proved, it
ought to do, is an error . . . .
Id. at 325, 9 S. Ct. at 292. This duty comes into play whenever
the court determines that jurisdiction is lacking, for "the court
is bound to ask and answer [the jurisdictional question] for
itself, even when not otherwise suggested," id. at 326, 9 S. Ct.
at 292 (quoting Mansfield, C. & L.M. Ry. Co. v. Swan, 111 U.S.
379, 382, 4 S. Ct. 510, 511 (1884)). Moreover, and more to the
point,
the statute does not prescribe any particular mode in
which such fact [the lack of jurisdiction] may be
brought to the attention of the court. It may be done
by affidavits, or the depositions taken in the cause
may be used for that purpose. However done, it should
be upon due notice to the parties affected by the
dismissal.
Id. (emphases supplied).
Thus, although the Supreme Court concluded that lack
of jurisdiction was manifest from the record before the circuit
court, and hence that the court erroneously failed to dismiss the
case in compliance with the substance of section five, id. at
328-29, 9 S. Ct. at 293, the Court was nonetheless satisfied that
the circuit court had complied with section five's procedural
strictures:
In the case before us the question [of subject matter
jurisdiction] was formally raised, during the progress
of the cause, by written motion, of which the plaintiff
had due notice, and to which he appeared and objected.
So that there can be no question as to any want of
opportunity for him to be heard, and to produce
evidence in opposition to the motion to dismiss.
Id. at 327-28, 9 S. Ct. at 293 (emphases supplied).
The court distinguished this case from Hartog v.
Memory, 116 U.S. 588, 6 S. Ct. 521 (1886). There, although the
complaint properly alleged diversity jurisdiction, the defendant
did not challenge the citizenship allegations until after
receiving an unfavorable verdict. The Supreme Court said that
if, from any source, the court is led to suspect that
its jurisdiction has been imposed upon by the collusion
of the parties or in any other way, it may at once of
its own motion cause the necessary inquiry to be made,
either by having the proper issue joined and tried, or
by some other appropriate form of proceeding, and act
as justice may require for its own protection against
fraud or imposition . . . .
Id. at 591, 6 S. Ct. at 522 (quoted in Morris, 129 U.S. at 327, 9
S. Ct. at 292-93) (emphases supplied). The Morris Court
contrasted the actions of the circuit court in its case with
those of the trial court in Hartog, which had
summarily dismissed the action, upon the ground solely
of want of jurisdiction, without affording the
plaintiff any opportunity whatever to rebut or control
the evidence upon the question of jurisdiction.
Morris, 129 U.S. at 327, 9 S. Ct. at 293 (emphasis supplied).
The trial court's failure to give the plaintiff an opportunity to
be heard before dismissing for lack of jurisdiction was enough to
warrant the Supreme Court's reversing the order of dismissal and
remanding for further proceedings. Id. Thus, the Supreme Court
read section five as requiring that the trial court provide the
affected parties with notice of its intent to remand, i.e., to
rule on the existence of subject matter jurisdiction, as well as
an opportunity to be heard.
B. Evolution of Section 1447(c)
Nothing in the subsequent evolution of section 1447(c)
from section five of the Judiciary Act of 1875 forward
demonstrates an intent to abrogate the salutary restriction
described above, i.e., that the (original) statutory power of the
federal trial courts to remand for lack of jurisdiction required
that remand orders be entered only after giving the affected
parties notice and an opportunity to be heard. The following
discussion of the evolution of section 1447(c) does not, for the
most part, treat the companion development of the bar on
appellate review of remand orders now expressed in 28 U.S.C.
1447(d), for the point of the discussion is to show that section
1447(c) should be held to require district courts to give notice
and an opportunity to be heard to the parties before remanding a
removed case. Once that is demonstrated, section 1447(d) ceases
to be a problem because that section does not bar review of an
order entered in excess of the district court's authority.
Section five was modified by the Judiciary Act of 1887,
which repealed the provision allowing review of remand orders "on
writ or error or appeal." See Act of March 3, 1887, ch. 373,
§§ 2, 6, 24 Stat. 552. The provision authorizing remand for lack
of jurisdiction, however, was unaffected by the 1887 act (or by
the 1888 act correcting errors in the enrollment of the 1887 act,
Act of March 3, 1887, ch. 866, 25 Stat. 433). State of Minnesota
v. Northern Sec. Co., 194 U.S. 48, 65, 24 S. Ct. 598, 602 (1904);
Waite v. City of Santa Cruz, 184 U.S. 302, 325, 22 S. Ct. 327,
335 (1902).
In 1911, Congress codified the Judicial Code. Act of
March 3, 1911, ch. 231, 36 Stat. 1087. Aside from not
resurrecting the repealed reviewability provision, the 1911 act
re-enacted section five's remand provision almost verbatim. Act
of March 3, ch. 231, § 37, 36 Stat. 1098. Thus, the 1911 Code
displays no intent to eliminate the notice-and-hearing
requirement.
The 1948 re-codification of the Judicial Code and the
1949 corrections thereto produced the remand provision's next
change in form. See Act of June 25, 1948, ch. 646, § 1447, 62
Stat. 869, 939, amended, Act of May 24, 1949, ch. 139, § 84, 63
Stat. 89, 102. As a result of these changes, the new 28 U.S.C.
§ 1447(c) read (with emphasis supplied):
If at any time before final judgment it appears that
the case was removed improvidently and without
jurisdiction, the district court shall remand the case,
and may order the payment of costs.
Again, as the Supreme Court has explained, the change from the
1911 Judicial Code to section 1447 was "no[t] inten[ded] to
change the prior law substantively," but was meant "to recodify
the pre-1948 law without material change insofar as the
provisions of §§ 71 and 80 of the old Code here relevant were
concerned." Thermtron, 423 U.S. at 350 n.15, 96 S. Ct. at 592
n.15.11
Moreover, the "it appears" language carried through the
re-codification, albeit with minor modification: the statute
dropped the modifier "to the satisfaction of the district court"
(and switched from the future to the present tense). The
elimination of court-centered language from the requirement that
the lack of jurisdiction "appear" moves in the opposite direction
of what one would expect if Congress intended to delete a
requirement that courts give parties notice and an opportunity to
be heard before remanding cases for lack of subject matter
jurisdiction. Thus, the requirement, still in effect in the
Judicial Code of 1911, survived re-codification in 1948.
The current version of section 1447(c),
A motion to remand the case on the basis of any defect
in removal procedure must be made within 30 days after
the filing of the notice of removal under section
1446(a). If at any time before final judgment it
appears that the district court lacks subject matter
jurisdiction, the case shall be remanded.
28 U.S.C.A. § 1447(c) (1994), results from one of many amendments
to the Judicial Code made by Congress in 1988. See Judicial
11
. Although the dissent in Thermtron was less sanguine than the
majority that no change was intended by the 1948 re-codification,
see Thermtron, 423 U.S. at 359-60, 96 S. Ct. at 597 (Rehnquist,
J., dissenting), it offered no evidence of the type of "changes
in substance" that were intended, id. at 360, 96 S. Ct. at 597,
and at all events, the language relevant here -- the intact
provision that the lack of jurisdiction shall "appear" --
remained. See infra.
Improvements and Access to Justice Act of 1988, Pub. L. 100-702,
102 Stat. 4642. The two sentences of this version of section
1447(c) were produced by splitting up the sole sentence of the
pre-amendment provision. In doing so, Congress replaced the two
prior authorized remand grounds -- if a case was removed
"improvidently," or if a case was removed "without jurisdiction"
-- with, respectively, a sentence authorizing remands of cases
for a "defect in removal procedure" and one authorizing remands
for a "lack[ of] subject matter jurisdiction." See Rothner v.
City of Chicago, 879 F.2d 1402, 1411 & n.7 (7th Cir. 1989). The
scanty legislative history of this change (a mere two
paragraphs), see H.R. REP. NO. 100-889, 100th Cong., 2d Sess. 72
(1988), reprinted in 1988 U.S.C.C.A.N. 5982, 6033; see also 134
CONG. REC. S16284, S16308 (daily ed. Oct. 14, 1988); Court Reform
and Access to Justice Act: Hearings on H.R. 3152 Before the
Subcomm. on Courts, Civil Liberties and the Administration of
Justice of the House Comm. on the Judiciary, 100th Cong., 1st &
2d Sess. 97-98 (1987-1988), reveals no intent to change the
requirements for district court remands, other than to require
that motions for remands for removal procedure defects be made
within thirty days of removal. Importantly, the statute retained
(without change) the operative phrase, "it appears."
C. Consistency with Judicial Policy
As the foregoing analysis shows, section 1447(c)
requires the district court to give the affected parties notice
and an opportunity to be heard before remanding a case. This
makes sense, for subject matter jurisdiction -- although a
threshold issue -- is not something fit for judicial notice, and
the law and facts of a given case must generally be determined,
in our adversary system, by the court, after hearing from the
interested parties.12
More specifically, district courts are obligated to
listen to the affected parties before dismissing a case for lack
of subject matter jurisdiction. We have explained this in
Neiderhiser v. Borough of Berwick, 840 F.2d 213, 216 n.6 (3d Cir.
1988). There, the district court had dismissed the plaintiff's
action for lack of subject matter jurisdiction because it
concluded, sua sponte, that the suit did not present a live case
or controversy. Id. at 216. The fact that the district court
12
. The majority's invocation of cases where the court sua
sponte raised the issue of subject matter jurisdiction is not to
the contrary. The practice at least of this Circuit is to allow
the parties the opportunity to be heard even when sua sponte
raising the issue of subject matter jurisdiction. See, e.g.,
Lunderstadt v. Colafella, 885 F.2d 66, 69 (3d Cir. 1989); Knop v.
McMahan, 872 F.2d 1132, 113 (3d Cir. 1989); Lovell Mfg. v.
Export-Import Bank of the United States, 843 F.2d 725, 729 (3d
Cir. 1988); Lewis v. International Brotherhood of Teamsters,
Chauffeurs, Warehousemen and Helpers of America, Local Union No.
771, 826 F.2d 1310, 1312 (3d Cir. 1987); Kiick v. Metropolitan
Edison Co., 784 F.2d 490, 492 (3d Cir. 1986); Stibitz v. General
Pub. Utilities Corp., 746 F.2d 993, 995 (3d Cir. 1984); Local
Union 334, United Ass'n of Journeymen and Apprentices of Plumbing
and Pipe Fitting Indus. of U.S. and Canada, AFL-CIO, 628 F.2d
812, 813 (3d Cir. 1980); Medlin v. Boeing Vertol Co., 620 F.2d
957, 958 & n.1 (3d Cir. 1980); Jersey Central Power & Light Co.
v. Local Unions 327, 749, 1289, 1298, 1303, 1309 and 1314 of
Int'l Brotherhood of Elec. Workers, 508 F.2d 687, 698 n.30 (3d
Cir. 1975).
sua sponte considered dismissal was not a problem in itself, but
the procedure used was impermissible:
While the district court's consideration of the
jurisdictional issue sua sponte was proper, the court
did not afford the parties the opportunity to brief or
present evidence on this issue. We find this lack of
opportunity to be heard improper. The court below
should have allowed [the plaintiff] sufficient time to
present evidence or otherwise respond on the issue of
jurisdiction before it determined that none existed.
Id. at 216 n.6 (emphases supplied). We did not need to remand
there only because -- on the extant record -- we ruled in favor
of the plaintiff, holding that subject matter jurisdiction
existed.
As a general matter, the district court is required to
give parties notice and an opportunity to be heard before
remanding a removed case. See Local 336, American Federation of
Musicians, AFL-CIO v. Bonatz, 475 F.2d 433, 437 (3d Cir. 1973)
("Even on [issues of jurisdictional fact] the record must clearly
establish that after jurisdiction was challenged the plaintiff
had an opportunity to present facts by affidavit or by
deposition, or in an evidentiary hearing, in support of his
jurisdictional contention.") (emphasis supplied); Prakash v.
American Univ., 727 F.2d 1174, 1179-80 (D.C. Cir. 1984) ("When
subject matter jurisdiction is questioned, the court must, of
course, satisfy itself of its authority to hear the case, and in
so doing, it may resolve factual disputes. The court has
considerable latitude in devising the procedures it will follow
to ferret out the facts pertinent to jurisdiction, and normally
it may rely upon either written or oral evidence. The court
must, however, afford the nonmoving party `an ample opportunity
to secure and present evidence relevant to the existence of
jurisdiction.'") (quoting Gordon v. National Youth Work Alliance,
675 F.2d 356, 363 (D.C. Cir. 1982) (Spotswood W. Robinson, III,
C.J., concurring)).
While these cases go to jurisdictional facts, I do not
see why their reasoning is not also applicable to "jurisdictional
law." Indeed, in the instant case, Liberty Mutual contends that
the district court adopted verbatim Ward Trucking's mistaken view
of the requirements of 28 U.S.C. § 1446(b) for establishing
amount in controversy, and that this error led the district court
incorrectly to conclude that the plaintiff could not use
discovery responses to support removal. In Liberty Mutual's
submission, the district court's confusion as to jurisdictional
law led the court to conclude incorrectly that Liberty Mutual had
not shown a jurisdictional fact, i.e., an amount in controversy
in excess of $50,000. See discussion in the margin.13
13
. Although the majority opinion refers generally to the basis
for the district court's remand order, it paints an incomplete
picture. The majority notes that the district court entered its
first remand order because Ward Trucking's state court complaint
and writ failed to show a sufficient amount in controversy, and
because the affidavit of Liberty Mutual's counsel, in which he
opined that the amount in controversy exceeded $50,000, was
legally insufficient. And, as the majority explains, the
district court remanded the second time after it refused to
consider the discovery responses that had since been submitted by
Liberty Mutual in support of removal. Despite the fact that
Liberty Mutual thus presented admissions of the plaintiff, and
These views are strongly supported by the discussion in
In re Continental Casualty Co., 29 F.3d 292, 294 (7th Cir. 1994),
(..continued)
not merely a statement of its own counsel's views, the majority
simply states:
The issue the district court confronted in each opinion
was whether the papers that Liberty Mutual placed
before it established the amount in controversy
requirement of diversity jurisdiction.
Maj. Op. at 12. This characterization of the issues is
incomplete.
Under the first paragraph of 28 U.S.C. § 1446(b), the
issue in the first removal and remand was whether the "initial
pleadings" filed by the defendant in the state court action
established that suit could have been brought in federal court.
See Foster v. Mutual Life Marine & Island Ins. Co., 986 F.2d 48,
54 (3d Cir. 1993) cited in Maj. Op. at 4 n.2. However, under the
second paragraph of section 1446(b), the issue in the second
removal and remand was whether Liberty Mutual had presented the
district court with "other paper" that showed an adequate amount
in controversy. Foster resolved only the question of what
constituted "pleadings" and did not define "other paper"; indeed,
several reported decisions, including one from the Middle
District of Pennsylvania, hold that discovery responses may
constitute "other paper" that can establish amount in controversy
under section 1446(b). See, e.g., Zawacki v. Penpac, Inc., 745
F. Supp. 1044, 1047 (M.D. Pa. 1990) (deposition testimony). But
Ward Trucking cited none of these cases to the district court,
instead using the Foster definition of pleadings to argue in its
remand motion that the discovery responses were inadmissible for
amount in controversy purposes. Without even asking whether
Liberty Mutual disagreed with that construction of section
1446(b) (at which time Liberty Mutual could have called these
other cases to the court's attention for consideration), the
district court entered a remand order that word for word adopted
Ward Trucking's interpretation of Foster and section 1446(b).
I do not, of course, opine as to whether Liberty Mutual
or Ward Trucking correctly interpreted section 1446(b). My
discussion is meant solely to illustrate the dangers inherent in
the majority's interpretation of section 1447(c) as authorizing
district courts to remand without giving the parties notice and
an opportunity to be heard.
where the Court of Appeals for the Seventh Circuit held that
section 1447(c) does not authorize district courts to remand
cases for procedural defects absent a motion by a party. In so
concluding, the court stressed the importance of hearing from the
affected parties:
By acting without any motion, district judges increase
the risk of error--both legal error and error in
understanding the parties' desires. Ours is an
adversarial system, and courts rely on lawyers to
identify the pertinent facts and law. In this case the
district judge stated the facts correctly but
apparently was unaware of cases that had discussed the
issue and reached conclusions at odds with his own.
Perhaps these other cases are incorrect; we have no
views on the subject. But the district court should
have solicited the parties' submissions before acting,
to avoid what has happened in this case--extended
disputation, potentially leading to another change of
forum. If the district judge should entertain the
parties' views before remanding a case, then he also
ought to wait for a motion . . . .
Id. at 295 (citation omitted). Because the court of appeals
required the district court to hear from the parties before
remanding, it concluded that the district court could not sua
sponte remand on the grounds of procedural defect. See id.
Although the plaintiff's ability to waive procedural defects
supported the court's conclusion that district courts must await
a party's motion before remanding for procedural defects, id.,
the independent requirement that district courts must "solicit
the views of the parties" flowed from the more general concerns
about risks of error in light of the nature of our adversarial
court system.14
14
. The construction of 1447(c) described above also accords
with the sound practice of many of our district court judges.
See, e.g., Allergy Diagnostics Lab. v. The Equitable, 785
F. Supp. 523, 524 (W.D. Pa. 1991) (addressing arguments made by
removing defendant "upon the court's raising the jurisdictional
issue at a status conference"); McDonough v. Blue Cross of N.E.
Penn., 131 F.R.D. 467, 470-72 (W.D.Pa. 1990) (remanding only
after addressing and rejecting defendants contentions in support
of jurisdiction); Mall v. Atlantic Fin. Federal, 127 F.R.D. 107,
108-09 (W.D. Pa. 1989) (although neither plaintiff nor defendants
moved for remand, both plaintiff and one defendant questioned the
court's jurisdiction); id. at 110 (defendant opposing remand
filed supplemental brief arguing for jurisdiction); Recchion v.
Kirby, 637 F. Supp. 290, 291 (W.D. Pa. 1986) ("[The district
court] sua sponte addressed the propriety of removal . . . and
the basis for . . . subject matter jurisdiction and ordered the
parties to file briefs on the issue.").
D. Consistency with Congressional Policy
This construction of section 1447(c) accords with the
policy underlying section 1447. Certainly, in curtailing review
of remands issued for lack of jurisdiction, Congress did seek "to
make the judgment of a district court remanding a case final and
conclusive in order to avoid the delay caused by appellate review
of remand decisions." Maj. Op. at 7 (emphasis supplied). But by
concluding that the risk of erroneous remand orders was not great
enough to outweigh the threat posed by protracted litigation over
jurisdictional questions, Congress must have presupposed the
exercise of judgment. Cf. Kloeb v. Armour & Co., 311 U.S. 199,
201, 204, 61 S. Ct. 213, 215-16 (1940) (where, on plaintiff's
remand motion, district court took evidence before deciding to
grant remand, remand was unreviewable, for the remand statutes
"entrust determination concerning such matter to the informed
judicial discretion of the district court") (emphasis supplied).
That expectation would conform with my view that section 1447(c)
requires the district court to afford the affected parties notice
and opportunity to be heard before it remands cases to state
court.
The assumption that district courts arrive at reasoned
remand decisions, unlikely to be wrong, also underlies the
decision of In re TMI Litigation Cases Consolidated II, 940 F.2d
832 (3d Cir. 1991), and supports my conclusions here. As the
majority relates, that case held that section 1447(d) did not bar
review of a district court's remand order that was based on the
lack of subject matter jurisdiction flowing from the district
court's determination that the act giving rise to federal
question jurisdiction was itself unconstitutional. Maj. Op. at
13-14. How was this court able to review the remand order,
"plainly within the bounds of § 1447(c)," Gravitt, 430 U.S. at
723, without offending section 1447(d)? Because we concluded
that "the jurisdictional determination of the district court
. . . was not the type of federal subject matter jurisdiction
decision intended to be governed by the terms of or the policy
underlying section 1447(c)." Maj. Op. at 14 (quoting TMI
Litigation, 940 F.2d at 845) (internal quotation marks omitted).
As the majority here explains, "the ruling which triggered the
remand order was not the routine type of jurisdictional
determination . . . which Congress entrusted to the district
courts[.]" Id. (emphasis supplied).
TMI Litigation might be distinguished on the grounds
that it involved a distinction among the subject matters of
district court determinations, rather than the procedures, but it
supports my view that Congress did not expect district courts to
accept verbatim a moving party's statement of the law without
listening to the opposing party's views, for that is not a
"routine" method of making judicial decisions. Given that judges
are human, a court that would rule without listening is
appreciably more likely to err than one that considers both
sides' input. Since we ordinarily do not scrutinize district
courts' subject matter jurisdiction remand decisions for
substantive error, it is critically important that we preserve
the prophylactic requirement that the court hear first from the
parties before remanding. Indeed, providing notice and an
opportunity to be heard may even reduce delays, for by reducing
the chances of erroneous remands, this rule makes it less likely
that parties will need to remove actions more than once (where
the time period permits) in order to use a subsequent removal
notice to explain the governing law to the district court.
This construction of 1447(c) is also consistent with
Supreme Court precedent on reviewability of remand orders. In
Thermtron, the district court had entered an order to show cause
as to why the case should not be remanded and the parties had
responded to that order. See Thermtron, 423 U.S. at 339-40, 96
S. Ct. at 587. In Gravitt, 430 U.S. at 723, 97 S. Ct. at 1439,
the district court had afforded the removing defendant an
opportunity to be heard before granting the plaintiff's remand
motion. See 416 F. Supp. 830, 831 & n.2 (1976).
E. Summary
In conclusion, the Supreme Court early on held that
remands under the 1875 forerunner of section 1447(c) required
that the affected parties first be given notice and an
opportunity to be heard. Nothing in the subsequent development
of the remand provision was intended to abolish this requirement,
which does not conflict with section 1447(d)'s underlying policy
of avoiding delay. I must therefore disagree with the majority
that section 1447(c) authorized the district court to remand
without first allowing Liberty Mutual to respond to Ward
Trucking's remand motion.
II. § 1447(d) AND REVIEWABILITY OF
THE DISTRICT COURT'S REMAND ORDER
Because the district court failed to provide Liberty
Mutual an opportunity to be heard before remanding, its remand
order was unauthorized. As a result, under our remand
reviewability jurisprudence, section 1447(d) does not prevent us
from issuing a writ of mandamus to compel the district court to
remain within the bounds of its authority by awaiting Liberty
Mutual's response to Ward Trucking's remand order. I elaborate
on these points as follows.
A. Reviewability of Procedurally Unauthorized Remand Orders
Our opinion in Air-Shields, Inc. v. Fullam, 891 F.2d 63
(3d Cir. 1989), dictates the conclusion that remand orders
entered in a manner not authorized by section 1447(c) are
reviewable despite the limitations in section 1447(d). In Air-
Shields, the district court sua sponte remanded a case that it
concluded had been filed untimely and without a required surety
bond. Id. at 64-65. Because we determined that section 1447(c)
would not have allowed the district court to remand for these
procedural defects outside thirty days from the filing period,15
id. at 65, we concluded that by doing so "the district court
exceeded its statutorily defined power," id. at 66 (quoting
Thermtron, 423 U.S. at 351, 96 S. Ct. at 593) (internal quotation
marks omitted). Thus, we were not barred by section 1447(d) from
issuing a writ of mandamus directing the district court to vacate
its remand order. Id.
The situation here is analogous. Since, as I have
shown, notice and an opportunity to be heard before remand are
"essential to action under . . . § 1447(c), then the lack
[thereof] deprives a district judge of power to return a case to
state court." Continental Casualty Co., 29 F.3d at 294. By
granting Ward Trucking's motion to remand without allowing
Liberty Mutual to respond, the district court here exceeded its
15
. We did not decide whether the district court was ever
permitted to remand for defect in removal procedure absent a
motion by a party. See id. at 65.
statutorily defined power. I of course agree with the majority
that "only remand orders issued under § 1447(c) and invoking the
grounds specified therein . . . are immune from review under
§ 1447(d)." Maj. Op. at 8 (quoting Thermtron, 423 U.S. at 346,
96 S. Ct. at 590) (internal quotation marks omitted and emphasis
supplied here). But the district court's failure to give Liberty
Mutual notice and opportunity to be heard precluded this from
constituting a "remand order issued under § 1447(c)."
B. Unauthorized Action or Unreviewable Error
While the majority does not address the Air-Shields
analysis, it responds to Liberty Mutual's arguments by attacking
the construction of section 1447(c) discussed above, accusing
Liberty Mutual of "equat[ing] error with unauthorized action."
Maj. Op. at 21. This remonstration, however, is misdirected.
The section 1447(c) requirement that district courts
hear from the parties before remanding does not, as the majority
believes, dictate that "every erroneous remand decision would be
reviewable." Id. Rather, since the district court's authority
to remand a removed case extends to all situations where it finds
a lack of subject matter jurisdiction after allowing the parties
notice and an opportunity to be heard, the courts of appeals
would review only those decisions where the district court fails
to listen to the parties before remanding. If the court receives
argument from each side before acting yet still remands for lack
of subject matter jurisdiction, review would generally be
unavailable, regardless of how erroneous the court may have been
in its jurisdictional determination.
Indeed, the majority is itself guilty of conflating
error with unauthorized action. I agree that Thermtron and
Gravitt teach that "when a district court exercises its power to
remand under section 1447(c), section 1447(d) allows a district
court to err." Id. However, it does not as a matter of logic
"necessarily follow[] that section 1447(d) also allows a district
court to be procedurally unfair." Id. The majority's deduction
would be sound only if procedural unfairness were merely one more
form of error. But that cannot be, for to so hold would
undermine the legitimacy of our procedural system. Procedural
fairness is the predicate of legitimacy. And since
(concomitantly) section 1447(c) does not authorize judges to
remand without hearing from the parties, a district court does
not exercise "its power to remand under section 1447(c)" when it
remands as the district court did here, for it possesses no such
power. Such conduct would not then be an "error" permitted to
stand by section 1447(d) any more than would be the remand at
issue in Thermtron, which was entered for docket control reasons;
both actions are ultra vires.
The majority's reasoning is therefore either circular
or inconsistent with Thermtron. The majority's confident
assertion that "[j]ust as section 1447(d) prohibits our review of
the merits of a remand order that falls within the parameters of
section 1447(c), it prohibits our review of the manner by which
such an order is rendered," id. (emphasis supplied), begs the
question: Does a remand entered without hearing from the
removing party "fall within" section 1447(c)? Since, as I have
argued, it does not, section 1447(d) is no bar to our review.
III. CONCLUSION
I believe that the majority errs in construing section
1447(c) to authorize district courts to issue remand orders
without giving the parties notice and an opportunity to be heard.
Fortunately, the damage this holding does to remand jurisprudence
may in time prove to be circumscribed, for nothing in the
majority's opinion today requires district courts to engage in
this constitutionally dubious practice.16 Courts might never
need to address this question if district courts would in the
future give the notice and opportunity to be heard of which I
have spoken. This would not undermine section 1447's policy of
delay avoidance because, unless the district court desires to
extend it, the substantive remand ruling can be made without
elaborate filings or procedures.
For the foregoing reasons, I respectfully dissent.
16
. It remains an open question whether such conduct violates
the Due Process Clause, for Liberty Mutual has not brought a
constitutional challenge.