Hudson United Bank v. LiTenda Mortgage Corp.

Opinions of the United

1998 Decisions States Court of Appeals

for the Third Circuit

4-15-1998

Hudson United Bank v. Litenda Mtg Corp

Precedential or Non-Precedential:

Docket 97-5074

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Filed April 15, 1998

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 97-5074

HUDSON UNITED BANK, banking corporation of the State

of New Jersey,

Appellant

v.

LITENDA MORTGAGE CORP.;

THEODORE H. HOWARD;

LINDA M. HOWARD, his wife;

FEDERAL HOME LOAN MORTGAGE CORPORATION,

doing business as Freddie Mac;

GARY S. YOUNG;

YOUNG, DIMIERO & SAYOVITZ;

RICHARD G. NORWALK AND NORWALK ASSOCIATES

On Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 96-cv-02204)

Argued Thursday, December 11, 1997

BEFORE: GREENBERG, ROTH, and GARTH,

Circuit Judges

(Opinion filed April 15, 1998)

Richard W. Mackiewicz, Jr. (Argued)

Burke & Mackiewicz

625 Washington Street

Hoboken, New Jersey 07430

Attorneys for Appellant

Lance J. Wolf (Argued)

Federal Home Loan Mortgage

Corporation

Legal Department

8200 Jones Branch Drive

McLean, VA 22102

Gerald T. Ford

Landman, Corsi, Ballaine &

Ford

One Gateway Center

Suite 500

Newark, NJ 07102

Attorneys for Appellees

Litenda Mortgage Corp.,

Theodore H. Howard,

Linda M. Howard, his wife,

Federal Home Loan Mortgage

Corporation d/b/a Freddie Mac

Brian Corrigan

Law Office of Brian Corrigan

150 Morris Avenue

P.O. Box 476

Springfield, NJ 07081

Attorney for Appellees

Richard G. Norwalk and

Norwalk Associates

2

OPINION OF THE COURT

GARTH, Circuit Judge:

This is an appeal of a district court order denying a

motion for reconsideration filed by Hudson United Bank

("Hudson"). The district court had dismissed Hudson's

federal claims, and remanded the state claims to state

court pursuant to 28 U.S.C. S 1367(c). When Hudson

moved for reconsideration of the dismissal and attempted to

amend its complaint, the district court held that it had lost

jurisdiction to hear the case when the remand order was

sent to state court. Accordingly, Hudson's motion was

denied.

We hold that the district court had jurisdiction to

entertain Hudson's motions. Thus, we reverse.

I.

On March 20, 1995, Theodore H. Howard, Linda M.

Howard, and their company, LiTenda Mortgage Corp.,

(collectively, "LiTenda") borrowed almost two million dollars

from the Hudson United Bank ("Hudson") tofinance

LiTenda's mortgage selling and servicing business. At the

time, LiTenda was a mortgage seller/servicer approved by

the Federal Home Loan Mortgage Corporation ("Freddie

Mac").1 As collateral for the loan, Hudson accepted

LiTenda's contractual rights to income derived from

servicing a portfolio of mortgages for Freddie Mac.

On May 2, 1996, Freddie Mac terminated LiTenda's

eligibility as a seller/servicer. In a letter faxed to LiTenda,

Freddie Mac stated that LiTenda's eligibility was revoked

_________________________________________________________________

1. Freddie Mac is a federally chartered, sponsored, and regulated

corporation that purchases home mortgages from lenders and sells

securities to the public to fund the purchases. Mortgages are only

purchased from, and serviced by, approved seller/servicers under the

terms of contracts authored by Freddie Mac. See 12 U.S.C. S 1454 (1989

& West Supp. 1997); American Bankers Mortgage Corp. v. Federal Home

Loan Mortgage Corp., 75 F.3d 1401, 1404 (9th Cir. 1996).

3

because LiTenda had violated their contractual agreement

in at least nine different ways--among them, by pledging

LiTenda's contractual rights as collateral to secure the loan

with Hudson.2 The termination letter directed LiTenda to

return all files and mortgage documents to Freddie Mac,

who in turn transferred its portfolio to another servicer.

Left without Freddie Mac's business, LiTenda's financial

condition deteriorated, and the loan with Hudson went into

default.3 When Hudson sought the contract rights it

believed it was owed under the loan agreement with

LiTenda, Freddie Mac rejected Hudson's claim.

Hudson responded by filing a complaint in state court

containing claims against both LiTenda and Freddie Mac.4

Hudson's claims against Freddie Mac alleged that Freddie

Mac was illegally withholding from Hudson the benefits it

was due as collateral under the terms of its loan agreement

with LiTenda. Freddie Mac then removed the case to federal

court pursuant to 12 U.S.C. S 1452(f), which confers federal

subject matter jurisdiction over any civil action to which

Freddie Mac is a party.

Once in federal court, Freddie Mac filed a motion to

dismiss for failure to state a claim pursuant to Fed. R. Civ.

_________________________________________________________________

2. The contractual relationship between Freddie Mac and LiTenda was

governed by a Seller/Servicer Guidebook authored by Freddie Mac. The

Guidebook set out the rights and duties to which LiTenda was subject as

a seller/servicer of Freddie Mac's mortgages. The nine violations of the

Guidebook that Freddie Mac alleged included: failure to account properly

for the disposition of funds; failure to fund and safeguard funds

properly; failure to comply with financial responsibilities; and failure

to

maintain qualified facilities and staff.

LiTenda subsequently petitioned Freddie Mac for review of the

termination decision. On August 1, 1996, Freddie Mac affirmed its

decision to terminate LiTenda's eligibility, calling LiTenda's violations

of

the contract "especially egregious," and stating that LiTenda's "record at

Freddie Mac was marginal at best."

3. LiTenda filed a petition in the United States Bankruptcy Court for the

District of New Jersey on November 21, 1996.

4. Hudson also named several other parties as defendants. For the sake

of clarity, however, we will focus our analysis here on the claims against

LiTenda and Freddie Mac.

4

P. 12(b)(6). Freddie Mac argued that Hudson had failed to

state a claim against Freddie Mac because Hudson's claim

under the loan agreement derived solely from LiTenda's

rights, and LiTenda's contract rights had been extinguished

when Freddie Mac revoked LiTenda's privileges as a

seller/servicer. Because LiTenda had no rights against

Freddie Mac, Hudson could not use its claim to LiTenda's

rights to state a cause of action against Freddie Mac.

On November 26, 1996, the district court granted Freddie

Mac's motion to dismiss for failure to state a claim.

Agreeing with Freddie Mac that Hudson had no claim

against Freddie Mac because LiTenda had no such claim,

the district court dismissed all of the counts against

Freddie Mac under Fed. R. Civ. P. 12(b)(6).5 Left without an

original basis for federal subject matter jurisdiction, the

district court exercised its discretion under 28 U.S.C.

S 1367(c), and remanded the remaining portions of the case

against LiTenda. A certified copy of the remand order was

mailed to the state court the next day, on November 27,

1996.

On December 6, 1996, Hudson filed several post-

dismissal motions in the district court. First, Hudson

moved for the district court to reconsider its dismissal

pursuant to Fed. R. Civ. P. 59(e) and Fed. R. Civ. P. 60(b).

According to Hudson, the district court had wrongly

concluded that LiTenda's rights were extinguished when

Freddie Mac revoked LiTenda's status as a seller/servicer.

Pointing to the contract between Freddie Mac and LiTenda,

Hudson noted that this was true only if LiTenda's status

had been revoked "with cause." If the termination was

"without cause," Hudson continued, then the contract

entitled LiTenda (and thus Hudson) to a termination fee

equal to the market value of LiTenda's servicing portfolio.

Although Hudson had not raised this issue previously,

_________________________________________________________________

5. Properly relying on Pension Benefits Guar. Corp. v. White Consol.

Indus., 998 F.2d 1192, 1196 (3d Cir. 1993), the district court considered

the portions of the Guidebook attached by the defendant and relied on

by both parties. Those portions of the Guidebook made clear that

LiTenda had no continuing rights in the servicing contract that Hudson

could rely on, such that it was clear as a matter of law that Hudson was

not entitled to relief.

5

Hudson now argued that the termination was "without

cause."

Hudson also moved to amend its complaint. The

amended complaint contained what Hudson modestly

termed "prophylactic" changes in its cause of action; in

particular, the proposed amended complaint alleged for the

first time that Freddie Mac had terminated LiTenda's

portfolio "without cause."6

The district court denied Hudson's motion in an order

dated January 13, 1997. The district court quoted Trans

Penn Wax Corp. v. McCandless, 50 F.3d 217, 225 (3d Cir.

1995) for the proposition that "a district court loses

jurisdiction over a case once it has completed the remand

by sending a certified copy of the remand order to the state

court." Id. Because a certified copy of the remand order had

been sent to the state court on November 27, 1996, the

district court concluded that its jurisdiction to hear

Hudson's motion for reconsideration had been divested on

that date. The district court denied Hudson's motion

without reaching the merits.

Hudson filed a timely appeal.

II.

Although neither party contests our appellate

jurisdiction, we have an independent duty to ensure that

we have jurisdiction over a case or controversy before we

attempt to resolve it. See PAS v. Travelers Ins. Co., 7 F.3d

349, 352 (3d Cir. 1993). In this case, the inquiry is

complicated by the fact that there are three distinct orders

that Hudson has attempted to appeal.

The first is the November 26, 1996 order dismissing

Hudson's claims against Freddie Mac under Fed. R. Civ. P.

12(b)(6), which we will refer to as "the dismissal order." The

second is the November 26, 1996 order remanding the

remaining claims against LiTenda to state court pursuant

_________________________________________________________________

6. Hudson also moved for a stay of the remand order. As the remand

order had already been sent to state court, however, this motion was

moot.

6

to 28 U.S.C. S 1367(c), which we will refer to as "the

remand order." The third is the January 13, 1997 order

denying Hudson's motion for reconsideration, which we will

refer to as "the reconsideration order."

Our cases establish that we have appellate jurisdiction

over the dismissal order pursuant to 28 U.S.C. S 1291. See

Carr v. American Red Cross, 17 F.3d 671, 674-77 (3d Cir.

1994) (holding that a dismissal order preceding aS 1367(c)

remand order is reviewable by direct appeal pursuant to 28

U.S.C. S 1291). The reasoning of Carr also makes clear that

we have appellate jurisdiction over the reconsideration

order pursuant to 28 U.S.C. S 1291. See id.

Although we will resolve this case without reviewing the

remand order, we note that we are authorized to exercise

jurisdiction over the remand order as well. It is clear that

28 U.S.C. S 1447(d) does not bar appellate review of the

remand order, because it was issued not under S 1447(d),

but rather pursuant to 28 U.S.C. S 1367(c). See, e.g.,

Pennsylvania Nurses Ass'n v. Pennsylvania State Educ.

Ass'n, 90 F.3d 797, 801 (3d Cir. 1996) (holding that

S 1447(d) is inapplicable to a remand order made pursuant

to S 1367(c)), cert. denied, 117 S. Ct. 947 (1997). Second,

although we would be able to review the remand order only

through a petition for mandamus, see PAS, 7 F.3d at 353,

we may treat Hudson's notice of appeal as a mandamus

petition. See Korea Exch. Bank v. Trackwise Sales Corp., 66

F.3d 46, 51 (3d Cir. 1995).7

_________________________________________________________________

7. Judge Greenberg is of the view that when, as here, a district court

dismisses the federal claims from a case removed from state court and

remands the state claims to state court pursuant to 28 U.S.C.

S 1367(c)(3), instead of exercising supplemental jurisdiction over them,

that, upon reversal of the dismissal of the federal claims, the court of

appeals may order that the state claims be reinstated without exercising

mandamus jurisdiction. He believes that an appeal by the plaintiff in

such a case is, in reality, from the dismissal order and not from the

remand order, because the plaintiff may be content to litigate the state

claims in state court where the plaintiff started the action. Therefore,

the

order from the court of appeals reinstating the state claims in federal

court is merely incidental to the reversal of the dismissal and is

authorized by 28 U.S.C. S 2106 which provides that after a reversal of a

ruling by a district court, a court of appeals "may remand the cause and

direct the entry of such appropriate judgment, decree or order, or require

such further proceedings to be had as may be just under the

circumstances."

7

III.

The question posed by this case is whether the district

court had jurisdiction to adjudicate Hudson's motion for

reconsideration. Our answer is yes.

A.

Congress has designed our federal court system so that

it affords civil litigants ample opportunity to seek review of

adverse decisions in the inferior courts. First, litigants may

request reconsideration of an unfavorable result in the

district court. See Fed. R. Civ. P. 59(e), 60(b). Second,

losing parties are entitled to seek review of "all final orders"

in the court of appeals. See 28 U.S.C. S 1291. Third,

litigants may request rehearing by a full court of appeals.

See Fed. R. App. P. 35. The animating concept behind this

forgiving structure is that justice is best served by the

checks and balances afforded by regular opportunities for

judicial review.

Despite this general design, the need to deter vexatious

litigation has led Congress to carve out exceptions in which

review is curtailed or even eliminated. One such exception

is the rule against review of remand orders following

improper removal to federal court, currently codified at 28

U.S.C. S 1447(c) and (d).8 This longstanding rule divests the

_________________________________________________________________

8. The text of 28 U.S.C. S 1447(c) and (d) reads as follows:

(c) A motion to remand the case on the basis of any defect other

than lack of subject matter jurisdiction 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. An

order remanding the case may require payment of just costs and

any actual expenses, including attorney fees, incurred as a result

of

the removal. A certified copy of the order of remand shall be

mailed

by the clerk to the clerk of the State court. The State court may

thereupon proceed with such case.

(d) An order remanding a case to the State court from which it was

removed is not reviewable on appeal or otherwise, except that an

order remanding a case to the State court from which it was

removed pursuant to section 1443 of this title shall be reviewable

by

appeal or otherwise.

8

federal courts of jurisdiction to review a district court's

remand order when the order is based on a defect in

removal procedure or lack of subject matter jurisdiction.

See Thermtron Products, Inc. v. Hermansdorfer, 423 U.S.

336, 346, 96 S. Ct. 584, 590 (1976); Quackenbush v.

Allstate Ins. Co., ___ U.S. ___, ___, 116 S. Ct. 1712, 1718

_________________________________________________________________

28 U.S.C. S 1447 (West Supp. 1997).

Those attempting to divine the meaning of S 1447 from its text would

do well to recall that sometimes "a page of history is worth a volume of

logic." New York Trust Co. v. Eisner, 256 U.S. 345, 349, 41 S. Ct. 506,

507 (1921) (Holmes, J.). In Thermtron Products, Inc. v. Hermansdorfer,

423 U.S. 336, 96 S. Ct. 584 (1976), the Supreme Court examined the

century-old history of Congress's bar to review of remand orders and

concluded that the bar to review contained in S 1447(d) covered only

remands issued because a case was removed improperly or the district

court was without subject matter jurisdiction. See id. at 346-50; 96 S.

Ct. at 590-93. At the time of Thermtron, the text of S 1447(c) provided

the

textual hook for this interpretation. It then read:"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 just costs." Thermtron , 423 U.S. at 342, 96 S. Ct.

at 589. Thus, the Court concluded that the bar to review contained in

S 1447(d) applied only when the remand was based on the grounds

specified in S 1447(c). See id. at 346; 96 S. Ct. at 590.

Congress has since amended S 1447(c) several times, most recently in

1996. The amendments have focused on creating and clarifying time

limits concerning when a plaintiff can seek a remand following removal

from state court. These amendments have slightly altered the grounds

for remand "specified" in the text of S 1447(c): the statute now speaks of

remands for lack of subject matter jurisdiction, and remands for "any

defect other than lack of subject matter jurisdiction." 28 U.S.C. S

1447(c)

(West Supp. 1997). Rather than take this change in language as a

wholesale rejection of Thermtron and a dramatic expansion of S 1447(d),

we will assume that Congress did not mean to upset the Thermtron limits

on S 1447(d), and that they remain in effect unchanged by the

intervening textual modifications to S 1447(c). This conclusion is

supported by the legislative history of the 1996 amendment. See H.R.

REP. NO. 104-799 at 2-3 (1996), reprinted in 1996 U.S.C.C.A.N. 3417,

3418-19 (suggesting that the textual changes were designed only to

clarify Congressional intent on the timing of remands made for reasons

other than lack of subject matter jurisdiction).

9

(1996). The purpose of the rule is to prevent a party to a

state lawsuit from using federal removal provisions and

appeals as tool to introduce substantial delay into a state

action. See Thermtron, 423 U.S. at 354-55, 96 S. Ct. at

594-95 (Rehnquist, J., dissenting). Without S 1447(d), a

party to a state action could remove the action to federal

court, await remand, request reconsideration of the

remand, appeal, request rehearing, and then file a petition

for a writ of certiorari, all before being forced to return to

state court several years later. See Greenwood v. Peacock,

384 U.S. 808, 832-33, 86 S. Ct. 1800, 1815 (1966)

(contemplating the delay that would result if state criminal

defendants could regularly seek removal under 28 U.S.C.

S 1443, and then seek review of subsequent remand

orders). To avoid this delay, Congress has fashioned an

exception to the general rule of review, and made a district

court's initial determination that removal was

inappropriate, a nonreviewable one.

B.

In the present case, the district court issued a remand

pursuant to 28 U.S.C. S 1367(c),9 rather than 28 U.S.C.

S 1447(c). Section 1367(c) grants district courts the

discretion to refuse to exercise supplemental jurisdiction

when "values of judicial economy, convenience, fairness,

and comity" counsel that the district court remand state

claims to a state forum. See City of Chicago v. International

College of Surgeons, ___ U.S. ___, ___, 118 S. Ct. 523, 534

(1997) (quoting Carnegie Mellon Univ. v. Cohill , 484 U.S.

343, 350, 108 S. Ct. 614, 619 (1988)). Because the original

_________________________________________________________________

9. 28 U.S.C. S 1367(c) (1993) states:

(c) The district courts may decline to exercise supplemental

jurisdiction over a claim under [28 U.S.C. S 1367](a) if--

(1) the claim raises a novel or complex issue of State law,

(2) the claim substantially predominates over the claim or claims

over which the district court has original jurisdiction,

(3) the district court has dismissed all claims over which it has

original jurisdiction, or

(4) in exceptional circumstances, there are other compelling

reasons for declining jurisdiction.

10

basis of federal jurisdiction in this case was the presence of

Freddie Mac as a party, see 12 U.S.C. S 1452(f), the district

court exercised its discretion and declined to exercise

supplemental jurisdiction over the state claims against

LiTenda following the dismissal of the claims against

Freddie Mac. See 28 U.S.C. S 1367(c)(3).

The first question posed by this case is whether the bar

to review provided by S 1447(d) is even implicated when a

district court enters a remand order pursuant toS 1367(c).

The decisions of the Supreme Court, this court, and our

sister circuits make clear that S 1367(c) remands, such as

the one entered by the district court here, do not invoke the

bar to review prescribed by S 1447(d). See, e.g., Cohill, 484

U.S. at 355 n.11, 108 S. Ct. at 621 n.11 ("Section[ ] 1447(c)

. . . do[es] not apply to cases over which a federal court has

pendent jurisdiction. Thus, the remand authority conferred

by the removal statute and the remand authority conferred

by the doctrine of pendent jurisdiction overlap not at all.");

Pennsylvania Nurses Ass'n v. Pennsylvania State Educ.

Ass'n, 90 F.3d 797, 801 (3d Cir. 1996) (holding that

S 1447(d) is inapplicable to a remand order made pursuant

to S 1367(c)); Trans Penn Wax Corp. v. McCandless, 50 F.3d

217, 224 (3d Cir. 1995) (same); PAS v. Travelers Ins. Co., 7

F.3d 349, 352 (3d Cir. 1993) (same). See also Things

Remembered, Inc. v. Petrarca, 516 U.S. 124, 130, 116 S. Ct.

494, 498 (1995) (Kennedy, J., concurring) (noting that

several other circuits have agreed that remands pursuant

to S 1367(c) do not implicate the bar to review provided by

S 1447(d)) (citing cases); Trans Penn, 50 F.3d at 224 (same)

(citing cases from eight circuits).

Although the sharp distinction between remands

authorized by S 1367(c) and remands authorized by

S 1447(c) is often misunderstood, the reason behind their

different treatment is clear. Review of S 1447(c) remands is

barred to keep parties to state actions from making

dubious allegations of federal jurisdiction in order to

forestall the prompt resolution of state cases. Thus,

S 1447(c) remands are warranted only when a federal court

has no rightful authority to adjudicate a state case that has

been removed from state court. In such cases, the statute

provides a quick, permanent, and mandatory remedy to

11

return a state case to state court. See International Primate

Protection League v. Administrators of Tulane Educ. Fund,

500 U.S. 72, 89, 111 S. Ct. 1700, 1710 (1991).

By contrast, S 1367(c) serves no such corrective purpose.

Remands authorized by S 1367(c) may be entered only when

federal subject matter jurisdiction has been affirmatively

established, via 28 U.S.C. S 1367(a), and are entered

independently of whether the case originated in state or

federal court. See International College of Surgeons, 118 S.

Ct. at 530. Thus, a district court's decision to remand

pursuant to S 1367(c) does not imply that the case was

improperly filed in federal court. Rather, it reflects the

court's judgment, reviewable on appeal for abuse of

discretion, see Sparks v. Hershey, 661 F.2d 30, 33 (3d Cir.

1981), that at the present stage of litigation it would be best

for supplemental jurisdiction to be declined so that state

issues may be adjudicated by a state court. See United Mine

Workers v. Gibbs, 383 U.S. 715, 726-27, 86 S. Ct. 1130,

1139-40 (1966). In such circumstances, there is no

pressing need to block the mechanisms of review that are

generally afforded civil litigants.

Thus, the bar to review codified at S 1447(d) is entirely

inapplicable when the basis of the remand was the district

court's discretion pursuant to S 1367(c).

C.

Freddie Mac contends that we should construe the cases

holding that the S 1447 bar to review is inapplicable when

a remand is issued under S 1367(c) as establishing that

only appellate jurisdiction is available. Conceding our

appellate jurisdiction, Freddie Mac argues that the bar to

review should nonetheless apply to post-remand motions

filed before the district court. In other words, Freddie Mac

argues that the district court lacked jurisdiction to

adjudicate the post-remand motions, but that we have

appellate jurisdiction to review the merits of the district

court's orders.

We cannot agree. It is difficult to understand how we can

exercise appellate jurisdiction over the merits of a case if

the district court in which the notice of appeal wasfiled did

12

not itself have jurisdiction when the notice of appeal was

filed. Federal jurisdiction cannot be "lost" by the district

court one day and then "found" by the court of appeals

later on. Rather, jurisdiction that is originally and properly

vested in the district court becomes vested in the court of

appeals when a notice of appeal is filed. See Venen v.

Sweet, 758 F.2d 117, 120 (3d Cir. 1985) ("As a general rule,

the timely filing of a notice of appeal is an event of

jurisdictional significance, immediately conferring

jurisdiction on a Court of Appeals and divesting a district

court of its control over those aspects of the case involved

in the appeal.") Thus, if S 1447(d) does not deny an

appellate court jurisdiction to review a remand order, it

cannot deny the district court jurisdiction to entertain a

motion for reconsideration before the notice of appeal is

filed. See, e.g., J.O. v. Alton Community Unit Sch. Dist. 11,

909 F.2d 267, 273-274 (7th Cir. 1990) (holding that a

district court has the power to reconsider its order following

a S 1367(c) remand during the time allowed forfiling a

notice of appeal).

D.

We next address whether the mailing of the S 1367(c)

remand order to state court divested the district court of

jurisdiction. The primary support for this view derives from

language in Trans Penn Wax Corp. v. McCandless, 50 F.3d

217, 224 (3d Cir. 1995), which could be read (and was

read, by the district court) to suggest that the answer to

that question is "yes." However, such a reading of the dicta

in Trans Penn would ignore the sharp distinction between

S 1447(c) remands and those remands authorized by

S 1367(c). Accordingly, we conclude that the mailing of a

remand order does not divest a district court of jurisdiction

to entertain a motion for reconsideration following a

remand order issued under S 1367(c).

Trans Penn was a labor action brought by employees in

state court against their employer. Following the employer's

removal to federal court, the employees withdrew their

federal claims and asked the district court to remand the

remaining state claims to state court. The district court did

so, exercising its discretion according to S 1367(c).

13

Subsequently, the employer filed a motion for

reconsideration, which was denied on the merits. The

employer then petitioned our court for a writ of mandamus,

arguing that the remand was inappropriate because federal

issues remained lurking within the remaining state claims.

Before reaching the merits, we addressed at length

whether the district court had jurisdiction to reconsider its

remand order on the merits. We began by noting correctly

that the S 1447(d) bar to review was inapplicable because

the remand order was issued pursuant to S 1367(c). See id.

at 224. Nonetheless, the court suggested, there was a

question as to whether the district court had jurisdiction to

reconsider its own remand order. Our own precedent, the

court intimated, was "inconclusive." Id. at 226. First, there

was a "general rule . . . that a district court loses

jurisdiction over a case once it has completed the remand

by sending a certified copy of the remand order to the state

court." Id. at 225. Second, remands authorized by S 1367(c)

were generally reviewable. Finding no evidence that a

remand order had been sent to the state court, and noting

that the S 1367(c) remand did not implicateS 1447(d), we

held that the district court retained jurisdiction to

reconsider its order of remand. See id. at 227.

The conclusion we have reached in this case is in accord

with the holding of Trans Penn. In both cases, the district

court retained jurisdiction to reconsider its remand order.

To the extent that dicta in Trans Penn could be read as

suggesting a different result would be warranted if the

remand order had been sent to state court before the

motion for reconsideration was filed, we disavow that

notion. Indeed, the law in our circuit is clear. The mailing

of a remand order divests the district court of jurisdiction

when the remand is authorized by S 1447(c). See Hunt v.

Acromed Corp., 961 F.2d 1079, 1082 (3d Cir. 1992). When

the remand is authorized by S 1367(c), the bar to review is

inapplicable and the district court may reconsider its

remand order just as it would any other order. See Trans

Penn, 50 F.3d at 227; Thomas v. LTV Corp., 39 F.3d 611,

616 (5th Cir. 1994); Alton Community Unit Sch. Dist. 11,

909 F.2d at 273-274.

14

Because the remand in this case was authorized by

S 1367(c), the mailing of the remand order to state court did

not divest the district court of jurisdiction to entertain

Hudson's motion for reconsideration.

IV.

Having determined that the district court retained

jurisdiction to adjudicate Hudson's motion for

reconsideration, we must next decide whether to proceed to

the merits of the case or reverse and remand to the district

court. Hudson argues that we should reverse the

reconsideration order of the district court, and remand this

case to the district court so it may entertain Hudson's

motion on the merits. Freddie Mac contends that in the

name of judicial economy we should address the merits of

the motion for reconsideration in this appeal.

When a district court has failed to reach a question below

that becomes critical when reviewed on appeal, an appellate

court may sometimes resolve the issue on appeal rather

than remand to the district court. See, e.g., Chase

Manhattan Bank, N.A. v. American Nat'l Bank and Trust

Co., 93 F.3d 1064, 1072 (2d Cir. 1996) (summary

judgment). This procedure is generally appropriate when

the factual record is developed and the issues provide

purely legal questions, upon which an appellate court

exercises plenary review. In such a case, an appellate

tribunal can act just as a trial court would, so nothing is

lost by having the reviewing court address the disputed

issue in the first instance. See Otto v. Variable Annuity Life

Ins. Co., 814 F.2d 1127, 1138 & n.11 (7th Cir. 1986).

Such a procedure may be inappropriate, however, when

the issue to be addressed is not a purely legal question.

When the resolution of an issue requires the exercise of

discretion or fact finding, for example, it is inappropriate

and unwise for an appellate court to step in. As the

Supreme Court has stated, "the proper role of the court of

appeals is not to reweigh the equities or reassess the facts

but to make sure that the conclusions derived from those

weighings and assessments are juridically sound and

supported by the record." Curtiss-Wright Corp. v. General

Elec. Co., 446 U.S. 1, 10, 100 S. Ct. 1460, 1466 (1980).

15

The merits of Hudson's motion for reconsideration and to

amend its pleadings fall within the zone of discretion and

judgment that is best addressed initially by the district

court. A district court's decision to deny a motion for

reconsideration is placed within the sound discretion of the

district court; factual determinations supporting its

decision are reviewed by us under a clearly erroneous

standard. See North River Ins. Co. v. CIGNA Reinsurance

Co., 52 F.3d 1194, 1203 (3d Cir. 1995). Similarly, a district

court's decision to grant or deny leave to amend pleadings

is reviewed for abuse of discretion. See Heyl & Patterson

Int'l, Inc. v. F.D. Rich Housing, 663 F.2d 419, 425 (3d Cir.

1981). It is not our place to exercise the discretion normally

afforded the district court.

Accordingly, we will not reach the merits of Hudson's

motion, and instead will remand to the district court so

that the district court can take whatever steps are

necessary to entertain Hudson's post-dismissal motions. If

Hudson's reconsideration motion is granted, and if it is

permitted to amend its complaint, the district court will

need to vacate the remand order and give appropriate

notification to the state court. If Hudson's motions are

denied, however, no such steps will be necessary: it would

be a waste of judicial effort (indeed, a needless spinning of

wheels) to reclaim the state action from state court, only to

have to order a remand again immediately thereafter. Of

course, we do not express any opinion as to the merits of

Hudson's motions, leaving it to the sound discretion of the

district court as to how it regards allegations in Hudson's

original and amended complaint, as well as the timeliness

of Hudson's "without cause" theory.

The January 13, 1997 order of the district court will be

reversed, and remanded to the district court for further

proceedings consistent with this opinion.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

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