Petition for Writ of Certiorari — Chesapeake Insurance v. Foster
Supreme Court brief1991
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gi a : Gupreme Court, U.S.
AUS 16 199]
No.
;
IN THE SDHFBE OF THE CleaK |
Supreme Court of the United States
OctToBEeR TERM, 1991
CHESAPEAKE INSURANCE COMPANY, LIMITED,
Petitioner,
VS.
CONSTANCE B. FOST”_R, Insurance Commissioner of the
Commonwealth of Pennsylvania, as Rehabilitator of the Mutual
Fire, Marine & Inland Insurance Company,
Respondent.
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
PETITION FOR WRIT OF CERTIORARI
STEVEN M. PESNER
ANDERSON KILL OLICK &
OsHINSKY, P.C.
Counsel of Record for Petitioner
Chesapeake Insurance Company
Limited
666 Third Avenue
New York, New York 10017
(212) 850-0738
On the Brief:
Davip M. ZENSKY
QUESTIONS PRESENTED FOR REVIEW
Did the United States Court of Appeals for the Third Cir-
cuit improperly extend this Court’s ruling in Carnegie-Mellon
University v. Cohill, 484 U.S. 343, 108 S. Ct. 614 (1988) (“Cohill’)
by permitting the district court to remand a diversity action to
state court based on grounds concededly not authorized by Con-
gress or this Court, to wit, a contractual “service of suit”
provision? a
Did the Third Circuit err in empowering the District Court
to remand this properly removed diversity action to state court
where Respondent violated the mandatory thirty (30) day time
limit imposed by 28 U.S.C. § 1447(c) for non-jurisdictional re-
mand motions and where the United State Court of Appeals
for the Fifth Circuit has twice ruled to the contrary?
Did the Third Circuit err in holding that a contractual pro-
vision waived Petitioner’s statutory right of removal where the
provision contains no reference to removal or waiver, no state-
ment restricting litigation to state court and no specific venue
in which the parties agree to litigate, and where the Fifth and
Eight Circuits have reached conflicting results?
ili
TABLE OF CONTENTS
QUESTIONS PRESENTED FOR REVIEW.......
Meee Oe PO PPE EEO... eee.
ES
ie ea oi oar 'seccceatsnenes
STATUTES INVOLVED IN THE CASE........
si Agemens OF THE CASE .................
ee ky vie yp wae O62 6 v2 0 ons
I.
A WRIT OF CERTIORARI SHOULD
ISSUE BECAUSE THE JUDGMENT
BELOW CONFLICTS WITH DECISIONS
OF THIS COURT AND OF OTHER
CIRCUITS AND BECAUSE IT DECIDED
IMPORTANT QUESTIONS OF FEDERAL
LAW WHICH SHOULD BE SETTLED BY
a ev oc.es vats vsce ese. [ores
A. The Third Circuit Improperly Expanded
The Power Of The District Courts and
This Court’s Ruling in Cohill...........
. The Third Circuit’s Construction of
Section 1447(c) Conflicts With Decisions
of the Fifth Circuit and Those of This
Court Respecting the Proper Use of
Legislative History ....................
. The Third Circuit’s Construction of the
“Service of Suit” Clause was Erroneous
and in Direct Conflict With The Sixth
REISE A i
eg oii vse is «o's ewes
10
iv
Page
APPENDIX
Judgment of the United States Court of
Appeals for the Third Circuit, Filed on May
cy oe eae rie eee A-1l
Opinion of the United States District Court
for the Eastern District of Pennsylvania,
Issued from the Bench on September 26,
Dc ab OES ea eee NER eee ee ieee. A-28
TABLE OF AUTHORITIES
CASES Page
Adams Fruit Co., Inc. v. Barrett; __ U.S. __, 110
CEI 55-60 Ae55 0s bok ces ee uses: 15
Air-Shields, Inc. v. Hon. John P. Fullam, 891
| rer or ae ree 1, 10,
12n
Baris v. Sulpicio Lines, Inc., 932 F.2d 1540
SN iia nen cad cae ee ee Ces ate eee es a, 33
Blum v. Stenson, 465 U.S. 886, 104 S.Ct. 1541
CR eet ee cere rer trey Cores tres 15
Carnegie-Mellon University v. Cohill, 484 U.S.
eee eee ce ef
7, 8,9
Cohen v. Beneficial Indus. Loan Corp., 337 U.S.
es, Ge ee ee SI oi tee sr atoeree wes l
Cook v. Shell Chem. Co., 730 F. Supp. 1381
CG I 0 8hc sv 57s 0 305 538 4005 Fou 12n, 13
Demarest v. Manspeaker, __ U.S. __, 111 S.Ct.
Sc vik ceva r use a hcl ele eee eee ees 15
Gray v. Moore’s Business Forms, Inc., 711 F.
Supp. 543 (N.D.Cal. 1989) .................. 12n, 14
Hughes v. Ohio Bell Tel. Co., 916 F.2d 367 (6th
.. FI in tha ves cae Cee ees )
In Re Delta America Re Ins. Co., 900 F.2d 890
PEs wen Chava ka Rok eehak Reha Sao 3, 16,
17n
In re Shell Oil Co., 932 F.2d 1518 (5th Cir.
BY 56s oe Oa ce an Cena ee ee 1, 3, 12n,
13n, 14
Leidolf v. Eli Lilly and Co., 728 F. Supp. 1383
ak SS ere reer eee rr er 12n
CASES Page
Moses H. Cone Memorial Hospital v. Mercury
Constr. Corp., 460 U.S. 1, 103 S. Ct. 927
De oe eins 60 ck INSEL EMER DCR Cae? ]
Regis Assocs. v. Rank Hotels, 894 F.2d 193 (6th
on Ua a dh an ey de anes web nee cies 16
Taylor v. St. Louis Southwestern Ry Co., 128
ee Re CEP BOUND «eo cc tvcwcseees 12n, 14
Thermtron Prods., Inc. v. Hermansdorfer, 423
oe | Be eee 3 ¢
7, 8,9
Weltman v. Silna, 879 F.2d 425 (8th Cir. 1989) .. 16
Winners Corp. v. Lafeyette Life Ins. Co., 734 F.
Supp. 812 (M.D. Tenn. 1989) ............... 12n
STATUTES AND RULES
ee aes. 1
OS 4
MI CONOR 8... eee eee ceeecnues 13
ER wi csperdesesceveves 7
nee 4,6
28 U.S.C. § 1441 (b) ....0 0... eee eee eee eee 12, 14
28 U.S.C. § 1441 (c) ....... 2. cece cece cece ee 8, 10n
28 U.S.C. § 1445(c) .... 0... cee ccc e cece eee ees 13, 14
98 U.S.C. § 1446.0... oo eee cece ee cece ee 4, 6,7
28 U.S.C. § 1446(a) ....0 00 cece eee eee eee 1, 14
nl
Page
Sy ee oo aa sae vane cat whee es 14
eT te |. Se a ae ee eee 7
pe ee ere ny ares passim
Ra ek, veces cee eae eaen ]
1988 Judicial Improvements and Access to Justice
Act, Pub. L. 100-702, 102 Stat. 4642 ......... 9n, 10n
H.R. 100-889 at 72, 100 Code Cong. & Adm.
SES 5 6 oss dcr ce reuse Ua Neck ae ees: 1]
Judicial Improvements Act of 1990, Pub. L.
ore 10n
i I ee ee nes deks ena tenes es 3
ee POPP eee rT eer rer ere 3
MISCELLANEOUS
1A J. Moore & B. Ringle, Moore’s Federal
PrmOnbee GHG GG. SG) oe ccc ccc ce recnveees 1]
DECISIONS BELOW
The judgment of the United States Court of Appeals for the
Third Circuit, filed May 20, 1991, is reported at 933 F.2d 1207
and is set forth in the Appendix hereto (“App.”) at App. 1-27.
The opinion of the United States District Court for the Eastern
District of Pennsylvania, issued from the bench on September
26, 1990, is set forth at App. 28-41.
JURISDICTION
The judgment appealed from herein was entered by the
United States Court of Appeals for the Third Circuit on May
20, 1991. Pursuant to 28 U.S.C. § 1254(1), this Court has jurisdic-
tion to review the judgment by writ of certiorari. Appellate
jurisdiction is appropriate because the appeal is from an order
which is collaterally final and which amounted to a dismissal
since its effect was to terminate federal court jurisdiction. Cohen
v. Beneficial Indus. Loan Corp., 337 U.S. 541, 69 S.Ct. 1221
(1949); Moses H. Cone Memorial Hospital v. Mercury Constr.
Corp., 460 U.S. 1, 103 S.Ct. 927 (1983); see App. 5-8. Appellate
review is not precluded by 28 U.S.C. § 1447(d) because the
district court exceed its statutory authority in remanding the
matter to state court (1) after the thirty day time limit imposed
by 28 U.S.C. § 1447(c) had expired and/or (2) for a reason not
permitted by 28 U.S.C. § 1447(c). E.g., Thermtron Products,
Inc. v. Hermansdorfer, 423 U.S. 336, 96 S.Ct. 584 (1976); In re
Shell Oil Company, 932 F.2d 1518, 1520-21 (5th Cir. 1991); Air-
Shields, Inc. v. Hon. John P. Fullam, 891 F.2d 63, 65 (3d Cir.
1989).
STATUTES INVOLVED IN THE CASE
The statute primarily involved herein is 28 U.S.C. § 1447(c)
(“Section 1447(c)”), which provides as follows:
A motion to remand the case on the basis of any defect
in removal procedure must be made within thirty 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 attorneys fees, in-
curred 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 mav
thereupon proceed with such case.
To Petitioner's knowledge, there are no constitutional provisions,
treaties, ordinances or regulations involved in this case.
STATEMENT OF THE CASE
Preliminary Statement
This case raises important issues as to the powers of the federal
courts concerning (1) a district court’s authority to remand to
state court a properly-removed diversity action on the basis of
a “Service of Suit” or forum selection provision, (2) the scope
of Congress’ recently-enacted time limits governing remand mo-
tions and (3) the correct construction of a contractual provi-
sion alleged to constitute a waiver of Petitioner’s right to removal
and the proper standard for ascertaining such waiver.
The Third Circuit held that the district court could properly
remand this action even though Respondent failed to move for
remand within the thirty day (30) limit mandated by Section
1447(c) for all remand motions not founded on a lack of sub-
ject matter jurisdiction. Specifically, the Third Circuit ruled that
Section 1447(c) did not apply to remand motions based on a
forum selection provision and, further, that the district courts
are empowered to grant remand motions based on such grounds
despite the lack of any further statutory authorization therefor.
The Third Circuit also held that a provision in the underly-
ing contracts at issue entitled “Service of Suit”, which said
nothing about removal rights or waiver, in fact, constituted a
waiver of Petitioner’s statutory rights to removal.
Review by this Court pursuant to a writ of certiorari is war-
ranted because the Third Circuit decided several important ques-
tions of federal law which have not been, but should be, settled
by this Court. See Rules of the Supreme Court of the United
States (“Sup.Ct.R.”) 10.1.(c). Moreover, review by this Court is
warranted because:
(1) The Third Circuit’s holding that the district court
had inherent remand powers authorizing it to re-
mand the within action conflicts with this Court’s
decisions in Cohill and Thermtron;
(2) The Third Circuit’s ruling that Section 1447(c) was
inapplicable to the remand proceedings herein
conflicts with the decisions of the United States
Court of Appeals for the Fifth Circuit in Baris v.
Sulpicio Lines, Inc., 932 F.2d 1540 (1991) and In
re Shell Oil Company, 932 F.2d 1518; and
(3) The Third Circuit’s construction of the contrac-
tual provision at issue directly conflicts with the
decision of the United States Court of Appeal for
the Sixth Circuit in In Re Delta America Re In-
surance Co., 900 F.2d 890 (1990), which construed
the identical clause as not constituting a waiver
of removal rights.
See Sup.Ct.R. 10.1.(a), (c).
Statement of Facts
Petitioner Chesapeake Insurance Company Limited (‘Peti-
tioner” or “Chesapeake”) is a Bermuda corporation with its prin-
cipal place of business at Hamilton, Bermuda!
' Chesapeake’s parent company is CFC Holdings Corporation; Chesapeake
has no subsidiaries. See Sup.Ct.R. 29.1]
Respondent Constance B. Foster is the Insurance Commis-
sioner of Pennsylvania acting in her capacity as the Rehabilitator
of Mutual Fire, Marine & Inland Insurance Company (“Mutual
Fire”). Mutual Fire is a Pennsylvania corporation and has been
subject to rehabilitation proceedings under the control of
Respondent’s office since December 8, 1986.
This action was commenced by Respondent in the Com-
monwealth Court of Pennsylvania on or about September 29,
1989. On October 19, 1989, pursuant to 28 ULS.C. §§ 1332(a),
1441(a) and 1446, Petitioner properly removed this case to the
United States District Court for the Eastern District of Penn-
sylvania based on the court’s diversity jurisdiction.
Respondent’s complaint asserts claims for the alleged breach
of certain reinsurance agreements purportedly in effect between
July 1, 1982 and June 30, 1985. Petitioner has since answered
the complaint, wherein it has denied liability, asserted numerous
affirmative defenses and alleged three counterclaims for
rescission.
Fifty-four (54) days after Petitioner’s removal, on December
11, 1989, Respondent moved the district court to remand the
action to the Commonwealth Court of Pennsylvania, claiming
that (1) the district court should abstain from adjudicating the
matter and (2) Chesapeake purportedly had waived its right to
remove based on a certain contractual provision. App. 9. In sup-
port of the assertion that Petitioner contractually had waived
its removal rights, Respondent relied on the following provision
contained in the agreements at issue:
SERVICE OF SUIT
In the event the Retrocessionaire is not domiciled in
the United States of America, and the Retrocessionaire
fails to pay any amount claimed to be due hereunder,
the Retrocessionaire, at the request of the Company,
will submit to the jurisdiction of any court of com-
petent jurisdiction within the United States and will
comply with all requirements necessary to give such
court jurisdiction; and all matters arising hereunder
shall be determined in accordance with the law and
practice of such court.
See App. 20.
Petitioner opposed remand to state court. As a foreign cor-
poration being sued by the Commonwealth of Pennsylvania in
a Pennsylvania state court, Petitioner rightfully and reasonably
preferred to have the matter adjudicated by the presumptively
more independent federal district court. Since the Chesapeake-
Mutual Fire agreements said absolutely nothing about
Chesapeake waiving its removal rights and contained no provi-
sion confining litigation to Pennsylvania state court or even to
a state court generally, Petitioner denied that it ever agreed to
waive any of its removal rights.’
Moreover, in opposing remand Petitioner asserted that, ir-
respective of whether there had been a valid waiver of removal,
pursuant to Section 1447(c) the district court lacked authority
to remand the action because Respondent’s motion (1) was in
violation of the mandatory thirty day time limit for non-
jurisdictional remand motions and/or (2) was seeking remand
on grounds not recognized as valid.
The district court, on September 26, 1990, granted Re-
spondent’s motion to remand in an opinion delivered from the
bench. App. 28-41. The district Court did not reach Respondent's
claims regarding abstention, but instead, ruled that the “Ser-
vice of Suit” clause constituted a waiver of Petitioner’s removal
rights. Thereafter, the district court entered an order remand-
ing the action to state court but upon Petitioner’s motion, stayed
its judgment pending appeal. App. 5.
? During oral argument before the district court, Respondent's counsel con-
ceded that “nothing in the text... specifically eliminates Chesapeake’s right
to removal” and that the subject clause “was not a model of clarity”.
The Third Circuit, in an opinion and judgment filed on May
20, 1991, affirmed the district court. After concluding that the
Court had appellate jurisdiction, the Third Circuit made three
rulings challenged herein: that Respondent’s remand motion was
timely, that the district court had authority to remand on the
basis of the “Service of Suit” clause and that such clause did
in fact operate as a waiver of Petitioner’s removal rights. App.
9-25.
On June 7, 1991, Petitioner moved for a stay of the mandate
of the Third Circuit; on June 28, 1991, the Court denied
Chesapeake’s motion.
ARGUMENT
I. A WRIT OF CERTIORARI SHOULD ISSUE
BECAUSE THE JUDGMENT BELOW CONFLICTS
WITH DECISIONS OF THIS COURT AND OF
OTHER CIRCUITS AND BECAUSE IT DECIDED
IMPORTANT QUESTIONS OF FEDERAL LAW
WHICH SHOULD BE SETTLED BY THIS COURT
A. The Third Circuit Improperly Expanded The
Power Of The District Courts and This Court's
Ruling in Cohill
The exclusive grounds governing the remand of a diversity
action removed pursuant to 28 U.S.C. §§ 1441(a) and 1446 are
set forth in Section 1447(c). Thermtron, 423 U.S. at 342, 96 S.Ct.
at 588-89 (case removed under 28 U.S.C. §§ 1441(a) and 1446
“may be remanded only in accordance with [28 U.S.C.] § 1447
which governs procedure after removal”); Cohill, 484 U.S. at
358, 108 S.Ct. at 623 (White, J., joined by Rehnquist, C.J. and
Scalia, J., dissenting) (“cases may be remanded only for reasons
authorized by statute”). There has never been recognized a com-
mon law of remand. Cohill, 484 U.S. at 360, 108 S.Ct. at 623-24
(dissenting opinion).
The Third Circuit, in sustaining the district court’s remand
order, held that a remand motion premised on a forum selection
clause is not governed by Section 1447(c) and the thirty (30) day
remand time limit set forth therein. App. 9-13. As discussed
below, Petitioner believes that the Court below erred and that
Respondent’s remand motion was both authorized by and sub-
ject to Section 1447(c).
However, the Third Circuit then held that, despite the absence
of a statutory basis, a forum selection clause is a “proper, non-
statutory ground for remand”. App. 14 (emphasis supplied). Such
a ruling clearly conflicts with this Court’s decisions in Cohill
and Thermtron, and improperly expands the powers of the
district courts beyond those granted by Congress.
Thermtron was a case arising out of an automobile accident;
the action was removed to federal court on the basis of diversi-
ty, and then remanded. 423 U.S. at 337-41, 96 S.Ct at 586-88.
This Court ruled that a case removed under 28 U.S.C. §§ 1441
and 1446 “may be remanded only in accordance with § 1447
which governs procedure after removal” and vacated the district
court’s remand order. Jd. at 342-45. Thus, this Court stated that
it was:
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.
... Because the District Judge remanded a properly
removed case on grounds that he had no authority to
consider, he exceeded his statutorily defined power. . ..
Id. at 351, 96 S.Ct. at 593.
Cohill, unlike Thermtron, was an action between non-diverse
parties that involved both state and federal claims and was
removed to federal court on the basis of pendent jurisdiction.
484 US. at 345, 108 S.Ct. at 616. A divided Court (5-3) held
that under these circumstances, after the federal claim(s)
creating federal subject matter jurisdiction have been dismiss-
ed, the doctrine of pendent jurisdiction includes the authority to
remand to state court the remaining state law claims. Id. at
348-356, 108 S.Ct. at 618-22.°
The majority reasoned that the doctrine of pendent jurisdic-
tion (unlike diversity) creates an area of discretionary subject
matter jurisdiction and that when pendent jurisdiction is in-
voked, the district court must “consider throughout the litiga-
tion whether to exercise its jurisdiction over the case”. Id. at
349-50, 108 S.Ct. at 618-19. Therefore, the majority concluded
that the discretion inhering in the doctrine of pendent jurisdic-
tion, to deny jurisdiction at the outset or at any time thereafter,
also encompasses the authority to remand. Id.*
Cohill did not, however, overrule or limit the Thermtron
holding respecting diversity cases in any way. To the contrary,
the Cohill majority made clear that the remand authority it had
found strictly was limited to the facts before it, i.e, to cases
removed on the basis of pendent jurisdiction. Thus, it stated:
The remand power that we recognize today derives
from the doctrine of pendent jurisdiction and applies
only to cases involving pendent claims. Sections
144l(c) and 1447(c)...do not apply to cases over
which a federal court has pendent jurisdiction.
Id. at 355 n.11, 108 S.Ct at 62] n.11 (emphasis supplied).
Moreover, with respect to cases removed from state court on
the basis of diversity and the Court’s holding in Thermtron that
the non-statutory remand of such cases is unlawful, the Court
stated:
? The Cohill majority was comprised of Justices Marshall, Brennan, Blackmun,
Stevens and O’Connor; Chief Justice Rehnquist and Justices White and Scalia
dissented.
* The dissenting Chief Justice and Associate Justices flatly rejected the sug-
gestion that the district courts possess inherent, extra-statutory remand authori-
ty, finding it “inconsistent with Congress’ understanding of the federal courts’
remand authority as well as with the precedents of this Court”. 484 U.S. at
359, 108 S.Ct. at 623.
The Thermtron decision was a response to a clearly
impermissible remand, of a kind very different from
that at issue here. In Thermtron, the District Court
had no authority to decline to hear the removed case.
The Court had diversity jurisdiction over the case,
which is not discretionary.
Id. at 356, 108 S.Ct. at 621-22. Hence, with respect to diversity
cases, the Cohill decision expressly left Thermtron intact and
was limited only to cases removed on the basis of pendent
jurisdiction. See Hughes v. Ohio Bell Telephone Company, 916
F.2d 367, 372 (6th Cir. 1990).
Here, notwithstand 1g Thermtron and this Court’s explicit
admonitions in Cohill, the Third Circuit expanded the Cohill
ruling — and the remand power of the district courts — to encom-
pass the remand of a diversity action on the basis of an alleged
“Service of Suit” or forum selection clause. The Third Circuit
did acknowledge that “a reasonable argument for the opposing
view exists” and that “Cohill and Thermtron taken together
could stand for the proposition that non-statutory remands are
oniy authorized when the district court has discretion not to
exercise pendent jurisdiction over the case”. App. 14. Nonetheless,
the Third Circuit deigned to extend Cohill to diversity cases,
reasoning that permitting remand in such situations would pro-
mote economy, convenience and fairness. App. 19.
A writ of certiorari to review the judgment below is war-
ranted. The Third Circuit’s ruling clearly is contradictory to
this Court’s decisions in Thermtron and Cohill. Moreover, the
Third Circuit’s reasoning effects a drastic expansion of the federal
courts’ power to dispose of cases within their mandatory jurisdic-
tion, so long as economy, convenience and fairness is promoted.
Such an expansion, as explained by the Cohill dissenters, is con-
trary to Congress’ control of the district courts as well as its clear
understanding of remand as exclusively statute-based.* The
* Indeed, in the past four years alone Congress has twice enacted legislation
dealing with questions of remand. See 1988 Judicial Improvements and Access
(Footnote continued)
10
propriety of remand under these circumstances and the basis
therefor thus present important questions of federal law which
should be decided by this Court.
B. The Third Circuit’s Construction of Section 1447(c)
Conflicts With Decisions of the Fifth Circuit and
Those of this Court Respecting The Proper Use of
Legislative History
Petitioner asserts that Respondent’s remand motion was
authorized by statute - by Section 1447(c) - but therefore was
subject to the thirty (30) day statutory time limit and, accord-
ingly, was barred since it was made fifty four (54) days after
removal. App. 9. The Third Circuit rejected Petitioner’s argu-
ment, holding that Section 1447(c) does not encompass remand
motions based on an alleged contractual waiver of removal. In
so ruling, the Third Circuit reached a result at odds with rul-
ings of the Fifth Circuit; further, the Third Circuit misapplied
this Court’s decisions and incorrectly refused to heed highly rele-
vant Congressional history. As a result, the Third Circuit
misconstrued the statute.
Prior to 1988, Section 1447(c) contained no time limit for re-
mand motions. Instead, in pertinent part, it stated as follows:
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.
See Cohill, 484 U.S. at 347 n.2, 108 S.Ct. at 617 n.2.
In 1988, Congress substantially revised several provisions of
the removal and remand statutes (28 U.S.C. §§ 1441-1452), in-
cluding Section 1447(c). Pub.L. 100-702, 102 Stat 4642 (1988);
see generally, Air-Shields, 891 F.2d at 65. As amended, Section
to Justice Act, Pub.L. 100-702, 102 Stat. 4642 (amending, inter alia, § 1447(c));
Judicial Improvements Act of 1990, Pub.L. 101-650, 104 Stat. 5089 (amend-
ing § 144]l(c)). Congress’ activity in the field surely demonstrates its under-
standing that remand powers flow strictly from statute
7
1]
1447(c) deletes “improvidently and without jurisdiction” as the
test for remand and enacts the following two categories of re-
mand authority: any defect in removal procedure and a lack
of subject matter jurisdiction. Remand motions asserting the
former must be made within thirty (30) days of removal, while
those based on the latter may be made at any time before final
judgment. See supra at 1-2; see generally 1A J. Moore & B.
Ringle, Moore's Federal Practice § 0.157 [11.3-11.5] at 171-80,
0.168[4.1] at 642-44 (2d ed. 1990).
Thus, any non-jurisdictional remand motion now must
be made within thirty (30) days of removal. In imposing
such time limit, Congress explained its intent and purpose as
follows:
Section 1447(c) now appears to require remand to
state court if at any time before final judgment
it appears that the removal was improvident. So
long as the defect in removal procedure does not
involve a lack of federal subject matter jurisdiction,
there is no reason why either State or Federal Courts,
or the parties, should be subject to the burdens
of shuttling a case between two courts that each
have subject matter jurisdiction. There is also some
risk that a party who is aware of a defect in removal
procedure may hold the defect in reserve as a means
of forum shopping if the litigation should take an
unfavorable turn. The amendment provides a period
of 30 days within which remand must be sought on
any ground other than lack of subject matter jur-
isdiction. The amendment is written in terms of a
defect in “removal procedure” in order to avoid any
implication that remand is unavailable after disposi-
tion of all federal questions leaves only State law ques-
tions ....
H.R. 100-889 at 72, 100 Code Cong. & Adm. News at 6033
(emphasis supplied). Since Respondent’s remand motion was
not based on any allegation that subject matter jurisdiction was
12
lacking, it was subject to, and precluded by, Section 1447(c)’s
thirty (30) day time limit.°
Here, however, the Third Circuit refused to apply Section
1447(c)’s time limit to Respondent’s remand motion, not-
withstanding Congress’ clear directive that the time limit govern
remand motions based on any ground other than lack of sub-
ject matter jurisdiction. Instead, the Third Circuit held that the
“defect in removal procedure” category excluded remand mo-
tions based on a forum selection clause. App. 13.
The Third Circuit’s ruling is at odds with two decisions of the
Fifth Circuit issued just subsequent to the ruling below. In Shell
Oil, the Fifth Circuit reviewed on mandamus an order remand-
ing the action to state court; remand had been ordered on the
ground that removal was in violation of 28 U.S.C. § 1441(b) since
two defendants were citizens of the forum state. 932 F.2d at 1518.
Despite the fact that Section 1441(b) imposes a clearly substan-
tive restriction on removal, defendants argued that plaintiffs were
barred by Section 1447(c) from seeking remand because their re-
mand motion was made thirty two (32) days after removal. The
Fifth Circuit thus framed the issue as “whether the presence of
forum defendants is a ‘defect in removal procedure’ such that
§ 1447(c)’s time limit is applicable”. Jd. at 1521.
After a thorough analysis of the legislative history, commen-
tators and precedents, the Fifth Circuit held that the “defect
in removal procedure” provision and its accompanying thirty
(30) day time limit govern “all non-jurisdictional defects existing
at the time of removal”. Id. at 1522 (emphasis added). Hence,
the Fifth Circuit ruled that plaintiffs had lost the opportunity
to seek remand and vacated the remand order. Jd. at 1523.
* The lower federal courts have applied Section 1447(c)'s time limit to a wide
range of cases and barred concededly meritorious remand motions where such
time limit was violated. See Air-Shields, 891 F.2d at 65-66; Shell Oil, 932 F.2d
at 1521-23; Cook v. Shell Chem. Co., 730 F. Supp. 1381 (M.D.La. 1990); Leidolf
v. Eli Lilly and Co., 728 F. Supp. 1383, 1387-88 (E.D.Wis. 1990); Winners
Corporation v. Lafeyette Life Insurance Company, 734 F. Supp. 812, 814-15
(M.D. Tenn. 1989); Gray v. Moore's Business Forms, Inc.,.711 F. Supp. 543
(N.D.Cal. 1989); Taylor v. St. Louis Southwestern Railway Co., 128 F.R.D.
118 (D.Kansas 1989).
13
Three weeks later, a different panel of the Fifth Circuit held
the thirty (30) day bar of Section 1447(c) applicable to an even
more “substantive” removal defect in Baris, 932 F.2d 1540. There,
defendants removed to federal court an admiralty action on the
basis of federal question jurisdiction; fifty-four (54) days later
plaintiffs, inter alia, sought remand on the ground that an ac-
tion commenced in state court pursuant to the “savings to suitors”
clause of 28 U.S.C. § 1333(1) is not removable in the absence
of diversity. 932 F.2d at 1542-53.
Although the Fifth Circuit recognized that the action likely
was, as a matter of substantive admiralty law, non-removable,
it held that plaintiffs had lost the opportunity to seek remand
by failing to comply with Section 1447(c)’s thirty (30) day time
limit. The Baris plaintiffs argued that the time limit applied only
to a “defect in removal procedure”, which they had not asserted.
Id. at 1543. The Fifth Circuit disagreed, holding that, 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”. Id. at 1544. Compare
Cook, 730 F. Supp. at 1381-82 (removal on basis of diversity in
violation of bar of 28 U.S.C. § 1445(c) held “defect in removal
procedure”; remand waived by non-compliance with thirty day
time limit). The Fifth Circuit reasoned that removal in deroga-
tion of a substantive restriction on removal jurisdiction (i.e., a
forum selection clause), as well as in violation of a particular
removal procedure, each constitutes a defect in “removal process”
and is thus governed by Section 1447(c). Id. at 1544-46.’
There is thus a clear split between the Third Circuit and the
Fifth Circuit as to the meaning and application of Section
1447(c). The Third Circuit held below that Section 1447(c) was
inapplicable and that remand was timely. Under the Fifth Cir-
cuit holdings, however, however, remand of the instant matter
beyond the thirty (30) day time limit clearly would have been
’ In both Shell Oil and Baris, the Fifth Circuit found the leading commen-
tators to be in accord with its approach. Shell Oil, 932 F.2d at 1521-22; Baris,
932 F.2d at 1544-45.
a
14
precluded since the “Service of Suit” clause allegedly constituting
a waiver of Petitioner’s removal rights (1) was available to
Respondent as a basis for remand at the time of removal and
(2) had no effect on the district court’s original subject matter
jurisdiction to hear this action.
Apart from inter-Circuit conflicts, there are additional reasons
supporting review by this Court. Indeed, the application and
scope of Section 1447(c) is an important question of federal law
that should be decided by this Court.’ As the faregoing discussion
of the Circuit Courts’ conflicting approaches demonstrates, the
need for uniform guidance by the Supreme Court becomes clear
when one examines the various recognized grounds for remand.
Certain potential grounds for remand clearly are “procedural”,
such as where the removing party fails to file a “short and plain
statement of the grounds for removal, together with a copy of all
process, pleadings and orders” in violation of 28 U.S.C. § 1446(a).
Other grounds for remand, however, are less “procedural”.
For example, removal is not available in a diversity case if any
defendant is a citizen of the state where the action is commenced.
See 28 U.S.C. § 1441(b). Nor may a diversity case be removed
more than one year after its commencement. See 28 U.S.C. §
1446(b). Finally, the removal statutes preclude the removal of
actions based on state workmen’s compensation statutes. See 28
U.S.C. § 1445(c). Nonetheless, remand motions asserting these
grounds properly have been held within the “defect in removal
procedure” category and barred where the thirty (30) day limit
was violated. E.g., In re Shell Oil, 932 F.2d at 1521-23; Gray,
7ll F. Supp. at 545; Cook, 730 F. Supp. at 1382; Taylor, 128
F.R.D. at 119-20. The Third Circuit’s ruling below erroneously
suggests that remand motions such as these are not subject to
the statutory thirty (30) day time limit.
The Third Circuit here took note of the highly significant
legislative history, but ruled that the statutory language of
* Congress’ passage of the 1988 amendments to the Section 1447(c) suggests
at the least that the Legislative branch views the matter as significant.
15
Section 1447(c) “is clear on its face”, and therefore refused to
heed the clear directive the statutes legislative history. App. 10-13.
However, the phrase at issue, “defect in removal procedure”,
neither is defined nor self-defining. Indeed, despite proclaim-
ing the statute to be clear on its face, the Third Circuit could
provide no definition or explanation of the parameters of Sec-
tion 1447(c)’s time limit and “defect in removal procedure”
language.
Without reference to Section 1447(c)’s legislative history, ap-
plication of the subject statutory phrase is elusive, if not impossi-
ble. Since the meaning and scope of Section 1447(c) is not clear
on its face, the Third Circuit’s refusal to construe the statute
in light of the legislative history underlying Section 1447(c)’s
thirty (30) day time limit conflicts with this Court’s rulings. E.g.,
Adams Fruit Co., Inc. v. Barrett, _ U.S. _, _, 110 S.Ct. 1384,
1387 (1990) (where statutory language is not clear, construction
turns on “intent of Congress as revealed in the history and pur-
poses of the statutory scheme”); Blum v. Stenson, 465 U.S. 886,
896, 104 S.Ct. 1541, 1548 (1984) (same).
Moreover, even if the statutory phrase “defect in removal pro-
cedure” is clear and unambiguous, the result reached by the
Third Circuit is “demonstrably at odds with the intentions of
its drafters”, and thus, incorrect. E.g., Demarest v. Manspeaker,
— US. _, —, lll S.Ct. 599, 604 (1991). Congress’ statement
that, within thirty days, “remand must be sought on any ground
other than lack of subject matter jurisdiction”, clearly cannot
be squared with the Third Circuit’s judgment that the remand
motion at issue herein somehow was exempt.
The Third Circuit and the Fifth Circuit have thus rendered
wholly contradictory rulings. Further, because the scope of Sec-
tion 1447(c)’s time limit is an important issue of federal law that
should be decided by this Court, and because the Third Cir-
cuit’s refusal to give due weight to the pertinent legislative history
conflicts with this Court’s rulings, a writ of certiorari to review
the judgment below is appropriate.
eee ieeaineemeneniilll
16
C. The Third Circuit's Construction of the “Service
of Suit” Clause was Erroneous and in Direct Con-
flict With The Sixth Circuit
After holding that Respondent’s remand motion was not
governed by Section 1447(c) but nonetheless was timely and
within the district court’s powers, the Third Circuit ruled that
the “Service of Suit” clause, supra at 4-5, constituted a waiver
of Petitioner’s removal rights. App. 20-26. Because the clause
does not clearly and unequivocally demonstrate to a foreign
defendant that it is waiving its right to remove to federal court
state court suits against it, Petitioner respectfully submits that
the Third Circuit erred in finding waiver. As noted earlier, the
clause says nothing about removal, nothing about waiver, and
nothing restricting litigation to Pennsylvania state courts or even
a state court generally.
A writ of certiorari is warranted because the ruling below
squarely conflicts with the ruling of the Sixth Circuit in Delta
America, 900 F.2d 890. There, the Sixth Circuit had before it
the same clause at issue here, which the district court had held
to waive removal. See id. at 892; App. 22 n.15 (acknowledging
that clause at issue in Delta America is “virtually the same’).
In conflict with the judgment below, the Sixth Circuit in Delta
America reversed the district court’s remand order and held that
the clause did not constitute a waiver of removal because it was
not “explicit”. Id. at 894.
Significantly, the Delta America Court held that the ap-
propriate standard by which to assess the alleged waiver was
whether it was “clear and unequivocal”. Id. at 892 (citing Regis
Associates v. Rank Hotels, 894 F.2d 193, 915 (6th Cir. 1990)).
Employing “principles of contract interpretation”, the Sixth Cir-
cuit reasoned that it would have been “easy enough” to explicitly
provide for the waiver of removal rights in the agreement had
that been the parties’ intent. Jd. at 892-94.
Similarly, in Weltman v. Silna, the Eighth Circuit examined
a contract clause consenting to jurisdiction and venue “in state
court in the City of St. Louis”. 879 F.2d 425, 427 (1989). The
17
Eight Circuit held that the clause did not waive removal because
waiver “must be clear and unequivocal” and the clause “did not
address removal”. Id. Here, however, the Third Circuit rejected
the “clear and unequivocal” standard, and held, in effect, that
the clause adequately implied a waiver of removal. App. 20-25
& n.15.°
Hence, because there are conflicts in various Courts of Ap-
peals respecting (1) the correct standard to assess an alleged
waiver of removal rights and (2) the proper construction of the
clause at issue here, this Court should review the judgment
below. Further, because the use of forum selection clauses is
widespread, the contractual waiver of removal rights raises im-
portant issues of federal law that should be settled by this Court.
* The Third Circuit sought to distinguish Delta America on the basis that the
removing defendant technically was a foreign sovereign that had effected
removal pursuant to 28 U.S.C. § 1441(d). App. 22-23 n.15. This purported
distinction is of little importance. As noted, the Delta America decision
employed principles of contract construction, and acknowledged that a foreign
sovereign, like any other litigant, can contractually waive removal so long as
appropriate language is used. 900 F.2d at 893-94. Further, in Delta America
the removing defendant made no claim to immunity; rather, the Court viewed
the primary significance of the sovereign’s removal rights as enabling “foreign
states. . .to avoid any local bias or prejudices possibly inherent in state court
proceedings”. Id. at 893. This, of course, is no different from the purposes
underlying Congress’ establishment of removal j’ risdiction for diverse defen-
dants such as Petitioner.
18
CONCLUSION
For the foregoing reasons, Petitioner respectfully requests that
this Court issue a writ of certiorari to review the judgment of
the Third Circuit.
Dated: New York, New York
August 15, 1991
pectfully Sybmitted,
lw
STEVEN M. PESNER
ANDERSON KILL OLICK
& OsHINSKy, P.C. —
666 Third Avenue
New York, New York 10017
(212) 850-0738
Attorneys for Petitioner Chesapeake
Insurance Company Limited
On the Brief:
Davin M. ZENSKY
APPENDIX
A-l
Filed May 20, 1991
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nc. 90-1752
CONSTANCE B. FOSTER, Insurance
Commissioner of the Commonwealth of
Pennsylvania, as Rehabilitator of the Mutual
Fire, Marine & Inland Insurance Company,
v.
CHESAPEAKE INSURANCE COMPANY, LTD..,
Appellant.
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civ. No. 89-7468)
Argued April 15, 1991
BEFORE: STAPLETON, GREENBERG,
and HIGGINBOTHAM, Circuit Judges
(Filed: May 20 , 1991)
David M. Zensky (Argued)
Steven M. Pesner
Anderson, Kill, Olick &
Oshinsky
666 Third Avenue
New York, NY 10017
A-2
Daniel Segal
Charles F. Forer
Hangley, Connolly, Epstein,
Chicco, Foxman & Ewing
1515 Market Street
Suite 900
Philadelphia, PA 19102 z
Attorneys for Appellant
Gaetan J. Alfano (Argued)
Gregory P. Miller
Ann Krasnowiecki
Miller, Alfano & Raspanti
Suite 3402
1818 Market Street
Philadelphia, PA 19103
Attorneys for Appellee
OPINION OF THE COURT
GREENBERG, Circuit Judge.
The appeal in this diversity of citizenship,
breach of contract case, primarily involves the
interplay between a contract's forum selection
clause and 28 U.S.C. § 1447(c) governing remand
upon removal.' The district court determined that:
(1) a motion to remand based on a such a clause
is not governed by the 30-day time limit imposed
on motions for remand by section 1447(c); (2) such
a clause is a permissible ground for remand; (3)
the clause in this case waived the right of removal;
1. Provision for remand is also made in 28 U.S.C. § 1441l(c)
in circumstances not applicable here. A forum selection clause
is also called a “service of suit” clause but as a matter of
convenience we will use the first designation.
and (4) the clause is enforceable. The district caurt
therefore remanded the case to the state court in
which it had been commenced. We determine that
we have jurisdiction over this appeal, and that the
district court’s several rulings were correct.
I.
FACTS AND PROCEDURAL HISTORY
In July 1982, Mutual Fire, Marine and Inland
Insurance Company, a company organized and
licensed under the laws of Pennsylvania, entered
into a reinsurance agreement with
defendant-appellant Chesapeake Insurance
Company, Ltd., a Bermuda-based corporation. The
agreement — or “treaty” — provided that Mutual
Fire would “cede” to Chesapeake, and others, a
portion of the risk that it, Mutual Fire, bore on
its policies; Chesapeake would bear the cost of
that risk once it became an actual liability; and
for this Mutual Fire would pay premiums to
Chesapeake. Mutual Fire entered into so many
similar treaties that by the mid-1980'’s between
60% and 70% of its business entailed reinsurance,
involving over 8,000 treaties with various insurers
worldwide. The agreement between Mutual Fire
and Chesapeake included the forum selection
clause in issue here which required Chesapeake
at Mutual Fire's request in the event of certain
disputes to “submit to the jurisdiction of any court
of competent jurisdiction within the United
States.”?
2. Actually there were several treaties between Mutual Fire
and Chesapeake but as the parties do not distinguish among
them for purposes of the forum selection clause we refer to
them in the singular.
A-4
These reinsurance treaties were apparently
disadvantagous to Mutual Fire as it became
insolvent, partly, it is alleged, due to the refusal
of reinsurers like Chesapeake to pay their share
of losses to Mutual Fire.* Accordingly, the
Pennsylvania Insurance Commissioner (now
plaintiff-appellee Constance B. Foster) took over
Mutual Fire, and, on December... 8, 1986, the
Commonwealth Court of Pennsylvania appointed
the commissioner Rehabilitator. Because one of
Foster's duties as Rehabilitator is to marshal
Mutual Fire’s assets, she commenced this suit
against Chesapeake in the Commonwealth Court
seeking the monies allegedly owed by it to Mutual
Fire under the agreement. Chesapeake is said to
be in breach of its agreement with Mutual Fire in
an amount in excess of $4,000,000.
On October 18, 1989, there being diversity of
citizenship and an adequate amount in controversy
to support district court jurisidiction, Chesapeake
— in a manner which was timely and without
procedural defect — removed this suit to the
United States District Court for the Eastern
District of Pennsylvania, but on December 11,
1989 — the 54th day after the notice of removal
was filed —, Foster moved to remand the case to
the Commonwealth Court.
The district court granted the motion in an oral
opinion, first holding that section 1447(c) did not
bar the motion as untimely. That section provides,
in part:
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
3. At year-end 1988, Mutual Fire's deficit was over
$400,000,000, constituting the country’s third or fourth
largest insurer insolvency.
A-5
before final judgment it appears that the district
court lacks subject matter jurisdiction, the case
shall be remanded.
Then holding that the grounds for remand specified
by section 1447(c) were not exclusive, and that
waiver of the right to remove constituted a proper
ground for remand, the court found that
Chesapeake had waived its right to remove
pursuant ti the forum selection clause in its
agreement with Mutual Fire. Finally, holding that
the clause was enforceable, the district court
ordered the case remanded by order of September
27, 1990. This appeal followed and the district
court has stayed its order of remand pending
appeal.
II.
DISCUSSION
A. Appellate Jurisdiction
Although the parties in their original briefs
contended that this court has jurisdiction over the
appeal from the district court's order of remand
under 28 U.S.C. § 1291, we sua sponte ordered
supplemental briefing on this issue in light of 28
U.S.C. § 1447(d), which provides, in part: “An
order remanding a case to the State court from
which it was removed is not reviewable on appeal
or otherwise ... .“* Having reviewed the
supplemental submissions and the authority cited
4. An exception is made for civil rights cases remanded to
the state court. 28 U.S.C. § 1447(d). Additionally, the
Financial Institutions Reform, Recovery and Enforcement Act
(“"FIRREA") empowers the Resolution Trust Corporation to
remove actions to federal court and also gives it-the right to
appeal any remand orders issued by a district court. See 12
U.S.C. § 1441 a(I)(3).
A-6
therein, we determine that we have jurisdiction
over this appeal.
The Supreme Court in Thermtron Products, Inc.
v. Hermansdorfer, 423 U.S. 336, 96 S.Ct. 584
(1976), held that an order remanding a case for
reasons not mentioned in the statute governing
removal upon remand, 28 U.S.C. § 1447(c), ts
reviewable. In Thermtron, the district court
remanded a_ properly removed diversity case
because of the crowded state of its docket, an
action the court of appeals held on an application
for a owrit of mandamus. or prohibition
unreviewable because of section 1447(d). The
Supreme Court, however, held that subsections (c)
and (d) of section 1447 are in pari materia and
must be read accordingly. “This means that only
remand orders issued under § 1447(c) and
invoking the grounds specified therein . .. are
immune from review under § 1447(d).” 423 U.S.
at 346, 96 S.Ct. at 590. Thus, whereas section
1447(c) then specified as grounds for remand that
“the case was removed improvidently and without
jurisdiction,” and whereas the district court had
remanded for a reason not mentioned by section
1447(c), the Court held that review of the order of
remand was not barred by _ section 1447(d). The
Court then reversed the judgment of the court of
appeals, and remanded the case to that court for
it to issue a writ of mandamus “to prevent
nullification of the removal statutes by remand
orders resting om grounds having no warrant in
the law.” 423 U.S. at 353, 96 S.Ct. at 594.
Accordingly, while section 1447(d) was intended
“to prevent delay in the trial of remanded cases
by protracted litigation of jurisdictional issues,”
423 U.S. at 351, 96 S.Ct. at 593 — and the
district court is therefore given the last word on
whether it has jurisdiction to hear the case -,
A-7
that policy does not apply when the district court
has reached beyond jurisdictional issues or issues
of defective removal, and has remanded for other
reasons. Accordingly, the order of remand here,
based on the forum selection clause in the
contract between Mutual Fire and Chesapeake, is
not rendered unappealable by section 1447(d). In
the words of another court of appeals that has
considered this issue:
[Wj]here a district court bypasses _ the
jurisdictional arguments and reaches the merits
of a contract dispute, the policy [behind section
1447(d)] is inapplicable. Any delay caused by an
appeal of the contract issue is a delay that must
be countenanced. To apply section 1447(d) to
the district court's decision on the enforceability
of the forum selection clause would extend the
scope of section 1447(d) far beyond its intended
parameters and would leave matters of
substantive contract law unreviewable. We
refuse to impute such an intent to Congress.
Pelleport Investors, Inc. v. Budco Quality Theatres,
Inc., 741 F.2d 273, 277 (9th Cir. 1984).
In a similar vein, the Court of Appeals for the
Sixth Circuit has stated, in a case also involving
remand due to a forum selection clause: “[A]
remand order is reviewable on appeal when it is
based on a substantive decision on the merits of
a collateral issue as opposed to just matters of
jurisdiction.” Regis Associates v. Rank Hotels
(Management) Ltd., 894 F.2d 193, 194 (6th Cir.
1990). See also Clorox Co. v. United States District
Court for the Northern District of California, 779
F.2d 517, 520 (9th Cir. 1985) (same; reviewing on
appeal remand due to claimed waiver of removal);
In re Delta America Re Ins. Co., 900 F.2d 890, 892
A-8
(6th Cir. 1990) (following Regis; reviewing on
appeal remand due to forum selection clause after
removal by retrocessionaire); Karl Koch Erecting
Co. v. New York Convention Center Dev. Corp., 838
F.2d 656, 658 (2d Cir. 1988) (same; reviewing on
appeal remand due to forum selection clause).”
Furthermore, an order remanding a_ case
pursuant to a forum selection clause is “final” for
the purposes of 28 U.S.C. § 1291 under the
collateral order doctrine as it conclusively
determines a disputed issue wholly separate from
the merits of the litigation, ie., the legal
construction of the clause; it ends the litigation in
the federal forum, amounting to a dismissal since
its purpose and effect is to surrender jurisdiction
to the state court; and if not appealable now the
order will be unreviewable. See Pelleport, 741 F.2d
at 278.
Accordingly, 28 U.S.C. § 1447(d) does not bar
review of the order of the district court remanding
this case to the Commonwealth Court, and that
order is considered “final” so as to vest this court
with jurisdiction to hear this appeal under 28
U.S.C. § 1291.°
5. Cf. Atr-Shield, Inc. v. Fullam, 891 F.2d 63, 66 (3d Cir.
1989) (more than 30 days after notice of removal filed, district
court sua sponte remanded case due to procedural defects;
as district court's order was therefore not based on section
1447(c), in the sense that it did not comply with the 30-day
limitation pericd therein, this court's -eview on mandamus
was not limited by section 1447(d)).
6. We note that because the order challenged is collaterally
“final” as making a merits determination, an appeal is proper
here, not a petition for mandamus. See Corcoran v. Ardra Ins.
Co., 842 F.2d 31, 35 (2d Cir. 1988); Karl Koch Erecting Co.
v. New York Convention Center Dev. Corp., 838 F.2d at 659
n.l; Pelleport Investors, Inc. v. Budco Quality Theatres, Inc.,
741 F.2d at 277-78. Of course, if we considered that
A-9
B. The 30-day Time Limit of Section 1447{(c)
Foster's motion to remand — made on the 54th
day after the notice of removal was filed — was
predicated on two grounds: first, that the district
court should abstain from hearing the case, and,
second, Chesapeake had waived its right to remove
by executing the agreement with the forum
selection clause. The district court decided the
matter solely on the basis of the clause. The
parties agree that a stipulation into which they
entered before the district court did not address
the timeliness of Foster's motion as it merely gave
Foster more time to move for remand due to
defective removal. Chesapeake claims that the
motion for remand was untimely under section
1447(c). That section, again, provides that 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,”
and that a motion to remand based on lack of
subject matter jurisdiction may be made at any
time before final judgment. 28 U.S.C. § 1447(c).
Foster, however, claims that the 30-day limit of
section 1447(c) is not applicable to her motion for
the same reason that the stipulation is not
mandamus was required, we could treat the notice of appeal
as an application for the writ. We also point out that in
McLaughlin v. ARCO Polymers, Inc., 721 F.2d 426, 428 n.1l
(3d Cir. 1983), we held, without reliance on the collateral
order doctrine, that an order transferring an _ action
commenced in a district court to a state court on the ground
that the district court lacked subject matter jurisdiction was
appealable as a final order. While, we recognize that an order
remanding for lack of jurisdiction is subject to 28 U.S.C.
§ 1447(d), it is difficult in principle to distinguish between an
order of remand and an order of transfer for purposes of
finality as in both situations the order effectively terminates
the case in the federal courts. See Carteret Savings Bank, FA
v. Shushan, 919 F.2d 225, 229 n.7 (3d Cir. 1990).
A-10
applicable to her motion — tLe., because the
motion was not based on “any defect in removal
procedure.”’
Chesapeake’s claim that the 30 day limit
nonetheless applies to a motion not grounded on
a defect in removal procedure is based on the
legislative history of section 1447(c). Prior to the
amendments made to section 1447 on November
19, 1988, by the Judicial Improvements and
Access to Justice Act, Pub. L. No. 100-702, § 1016,
102 Stat. 4670 (1988), section 1447(c) 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.
28 U.S.C. § 1447(c) (1982).
The Report of the House Judiciary Committee
accompanying the 1988 Act had this to say about
old section 1447(c) and the new section as
amended:
Section 1447(c) now appears to require remand
to state court if at any time before final
judgment it appears that the removal was
improvident. So long as the defect in removal
procedure does not involve a lack of federal
subject matter jurisdiction, there is no reason
why either State or Federal courts, or the
7. A forum selection clause does not oust a court of subject
matter jurisdiction, The Bremen v. Zapata Off-Shore Co., 407
U.S. 1, 12, 92 S.Ct. 1907, 1914 (1972), and abstention is, of
course, predicated on the notion that while the federal court
has subject jurisdiction, it should decline to exercise it.
Accordingly, neither prong of Foster's motion raised the issue
of lack of subject matter jurisdiction.
A-11
parties, should be subject to the burdens of
shuttling a case between the two courts that
each have subject matter jurisdiction. There is
also some risk that a party who is aware of a
defect in removal procedure may hold the defect
in reserve as a means of forum shopping if the
litigation should take an unfavorable turn. The
amendment provides a period of 30 days within
which remand must be sought on any ground
other than lack of subject matter jurisdiction. The
amendment is written in terms of a defect in
removal procedure’ in order to avoid any
implication that remand is unavailable after
disposition of all federal questions leaves only
State law questions that might be decided as a
matter of ancillary or pendent jurisdiction or
that instead might be remanded.
H.R. Rep. No. 889, 100th Cong., 2d Sess. 72,
reprinted in 1988 U.S. Code Cong. & Admin. News
5982, 6033. (Emphasis added). Pointing to the
above underscored language in the Report that
states that “[t]he amendment provides a period of
30 days within which remand must be sought on
any ground other than lack of subject matter
jurisdiction,” id. (emphasis added), Chesapeake
asserts that all non-jurisdictional motions for
remand — including those grounded upon a forum
selection clause — must be made within the 30-day
period.
We do not agree. As the district court noted,
Chesapeake's theory is based on the erroneous
principle that “if the statute is clear, one should
appeal to the legislative history ... .” Indeed,
section 1447(c) could not be clearer, and to adopt
Chesapeake’s view by drawing upon legislative
history without an ambiguity appearing in the
statute would be contrary to the rules of statutory
A-12
construction. See Rubin v. United States, 449 U.S.
424, 430, 101 S.Ct. 698, 701 (1981) (when
language of statute is clear “judicial inquiry is
complete”); United States v. Ron Pair Enterprises,
Inc., 489 U.S. 235, 109 S.Ct. 1026, 1031 (1989)
(plain meaning of legislation is conclusive except
in rare case where literal application of statute will
produce result demonstrably at odds with
intention of drafters); Paskell v. Heckler, 768 F.2d
540, 543 (3d Cir. 1985) (while relevant legislative
history must be considered, “clear statutory
language placed an extraordinarily heavy burden
on the party who seeks to vary it by reference to
legislative history’).
Moreover, the House Report itself recognizes the
existence of at least one ground for remand not
mentioned in section 1447(c) and not governed by
the 30-day requirement — Le., when “disposition
of all federal questions leaves only State law
questions that might be decided as a matter of
ancillary or pendent jurisdiction or that instead
might be remanded.” H.R. Rep. No. 889, 100th
Cong., 2d Sess. 72, reprinted in 1988 U.S. Code
Cong. & Admin. News at 6033. This ground for
remand was recognized by the Supreme Court in
Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 108
S.Ct. 614 (1988), and has, in turn, been used by
at least one court of appeals for the proposition
that there are other non-section 1447(c) reasons
for remand, see Corcoran v. Arda Ins. Co., 842
F.2d, 31, 33-34 (2d Cir. 1988) (abstention was
legitimate, non-section 1447(c) ground for remand;
citing and discussing Cohill). The very legisiative
history upon which Chesapeake relies, then,
recognizes that not all non-jurisdictional motions
for remand are governed by the 30-day time limit
section 1447(c).
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Accordingly, as the statute is clear on its face
and the legislative history ambiguous at best, the
district court was correct in holding that section
1447(c)’s requirement that “[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” applies only to
motions for remand on the basis of any defect in
removal procedure. See 28 U.S.C. § 1447(c). Cf.
Air-Shields, Inc. v. Fullam, 891 F.2d 63, 65 (3d Cir.
1989) (“[t]he 1988 version of Section 1447(c) omits
the previous ‘improvidently removed’ grounds for
removal and restricts the time for remand motions
based on procedural defects”); State v. Ivory, 906
F.2d 999, 100 n.1 (4th Cir. 1990) (“The thirty-day
limitation applies only to objections to defects in
removal procedure’”).®
8. It is true that Chesapeake’s position has solid policy
reasons behind it. As the House Report recognizes, it is a
waste of everyone's time for cases to be shuttled back and
forth between two courts that have jurisdiction, and the waste
is exacerbated where the case has been removed, litigated at
the federal level for quite some time, and then, due to a
late-raised issue of defective removal, remanded. Moreover, the
House Report also recognizes the unsavory possibility of a
plaintiff keeping a defect in removal on reserve as an escape
hatch should the federal litigation begin to bode ill. These
policy concerns counselling « short time limit for motions to
remand no doubt apply to all non-jurisdictional grounds for
remand, including a forum selection clause. However, a
district court in the proper exercise of its discretion may deny
as untimely a non-procedural-defect, non-jurisdictional motion
to remand if made at an unreasonably late stage of the federal
litigation. See C. Wright, A. Miller, & E. Cooper, Federal
Practice & Procedure § 3721 at 227-28 (1985). The policy
concerns behind this rule, however, simply are not present in
this case as Foster's motion was made on the 54th day after
removal.
C. Grounds For Remand
After determining that the motion to remand was
timely, the district court considered whether the
forum selection clause — assuming that it did
waive Chesapeake’s right to remove, and was
enforceable — was a proper ground for remand.
The district court concluded that the clause was
a proper, non-statutory ground for remand.
We agree — although a reasonable argument for
the opposing view exists. It is undeniable that in
Cohill the Court repeatedly stressed that its
holding was limited to the context of pendent
jurisdiction and was based on the nature of
pendent jurisdiction — Le., that once the district
court has discretion to decline to exercise pendent
jurisdiction over the state-law claims by dismissing
them, it has the power to remand them too. Here,
of course, removal was based on diversity of
citizenship, and the district court did not have
discretion to decline to exercise jurisdiction: its
Jjurtsdiction was mandatory. Indeed, Cohill itself
recognized this difference in distinguishing
Thermtron when it said: “In Thermtron, the District
Court had no authority to decline to hear the case.
The court had diversity jurisdiction over the case,
which is not discretionary. Thus, the District Court
could not properly have removed the case from its
docket, whether by a remand or a dismissal.” 484
U.S. at 356, 108 S.Ct. at 621-22. Arguably, then,
Cohill and Thermtron taken together could stand
for the proposition that non-statutory remands are
only authorized when the district court has
discretion not to exercise pendent jurisdiction over
the case. See Hughes v. Ohio Bell Telephone Co.,
916 F.2d 367, 372 (6th Cir. 1990). We believe,
however, that this interpretation results from too
marrow aé_ée reading of Cohill, the _ statutory
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procedures for removal and remand, and the
powers of the district court.
First of all, the circumstance that a remand is
based on non-statutory grounds, though important
post-Thermtron, is, post-Cohill, of diminished
significance. Cohill clearly overruled Thermtron to
the extent that Thermtron had held that only
statutory grounds for remand are authorized.
The Court’s opinion in Thermtron contained
absolute language to the effect that the only
grounds available for remand are those specified
by section 1447(c). See 423 U.S. at 345, 96 S.Ct.
at 590 (“the remand was for reasons not
authorized by statute"); id. n.9 (“Lower federal
courts have uniformly held that cases properly
removed from state to federal court within the
federal court's jurisdiction may not be remanded
for discretionary reasons not authorized by the
controlling statute”); id. at 351, 96 S.Ct. at 593
(“we are not convinced that Congress ever intended
to extend carte blanche authority to the district
court 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”).
Twelve years later, however, in Cohill, 484 U.S.
343, 108 S.Ct. 614, the Court found that the
language in Thermtron “loses controlling force
when read against the circumstances of that case.”
Id. at 355, 108 S.Ct. at 621. “The Thermtron
decision,” which, again, involved the sua sponte
remand of a removed diversity action because of
the congested state of the district court's docket,
“was a response to a clearly impermissible remand, ~
of a kind very different from that at issue here.”
Id. at 621, 108 S.Ct. at 356. In Cohill the district
court remanded the pendent claims remaining tn
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a removed federal question case once the federal
question counts of the complaint had _ been
eliminated. It had already been settled that once
such a situation presented itself the district court
could, in the exercise of its discretion, dismiss the
remaining pendent claims. The Cohill court took
this rule a step further and concluded that
a district court has discretion to remand to
state court a removed case involving pendent
claims upon a= proper determination that
retaining jurisdiction over the case would be
inappropriate. The discretion to remand enables
district courts to deal with cases involving
pendent claims in the manner that best serves
the principles of economy, convenience,
fairness, and comity which underlie the pendent
jurisdiction doctrine. Such discretion is
precluded neither by the removal statute nor by
our decision in Thermtron.
Id. at 357, 108 S.Ct. at 622.°
Thus, as the Court of Appeals for the Seventh
Circuit recognized in Rothner v. City of Chicago,
879 F.2d 1402 (7th Cir. 1989) (where the main
issue was the reviewability of the order of remand),
“the [Cohill] Court in effect held, contrary to
Thermtron, that § 1447(c) does not contain all of
the permissible grounds for remand.” 879 F.2d at
1406 (emphasis in original). And, as the dissent
in Rothner put it in a useful formula with which
the majority opinion in Rothner was in accord,
Cohill
9. Chief Justice Rehnquist and Justices White and Scalia
dissented and would have held that the Thermtron language
meant what it said — Le., “cases may be remanded only for
reasons authorized by statute ... ,~ Cohill, 423 U.S. at 354,
108 S.Ct. at 623 (White, J., dissenting), since the federal
courts do not possess an inherent power to remand, id. at
360, 108 S.Ct. at 624.
iim mi
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left us with three categories of grounds for
remand: (1) those authorized by § 1447(c) and
beyond the power of appellate review; (2) those
not authorized by § 1447(c) but nonetheless
lawful in principle and reviewable for error in
execution (the example from [Cohill] is a remand
of a pendent state claim after deciding the
federal claim that authorized the removal); (3)
those not authorized by § 1447(c) or anything
else, and subject to automatic reversal] (the
example from Thermtron is a remand of a suit
the district court thinks it is too busy to hear).
Id. at 1420.'°
Section 1447(c), then, tells us that either defective
removal procedure or lack of subject matter
jurisdiction is a proper ground for remand. It also
tells us that motions for remand grounded on the
former are, and on the latter are not, governed by
a 30-day time limit. Finally, as we have already
noted, it tells us, in conjunction with section
1447(d), that remands based on either of these
grounds are not reviewable by appeal or otherwise.
But that is all. Section 1447(c) neither prohibits
nor authorizes the order of remand here, based on
a forum selection clause. It simply does not
10. In Rothner, the district court remanded after having
determined that the defendant had waived its right to remove,
prior to the expiration of the 30-day period given for removal,
by participating in the initial state court proceedings. The
court of appeals issued a writ of mandamus directing the
district court to entertain the action, finding that the
defendant had not waived its right to remove. The dissent
argued that the district court's order of remand was made
pursuant to section 1447(c), and thus was unreviewable under
section 1447(d). Neither the majority nor the dissent, however,
appears to have been troubled over whether waiver of removal
is a proper ground for remand. Indeed, it seems that no
post-Cohili forum selection case has addressed the issue.
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address the issue. Borrowing from the language of
Cohill, then, as no one doubts the district court's
power to dismiss pursuant to a properly construed
forum selection clause if a plaintiff violates the
clause,'' “Congress's silence in the removal] statute
does not negate the power to... .remand... .”
484 U.S. at 354, 108 S.Ct. at 621 (emphasis
added). !?
That said, we have little doubt that a remand
based on a forum selection clause is lawful. Unlike
the district court in Thermtron, the district court
here did not refuse to hear a case properly before
it. Indeed, the district court in this case accepted
jurisdiction and, in the’ exercise of that
jurisdiction, determined, as a threshold matter on
the merits, that Chesapeake had waived its right
to remove the case — Le., that, pursuant to the
parties’ contract, the case ought not have been in
federal court. Thus, while the district court did not
have the discretion, as in Cohill, to decline to hear
the case at all, once it determined that the clause
barred Chesapeake from removing, it would have
been committing clear error — and violence to the
parties’ contract — had it nevertheless continued
to hear the case. Unlike the district court in
Thermtron, then, the district court here, upon its
view of the clause, could “properly have eliminated
the case from its docket . . . by a dismissal.”
11. See most recently Carniwal Cruise Lines, Inc. v. Shute, 59
U.S.L.W. 4325 (U.S. Apr. 17, 1991).
12. We realize that our result may not be consistent with
Cooley v. Pennsylvania Housing Finance Agency, 830 F.2d 469
(3d Cir. 1987), and Levy v. Weissman, 671 F.2d 766 (3d Cir.
1986), as they support the conclusion that the basis of a
remand must be statutory. These cases, however, are not
controlling for, as noted in Cooley, they are pre-Cohill. 830
F.2d at 475.
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Cohill, 484 U.S. at 356, 108 S.Ct. at 622. Indeed,
at that point it had no discretion whatsoever not
to remove the case from its docket. In such a
situation, again unlike Thermtron, a remand, as
opposed to dismissal, does no harm to removal or
diversity jurisdiction. Measured against the
concerns raised by Thermtron, and by analogy to
those raised in Cohill, we therefore believe that the
district court's remand was lawful.
Moreover, as the passage from the House Report
set forth supra demonstrates, Congress is
concerned that removal procedure be handled in
a manner that promotes economy, convenience,
and fairness — the very concerns used by the
Court to justify the remand in Cohill. It is manifest
‘hat in giving effect to a forum selection clause by
remanding rather than dismissing a case, concerns
of economy and convenience are _ promoted.
Fairness, too, is forwarded by a remand for once
the district court determines that a defendant has
violated a forum selection clause by wrongfully
removing a case, justice and common _ sense
warrant that a remand, rather than a dismissal,
be ordered. Otherwise a plaintiff proceeding in
accordance with the parties’ agreement will be
penalized for the conduct of a defendant who does
not. The district court in remanding merely
exercised its powers to fashion a remedy for
breach of the clause, giving “effect to the legitimate
expectations of the parties, manifested in their
freely negotiated agreement, by _ specifically
enforcing the forum clause,” see The Bremen uv.
Zapata Off-Shore Co., 407 U.S. 1, 12, 92 S.Ct.
1907, 1914 (1972). The district court also thereby
exercised its inherent powers to correct abuses of
federal practice and procedure, vindicating the
improper use of removal. Thus, if a defendant has
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removed a case in violation of a forum seiection
clause, remand is a particularly appropriate and
effective remedy for the wrong. In sum, a forum
selection clause can properly be the basis of
remand. Cf. Corcoran v. Ardra Ins. Co., 842 F.2d
at 31 (abstention in removed case was proper
ground for remand).
D. Forum Selection Clause As Waiver Of Right To
Remove
The forum selection clause in the reinsurance
agreement provides:
In the event the Retrocessionaire [Chesapeake]
is not domiciled in the United States of America,
and the Retrocessionaire fails to pay any
amount claimed to be due hereunder, the
Retrocessionaire, at the request of the Company
{Mutual Fire], will submit to the jurisdiction of
any court of competent jurisdiction within the
United States and will comply with all
requirements necessary to give such court
jurisdiction; and all matters arising hereunder
shall be determined in accordance with the law
and practice of such court.!4
The district court, engaging in contractual
construction over which we exercise plenary review,
see, e.g., John F. Harkins Co. v. Waldinger Corp..,
796 F.2d 657, 659 (3d Cir. 1986), cert. denied, 479
U.S. 1059, 107 S.Ct. 939 (1987); Ram Constr. Co.
v. American States Ins. Co., 749 F.2d 1049, 1053
(3d Cir. 1984), determined that the legal effect of
the clause was to waive Chesapeake’s right to
remove. The right to remove may be waived, see
generally J. Moore & B. Ringle, 1A Moore's Federal
13. Forum selection clauses are in rather widespread use
throughout the insurance industry. See, e.g., In re Delta Re
Ins. Co., 900 F.2d 890, 892 (6th Cir. 1990).
A-21
Practice 40.157(9] at 149 (1990), and we agree with
the district court that by consenting to “submit* to
“any court” of competent jurisdiction “at the request
of the Company,” and to comply with all
requirements necessary to give “such court”
jurisdiction, Chesapeake agreed to go to, and stay
in, the forum chosen by Mutual Fire.
This construction is in accord with a long line
of cases treating similar language which found
that the forum selection clauses waived the
defendant's right to remove, and which therefore
granted the plaintiffs motion to remand. See West
Chestnut Realty of Haverford, Inc. v. First State
Ins. Co., 1990 WESTLAW 87377 (U.S.D.C., E.D.
Pa. 1990); Cessna Aircraft Co. v. Fidelity & Cas.
Co. of New York, 616 F. Supp. 671 (D.N.J. 1985);
Capital Bank & Trust Co. v. Associated Int'l Ins.
Co., 576 F. Supp. 1522 (M.D. La. 1984); Himes v.
Admiral Ins. Co., 575 F. Supp. 312 {E.D. Ky.
1983); Lavan Petroleum Co. v. Underwriters at
Lloyds, 334 F. Supp. 1069 (S.D.N.Y. 1971); Perini
Corp. v. Orton Ins. Co., 331 F. Supp. 453 (E.D.
Cal. 1971); Oti Well Serv. Co. v. Underwriters at
Lloyd's London, 302 F. Supp. 384 (C.D. Cal. 1969);
Euzzino v. London & Edinburgh Ins. Co., 228 F.
Supp. 431 (N.D. Ill. 1964); General Phoenix Corp.
v. Malyon, 88 F. Supp. 502 (S.D.N.Y. 1949). We
also note that the clause in this case provides that
matters arising out of the reinsurance agreement
are to “be determined in accordance with the law
and practice of such court,” and, in a separate
paragraph, that Chesapeake agrees to “abide by
the final decision of such court” — such court, of
course referring to the court to which Chesapcake
agreed to submit at the request of Mutual Fire.
Thus, Chesapeake’s removal was _ particularly
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violative of these portions of the clause, for
removal prevents such court from rendering a final
decision, and while the substantive law to be
applied by the federal court upon removal of this
diversity action would still be that applied in the
state court, the practice of the federal courts rather
than that of the Commonwealth Court of
Pennsylvania would govern the matter. See
Euzzino, 228 F. Supp. at 433; General Phoenix, 88
F. Supp. at 503.'* This, together with the rest of
the clause’s language, convinces’ us _ that
Chesapeake waived its right to remove the action.'®
14. Indeed, in Roberts v. Lexington Ins. Co., 305 F. Supp. 47
(E.D.N.C. 1969), concentrating on “the practice” portion of “all
matters arising hereunder shall be determined in accordance
with the law and practice of such court,” the court held that
this language constituted an express prohibition against
removal. However, employing a legal theory subsequently
rendered outmoded by the Supreme Court in The Bremen v.
Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, the Roberts
court refused to enforce the clause, finding it an illegal
attempt to “oust” the federal courts of their jurisdiction. See
also Hasek v. Certain Lloyd's Underwriters, 228 F. Supp. 754
(W.D. Mo. 1963) (clause illegal and void contractual limitation
of court's jurisdiction). In The Bremen, however, the Court
said that forum selection clauses do not “oust” courts of
jurisdiction, and held that they are prima facie enforceable.
15. We note that in In re Delta Re Ins. Co., 900 F.2d 890,
the Court of Appeals for the Sixth Circuit, construing virtually
the same clause as that involved here, reversed an order of
remand, holding that the clause did not work a waiver of the
right to remove. In Delta, the defendant, a commercial bank
branch of a foreign sovereign, removed a state court action
pursuant to 28 U.S.C. § 1441(d), a part of the Foreign
Sovereign Immunity Act (FSIA), which extends removal to
actions brought against foreign states and which permits the
foreign state to demand a non-jury trial once in federal court.
The court of appeals turned to the language of the clause
and, utilizing a standard it had applied in an _ earlier
forum-selection / waiver-of-removal case — Regis Assocs. v.
Rank Hotels (Management) Ltd., 894 F.2d 193 (6th Cir. 1990)
a
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See C. Wright, A. Miller, & E. Cooper, 14A Federal
Practice & Procedure § 3721 at 223 (1985) (finding
—, found that the clause did not “clearly and unequivocally”
reveal an intent to waive the right to remove. The court then
proceeded, however, to explain that this finding was especially
bolstered by the language and purpose of section 1441(d). As
the section gave foreign sovereigns the unqualified right to
remove actions commenced against them in state court, and
thus avoid “any local bias or prejudices possibly inherent in
state court proceedings and also to avoid trial by jury,” 900
F.2d at 893, the court could “conceive of no reason why a
foreign state would waive a right of removal. Since the FSIA
allows a foreign state to remain in a state court if sued there
and have a jury if desired, there is absolutely nothing to be
gained by giving up the option to go to federal court and avoid
a jury trial.” Jd. Finally, noting that the FSIA represents a
drastic departure from the previously long-standing rule
granting foreign sovereigns absolute immunity, and that under
the FSIA immunity nevertheless remains an _ important
threshold consideration, the court felt that the purposes
behind the FSIA, and section 1441(d) in particular, are best
served by the development, in federal court. of a uniform body
of law on sovereign immunity in the FSIA era. 900 F.2d at
894. Obviously viewing the element of foreign sovereignty of
paramount importance, the court concluded: “In order to
provide maximum guidance for future cases involving foreign
states, we hold that any claimed waiver of the right of removal
stemming from contractual language must be explicit.” Id. at
894 (footnote omitted). Inasmuch as we believe Delta was
primarily driven by considerations peculiar to the FSIA, we
do not find it persuasive here.
Moreover, we do not see why contractual watvers of the
right to remove must be “clear and unequivocal.” True, no
less a commentator than Professor Moore states the
proposition broadly: “Waiver of the right to remove is . .
possible but defendant's intent must be clear and
unequivocal.” J. Moore & B. Ringle, 1A Moore's Federal
Practice 40.157|9] at 152. See also Weltman v. Silna, 879 F.2d
425, 427 (8th Cir. 1989) (same; citing Moore's). But Moore
makes his statement solely in the context of a discussion of
waiver of removal by the defendant's participation in state
court. proceedings. See generally Moore's 40.157(9] at 149-55.
And, indeed, the cases cited by Moore's, and by the Court of
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Appeals for the Sixth Circuit in Delta and Regis, either
involved non-contractual, litigation-based waivers, see Kiddie
Rides U.S.A., Inc. v. Elektro-Mobiltechnik GMBH, 579 F. Supp.
1476 (C.D. Ill. 1984); Carpenter v. Illinois Cent. Gulf R.R. Co.,
524 F. Supp. 249 (M.D. La. 1981); Hildreth v. General
Instrument, inc., 258 F. Supp. 29 (D.S.C. 1966); Champion
Brick Co. of Baltimore County v. Signode Corp., 37 F.R.D. 2
(D. Md. 1965); Rockwell v. United States Fidelity & Guar. Co.,
137 F. Supp. 317 (M.D. Pa. 1955); Davilla v. Hilton Hotels
Int'l, Inc., 97 F. Supp. 32 (D.P.R. 1951); or, in turn, cited
non-contractual waiver cases or Moore's, see Capital Bank &
Trust Co. v. Associated Int'l Ins. Co., 576 F. Supp. 1522 (M.D.
La. 1984); Morgan Dallas Corp. v. Orleans Parish School Bd.,
302 F. Supp. 1208 (E.D. La. 1969). In the context of
litigation-based waiver, the “clear and unequivocal” standard
makes sense. Otherwise, in order not to waive the right to
remove defendants would have to remain inactive in the state
court, running the peril of being held in default should a
remand from the district court later occur. See Moore's
70.157(9] at 154.
In the context of contractual waiver, however, we do not
perceive the need for the “clear and unequivocal” standard.
While it is true that removal represents what has somewhat
reverently been called “a statutory right to a federal forum”
(a right the Supreme Court was obviously willing to vindicate
in Thermtron), this talismanic phrase loses much of its fire in
light of the fact that for “approximately five score years” the
federal courts “have construed the removal statutes strictly
and, on the whole, against the right of removal,” Moore's
70.157[1.- 3] at 38 (emphasis added). The “clear and
unequivocal” standard, then, fails to consider the constrictive
rather than expansive nature of the right of removal, in
addition to serving no meritorious policy of litigation. It
probably had its genesis in the notion, now discarded, that
forum selection clauses were presumptively unenforceable as
“contrary to public policy” or as an illegal attempt to “oust”
the court's jurisdiction. The Supreme Court has said that this
notion is old-fashioned and contrary to freedom of contract.
The Bremen v. Zapata Off-Shore Co., 407 U.S. at 10-12, 92
S.Ct. at 1913-14.
We think the “clear and convincing” standard so stringent
as to be contrary to the right of parties to contract in advance
regarding where they will litigate. A court simply should
determine contractual waiver of the right to remove using the
A-25
“persuasive” cases which construe this clause as
valid waiver of removal).'®
E. Enforceability of the Forum Selection Clause
Finally, we agree that the clause is enforceable
in this case.'’ In The Bremen v. Zapata Off-Shore
Co., 407 U.S. 1, 92 S.Ct. 1907, the Supreme Court
same benchmarks of construction and, if applicable,
interpretation as it employs in resolving all preliminary
contractual questions. Indeed, inasmuch as the determination
of whether there is a waiver of the right of removal to be
derived from a forum selection clause will at least in some
cases, such as here, be a matter of construction and thus of
law, it seems anamolous to speak of a “clear and unequivocal”
standard for we simply make plenary determinations of legal
issues.
16. Chesapeake regards Patten Securities Corp. v. Diamond
Greyhound & Genetics, Inc., 819 F.2d 400 (3d Cir. 1987), as
“closely analogous” to this case but we do not. There a
customer of a securities dealer sought to arbitrate a claim
against the dealer. In a reversal of the usual pattern in such
cases, the dealer preferred a judicial tribunal for resolution
of the dispute and thus brought an action against the
customer in the district court for declaratory relief and,
alternatively, for damages. In the district court the dealer
sought an order to compel the customer to discontinue the
arbitration contending, inter alia, that the customer waived
the right to arbitrate by agreeing to a forum selection clause
consenting to the jurisdiction of the state and federal courts
in New Jersey. We rejected this contention for various reasons
including the circumstance that while we regarded arbitration
as favored, forum selection clauses must be scrutinized
carefully so that “if doubts arise as to whether this dispute
is arbitrable or not, such doubts must be resolved in favor
of arbitrability.” Id. at 407. No such consideration of preferred
forum is implicated in remanding this case as there is no
reason for a preference for a federal over a state court in this
action. See note 15, supra.
17. We will assume that our review is plenary on this
essentially factual issue as the matter was resolved in the
district court on a record developed on a motion. But the
standard of review on this point is not critical as Chesapeake's
position on it is completely insubstantial.
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held that forum selection clauses are “prima facie
valid and should be enforced unless enforcement
is shown by the. resisting party to be
‘unreasonable’ under the circumstances.” Id. at 10,
92 S.Ct. at 1913. A forum selection clause is
“unreasonable” wnere the defendant can make a
“strong showing” id. at 15, 92 S.Ct. at 1916, either
that the forum thus selected is “so gravely difficult
and inconvenient that he willfor all practical
purposes be deprived of his day in court,” id. at
18, 92 S.Ct. at 1917, or that the clause was
procured through “fraud or overreaching,” id. at
15, 92 S.Ct. at 1916. No showing — let alone a
“strong showing” — of either of these elements was
made by Chesapeake. Chesapeake admits that by
the clause it waived any claim to inconvenience of
forum, and the agreement between it and Mutual
Fire was clearly an arms’-length deal, between
sophisticated commercial entities, “unaffected by
fraud, undue influence, or overweening bargaining
power,” cf. id. at 12, 92 S.Ct. at 1914. That there
may not have been actual negotiations over the
clause does not affect its validity. See Carnival
Cruise Lines, Inc. v. Shute, 59 U.S.L.W. 4323, 4325
(U.S. Apr. 17, 1991). In general, the insurance
industry has obviously long found it a convenient
and expeditious provision to include in its
contracts where it binds the insurer, see n.13,
supra, and it is a particularly fair provision in a
reinsurance treaty, as it allows the _ ceding
company, rather than the many and far-flung
retrocessionaires, to select the forum when the
retrocessionaires have refused to pay.
A-27
Il.
CONCLUSION
In light of the foregoing we conclude that: (1)
our jurisdiction over this appeal is not barred by
28 U.S.C. § 1447(d) and the district court's order
of remand was “final” for the purposes of 28 U.S.C.
§ 1291; (2) Foster's motion to remand was not
barred by the 30-day time limit of 28 U.S.C.
§ 1447(c); (3) enforcernent of a waiver of the right
to remove is a proper ground for remand; (4)
Chesapeake waived its right to remove in the
forum selection clause of its contract with Mutual
Fire; and (5) the clause is enforceable. Accordingly,
we will affirm the order of September 27, 1990, of
the district court remanding this case to the
Commonwealth Court of Pennsylvania.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
A-28
(The Court resumed the proceedings at 11:55 a.m.)
THE COURT: This is a diversity action removed to this court
from the Commonwealth Court, where it was initiated Sep-
tember 29, 1989. The lawsuit was one brought by Constance
Foster in her capacity as Insurance Commissioner of the Com-
monwealth. The defendant, Chesapeake, is a Bermuda-based
and incorporated insurance company
The suit was brought by Ms. Fosfer in her capacity as
rehabilitator of the insolvent Mutual Fire, Marine & Inland In-
surance Company. Suit was brought as part of the Commis-
sioner’s obligation to collect assets of the insolvent Mutual Fire
based upon a group of reinsurance treaties which involve, among
others, obligations by Chesapeake to Mutual, obligations which,
on the expiration of the reinsurance treaties, were embodied in
a reinsurance deposit trust agreement.
Suffice it to say, that the basic purpose of the lawsuit brought
by Ms. Foster is to recover in the name of Mutual Fire, and on
behalf of Mutual Fire’s multiple creditors, sums allegedly due
to Mutual Fire from Chesapeake under the agreed insurance
arrangements.
Defendant Chesapeake removed this action to this court on
October 19, 1989. Approximately a week later — to be precise,
on October 25—this court, pursuant to a stipulation between
the parties, entered an order reciting that “Plaintiff may have
until December 11, 1989 to file a motion to remand based on
any defect in the removal procedure under 28 USC Section
1447(c). These extensions are without prejudice to the rights of
either party, and shal! not be deemed to constitute a waiver of
any rights of either party.”
The plaintiff did then move to remand on December lth,
1989, the date on which the stipulation expired. The grounds
on which plaintiff has sought remand are, one, that Mutual Fire
and Chesapeake had incorporated into their contractual
arrangements, in particular, into the so-called companion
A-29
line agreement, a forum selection clause which constituted,
among other things, a waiver of Chesapeake’s entitlement to
remove this action or any other covered by the agreement from
a state court to a federal court.
The second ground on which plaintiff moved to remand was
the submission that this case is one in which it would be a proper
exercise of this court’s discretion to abstain with a view to hav-
ing the issues addressed in the Commonwealth Court.
There have been numerous submissions since the filing of the
motion to remand. The parties have requested delays in the
disposition of the motion. That is why it is only now before us.
Argument has been held this morning, and the motion is now
ripe for disposition.
As an initial matter, defendant Chesapeake contends that the
motion to remand is untimely. As noted before, the parties
entered into a stipulation which contemplated that plaintiff
would have until December 11, 1989 “to file a motion to remand
based on any defect in the removal procedure under 28 USC
Section 1447(c).”
Plaintiff did, in fact, move by December 11, but it is defen-
dant’s submission that the stipulation does not help the plain-
tiff, because the grounds on which plaintiff has sought remand
are not grounds which, within the meaning of the stipulation,
are “based on any defect in the removal procedure under 28 USC
Section 1447(c).”
Moreover, defendant points out Section 1447(c), with a view
to which, quite evidently, the stipulation as drafted contains
a provision specifying that “a motion to remand the case on the
basis of any defect in the removal procedure must be made
within 30 days after the filing of a notice of removal under Sec-
tion 1446(a).”
It is undisputed that the motion to remand was filed more
than 30 days after the filing of the notice of removal. So it is
A-30
defendant’s position that the motion to remand is untimely under
the statute, and that the stipulation does not help the plaintiff,
because the motion that was filed was not one which addresses
“any defect in removal procedure.”
The completion of the argument on timeliness would be that
even if the stipulation would be thought to comprehend a mo-
tion based on the grounds that plaintiff is advancing, the stipula-
tion, nothwithstanding that it was approved by this court, is
incapable of extending the statutory 30-day limitation contained
in 1447(c).
It is not contended by the plaintiff that either the abstention
ground or the forum selection ground could be regarded as a
ground of remand that would become comprehended within
the “any defect in removal procedure.” So plaintiff, in urging
the timeliness of the motion, is not relying, and cannot rely, on
the stipulation.
However, plaintiff rejects the view that the quoted language
from 1447(c) specifying that “a motion to remand the case on
the basis of any defect in the removal procedure must be made
within 30 days after the filing of a notice of removal,” forecloses
the motion to remand which plaintiff has submitted. The posi-
tion taken by the plaintiff is that the 30-day limitation is ap-
plicable simply to motions which are bottomed on “any defect
in removal procedure,” and that 1447(c) is silent with respect
to the timing of other types of motion to remand.
The defendant’s position is that a proper understanding of
1447(c), which is statutory language adopted in 1988, can best
be gleaned from reference to House Report Number 100-889,
which discusses the new language in 1447(c), together with many
other changes in the judicial code accomplished by the Judicial
Improvements Act of 1988.
The particular language which defendant relies on is as
follows: “The amendment provides a period of 30 days within
which remand must be sought on any ground other than lack
A-31
of subject matter jurisdiction.” The exception of motions based
on lack of subject matter jurisdiction is keyed to the second
sentence of 1447(c). The second sentence reads: “If at any time
before final judgment it appears that the district court lacks sub-
ject matter jurisdiction, the case shall be remanded.”
In short, the position of the defendant, certainly bolstered
by the language of the House Report, is that remand is governed
comprehensively by Section 1447(c); that remand, within the
purview of the statute, contemplates two types of circumstances.
One of those is where there is “any defect in removal procedure,”
and the other is where there is a failure of subject matter
jurisdiction.
In short, any ground for remand — that is defendant’s
contention — which is not addressed to lack of subject matter
jurisdiction, is comprehended under the statutory phrase, “defect
in removal procedure.” If that position be correct, then defen-
dant is right in contending that plaintiffs motion is here un-
timely, since the grounds urged for remand, the forum selec-
tion clause and abstention, are not grounds that go to the
jurisdictions of this court, but rather to the appropriateness of
its exercise.
There is no question that the language of the House Report
strongly supports the construction urged by the defendant. In
stating, as the report does, that “the amendment provides a
period of 30 days within which remand must be sought on any
ground other than lack of subject matter jurisdiction,” that the
report certainly would lead one to the conclusion that the 30-day
limitation comprehends all remand motions other than those
going to the subject matter jurisdiction.
The problem, however, is that the language of 1447(c) does
not in terms correspond with the language of the House Report.
The language is directive that the 30-day limitation apply to
every “motion to remand the case on the basis of any defect in
removai procedure.”
A-32
Now, that syntax is consistent with the possibility that Con-
gress regarded all non-subject matter jurisdiction motions as mo-
tions based on a “defect in removal procedure.” But that language
does not compel that conclusion.
Accordingly, since I feel that it is my obligation to be guided
in the first instance by the text of the statute, and to look to
the guidance of the House Report or some other form of
legislative history only when the text is not itself dispositive, I
conclude that the text directs me to limit the 30-day time limit
to motions which indisputably are bottomed in a “defect in
removal procedure.”
That is to say, I conclude, therefore, that there is no time limit
specified by 1447(c) for any remand motion which is not based
on a “defect in removal procedure,” whether that be of a jurisdic-
tional nature or otherwise, provided that there is a category of
non-subject matter jurisdiction grounds for remand, and non-
“defect in removal procedure” grounds for remand that a district
court has power to entertain.
Whether there is such a third category is not, in my judg-
ment, decided by the text of 1447(c), and I am not prepared
to read into the House Report a preclusion of the possibility of
such an intermediate category of remand motions, unless I am
persuaded by the prehistory of Section 1447(c), that that indeed
is the jurisprudential heritage against which Section 1447(c) in
its new form was enacted.
Accordingly, the question of the timeliness of the plaintiff's
motion is a question which itself tenders the larger question,
whether abstention on the one hand, and a forum selection
clause on the other, constitute a category of grounds for remand
that a federal district court has authority to entertain either
within the rubric of 1447(c) or outside it.
The language of 1447(c), up to 1988, was of the following
form: “If, at any time before final judgment, it appears that
the case was removed improvidently and without jurisdiction,
A-33
the district court shall remand the case and may order the pay-
ment of just costs.” It is apparent from a reading of that language
that Congress has good reason to want to introduce a time period
within which at least some very large category of remand mo-
tions would have to be filed at an early date.
The construction of Section 1447(c), with respect to the ques-
tion of what sorts of motions to remand, were properly addressed
within the phrase, “removed improvidently and without jurisdic-
tion,” came before the Supreme Court of the United States in
1976, in Thermtron. In that case, which was a. diversity case,
the district judge remanded a removed case on the ground that
his docket was so heavy, that the plaintiff would be able to move
the case forward more expeditiously in the state court, and,
hence, removal would unjustifiably delay the plaintiff in the
achievement of plaintiffs entitlements.
The Supreme Court concluded that remand on the assigned
ground was inappropriate. The Supreme Court appeared to
determine that remand was available only on grounds specified
by the statute, those grounds being at the time, lack of jurisdic-
tion and improvident removal. Neither of those grounds being
present in Thermtron, the District Court’s order was set aside,
or directed to be set aside.
Five years after Thermtron, the Seventh Circuit in Ryan con-
sidered the question whether remand on abstention grounds was
permissible, and the Seventh Circuit concluded — following and
in reliance on Thermtron — that abstention was not embraced
within the remand scheme contained in 1447(c), and directed
that the remand order be abrogated.
In 1988, the Supreme Court revisited 1447(c) in the Cohill
case. There a district court had remanded the state law claims,
which had been pendent to a case removed to the federal court,
on the basis of a federal question count. Remand was directed
by the district court at a point in the litigation at which the
federal claim had dropped away, concluding at that point that
the Gibbs doctrine of discretionary entertaining of pendent state
A-34
claims dictated that, with the disappearance of the federal claim,
it would be a sound exercise of discretion to remit the state claims
to the state court. The district court then entered an order of
remand.
The three judge panel, which first reviewed the district court’s
decision in Cohill, concluded two-to-one that under Thermtron,
and a subsequent decision in this Circuit, Levy, since the re-
mand of pendent state claims — of initiatly pendent state claims
was not comprehended by 1447(c), the remand order was
unauthorized.
On further examination of the issue en banc, the Court of
Appeals for this Circuit was evenly divided, and, accordingly,
rendered no opinion. The even division en banc had the effect
of affirming the district court’s order. Accordingly, the matter
was reviewed by the Supreme Court presumably to determine
whether the remand, as affirmed by the Court of Appeals, con-
travened Thermtron. The divided Supreme Court affirmed the
Third Circuit and the judge who had ordered remand.
Through Justice Marshall, the Cohill court concluded that
Thermtron did not preclude the exercise by a federal court of
its discretionary authority to decline to pursue pendent state
claims when the federal claim, to which they were pendent, had
disappeared from the litigation. Justice Marshall noted that
where such litigation was begun in the federai court, the federal
court, at the point at which it concluded that its discretion called
for discontinuance of consideration of the state claims, would
dismiss as to those claims. Justice Marshall, for the Court,
concluded that in a situation in which the case had been begun
in a state court, and had been removed, the sensible procedure
was to remand to the state court.
Thermtron was not to the contrary. Thermtron, the Court
concluded, was a case in which the federal court, having on its
docket a diversity case which it had no discretion to decline to
entertain, had no authority to remand to the state court.
A-35
Subsequent to Cohill, about two months later, the Second Cir-
cuit, in Corcoran v. Ardra, revisited the question which had con-
fronted the Seventh Circuit in Ryan. That is the say, the Second
Circuit addressed the question whether a federal district court
had authority to remand to a state court a case removed from
the state court to the federal court, where the ground for re-
mand was abstention. The case was a case very like the case
before this court today; that is to say, it was a case brought by
New York’s Insurance Commissioner to recover assets of an in-
solvent insurance company. Removal was effectuated not on
diversity grounds, but on the basis of Section 205 of Title 9.
Section 205 specifies that “Where the subject matter of an
action or proceeding pending in a state court relates to an ar-
_ bitration agreement or award falling under the convention [the
foreign arbitral awards convention], the defendant or the defen-
dants may, at any time before the trial thereof, remove such ac-
tion or proceeding to the district court of the United States for
the district and division embracing the place where the action
or proceeding is pending.”
In a case removed on that basis, the Court of Appeals for the
Second Circuit decided that the district court had rightly con-
cluded that remand was appropriate for the reason that the
litigation being carried on by the superintendent of insurance
was litigation of a sort that so intimately involved complex and
obscure and important matters of state insurance law of a
regulatory nature, that it would be better for the case to be
handled under the Burford abstention doctrine than the state
courts.
The decisions in Cohill, and thereafter in Ardra, were in the
last year of the previous life of 1447(c). There has been no litiga-
tion brought to my attention since which would cast any dif-
ferent view on what 1447(c) in its old language contemplated.
In my judgment, the Second Circuit, looking at the remand
authority in the light of Cohill, came to the correct conclusion
to decide that a district court lacked authority to remand the
A-36
case in which sound abstention doctrine called for it not to be
dealt with, at least in the first instance in the federal courts,
which would apparently mean that the federal court would be
limited to dismissal or perhaps a stay of federal court proceedings
while the parties made their own way back perhaps to a state
court. Such untidy alternatives would not seem a maximal way
to manage the judicial process as against simply returning the
litigation to the court system in which it was initiated.
. Accordingly, I conclude that Judge Kearse’s decision in Cor-
coran versus Ardra was a very soundly based extrapolation from
the Supreme Court’s decision in Cohili just two months before.
Does 1447(c) in its new linguistic dress change the result? I
think not. We know that 1447(c) introduced a time limit, namely
30 days, with respect toa certain category of motions to remand,
namely those which could be regarded as being based on “any defect
in removal procedure.” The grounds for removal tendered in the
present case, the parties agree and so do I, cannot be categorized
as grounds bottomed in “any defect in removal procedure.”
Accordingly, if there is a category of remand motions which
are not based on a “defect in removal procedure,” and which
are not based on “lack of subject matter jurisdiction”, then such
motions are simply not comprehended by the 30-day limitation,
nor indeed are they foreclosed as a matter of substantive
availability by Section 1447(c).
I have concluded, on the basis of the cases running from
Thermtron through Corcoran versus Ardra, that the predecessor
language of 1447(c) did indeed contemplate that there would
be remand motions that were not within the then phrase “im-
providently granted,” and that were not within the provision
“for lack of jurisdiction by.” Similarly, I conclude that 1447(c),
as now written, does comprehend, by negative implication under
the case law, that there is a third category of cases, and today’s
litigation belongs in that category, which are not constrained
by the 30-day limitation, and which are not also confined to
jurisdictional challenges.
A-37
This means, in short, that I conclude that the plaintiff's mo-
tion to remand, A, is timely, and, B, offers at least one ground,
namely that of abstention, which can be entertained, as the
Second Circuit instructed in Corcoran versus Ardra, by a District
Court as a permissible category of remands.
Is the other ground, the forum selection clause claim, also
within the subset of non-jurisdictional and non-defect in removal
procedures ground for remand? I think so. To conclude that a
district court could not entertain a motion to remand, bottom-
ed on a claim that the removing party had waived its entitle-
ment to remove, would make such a forum of waiver ineffec-
tive, unvindicatable in the federal courts.
There is nothing in the language of 1447(c) that should lead
to such an anomalous result, and the case gloss on 1447(c)’s
predecessor, by which I mean particularly Cohill and Corcoran
versus Ardra itself, contemplate a more sensible resolution.
I will consider first the question whether the forum selection
clause in this case constitutes a waiver of the privilege of removal
by Chesapeake. The language of the so-called companion line
agreement, which is relied on by plaintiff, is as follows: “In the
event that the retrocessionaire is not domiciled in the United
States of America, and the retrocessionaire fails to pay any
amount claimed to be due hereunder, the retrocessionaire, at
the request of the company, will submit to the jurisdiction of
any court of competent jurisdiction within the United States,
and will comply with all requirements necessary to give such
court jurisdiction, and all matters arising hereunder shall be
determined in accordance with the law and practice of such
court.”
The quoted language is entirely silent with respect to removal.
However, the decided cases show that language in all relevant
respects, identical with the quoted language, has on several oc-
casions been construed as plaintiff contends it should be con-
strued, to constitute a waiver of the removal privilege.
A-38
Back in 1971, a federal district court in California, in Perini
Corporation versus Orion Insurance Company, dealt with the
following language: “Insurers hereon, at the request of the
assured, will submit to the jurisdiction of any court of compe-
tent jurisdiction within the United States of America and will
comply with all the requirements necessary to give such court
jurisdiction, and all matters arising hereunder shall be deter-
mined in accordance with the law and practice of such court.”
The language in that case is, I believe, verbatim with the
language that is presented in our case, starting with the words,
“will submit to the jurisdiction of any court of competent
jurisdiction within the United States.”
In Perini, the Court had this to say: “The meaning of the ser-
vice of suit clause is generally clear. It purports to compel the
insurer to submit to the forum chosen by a dissatisfied
-policyholder who sues to recover proceeds owing under the
policy. While it does not in terms waive the insurer’s rights to
remove to a federal forum, most courts have nonetheless deter-
mined that ‘submission’ to a state forum is a waiver of the in-
surer’s right to defend in federal court.”
The Perini court then went on to cite four somewhat earlier
cases, starting in 1949, and running up to 1969, all of them deci-
sions of federal district courts. The Perini decision, which has
been on the books for some years when the language that governs
this aspect of plaintiff's motion was written into the companion
line agreement, has continued to be regarded as a proper con-
struction of the same or very similar language.
Thus, in 1985, in Cessna Aircraft versus Fidelity and Casualty
Company, 616 F. Supp., 671, Judge Cohen, sitting in New Jersey,
dealt with language which ran as follows: “Will submit to the
jurisdiction of any court of competent jurisdiction within the
United States, and will comply with all requirements necessary
to give such court jurisdiction and all matters arising hereunder
shall be determined in accordance with the law and practice
of such court.”
A-39
Judge Cohen said at page 674, “Language identical to that
in issue here has consistently been held to constitute a waiver,
by the insurer, of its right to remove an action from State Court
to Federal Court.” Judge Cohen then cited a series of cases, in-
cluding Perini, and two on which Perini had relied, and also
two subsequent cases, Capital Bank and Trust from Louisiana,
at 576 Fed. Supp., and Lavan Petroleum, 334 Fed. Supp., in the
Southern District of New York in 1971.
To be sure, very recently, in January of this year, the Court
of Appeals for the Sixth Circuit took a contrary view of language
again interchangeable with the language we have here. The Sixth
Circuit in In Re: Delta America Re Insurance Company, in Li-
quidation, which is a 1990 U.S. App. Lexis 4641, decided on
March 30 of this year—the case is now reported, but I don’t
have the reporting citation in front of me. The Sixth Circuit con-
cluded that the quoted language did not constitute a waiver of
removal. The Court emphasized that the courts should demand
observance of a very strict standard before finding of waiver
of the removal privilege, a principle with which I have no quar-
rel. But what the Sixth Circuit evidently found, was of par-
ticularly compelling importance in its consideration of the case,
was that among the removing parties was Banco de Seguros del
Estado, which predicated removal “upon its status as a foreign
sovereign, as defined by the Foreign Sovereign Immunity Act.”
How crucial that aspect of the case was is suggested by the
Court’s observation at page six, text at note six. “Returning for
the moment to the question of intent of the parties, we can con-
ceive of no reason why a foreign state would waive a right of
removal. Since the FSIA allows a foreign state to remain in a
state court if sued there and have a jury if desired, there is ab-
solutely nothing to be gained by giving up the option to go to
federal court and avoid a jury trial.”
More to the point, the very first sentence in the Sixth Cir-
cuit’s opinion is as follows: “The issue presented by this appeal
is the right of an agency or instrumentality of a foreign state
to remove a state court contract action to federal court despite
A-40
a forum selection clause in the contract, which states that
jurisdiction to resolve contract disputes will lie in ‘any court of
competent jurisdiction within the United States.”
I agree that a waiver of privilege of removal should not
be lightly inferred. In the case before us, Chesapeake and
Mutual Fire adopted language in the early 1980’s, which had
been the subject of substantial litigation, as the Perini opinion
demonstrates. “
As of 1971, the Perini Court had found that the language
which Chesapeake and Mutual Fire utilized, was language
which “most courts” have found constituted a waiver of the
privilege of removal. Under such circumstances, it seems to me
the reasonable conclusion is that the contracting parties assumed
the gloss on the contractual language which was of longstanding.
I am not moved by the arguments advanced by defendant,
that the language was Mutual Fire's take-it-or-leave-it language.
It may well have been Mutual Fire’s form language, but I am
not persuaded that Chesapeake was not in a position, through
counsel, to negotiate for preservation of its privilege of removal,
if it were really concerned about the issue.
I come to the conclusion, therefore, that the quoted forum
selection clause does constitute, in the litigation before me, a
waiver of the privilege of removal by Chesapeake. The contrary
result in the Sixth Circuit, in the Delta American case, is a result
which, as I read the Sixth Circuit’s opinion, is at least substan-
tially rooted in the special circumstance that the removing party
appeared in the status of a foreign sovereign.
At all events, the construction which the Sixth Circuit in 1990
has given to the language at issue is hardly a construction which
was relied on, or could have been relied on, by Chesapeake or
Mutual Fire. In their consideration of what language should
go into the agreements made between them back in the early
’80’s, at that time, and indeed since that time, up until the Delta
American decision language of the kind at issue here, it seems
A-41
almost uniformly to have been recognized as accomplishing a
waiver of the removal privilege.
Having reached this conclusion, I come to the further con-
clusion that plaintiff is entitled to an order from this court
remanding this case to the Commonwealth Court, the Court
selected by the plaintiff standing in the shoes of Mutual Fire.
In view of this disposition of the motion, it is unnecessary for
me to consider the intriguing abstention issues that have been
tendered. I will enter an order remanding this case to the Com-
monwealth Court for the reasons that I have outlined.
I thank you all for your patience.
(Court adjourned the proceedings at 1:10 p.m.)
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.