Reply Brief — Chesapeake Insurance v. Foster

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No. 91-287 OCT z 13

Uirhe OF tHe CLERK

In The

Supreme Court of. the United States

October Term, 1991

.

CHESAPEAKE INSURANCE COMPANY LIMITED,

Petitioner,

VS.

CONSTANCE B. FOSTER, 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

REPLY BRIEF

t

STEVEN M. PESNER

ANDERSON KILL Ouick &

Osuinsky, 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

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

TABLE OF CONTENTS

Page

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I. THERE IS NO BAR TO REVIEW BY THIS COURT

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TABLE OF AUTHORITIES

Page

CASEs:

Air-Shields, Inc. v. Hon. John P. Fullman, 891 F.2d 63

(3G Cis. ISGP) cc ones ccacesssevsve nee eee 4,5

In Re Delta America Re Ins. Co., 900 F.2d 890 (6th

Che. 1996) os ccccccdescscacucesesceeeeeeiueiess 3

In Re Shell Oil Company, 932 F.2d 1518 (5th Cir.

BOGE)... ncvecevttneneeuneu 6 ieee nna nnna Eee 3, 4

Karl Koch Erecting Co. v. New York Convention Ctr.

Dev. Corp., 838 F.2d 656 (2d Cir. 1988)............. 3

Levy v. Weissman, 671 F.2d 766 (3d Cir. 1982)......... 3

Pelleport Investors, Inc. v. Budco Quality Theatres,

Inc., 741 RG 27S Gs CO Went oss ere heracees 3

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

Soh, 96 SCX. SOG GI: ccs 5< cere creaeeeeeeee 3, 4

Statutes & RUuLes:

ae US.C. Secdiom P0685 sivas ings ceceeeeeenneeasee ees 2

28 U.S.C. Section IGPECR «6. .cccksacscccuvessens passim

28 US.C. Section SOG s.os52 7555s eee passim

Federal Rule of Civil Procedure Rule 6(b)............ 5

Supreme Const Tete 06... <cccacsccueewennesieeares 5

Supreme Court Bale T6 .. 0 <sceseavean eeeeee ee 1

STATEMENT OF THE CASE

Petitioner Chesapeake Insurance Company Limited

(“Petitioner” or “Chesapeake”) respectfully submits this

Reply Brief in further support of its Petition For Writ of

Certiorari (“Pet.”) pursuant to Supreme Court Rule 15.6.

This Brief is submitted in order to address certain argu-

mes first raised in the Brief in Opposition (“Br.Opp.”)

of Respondent Constance B. Foster, Insurance Commis-

sioner of the Commonwealth of Pennsylvania, as Reha-

bilitator of the Mutual Fire Marine & Inland Insurance

Company (“Respondent”).

Respondent asserts that review of the judgment

below is precluded by 28 U.S.C. Section 1447(d) (1991),

and that Petitioner somehow has changed its construction

of 28 U.S.C. Section 1447(c) (1991) (respectively, “Section

1447(d)” and “Section 1447(c)”). Br.Opp. 7-9. Respondent

further asserts that a certain Stipulation and Order

entered in the district court (“Stipulation”) properly

extended the statutory time limit governing Respondent’s

motion to remand. Br.Opp. 9.

As set forth below, because the district court

exceeded its statutory remand authority under any char-

acterization of Section 1447(c) and the order at issue,

appellate review is not precluded by Section 1447(d).

Moreover, Respondent’s claims with respect to the record

below are incorrect, deceptive and misleading. Finally,

the Stipulation, which was not relied on below by either

party or the district court (App. 9)', in no way deprives

1 “App.” refers to the Appendix to Chesapeake’s Petition

For Writ of Certiorari. “Rpl.App.” refers to the Appendix to

this Reply Brief.

this Court of jurisdiction; nor does it undermine the

reasons set forth by Chesapeake in support of its Petition

for Writ of Certiorari.

ARGUMENT

I. THERE IS NO BAR TO REVIEW BY THIS COURT

The Court of Appeals below held that Section 1447(c)

was inapplicable to Respondent’s remand motion, but

that the district court nonetheless was authorized to

remand this action based on powers extrinsic to Section

1447(c). App. 14-20. In its Petition, Chesapeake argued,

inter alia, that this was improper. Pet. 6-10. Rather, Chesa-

peake has asserted that a motion to remand on the basis

of a purported forum selection clause properly should be

considered as grounded in Section 1447(c)’s grant of

remand authority to cases involving procedural defects.

Pet. 10-15.

Respondent seeks to invoke Section 1447(d) to bar

review. Section 1447(d) provides that, with the exception

of cases originally removed pursuant to 28 U.S.C. Section

1443, a remand order “is not reviewable on appeal or

otherwise”. Respondent maintains that Chesapeake’s

argument respecting Section 1447(c) renders the matter

nonreviewable pursuant to Section 1447(d). Br.Opp. 6-7, 9.2

2 Simultaneously, Respondent states that it disagrees with

Petitioner’s argument respecting Section 1447(c) and that

review therefore is appropriate. Br.Opp. 1-2, 6.

Under the facts and circumstances present in this

case, Section 1447(d), for several reasons, has no impact

on the availability of review by this Court. See Pet. 1.

As acknowledged by Respondent, this Court has held

that Section 1447(c) and Section 1447(d) “must be con-

strued together”. Br.Opp. 7 (citing Thermtron Products,

Inc. v. Hermansdorfer, 423 U.S. 336, 96 S.Ct. 584 (1976)).

Thus, in Thermtron, this Court held, inter alia, that only

those remand orders properly issued pursuant to a dis-

trict court’s statutory authority under Section 1447(c) are

immunized by Section 1447(d) from review. 423 U.S. at

343-52. “[W]e are not convinced that Congress ever

intended [through Section 1447(d)] to extend carte

blanche authority to the district courts to revise the fed-

eral statutes governing removal by remanding cases on

grounds which seem justifiable to them but which are not

recognized by the controlling statute”. Id. at 351.

Since Thermtron, all Courts of Appeals to address the

issue have agreed that where an action is remanded for

reasons other than those recognized by Section 1447(c),

the matter fully is reviewable, notwithstanding Section

1447(d). E.g., In Re Shell Oil Company, 932 F.2d 1518,

1518-21 (5th Cir. 1991); In Re Delta America Re Ins. Co., 900

F.2d 890, 892 (6th Cir. 1990); Karl Koch Erecting Co. v. New

York Convention Ctr. Dev. Corp., 838 F.2d 656, 658-59 (2d

Cir. 1988); Pelleport Investors, Inc. v. Budco Quality Theatres,

Inc., 741 F.2d 273, 276-77 (9th Cir. 1984); Levy v. Weissman,

671 F.2d 766, 769 (3d Cir. 1982).

Here, both the district court and Third Circuit

expressly held that the action should be remanded to

state court based on purported district court remand

authority wholly independent of Section 1447(c); indeed,

both Courts expressly held Section 1447(c) (and its man-

datory thirty day time limit) to be inapplicable. App.

9-20, 29-37. Accordingly, under settled law, the judgment

below plainly is reviewable. Given the actual disposition

by the Third Circuit, the judgment is reviewable irrespec-

tive of Chesapeake’s various arguments on appeal.

Moreover, even if this Court was to disagree with the

Third Circuit below and hold, as Chesapeake asserts, that

Respondent’s remand motion was encompassed by Sec-

tion 1447(c), review still would be unaffected by Section

1447(d) because Respondent failed to comply with Sec-

tion 1447(c)’s mandatory thirty (30) day time limit.

As set forth in Chesapeake’s Petition, Section 1447(c)

imposes a strict thirty (30) day time limit on remand

motions, unless premised on a lack of federal subject

matter jurisdiction. Pet. 1-2, 11. Here, however, Respon-

dent concededly first sought remand fifty-four (54) days

after removal. Br.Opp. 9; App. 4. Thus, at the close of the

thirty (30) day period, the district court’s statutory power

to entertain Respondent’s remand motion terminated,

and by remanding the action once the statutory time limit

had expired, the district court “exceeded its statutorily

defined power”. Thermtron, 423 U.S. at 351. Under these

circumstances, Section 1447(d) cannot act as a bar to

appellate review. Id. Indeed, the only two appellate deci-

sions to address the reviewability of a remand order

issued in derogation of Section 1447(c)’s time limit have

both, in accord with Thermtron, found the appellate bar of

Section 1447(d) to be inapplicable. Shell Oil, 932 F.2d at

1520-21 & n. 5 (Section 1447(d) would not preclude

review of untimely remand for procedural defects); Air-

Shields, Inc. v. Hon. John P. Fullam, 891 F.2d 63, 65-66 (3d

Cir. 1989) (vacating untimely remand order as exceeding

district court’s statutory authority).

Respondent appears to assert that the Stipulation

renders the remand order timely and, therefore, non-

reviewable. Br.Opp. 4 n.5, 9. Respondent’s contention is

unavailing since the statutory time limit imposed by Sec-

tion 1447(c) may not be extended. See, e.g., Air-Shields, 891

F.2d at 65-66; Cf. Fed.R.Civ.Proc. 6(b) (parties may only

extend time limits set by the court, the Federal Rules or a

notice issued thereunder).* Petitioner believes that an

extended discussion of the merits of Respondent’s claim

is unwarranted at this stage. See Supreme Court Rule 14.

Suffice it to say, Respondent's assertion in no way

deprives this Court of jurisdiction or precludes the avail-

ability of a Writ of Certiorari; rather, it simply may add

an additional question should this Court choose to review

the instant matter, as urged by Petitioner. (It bears notiny,

however, that, at no point in these proceedings has

respondent provided authority for the proposition that

Section 1447(c)’s time limit lawfully may be extended.)

Finally, Respondent claims that Petitioner somehow

has changed its arguments in this Court from those made

before the Third Circuit, and should be “estopped” from

3 In both the district court and the Third Circuit, Petitioner

argued that the time limit imposed by Section 1447(c) is, in

effect, jurisdictional, and thus, not subject to enlargement or

waiver. Rpl.App. 5-8 (excerpts from Petitioner’s Court of

Appeals brief). Since the Third Circuit and district court both

held that Section 1447(c)’s time limit was not controlling, nei-

ther Court addressed Petitioner’s argument that Section

1447(c)’s time limit can not be extended.

arguing that the remand motion at issue was subject to

Section 1447(c). Br.Opp. 7-8. Respondent’s claim under-

lies its effort to escape the impact of the recent Fifth

Circuit decisions invoked by Chesapeake’s Petition, and

the resulting conflict with the judgment of the Third

Circuit. Pet. 10-15. Respondent brazenly has mischarac-

terized the record.

Throughout the course of this litigation, Petitioner

consistently has maintained that remand of the action to

state court was unlawful for each of the several reasons

set forth in the Petition. Thus, in the district court, the

Third Circuit and this Court, Chesapeake asserted that

the district court lacked proper authority to even enter-

tain Respondent’s motion to remand because the motion

either was: (1) in violation of the mandatory thirty day

time limit set forth in Section 1447(c) or (2) outside the

scope of remand powers enacted by Section 1447(c) and,

therefore, invalid. App. 29-37 (district court opinion;

addressing both issues); App. 9-20 (Third Circuit opinion;

same); Pet. 6-15. Indeed, while quoting an isolated pas-

sage from Petitioner’s papers submitted to the Third Cir-

cuit, Respondent omits to disclose that Petitioner’s

leading argument on appeal was the same argument

respecting Section 1447(c) that Respondent now claims

Petitioner somehow should not be permitted to assert. See

Rpl.App. 1-5. Simply put, there is no merit whatsoever to

Respondent’s claim that Petitioner should be estopped

from raising certain arguments.

CONCLUSION

For the foregoing reasons and those set forth in its

Petition, Chesapeake respectfully requests that this Court

issue a Writ of Certiorari to the Court of Appeals for the

Third Circuit to review the Questions Presented as set

forth in the Petition.

Dated: New York, New York

October 2, 1991

Respectfully Submitted

STEVEN M. PEsNER

ANDERSON Kitt Ouick &

OsuHiNnsky, P.C.

666 Third Avenue

New York, New York 10017

(212) 850-0738

Attorneys for Petitioner Chesapeake

Insurance Company Limited

On the Brief:

Davip M. ZENSKY

Rpl. App. 1

APPENDIX

+ * *

A. The District Court Was Without Authority To

Grant a Non-Jurisdictional Remand Motion

Made Outside of The Statutory Thirty (30) Day

Time Limit

The exclusive procedures governing the remand of a

diversity action removed pursuant to 28 U.S.C. §§ 1441(a)

and 1446 are set forth in 28 U.S.C. § 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 pro-

cedure after removal”).

Although Plaintiff’s motion to remand was not made

within the thirty (30) day time limit provided by Section

1447(c), the district court held it had the power to remand

this case to the Commonwealth Court of Pennsylvania. In

holding that it had such authority, the district court erred.

Section 1447(c) was revised by Congress in 1988.8 In

pertinent part, Section 1447(c) now states:

Procedure after removal generally

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

8 The amendments to Section 1447(c) were effective upon

passage, i.e., November 19, 1988. Air-Shields, 891 F.2d at 65.

This action was commenced on or about September 29, 1989.

Rpl. App. 2

court lacks subject matter jurisdiction, the case

shall be remanded.

Thus, under Section 1447(c) as in effect when this action

was commenced, apart from motions to remand based on

an alleged lack of subject matter jurisdiction, there is no

exception to the thirty (30) day time limit. Since Plaintiff

never has alleged any defect in subject matter jurisdic-

tion, the district court had no authority to entertain Plain-

tiff’s motion to remand once the thirty (30) day time limit

expired.’

Although the thirty (30) day time limit has been in

effect for only two years, this Court already has had the

opportunity to make clear that compliance with this time

limit is mandatory and that contravening remand orders

must be vacated. Air-Shields, Inc. v. Fullam, supra, 891 F.2d

63.

In Air-Shields, the district court remanded the action

to state court, sua sponte, on the ground that the defen-

dant had failed to file its removal petition within the

thirty (30) day time limit set forth in 28 U.S.C. § 1446(b).

Id. at 64. This Court held that the remand order violated

Section 1447(c)’s thirty (30) day time limit, and granted a

writ of mandamus to vacate the remand:

* As discussed below, Chesapeake also rejects the proposi-

tion that a district court has authority to remand where the

basis alleged is a contractual clause. Infra at 19-26. However,

assuming such authority does exist, it can derive only from

Section 1447(c)’s authorization to remand cases involving a

“defect in removal procedure”; such authority, therefore, nec-

essarily would be constrained by the applicable statutory

thirty (30) day time limit.

ee

Rpl. App. 3

Even if the district court’s sua sponte action qual-

ifies as a motion under the revised 28 U.S.C.

§ 1447(c), the district court could only remand

within 30 days of the filing of the notice of

removal. Here the district court issued its

remand order more than seven months after the

defendant filed its removal petition. Revised Sec-

tion 1447(c) prohibits such untimely remand... .

By remanding the case for procedural defects

after the thirty day limit imposed by revised

Section 1447(c) had expired, the district court

‘exceeded [its] statutorily defined power’.

891 F.2d at 65-66 (emphasis supplied) (footnote & citation

omitted). Since this Court determined that the remand

exceeded the district court’s authority, the correctness of

the district court’s basis for remand (its finding that

removal had been improper) was irrelevant.!°

As noted, the current Section 1447(c) is the product of

a recent revision to the statute by Congress. The district

10 In accord with this Court’s Air-Shields decision,

numerous other courts have denied remand motions made

after the expiration of the thirty (30) days, even where such

motions, if timely, would have been granted. E.g., Winners

Corporation v. Lafayette Life Insurance Company, 734 F. Supp. 812,

814-15 (M.D. Tenn. 1989) (removal was defective but § 1447(c)’s

time limit “precludes the Court from considering the plaintiff's

untimely motion to remand”); Gray v. Moore’s Business Forms,

Inc., 711 F. Supp. 543 (N.D.Cal. 1989) (“removal was pro-

cedurally improper for two reasons” but remand denied; plain-

tiff “failed to comply with the clear mandate of [§ 1447]

subsection (c) that a motion to remand must be made within

thirty days”); Taylor v. St. Louis Southwestern Railway Co., 128

F.R.D. 118 (D.Kansas 1989) (action removed in violation of

§ 1441(b) but remand denied).

Rpl. App. 4

court’s refusal to comply with Section 1447(c)’s time limit

was in clear derogation of Congress’ intent and purpose

in amending the statute.

Prior to 1988, Section 1447(c) contained no time limit

for remand 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 Levy v. Weissman, 671 F.2d 766, 768 n.7 (3d Cir. 1982).

In 1988, pursuant to the Judicial Improvements and

Access to Justice Act, Pub.L. 100-702, 102 Stat. 4642, Con-

gress substantially revised several provisions of the

removal and remand statutes (28 U.S.C. §§ 1441-1452),

including Section 1447(c). See generally, Air-Shields, 891

F.2d at 65.

In imposing the thirty (30) day time limit on non-

jurisdictional remand motions, 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 judg-

ment it appears that the removal was improvi-

dent. So long as the defect in removal procedure does

not involve a lack of federal subject matter jurisdic-

tion, there is no reason why either State or Federal

Courts, or the parties, should be subject to the bur-

dens of shuttling a case between two courts that each

have subject matter jurisdiction. . . . The amend-

ment provides a period of 30 days within which

Rpl. App. 5

remand must be sought on any ground other than

lack of subject matter jurisdiction.

H.R. 100-889 at 72, 100 Code Cong. & Adm. News at 6033

(emphasis supplied). Thus, Congress clearly has required

that “any” remand motion which does not allege a lack of

subject matter jurisdiction “must” be sought within the

statutory thirty (30) day period.

Here the district court’s authority to order remand

only could have been based on Section 1447(c). Thermtron,

423 U.S. at 342, 96 S.Ct. at 588-89; see infra at 20-26.

Because Plaintiff’s motion was not premised on any

alleged defect in subject matter jurisdiction, it was subject

to Section 1447(c)’s mandatory thirty (30) day time limit.

In light of Congress’ clearly expressed legislative intent

in enacting the thirty (30) day time limit and this Court’s

ruling in Air-Shields that a remand order issued in viola-

tion of such time limit exceeds “statutorily defined

power”, the district court below lacked authority to grant

Plaintiff’s untimely motion. Accordingly, the district

court’s remand order should be reversed.

* * *

C. There Was No Valid Tolling Of The Thirty (30)

Day Time Limit For Plaintiff's Remand Motion

There is no dispute that Plaintiff's remand motion

was made well after the expiration of the statutory thirty

(30) day time limit. To be sure, Plaintiff did request that

Chesapeake stipulate to extend Plaintiff’s time to “file a

motion to remand, based on any defect in the removal

Rpl. App. 6

procedure under 28 U.S.C. § 1447(c)”. Chesapeake’s coun-

sel executed a stipulation prepared by Plaintiff’s counsel,

and the district court approved it. App. 302.

This stipulation, however, has no impact on the val-

idity of the district court’s remand order.

First, in urging that the remand motion was timely

filed, Plaintiff’s counsel disclaimed any reliance on this

stipulation. App. 14 (the stipulation “has no bearing on

the motion” before the court). Nor did the district court

invoke the stipulation in purporting to find authority to

remand this case. App. 81 (Plaintiff “is not relying, and

cannot rely, on the stipulation”).

Moreover, the statutory thirty (30) day time limit is

non-waivable and non-enlargeable. The clear import of

Congress’ intent in amending Section 1447(c) is that all

non-jurisdictional remand motions, in Congress’ words

“must” be made within the thirty (30) day statutory

period. Plainly, “must” cannot be read to mean “must

unless the parties decide otherwise”. Consistently, there-

with, this Court’s Air-Shields decision held that the dis-

trict courts lack all power to remand for non-jurisdictional

reasons after the statutory thirty (30) day time limit

expires.

Further support is found in the district court’s con-

struction of Section 1447(c)’s sister statute, 28 U.S.C.

§ 1446(b), which imposes a thirty (30) day time limit for

effecting removal. This statutory time period has been

held absolute and not subject to extension or enlarge-

ment, whether by stipulation or court order. E.g., Capone

v. Harris Corp., 694 F. Supp. 111, 112 (E.D.Pa. 1988) (thirty

day period of § 1446(b) is mandatory and cannot be

Rpl. App. 7

extended by the Court”); Balestrieri v. Bell Asbestos Mines,

Ltd., 544 F. Supp. 528, 529 (E.D.Pa. 1982) (same); Tyler v.

Prudential Insurance Company, 524 F. Supp. 1211, 1213

(W.D.Pa. 1981) (thirty day limit of § 1446(b) “cannot be

extended by consent of the parties”); Crompton v. Park

Ward Motors, Inc., 477 F. Supp. 699, 701 (E.D.Pa. 1979)

(same).

The reasoning underlying such strict construction of

the removal statute is deference to Congressional intent:

The overwhelming authority holds that

although an untimely petition for removal does

not create a jurisdictional defect, the time limit

established by the removal statute is mandatory

and must be strictly enforced to comply with

Congressional intent in fashioning § 1446(b). ...

The removal statute was drafted by Congress,

not the federal courts. If Congress had wanted

to allow the courts to examine [equitable consid-

erations in support of untimely petitions] it

could easily have done so by drafting appropri-

ate legislation.

Village Improvement Ass'n of Doylestown v. Dow Chemical

Co., 655 F. Supp. 311, 314-15 (E.D. Pa. 1987).!3 Signifi-

cantly, when Congress did desire an exception to this

mandatory thirty (30) day bar, it expressly legislated such

exception. See 28 U.S.C. 1441(d) (“time limitations of

13 The Dow Chemical Court also rejected the contention

that Rule 6 of the Federal Rules of Civil Procedure provided it

authority to extend the thirty (30) day time period since the

rule authorizes the enlargement only of those time periods set

by the federal rules themselves, notice given thereunder or by

an order of court. 655 F. Supp. at 315; see Fed. R. Civ. Pro. 6.

Rpl. App. 8

§ 1446(b) . . . may be enlarged at any time for cause

shown” where action to be removed is against a foreign

state). Such legislation would be redundant if Congress

understood that litigants or district courts had the power

to vary the time limit.

This reasoning is fully applicable here. Congress

unambiguously has placed a mandatory time limit on

remand motions, subject only to exception for a lack of

subject matter jurisdiction. Sections 1446(b) and 1447(c),

each with thirty (30) day time limits, should be construed

in pari materia; thus, the latter, like the former, should be

held non-extendable, either by the parties or the court.

See 2A Sands, Sutherland Statutory Construction, § 51.03

(4th Ed. 1984 rev.) at 467-69.