Respondents Brief — Kircher v. Putnam Funds Trust

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Saati OF THE CLERK |

No. 05-409

IN THE

Supreme Court of the United States

CARL KIRCHER, ET AL.,

Petitioners,

Vv.

PUTNAM FUNDS TRUST, ET AL.,

Respondents.

On Writ Of Certiorari

To The United States Court Of Appeals

For The Seventh Circuit

BRIEF FOR RESPONDENTS

MARK A. PERRY

Counsel of Record

MIGUEL A. ESTRADA

AMANDA M. ROSE

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Ave. N.W.

Washington, D.C. 20036

(202) 955-8500

Counsel for Respondent

Janus Capital Management LLC

[Counsel for Other Respondents

Listed on Inside Cover]

John D. Donovan, Jr.

Ropes & GRAY LLP

One Internationa! Place

Boston, Massachusetts

02110

(617) 951-7000

Thomas B. Smith

Ropes & GRAY LLP

700 12th Street, N.W.

Washington, D.C. 20005

(202) 508-4600

Attorneys for Respondents

Putnam Funds Trust, Put-

nam International Equity

Fund, Putnam Investment

Funds, Artisan Funds, Inc.,

and Scudder International

Fund, Inc.

Steven B. Feirson

Stephen J. McConnell

Nory Miller

DECHERT LLP

4000 Bell Atlantic Tower

Philadelphia, Pennsylvania

19103

(215) 994-2369

Attorneys for Respondent

Pacific Life Insurance

Company

Christopher P. Hall

fodd D. Brody

MORGAN, LEWIS &

Bockius LLP

101 Park Avenue

New York, N.Y. 10178

(212) 309-6702

Attorneys for Respondent

Deutsche Investment Man-

agement Americas Inc.

Dale R. Harris

DAVIS GRAHAM & STUBBS

LLP

1550 17th Street

Denver, Colorado 80202

(303) 892-9400

Attorneys for Respondent

Janus Investment Fund

Phil C. Neal

Mark A. Rabinowitz

NEAL, GERBER &

EISENBERG LLP

Two North LaSalle Street

Chicago, Hlinois 60602

(312) 269-8083

Attorneys for Respondent

Columbia Wanger Asset

Management L P.

John W. Rotunno

Kenneth E. Rechtoris

BELL, BOYD & LLoyD LLC

70 West Madison Street

Chicago, Dlinois 60602

(312) 807-4213

Attorneys for Respondents

Artisan Partners Limited

Partnership and Columbia

Acorn Trust

James R. Carroll

David S. Clancy

SKADDEN, ARPS, SLATE,

MEAGHER & FLOM LLP

One Beacon Street

Boston, Mass. 02108

(617) 573-4800

Attorneys for Respondent

Putnam Investment Man-

agement, LLC

Charles F. Smith

Lee P. Garner

SKADDEN, ARPS, SLATE,

MEAGHER & FLOM LLP

333 West Wacker Drive

Chicago, Illinois 60606

(312) 407-0787

Attorneys for Respondent

Van Kampen Series Fund,

Inc.

Robert Y. Sperling

David E. Koropp

WINSTON & STRAWN

35 West Wacker Drive

Chicago, Dlinois 60601

(312) 558-5600

Attorneys for Respondent

Van Kampen Investment

Advisory Corporation

QUESTION PRESENTED

The first question presented in the petition for a writ of

certiorari is:

“Whether the court of appeals had jurisdiction, contrary

to the holdings of three other circuits, to review a district

court order remanding for lack of subject-matter jurisdiction

a suit removed under the Securities Litigation Uniform Stan-

dards Act of 1998 (‘SLUSA’), notwithstanding 28 U.S.C.

§ 1447(d)’s bar on appellate review of remand orders based

on lack of subject-matter jurisdiction and the district courts’

conclusion that petitioners’ claims are not preempted by and

thus not rernovable under SLUSA.”

RULE 29.6 STATEMENT

Respondent Artisan Partners Limited Partnership has no

parent corporation, and no publicly held company owns 10%

or more of its stock. This respondent is a limited partnership,

the general partner of which is Artisan Investment Corpora-

tion, which has no parent corporation, and no publicly held

company owns 10% or more of its stock.

Respondent Artisan Funds, Inc. has no parent corpora-

tion, and no publicly held company owns 10% or more of its

stock.

Respondent Columbia Wanger Asset Management, LP

has no parent corporation, and no publicly held company

owns 10% or more of its stock. This respondent is a limited

partnership, the general partner of which is CWAM Acquisi-

tion GP, Inc., which is a wholly owned subsidiary of Colum-

bia Management Group, Inc., which in turn is a wholly

owned subsidiary of Fleet National Bank, which in tur is a

subsidiary of Bank of America Corporation, a publicly traded

company.

Respondent Columbia Acorn Trust has no parent corpo-

ration, and no publicly held company owns 10% or more of

its stock.

Respondent Deutsche Investment Management Ameri-

cas Inc. is a wholly owned subsidiary of Deutsche Bank

Americas Holding Corp., which is a wholly owned subsidi-

ary of Taunus Corporation, which is a wholly owned subsidi-

ary of Deutsche Bank AG, a publicly traded company that

owns 10% or more of respondent’s stock. No other publicly

held company owns 10% or more of its stock.

Respondent Janus Capital Management LLC is a wholly

owned subsidiary of Janus Capital Group Inc., a publicly

traded company that owns 10% or more of respondent’s

stock. No other publicly held company owns 10% or more

of its stock.

ill

Respondent Janus Investment Fund has no parent corpo-

ration, and no publicly held company owns 10% or more of

its stock.

Respondent Pacific Life Insurance Company is a wholly

owned subsidiary of Pacific Life Corporation, a private stock

holding company. No publicly held company owns 10% or

more of respondent’s stock.

Respondent Putnam Investment Management, LLC is an

indirect subsidiary of Marsh & McLennan Companies, Inc., a

publicly traded company that owns 10% or more of respon-

dent’s stock.. No other publicly held company owns 10% or

more of its stock.

Respondents Putnam Funds Trust, Putnam International

Equity Fund, and Putnam Investment Funds have no parent

corporation and no publicly held company owns 10% or

more of their stock.

Respondent Scudder International Fund, Inc. has no par-

ent corporation, and no publicly held company owns 10% or

more of its stock.

Respondent Van Kampen Investment Advisory Corpora-

tion merged on November 30, 2003, into Van Kampen Asset

Management, which is a wholly owned subsidiary of Van

Kampen Investments, Inc., which is a wholly owned subsidi-

ary of MSAM Holding II Inc., which is a wholly owned sub-

sidiary of Morgan Stanley, a publicly traded company that

owns 10% or more of respondent’s stock. No other publicly

held company owns 10% or more of its stock.

Respondent Van Kampen Series Fund, Inc. has no parent

corporation, and no publicly held company owns 10% or

more of its stock.

TABLE OF CONTENTS

SPREE UIIIIITITTT losccaciciadinnmotdiasiinntnnvedenteensoeseeenescontnssneteoencene l

SUMMARY OF ARGUMENT .........ccccccessceeeeseeeneneenes 6

ITT senteititncidcninnsinantemnasiasinninsipaiapnosrantiechonvees 10

I. The Seventh Circuit Properly Exercised

Appellate Jurisdiction Under Thermtron......... 10

A. The Remand Orders Were Not Based On

A Lack Of Subject-Matter Jurisdiction .... 11

1. The Jurisdictional Label Used By The

District Court Is Not Conclusive........ 12

2. The Seventh Circuit Correctly

Rejected The District Court’s

Jurisdictional Label .................c00000 16

a. SLUSA’s Removal Provision Is

Broader Than Its Preclusion

ERS AS es re 18

b. A Colorable Defense Of SLUSA

Preclusion Is Sufficient To

Confer Removal Jurisdiction....... 25

c. Respondents Asserted A

Colorable Defense Of SLUSA

CIR i a 28

d. Because It Had Removal

Jurisdiction, The District Court’s

Remand Orders Were

I IIIIIEN scstnistndninesontiansecosocsese 32

B. Affirmance Would Further The

Objectives Of SLUSA Without

Undermining The Policy Of § 1447(d).....37

Il. The Seventh Circuit Also Had Appellate

Jurisdiction Under Wad ..0...........ccccccceeeeeeeeeees 4]

TIT Pithinditinsiciidpinnsendaintincbsatnebeaevicnvoenceesinsnicnenen 47

TABLE OF AUTHORITIES

Cases

Abney v. United States,

GE TET, Gare IG OP ccscscntntcccscntinascvinsnccnenieomanseininenn 41

Adkins v. Ill. Cent. R.R. Co.,

326 F.3d 828 (7th Cir. 2003).............. satlimmaduiaiiatiaal 43

Alaska Dep't of Envtl. Conservation v. EPA,

BE es re Ce crcnccssesiistneseccticnnccccinnsceeseesiinnianns 23

Aliota v. Graham, —

984 F.2d 1350 (3d Cir. 1993)... ccc ccccecceeeeeeeeeeenees 13

Allied-Bruce Terminix Cos. v. Dobson,

_ = iS & | ET eer ereee nee 20-21

American Nat'l Red Cross v. S. G.,

es BOE CED cicentedccnthiensestesinsctesciiscnvotinsnnitiing 19

Arbaugh v. Y&H Corp.,

BR GE. CR cccicensesesneevnecensinenntionntcssnnsing passim

Baldwin v. Iowa State Traveling Men's Ass'n,

DT Fee COD initerncncintsintnscesticnctinnptantinniiennd 43

Barr v. Matteo,

Pe ek Br CI cictiiicsccrectintenisenintnniarninintinannne 27

Bell v. Hood,

ee eee CIP ED cticsnemniccsinescsnnstincionsie 5, 16, 26, 33

Beneficial Nat'l Bank v. Anderson,

ee: 0 eR ciracanistoinsoscnctubcmnssienotagetineensiasieinitois 19

Blackburn v. UPS, Inc.,

yoo ek | Fk XK eer 12

Blue Chip Stamps v. Manor Drug Stores,

es ae I caitccttectinnesieintpeynisianinivicaseansceiiniibil 6

Briscoe v. Bell,

ae ets I FN chicnscsipthsniisactstcecnniccmnainiiasiietiaincumatd 13

Burford v. Sun Oil Co.,

FE es BE CID ciciccesencnsccensecaccinnnencnbinscentonnsninie 36

C.LR. v. Sunnen,

Be CR, Fee CI ccccntecnccssccnsencscceveneresenneresetecccians 43

Carnegie-Mellon Univ. v. Cohill,

Ge Ce Fe FD veces citncceccintinnsevictntancsinneneiti passim

Caterpillar Inc. v. Lewis,

SOD TA, GE Ga rcs cencncnescastccsetscovecasesteesnanpeststncten 12

Chicot County Drainage Dist. v. Baxter State

Bank,

Be hs Oe CI cirecectsscerccsincrssctntsosinntetesinnninnesneceni 45

Cohen v. Beneficial Industrial Loan Corp.,

BPE as ee CD cecicstentvinsvtinsenmscreremnnnstniestnnenatian 44

In re Continental Cas. Co.,

y fm Pb le Lt | eer 12

Dalrymple v. Grand River Dam Auth.,

145 F.3d 1180 (10th Cir. 1998) 0... ceecceeneeserneeees 15

Davis v. Michigan Dep't of Treasury,

I Gs I ncn ctncintcsnicenncnininennnennnvinnnesen 25

Dudek v. Prudential Secs., Inc.,

ya 33

Dura Pharms., Inc. v. Broudo,

Be ls Re Ie CI ctcitineicnceonosmsicietecesineniencnenenscine 1

El Paso Natural Gas Co. v. Neztsosie,

ER eee 27

Fauntleroy v. Lum,

Bs Se I svisicctisninnisteotnreesctinntncneninenincennnnnnens 28

Ferrari, Alvarez, Olsen & Ottoboni v. Home Ins.

Co.,

oe Fe | een 15

Vil

Fong Foo v. United States,

Fee Cs Ce Ch eisintbniderncverinmnseeveneiimetnniniticings 14

Franchise Tax Bd. v. Construction Lab. Vac. Trust,

ee I: 0 I ccteisicinannscumittnitosnsctnsnscemnpetsasians 28, 33

Gold-Washing & Water Co. v. Keyes,

Fe Os BOP COED tictecentininecvinncentncsesunvermecantitdasintenn 29

Gozlon-Peretz v. United States,

9 gg | DINE 21

Gravitt v. Southwestern Bell Tel. Co.,

gS Se, , SES ee 11, 38, 40

Greenwood v. Peacock,

Pe as Ne CD cecenctaseesctcecnescconsteremnepsensinesarinns 33

Gutierrez de Martinez v. Lamagno,

POD Wes BEF COCR crcticicttnsinerrratsienenieeens 9, 17, 34

Hartford Fire Ins. Co. v. California, |

Fe Os. Fe CE cnceirenictinttccestinesintmneneiinnenonenatens 28

Hilton v. South Carolina Pub. Rys. Comm'n,

Fe Ca Be CEE veteterictteteniceenrpeniorieniomampesiin 39

INS v. National Ctr. for Immigrants’ Rights, Inc.,

FE Eres, ID COO cttaietacnnieccctennbensinnemcenepiiniaateniom 21

Izumi Seimitsu Kogyo Kabushiki Kaisha v. U.S.

Philips Corp.,

PI Es BOF I aciccnissnptnercininnntninerneciesiinnnanniiinnein 31

Jama v. ICE,

Pe Os Ne CI cccctdessth tentennniincactninviinsastiianniiantions 21

Jamison v. Wiley,

14 F.3d 222 (4th Cir. 1994)..............ccceccssocesvosserseees 34

In re Janus Mut. Funds Iny. Litig.,

310 F. Supp. 2d 1359 (J.P.M.L. 2004) .........cccccceeeees 3

Jefferson County v. Acker,

ee Sy Er OD settntsatetnsertetenvencienepeinsineid passim

Vill

Johnson Co. v. Wharton,

BE BI. Be CD orcevanecsccccssnscceroceoninnbepsinnnsnrensinets 45

Kelly v. Robinson,

FF Ses Be CD ctctesintincssnccniacietetetuntennipiminhtcinecanl 24

King v. St. Vincent's Hosp.,

FE Cs RO OOO cincvininsqcivcntecicedpinevinigtineeitataiijens 23

Kontrick v. Ryan,

S4O U.S. 443 (2006) ..cccrrcccssescesorcescecescsoossssovessonees 5, 16

Levering & Garrigues Co. v. Morrin,

BP Cre. CP CRIED ccncnghinternesesisnepibeteninenernnnent 29

Liberty Mut. Ins. Co. v. Weitzel,

424 U.S. 737 (1976) .......cccccccsceseceeeteeeneees 7, 13, 14, 15

Lindsey v. Dillard’s, Inc.,

306 F.3d 596 (8th Cir. 2002) 0.0... eee ceeeeceeeeeeeeeens 15

Lousiville & Nashville Ry. Co. v. Mottley,

BEE Ghee OG CEI cenceecntcwsessstactntecsertvenipescenimnenienes 16

McLaughlin Bros. v. Hallowell,

ee es Pe wetedevistedotcbeavincetesenecisvoinsitniedbint 46

Mangold v. Analytic Servs., Inc.,

77 F.3d 1442 (4th Cir. 1996) 0.0... ccceececeeseeeereeeees 15

Martin v. Franklin Capital Corp.,

Re a eh POP I cttstetictntrncrectvtninciosecsscasepobitiinetin 35

Merrill Lynch, Pierce, Fenner & Smith, Inc. v.

Dabit,

PF OR ID erieenivtosccicovocscscnsssunincansanitied passim

Mesa v. California,

eee 16, 25, 28, 33

Midlantic Nat'l Bank v. New Jersey Dep't of Envitl.

Prot.,

FOP Ee, FO IG cictorinmenescinpsteininninarsitansetinesincten 40

Missouri Pac. Ry. Co. v. Fitzgerald,

PE OF. FW CED vsiccsccssnsssecoseinreniivnstonsocssboenniecones 46

Moses H. Cone Mem'l Hosp. v. Mercury Constr.

Corp.,

Se Whats. 0 CI nccscesciccnosicocccneniansenssensetennsoosoepensanes 44

In re Mut. Funds Inv. Litig.,

384 F. Supp. 2d 845 (D. Md. 2005) ........:cccceeceeeeenees 3

Nashville, Chattanooga & St. Louis Ry. v. Wallace,

Fae As BOP CAO) cevscviintnssrsnecnsstinstinsscrasonisinsnnncies 13

Norton v. Mathews,

BET Tae DOO GIGI vvccescsnccncccsocsnsstosenssvsetontionieoneeses 30

Oklahoma Tax Comm'n v. Graham,

RE Be eas UE CID nicnnsscecnseconsensneiscnesscanswenssuntinnies 19

Oneida Indian Nation v. County of Oneida,

BEG UB. GE CBG) scsccccscrcescrcocsssnesessscosencesessosoooesoes 26

Osborn v. Bank of United States,

22 U.S. (9 Wheat.) 738 (1824) .......ccccesceeeeeerseeeeenes 33

Quackenbush v. Allstate Ins. Co.,

Fk FBR FO CED ccciicceresentotsccovesioccssnmmatnatinen passim

Railroad Co. v. Mississippi,

BGR ADD. CFS CEG IGD ccccsccosecsocscrssctitecscsoossnsvevesesessssees 29

Riley v. Merrill Lynch, Pierce, Fenner & Smith,

Inc.,

292 F.3d 1334 (11th Cir.), cert. denied,

SOT Wis DO ED ccicssocecsceintsistntiacneeccscaseanenticsboonten 2

Romero v. International Term. Oper. Co.,

BOO has BOW NII D vencsesosoniesincnttinscbetepentnsencetsoescoane 24

Rowinski v. Salomon Smith Barney Inc.,

398 F.3d 294 (3d Cir. 2005) ...........ccceccceeseeeeeeeeeeeees 38

Ruhrgas AG v. Marathon Oil Co.,

526 U.S. 574 (1999) .....cccccscsssessessseesssesseeesee 14, 34, 45

Salinas v. United States,

Bae iets Be CIT D cscnsiocecccvcdntencesnecensnenescoventsosoeneseees 20

Scarborough v. Principi,

541 U.S. 401 (2004) oo. ceeecessssesesesereesereeereeeenees 5, 16

Schweiker v. Hogan,

BT Cs FE COP OED verevtcccccctscrsccesscsvssconssopeoscsnssovonees 44

SEC v. Zandford,

FD GI ED CED wictiviinscsnvssercincrensnsnovnvosnnsccesoncosees 30

Semtcek Int'l Inc. v. Lockheed Martin Corp.,

Fe WT CPOE D siciscrcdeseticorvossososeseievisoreccoqeneccsses 45

Skelly Oil Co. v. Phillips Petroleum Co.,

Fe es EF Ce aiicavitansctisccdoictncnisevenstonseesiennens 33

Snapper, Inc. v. Redan,

171 F.3d 1249 (11th Cir. 1999)... ceeeseseeeeeeeeeees 12

St. Paul Mercury Indem. Co. v. Red Cab Co.,

Pe Ws See ID sindsecesenedonsevsictesscsmecsostoiscensciocese 34

Steel Co. v. Citizens for Better Env't,

523 U.S. 83 (1998) ...........ccecccsrcessrsrereees 17, 26, 29, 30

Stoll v. Gottlieb,

Be Ws WED CEI caccssonsccccscccsecoiinsncsonetnesocovescesonees 45

Taylor v. Freeland & Kronz,

Fe Oe OE ciansecvenciosemnepresecesensnneevencenentcnes 12

Tennessee v. Union & Planters’ Bank,

BAe Wie SID LEON cesepvccnecessetscsescenssenoeesesesiccesvcenes 16

Thermtron Prods., Inc. v. Hermansdorfer,

Re TO vicdpecstudisiiecnnsspertecianpoovvcocioet passim

Things Remembered, Inc. v. Petrarca,

PEO UB. FBO CEGISD srcicrsstnsoscsocoviccccoscosossossscocess passim

Trans Penn Wax Corp. v. McCandless,

Fe Fe BF Ce ee CI cdtccctasntnincnenssioriconsccsvenese 35

Underwriters Nat'l Assur. Co. v. North Carolina

Life & Accident & Health Ins. Guar. Ass'n,

RD Tt Ie CTI ciccictciscccsesscttcncevistinitiininennanenn 45

United States v. Cotton,

Fe WA ee GE in so nscinesnnnenivyennsctnniensnitennsintnsensniee 31

United States v. Jorn,

| Tn TNT 14

United States v. Martin Linen Supply Co.,

PS Tf ; ae ne NE RE TEN 7, 14

United States v. Munsingwear, Inc.,

De Cas BP CE cicitserecsisticcisnipetnennatinianiasnaiianal 45

United States v. O'Hagan,

Fe Rk Se CP cerrcieccesittinteniscnenqsaneesnenasionsninnabinn 30

United States v. Rice,

See Ts Fe I vocsecinesnncwsiniitsecntepinniaintioneniannal 43

United States v. Ruiz,

Bae Wats Ge CIID virecinescncsescneescnseseiseninisienntnnioanstens 28

United States v. Sisson,

I IE Ce FE sncenscscnnscnenisetnseninisniinneiiane 7, 14,15

UPS, Inc. v. Mitcheil,

Ne Te ee eR sidictitcirincinnensintpivinttnntesedvainbioniviane 39

Verlinden B.V. v. Central Bank of Nigeria,

RE Rs I aces cds eiccssbbitntninineies 9, 18, 32, 33

Waco v. United States Fid. & Guar. Co.,

BOD Oy BO CIB vesiccecscicirrecsnsincricreonosnsansbasens passim

Will v. Hallock,

i Gs i SD cececccennictccsenichossksaisnnettetecbinapiie 44

Willingham v. Morgan,

es CE RD aici tanicciennnissennecineniniiveinenad passim

Yankaus v. Feltenstein,

ee Rs Cae UG OP ccnincinniocspissnesdveicniauntinbeistetniannnds 46

xii

Yee v. City of Escondido,

as. SEED sinice divtstcsenitanensciintabestiahasiesinenatibaea 12

Statutes

Class Action Fairness Act of 2005, Pub. L. No.

ee ORs OF ccciinscsasensenceiincaneianenieannanedadotin 21, 40

Private Securities Litigation Uniform Standards

Act of 1995, Pub. L. No. 104-67, 109 Stat. 737......... 1

Securities Act of 1933, 15 U.S.C. § 77a et seq. (as

I aciicie hike chieniin ssa cen tecnisiibsaedictsiccnebisiucindiniptopniaicclebeiviicies l

ae Oe Fa eiccccinaiictin inactinslacieaciaidireiiniaianicinibaiaies 3

Re ee I iiceeecksihctsiccccitienibelielictebininuataia 2, 18-19

Se ae Oe FRI atiilinnscthesnsedeacienndinsepetecninabints passim

a Oe hittin ainichshhsnscniesvivctiinebpucecaiiilianatint 2

eles Pe icihiinicsncicennscidensenateiscdndnsentininibs 2

sa Ae Pia eiicneriscistssinntincchpninstinmaniatenninioraiodie 3

Sr AE FP aphrerncrencescessicnbnsdamsinciosiniiteiilan 35

eda i niciensihienincitcictapsnamaconisonticiaiaetenncctnes 2

BP earns Oe FEE icssiticsvineiicienienneneevenaelorieianieeees 2

OE iis cenctveecciiieonl 29

ae ns te I iiiciasecticenisnnensbintiniiobiaomiatntagiens 2

Ses Oe i cthiriniiinnnliinnsidiesiniiakmemeniienints 2

ie a PUI cictdric tenis svicennibesnidicinieie quinceleiartl 2

er Ee PU vccincccccnseschenpisiniinimpenicnnnciianal 1

CR SRA eee n mes ace RTI 1

Bs nk & TEESE RESO ae eIN ere 41

CI A a as 4)

es ar UI i cisiieiin cstcainssansicnteLdcabeasinidthtgdeale ati 2

Raa: 0b 8 Pe ccicechastintcinwtbiisbeipuneciiveasinnionsntipicnene 2

Securities Exchange Act of 1934, 15 U.S.C. § 78a

CE IE icctesichchdscdeicsnnintbisersiindinipanente 1

ae aay: Ue PURI cxssivissisnisenichigihptniedtsdapsecpsincamanpiebniiansindenl 3

ae es Oe Pe icciciveichsccotintssiskicctnadabiapeniniis 35

BP a te PII iccscicnischianrcictaiectnecnctenndasisitndiit l

BP tare at PRE Ria incicsdidisticncaneunsetinemiindveidstaite |

15 U.S.C. § 78u-4(b)(3).............. clic aelatideadeameailn sich ]

oF es Oe PIO concicinissccinsessuvtninnsbniiniesstins 41

BD TPS B FU I OD vce erevescecscesssecensaveonessebonce 41

Fa ire PAID ils cchcisies-nicienilloisicsteiongecbalapinisicdinmiianie 2

ae eee PID ctenincs biciienteennnwntenensiinntiianesiiaehimabeiiniainnn 2

Securities Litigation Uniform Standards Act of

1998, Pub. L. No. 105-353, 112 Stat. 3227.............4. 2

ge sas AN AIT Sicircishencdinsinapsssninocaeiplasoncsdibedacaigeubinestpaiadediinbeiniie 14

aan Sse iavicisbiasibcadcissiiibasdy iilideegsairidiuababieabaabeiti 10, 11

yp 4 | Oe 5 * . SEARS ee ree eee 40

a a FR ates ciicachntnciitssinsasinsisthonicicneninsitieiniben 34

nies EE itch ainpiesenii dessin shssethacedbigesnk asia iepedlanebi 25

Be as ae IE isk distil snntincibsiceconicokainehialasisiienneaiidedeiien 27

es ae inca: cnccintidcceacbinbibicucsbinteneenitannend passim

ase SE irdicicitincsiicnstthnntinisbininitinsibinindinlaneia passim

Be ga I eetisnprptivsihcdnsdscclemnnttnncninjaniieetnapiapibiaialetial 39

els Op Ee Rint csitciccisnndiiinnitvicsiccnnuioasentnintalibains 21

XIV

Other Authorities

H.R. Conf. Rep. No. 369,

104th Cong., Ist Sess. (1995)........ccccecsseeeeeeeeeeeees 1,2

H.R. Conf. Rep. No. 803,

105th Cong., 2d Sess. (1998) ..........sscccecsecessereeeees 2,37

H.R. Rep. No. 640,

105th Cong., 2d Sess. (1998) ..........008. 2, A 242 OO

S. Rep. No. 182,

105th Cong., 2d Sess. (1998) .........:cccesceeeees 2, 21, 27

Securities Litigation Abuses: Hearing Before the

Subcomm. on Secs., Comm. on Banking,

Housing & Urban Affairs, 1997 WL 687807..... 23-24

16 Moore's Federal Practice § 107.44[2][a] (3d

Morris & Goss, Why Claims Under the Securities

Act of 1933 Are Removable to Federal Court,

36 Sec. Reg. & L. Rep. (BNA) 626 (2004).............. 20

5A Wright & Miller, Federal Practice &

Procedure § 1350 (2d ed. 1990).........ccccscseseeeeeeeees 26

14C Wright & Miller, Federal Practice &

Procedure § 3739 (3d ed. 1998)...........cccccceeceseseeeeees 34

ISA Wnght & Miller, Federal Practice &

Procedure § 3914.11 (2d ed. 1992)............cceeceeeee 47

BRIEF FOR RESPONDENTS

Respondents respectfully submit that the judgment of the

court of appeals should be affirmed.

STATEMENT

After removal, the district court held that petitioners’

state-law claims are not precluded by the Securities Litiga-

tion Uniform Standards Act of 1998 (SLUSA). The court of

appeals held that it had jurisdiction to review the district

court’s resolution of the SLUSA issue, then reversed and re-

manded with directions to dismiss petitioners’ claims pursu-

ant to SLUSA.

1. In 1995 and 1998, Congress enacted two statutes that,

together, sought to regularize private enforcement of the se-

curities laws at the federal level and to significantly limit pri-

vate securities litigation at the state level. Both statutes

amended the two principal pillars of federal securities law:

the Securities Act of 1933, 15 U.S.C. §§ 77a et seq., and the

Securities Exchange Act of 1934, 15 U.S.C. §§ 78a et seq.

a. The Private Securities Litigation Reform Act of 1995

(PSLRA), Pub. L. No. 104-67, 109 Stat. 737, was enacted to

“implement[] needed procedural protections to discourage

frivolous litigation.” H.R. Conf. Rep. No. 369, 104th Cong.,

Ist Sess. 32 (1995). Congress concluded that the “private

securities litigation system is too important to the integrity of

American capital markets to allow this system to be under-

mined by those who seek to line their own pockets by bring-

ing abusive and meritless suits.” /d. at 31.

The PSLRA imposes rigorous pleading requirements on

plaintiffs in federal securities suits. 15 U.S.C. § 78u-4(b)(1),

(2); see Dura Pharms., Inc. v. Broudo, 125 S. Ct. 1627, 1633

(2005). It also imposes an automatic stay of discovery dur-

ing the pendency of motions to dismiss (15 U.S.C. §§ 77z-

1(b), 78u-4(b)(3)), constrains who can serve as lead plaintiff

in a securities class action (15 U.S.C. §§ 77z-1(a)(3), 78u-

4(a)(3)), and authorizes sanctions for frivolous litigation (15

U.S.C. §§ 77z-1(c), 78u-4(c)). In addition to these proce-

dural reforms, the PSLRA also establishes a “‘safe harbor” for

forward-looking statements, to encourage issuers to dissemi-

nate relevant information to the market without fear of open-

ended liability. H.R. Conf. Rep. No. 369, supra, at 32; see

15 U.S.C. §§ 77z-2(c), 78u-5S(c).

b. SLUSA, Pub. L. No. 105-353, 112 Stat. 3227, was

enacted “in order to prevent certain State private securities

class action lawsuits alleging fraud from being used to frus-

trate the objectives of the [PSLRA].” SLUSA § 2 (App. to

Pet. Br. 15a). “[S]tate-court class actions involving nation-

ally traded securities were virtually unknown” when the

PSLRA was enacted. S. Rep. No. 182, 105th Cong., 2d Sess.

4 (1998). But “the decline in federal securities class action

suits that occurred after the passage of the PSLRA was ac-

companied by a nearly identical increase in state court fil-

ings.” Riley v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,

292 F.3d 1334, 1341 n.12 (11th Cir.), cert. denied, 537 U.S.

950 (2002). Congress determined that “(t]he solution to this

problem is to make Federal court the exclusive venue for

most securities fraud class action litigation involving nation-

ally traded securities.” H.R. Conf. Rep. No. 803, 105th

Cong., 2d Sess. 15 (1998).

SLUSA precludes any court from hearing a state-law

“covered class action” alleging fraud or manipulation in con-

nection with the purchase or sale of a “covered security.” 15

U.S.C. § 77p(b). SLUSA also authorizes removal of “[a]ny”

covered class action “involving” covered securities, as set

forth in the preclusion provision. 15 U.S.C. §77p(c). A

covered class action is one that seeks damages on behalf of

50 or more persons. 15 U.S.C. § 77p(f)(2). Covered securi-

ties include mutual fund shares. 15 U.S.C. §§ 77p(f)(3),

771r(b). Expressly excluded from SLUSA’s preclusive reach

are derivative actions (15 U.S.C. § 77p(f)(2)(B)), actions un-

der the law of the State of incorporation involving proxy so-

licitations (15 U.S.C. § 77p(d)(1)), actions by States or their

securities comrvissioners (15 U.S.C. §§ 77p(d)(2), 77p(e)),

and actions between an issuer and indenture trustee (15

U.S.C. § 77p(d)(3)).

2. Petitioners are individuals who allegedly purchased

shares in mutual funds or their equivalents offered or advised

by respondents. See Resp. C.A. Br. 1 n.1, 6.3. Petitioners

filed these putative class actions in Illinois state court (in the

circuit courts for Madison and St. Clair Counties), alleging

that respondents had engaged in an undisclosed practice of

facilitating “market timing”—a term that petitioners use to

mean frequent trading of mutual fund shares to take advan-

tage of price arbitrage opportunities in funds holding interna-

tionally traded securities. See Pet. Br. 6-7.

Petitioners alleged that respondents marketed mutual

funds as long-term investments, but then “exposed long term

shareholders to market timing traders” by “failing to make

daily adjustments” to the value of portfolio securities traded

on foreign exchanges. J.A. 174 (Potter). Petitioners alleged

that respondents thereby “g{a]ve market timing traders the

opportunity to earn vastly higher returns at no additional

risk,” and that these “excess profits . . . c[a]me at the expense

of fellow shareholders.” /d. at 176, 177. Alleging that re-

spondents had facilitated this course of conduct without dis-

closing it to other investors, petitioners sought damages (in-

cluding punitive damages) and other relief on behalf of all

With one exception (see note 13, infra), SLUSA’s amendments to

the 1933 Act (15 U.S.C. § 77p) parallel those to the 1934 Act (15 U.S.C.

§ 78bb(f)). Both petitioners (Pet. Br. 5 n.1) and the court of appeals (Pet.

App. 3a, lla) refer only to the 1933 Act codification; for consistency,

respondents will generally do the same.

More than 400 lawsuits alleging “market timing” in various mutual

funds, including some of respondents’ funds, have been transferred for

coordinated proceedings in the District of Maryland. See /n re Janus

Mut. Funds Inv. Litig., 310 F. Supp. 2d 1359 (J.P.M.L. 2004). That court

has held state-law claims analogous to petitioners’ precluded by SLUSA.

In re Mut. Funds Inv. Litig., 384 F. Supp. 2d 845, 871-72 (D. Md. 2005).

investors who “held” shares in respondents’ mutual funds for

more than 14 days. /d. at 180-84; see also id. at 192, 197-

200 (Kircher); 218, 223-26 (Parthasarthy), 244, 249-52

(Dudley I); 262, 267-70 (Dudley II); 279, 284-87 (Vogeler);

296, 301-03 (Jackson); 316-18 (Spurgeon).

Respondents removed the cases to the United States Dis-

trict Court for the Southern District of Illinois, asserting (in-

ter alia) that “(t]he Court has subject matter jurisdiction over

this action pursuant to SLUSA.” J.A. 360 (Potter). Respon-

dents alleged that each aspect of the preclusion defense was

met because “this action is a covered class action,” petition-

ers had sued under state law, mutual fund securities are “cov-

ered securities,” and petitioners’ “claims are ‘in connection

with’ the purchase or sale of a covered security because they

are based upon statements and alleged manipulative conduct

relating to the value and nature of securities sold or consid-

eration received.” /d. at 360-61; see also id. at 331-36, 337-

40 (Parthasarthy), 341-57 (Kircher); 369-72 (Vogeler); 373-

89 (Dudley I); 390-406 (Dudley II); 407-12 (Jackson); 413-

35 (Spurgeon). Based on these allegations, respondents con-

cluded that “SLUSA mandates that this action be removed to

federal court.” Jd. at 362.

Petitioners’ sole objection to removal under SLUSA was

that the “in connection with” requirement was not met be-

cause the putative classes were comprised of “holders,”

rather than purchasers or sellers, of mutual fund shares. Pet.

App. 6a. In a series of similar orders, the district court con-

cluded that because petitioners ostensibly were suing on be-

half of “holders,” their claims would not be “cognizable un-

der the 1934 Act”; on that basis, the district court held that

“SLUSA does not preempt them.” Pet. App. 61a (Spurgeon);

see also id. at 26a-27a (Kircher), 30a (Dudiey I; 39a-40a

(Parthasarthy), 43a-45a (Potter); 50a-51a (Vogeler), 56a-57a

(Jackson). Having rejected respondents’ federal defense on

the merits, the district court remanded the cases to state court.

In each case, the court stated that it was remanding for lack

of subject-matter jurisdiction. See Pet. Br. 13 & n.22.

3. Respondents appealed the rejection of their SLUSA-

preclusion defense to the Seventh Circuit, which issued two

opinions by different three-judge panels.

a. The court of appeals (Easterbrook, Evans and Wil-

liams, JJ.) first determined that it had jurisdiction to consider

respondents’ appeal. Pet. App. 10a-17a. The court recog-

nized that 28 U.S.C. § 1447(d) precludes appellate review of

remand orders that are based on § 1447(c). /d. at 12a (citing

Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S. 336

(1976), and Things Remembered, Inc. v. Petrarca, 516 U.S.

124 (1995)). The court ruled, however, that a remand under

SLUSA “is not within § 1447(c) or equivalent to it, for [it]

comes at the end rather than the outset of federal adjudica-

tion.” /d. at 13a. As the court noted, “[t}he Supreme Court

has itself reviewed remand decisions that fall outside the

scope of § 1447(c).” Jbid. (citing Thermtron; Quackenbush

v. Allstate Ins. Co., 517 U.S. 706 (1996); and Carnegie-

Mellon Univ. v. Cohill, 484 U.S. 343 (1988)).

The court of appeals rejected petitioners’ contention that

a SLUSA-based remand connotes a lack of subject-matter

jurisdiction, and thus is governed by § 1447(c). “[T]he Su-

preme Court has observed that a court lacks ‘subject-matter

jurisdiction’ only when Congress has not authorized the fed-

eral judiciary to resolve the sort of issue presented by the

case (or the Constitution forbids adjudication).” Pet. App.

13a (citing Kontrick v. Ryan, 540 U.S. 443 (2004), and Scar-

borough v. Principi, 541 U.S. 401 (2004)). Under SLUSA,

“a federal judge is not only authorized but also required to

decide whether any court may entertain the litigation,” and

“{o}jnly after making the substantive decision that Congress

authorized it to make did the district court remand.” /d. at

14a. To “say that jurisdiction evaporated at that juncture .. .

would be tautological,” the court explained, because

“({o]therwise every federal suit, having been decided on the

merits, would be dismissed ‘for lack of jurisdiction’ because

the court’s job was finished.” /bid. (citing Bell v. Hood, 327

U.S. 678 (1946)).

b. In its second decision, the court of appeals (Easter-

brook, Ripple and Wood, JJ.) concluded that petitioners’

claims are precluded by SLUSA. Pet. App. la-9a. Although

petitioners “insist{ed] that any private action that is untenable

after Blue Chip Stamps [v. Manor Drug Stores, 421 U.S. 723

(1975),] also is unaffected by SLUSA,” the Seventh Circuit

held that “[iJt would be more than a little strange if the Su-

preme Court’s decision [in Blue Chip Stamps] to block pri-

vate litigation by non-traders became the opening by which

that very litigation could be pursued under state law, despite

the judgment of Congress (reflected in SLUSA) that securi-

ties class actions must proceed under federal securities law or

not at all.” Pet. App. 6a-7a, 8a. This Court has expressly

approved the Seventh Circuit’s merits decision in this case.

Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 547

U.S. _ (2006), slip op. 1, 14.

SUMMARY OF ARGUMENT

Petitioners assert that the Seventh Circuit was stipped of

appellate jurisdiction by 28 U.S.C. § 1447(d), which provides

that “[a]n order remanding a case to the State court from

which it was removed is not reviewable on appeal or other-

wise.” But that statute does not bar a// review of remand or-

ders and associated decisions, and it does not apply here.

I. In Thermtron Products, Inc. v. Hermansdorfer, 423

U.S. 336 (1976), the Court held that § 1447(d) bars appellate

review only of remand orders based on the grounds specified

in § 1447(c)}—<defects in removal procedure or lack of subject

matter jurisdiction. Because the remand orders in this case

were not based on either of these grounds, appellate review

was authorized by Thermtron, which the Court has repeat-

edly reaffirmed and implemented. Things Remembered, Inc.

v. Petrarca, 516 U.S. 124 (1995); Quackenbush vy. Allstate

Ins. Co., 517 U.S. 706 (1996).

A. The district court said that it was remanding for

“lack of subject matter jurisdiction.” Petitioners argue that

this statement is dispositive in its own right, and correct in

any event. They are wrong on both counts.

1. This Court recently observed that courts often label

dispositions “jurisdictional” when in fact they are based on a

failure to prove some substantive element. Arbaugh v. Y&H

Corp., 546 U.S. __ (2006). Such labels have “no preceden-

tial effect,” and cannot override the federal courts’ independ-

ent obligation to determine whether appellate jurisdiction ex-

ists. E.g., Liberty Mut. Ins. Co. v. Wetzel, 424 U.S. 737

(1976). In analogous circumstances, this Court has held that_

the label attached to a district court determination is not con-

trolling for purposes of appellate jurisdiction. United States

v. Martin Linen Supply Co., 430 U.S. 564 (1977); United

States v. Sisson, 399 U.S. 267 (1970). The label applied by

the district court here is, likewise, not controlling.

2. Petitioners’ entire case rests on an understanding of

the concept of “jurisdiction” that this Court unanimously re-

jected in Arbaugh, which confirmed that subject-matter juris-

diction refers only to “the question whether the federal court

had authority to adjudicate the claim in suit.” Because Con-

gress clearly authorized the district court to resolve the sub-

stantive question of SLUSA preclusion, the court’s ultimate

rejection of respondents’ federal defense was an exercise of

jurisdiction, not a determination that jurisdiction was lacking.

a. The Court also held in Arbaugh that where Congress

does not expressly make a statutory requirement jurisdic-

tional, the courts should treat it as non-jurisdictional. Under

that standard, the elements of SLUSA preclusion are not ju-

risdictional because SLUSA’s removal provision is broader

than its preclusion provision, such that some actions are re-

movable even if they are not precluded. The text of the re-

moval provision authorizes removal of “any” covered class

action “involving” covered securities as set forth in the pre-

clusion provision. These terms of inclusion show that Con-

gress intended the removal provision to be broader than the

preclusion provision, which is confirmed by the legislative

history. Thus, in Merrill Lynch, Pierce, Fenner & Smith,

Inc. v. Dabit, 547 U.S. __ (2006), this Court read SLUSA as

authorizing removal of ai// “covered class actions,” regardless

of whether such actions are precluded. The final clause of

the removal provision, which states that removed actions

“shall be subject” to the preclusion provision, provides fur-

ther structural proof that the removal provision is broader

than the preclusion provision; if they were coterminous, this

final clause would be redundant or superfluous. Congress

made the removal provision sweep wider than the preclusion

provision to ensure that federal courts would make the sub-

stantive determination whether a particular action is pre-

cluded by SLUSA.

b. Where Congress has made state-law claims remov-

able on the basis of a federal defense, this Court has held that

the federal courts have jurisdiction if the removing defen-

dants establish a “colorable” (non-frivolous) federal defense,

based on the defendants’ theory of the case at the time of re-

moval, even if that defense is ultimately rejected on the mer-

its. For example, the Court has rejected a “narrow, grudg-

ing” interpretation of the federal officer removal statute that

would require the officer to prove the federal defense in order

to remove the case. Jefferson County v. Acker, 527 U.S. 423

(1999); Willingham v. Morgan, 395 U.S. 402 (1969). Con-

gress enacted SLUSA against this established background

principle, and thus is presumed to have understood that a dis-

trict court has removal jurisdiction if the removing defen-

dants establish a colorable defense of preclusion at the time

of removal. Certainly, petitioners provide no justification for

treating “jurisdiction” under SLUSA differently than this

Court has done in other statutory contexts.

c. Where a case is removable on the basis of a federal

defense, the courts look to the removal papers to establish the

bases for federal jurisdiction. Here, respondents established

that their SLUSA preclusion defense was colorable; indeed,

petitioners conceded all of the elements but one. The sole

argument advanced by petitioners—that an action by “hold-

ers’ can never satisfy the “in connection with” requirement—

was unanimously rejected by this Court in Dabit. Respon-

dents’ position on this issue was perforce colorable; the dis-

trict court therefore had subject-matter jurisdiction at the time

of removal.

d. The existence of a substantial federal defense of

SLUSA preclusion is sufficient to invest the court with juris-

diction over the entire action, even if the defense is ulti-

mately rejected. Verlinden B.V. v. Central Bank of Nigeria,

461 U.S. 480 (1983); Gutierrez de Martinez v. Lamagno, 515

U.S. 417 (1995) (plurality). But because the surviving

claims will predominantly (if not entirely) involve state law,

the court has the discretionary authority to remand the case to

state court. Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343

(1988). Under Thermtron, as applied in Quackenbush, such

a discretionary remand order is appealable because it is not

based on one of the grounds in § 1447(c). Accordingly, the

Seventh Circuit correctly exercised appellate jurisdiction

over the remand orders in this case.

B. Allowing appellate review of SLUSA decisions

would further the statutory objective of uniformity. Petition-

ers do not contend otherwise; rather, they argue that affir-

mance would frustrate the policies of § 1447(d). This is an

attack on Thermtron itself; but Thermtron has been settled

law for three decades. Congress is presumed to have been

aware of the Thermtron rule, and thus to have understood

that non-jurisdictional SLUSA decisions would be appeal-

able. Adherence to that well-settled rule compels affirmance

of the decision below.

Il. The decision below could be affirmed on the alterna-

tive ground that appellate review was authorized by Waco v.

United States Fidelity & Guaranty Co., 293 U.S. 140 (1934).

In Waco, this Court held that the statutory bar on appellate

review of remand orders does not apply to an otherwise ap-

pealable antecedent decision that would be conclusive in the

remanded action. The district court’s decision that petition-

ers’ actions are not precluded under SLUSA is reviewable

under the Waco doctrine, because that decision is both im-

mediately appealable and would not be subject to reconsid-

eration or appeal on remand. Petitioners have failed even to

address the Waco doctrine in their principal brief.

ARGUMENT

“Because it ends the litigation in federal court, a remand

is a ‘final decision’ that may be appealed under 28 U.S.C.

§ 1291.” Pet. App. 12a (citing Quackenbush v. Allstate Ins.

Co., 517 U.S. 706, 711-15 (1996)); see note 3, infra. Thus,

to prevail on the question presented, petitioners must estab-

lish that some other statute precluded the court below from

exercising the appellate jurisdiction conferred on it by Con-

gress in § 1291.

Petitioners place sole reliance on 28 U.S.C. § 1447(d),

which provides that “[a]n order remanding a case to the State

court from which it was removed is not reviewable on appeal

or otherwise.” See Pet. Br. 24. But § 1447(d) does not pre-

clude all appellate review of remand orders and associated

decisions. As the court below correctly held, the orders in

this case are reviewable under Thermtron Products, Inc. v.

Hermansdorfer, 423 U.S. 336 (1976), because the district

court’s remand decisions were not based on a defect in re-

moval procedure or a lack of subject-matter jurisdiction.

Moreover, the orders in this case are also reviewable under

Waco v. United States Fidelity & Guaranty Co., 293 US.

140 (1934), because the district court’s antecedent decision

on the applicability of SLUSA would be functionally unre-

viewable in the state-court proceedings.

I. The Seventh Circuit Properly Exercised Appellate

Jurisdiction Under Thermtron

In Thermtron, this Court held that “only remand orders

issued under § 1447(c) and invoking the grounds specified

therein ... are immune from [appellate] review under

§ 1447(d).” 423 U.S. at 346. Since Thermtron, the Court has

reiterated that “§ 1447(d) must be read in pari materia with

§ 1447(c), so that only remands based on grounds specified

in § 1447(c) are immune from review under § 1447(d).”

Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 127

(1995); see also Quackenbush, 517 U.S. at 711-12 (same).

Under the 7hermtron rule, remand orders based on

grounds specified in § 1447(c)}—lack of subject-matter juris-

diction and defects in removal procedure—are not appeal-

able. Thus, § 1447(d) bars appellate review where the dis-

trict court remands for lack of complete diversity. Gravitt v.

Southwestern Bell Tel. Co., 430 U.S. 723, 723 (1977) (per

curiam). A remand based on a procedural defect, such as an

untimely removal, is likewise unreviewable. Things Remem-

bered, 516 U.S. at 128.

Also under Thermtron, remand orders based on grounds

not specified in § 1447(c) may be reviewed on appeal. For

example, the abstention doctrines are not within the scope of

§ 1447(c), and a remand order based on one of those doc-

trines is appealable. Quackenbush, 517 U.S. at 712. Simi-

larly, the congestion of a district court’s docket is not within

the scope of § 1447(c), and a remand order based on that, fac-

tor is reviewable on appeal. Thermtron, 423 U.S. at 351.

Because the remand orders in this case were not based

on any ground specified in § 1447(c), the Seventh Circuit

properly exercised appellate jurisdiction to review those or-

ders under the rule announced in 7hermtron, adhered to in

Things Remembered, and followed in Quackenbush.

A. The Remand Orders Were Not Based On A

Lack Of Subject-Matter Jurisdiction

According to petitioners, the remand orders fall within

§ 1447(d)’s bar to appellate review because the district court

: The remand order in Thermtron was reviewed on writ of mandamus

because the Court was of the view that “an order remanding a removed

action does not represent a final judgment reviewable by appeal” under

28 U.S.C. § 1291. 423 U.S. at 352-53. This aspect of Thermtron was

“disavow(ed]” in Quackenbush (517 U.S. at 715), which held that a re-

mand order is a final decision appealable under § 1291 because “[w]hen a

district court remands a case to a state court, the district court disassoci-

ates itself from the case entirely, retaining nothing of the matter on the

federal court's docket.” /d. at 714.

said that its remand orders were based on a “lack[ of] subject

matter jurisdiction.” Pet. App. 12a. Petitioners argue, first,

that the district court’s jurisdictional label is “dispositive”;

and second, that the district court “correctly concluded that

[it] lacked subject-matter jurisdiction.” Pet. Br. 24 & n.31.

Petitioners are wrong on both counts.

1. The Jurisdictional Label Used By The

District Court Is Not Conclusive

This Court very recently observed that judicial opinions

often recite “that the court is dismissing for ‘lack of jurisdic-

tion’ when some threshold fact has not been established,

without explicitly considering whether the dismissal should

be for lack of subject matter jurisdiction or for failure to state

a claim.” Arbaugh v. Y&H Corp., 546 U.S. ___ (2006), slip

op. 9 (internal quotation omitted). In Arbaugh, the Court

made clear that such “‘drive-by jurisdictional rulings’ ...

: Although petitioners suggest, half-heartedly, that the remand orders

could be held unreviewable as based on a “defect” other than subject-

matter jurisdiction (Pet. Br. 20 n.24, 34.43), the 1996 amendment to

§ 1447(c) on which they rely has “no effect on the scope of remands au-

thorized by § 1447(c), and therefore no effect on the scope of remand

orders with respect to which § 1447(d) bars appellate review.” Snapper,

Inc. v. Redan, 171 F.3d 1249, 1259-60 (11th Cir. 1999); see Public Citi-

zen Br. 5 n.2. Respondents established in the district court that there was

no “defect” within the meaning of § 1447(c) (see J.A. 359-60 (Potter)),

and petitioners did not timely claim otherwise; thus, the case could not

have been remanded on that basis. See Caterpillar Inc. v. Lewis, 519

U.S. 61, 69 (1996); Blackburn v. UPS, Inc., 179 F.3d 81, 90 n.3 (3d Cir.

1999). And even if the district court had remanded on the basis of a “de-

fect” not timely raised by petitioners, appellate review of such a remand

order is not barred by § 1447(d). In re Continental Cas. Co., 29 F.3d

292, 294-95 (7th Cir. 1994). In any event, because petitioners failed even

to mention their “defect” theory to the Seventh Circuit or in their certio-

rari petition, it may not be raised by petitioners for the first time in their

merits briefing. See, e.g., Taylor v. Freeland & Kronz, 503 U.S. 638, 646

(1992); Yee v. City of Escondido, 503 U.S. 519, 537 (1992).

should be accorded ‘no precedential effect’ on the question

whether the federal court had the authority to adjudicate the

claim in suit.” /d. at 9-10. Nothing in this Court’s prece-

dents requires courts to take precisely the opposite approach

in the context of remand orders. To the contrary, the rule of

blind deference petitioners propose directly conflicts with

this Court’s admonition that the federal courts must inde-

pendently determine whether appellate jurisdiction exists in a

given case (Liberty Mut. Ins. Co. v. Wetzel, 424 U.S. 737,

740 (1976))—a determination that requires an evaluation of

the substance of the district court’s decision. Nashville,

Chattanooga & St. Louis Ry. v. Wallace, 288 U.S. 249, 259

(1933) (“In determining whether this litigation presents a

case within the appellate jurisdiction of this Court, we are

concerned, not with form, but with substance’’).

To be sure, “[i]f a trial judge purports to remand a case

on the ground” that it lacked subject-matter jurisdiction, that

jurisdictional ruling is unreviewable “whether erroneous or

not.” Thermtron, 423 U.S. at 343; see Briscoe v. Bell, 432

U.S. 404, 413 n.13 (1977) (dictum). But in determining what

the district court “purported” to do, the appellate court must

look beyond the /abel affixed to the district court’s ruling.

See Things Remembered, 516 U.S. at 134 (Ginsburg, J., con-

curring) (“it ‘make[s] little sense’ to rest reviewability vel

non on the tag the trial court elects to place on its ruling”).

Petitioners concede that a district court may not insulate a

non-jurisdictional remand from appellate review by giving it

a “patently unreasonable” jurisdictional label (Pet. Br.

28 n.34), but they offer no convincing reason that an appel-

late court should nonetheless be bound by some less egre-

gious (but incorrect) jurisdictional label. See Thermtron, 423

U.S. at 357 (Rehnquist, J., dissenting). Even in close cases,

the appellate courts have an obligation to determine whether

a remand order was actually based on a lack of subject-

matter jurisdiction or something else. See Aliota v. Graham,

984 F.2d 1350, 1354-57 (3d Cir. 1993) (Alito, J.).

Contrary to petitioners’ contention, testing the label ap-

plied by the district court hardly renders § 1447(d) a “nul-

—)

lity.” Pet. Br. 28 n.34. Determining whether the actual basis

for a district court’s temand was “jurisdictional” does not

violate § 1447(d) because it does not require a court of ap-

peals to review the correctness of the district court’s remand

order. Here, for example, the court of appeals determined

that the remand orders were not “jurisdictional” before it

even addressed the district court’s substantive analysis of

SLUSA preclusion. Pet. App. 17a. In the vast majority of

cases, there will be no incongruity between a remand order’s

substance and its label; after all, “in most instances subject-

matter jurisdiction will involve no arduous inquiry.” Ruhr-

gas AG Vv. Marathon Oil Co., 526 U.S. 574, 587 (1999). But

where such an incongruity does arise, the appellate courts

must ensure that the district court correctly understood its

own jurisdiction. Cf Liberty Mut. Ins. Co., 424 U.S. at 743-

44 (where district court lacked authority to enter a Rule 54(b)

judgment, appellate jurisdiction was lacking “despite the fact

that the [court] undoubtedly made the findings required by

the Rule”).

This is not the first time that the Court has considered

whether a district court’s label is conclusive for purposes of

appellate jurisdiction. The Double Jeopardy Clause and 18

U.S.C. § 3731 preclude review of a judgment of acquittal in a

criminal case, even if the court of appeals believes that the

district court’s ruling “was based upon an egregiously erro-

neous foundation.” Fong Foo v. United-States, 369 U.S.

141, 143 (1962). In applying this bar on appealability, this

Court has instructed that “what constitutes an ‘acquittal’ is

not to be controlled by the form of the judge’s action.”

United States v. Martin Linen Supply Co., 430 U.S. 564, 571

(1977). Rather, a court of appeals “must determine whether

the ruling of the judge, whatever its label, actually represents

a resolution, correct or not, of some or all of the factual ele-

ments of the offense charged.” Jbid.; see also United States

v. Jorn, 400 U.S. 470, 478 n.7 (1971) (“the trial judge’s

characterization of his own action cannot control the classifi-

cation of the action for purposes of our appellate jurisdic-

tion’); United States v. Sisson, 399 U.S. 267, 279 n.7 (1970)

(“The label attached by the District Court to its own opinion

does not, of course, decide for us the jurisdictional issue”).

Just as a court of appeals may question a district court’s la-

beling of its judgment as an “acquittal” without violating the

bar on appeals of even erroneous acquittals, a court of ap-

peals may question a district court’s labeling of its remand

order as “jurisdictional” without violating the bar on appeals

of even erroneous jurisdictional remands.

Not surprisingly, the courts of appeals have generally

recognized that “powerful policy considerations and persua-

sive decisional authority” support their obligation to inde-

pendently determine the basis for a district court’s remand

order before holding that § 1447(d) bars an appeal. Mangold

v. Analytic Servs., Inc., 77 F.3d 1442, 1450-51 (4th Cir.

1996); see also, e.g , Lindsey v. Dillard's, Inc., 306 F.3d 596,

598 (8th Cir. 2002); Dalrymple v. Grand River Dam Auth.,

145 F.3d 1180, 1184 (10th Cir. 1998); Ferrari, Alvarez, Ol-

sen & Ottoboni v. Home Ins. Co., 940 F.2d 550, 553 (9th Cir.

1991). These courts and others have properly concluded that

a district court’s incantation of the phrase “subject-matter

jurisdiction” is not a sufficient basis for foreclosing an ap-

peal, nor for relieving the courts of appeals of their obligation

to serve as interpreters of their own jurisdiction. See Liberty

Mut. Ins. Co., 424 U.S. at 742 (holding that the court of ap-

peals had erred in accepting jurisdiction based on the district

court’s “recital” that a final judgment had been entered).

This Court has explained that it “must be guided in de-

termining the question of appealability of the trial court’s ac-

tion not by the name the court gave [its decision] but by what

in legal effect it actually was.” Sisson, 399 U.S. at 279 n.7

(internal quotation omitted). That principle is equally appli-

cable to the labels attached by district courts to their remand

decisions. The legal effect of the district court’s decision in

this case was to reject the SLUSA-preclusion defense inter-

posed by respondents; as demonstrated below, that was a de-

cision on the merits of a substantial federal question that the

court had jurisdiction to decide, not a determination that sub-

ject-matter jurisdiction was lacking.

2. The Seventh Circuit Correctly Rejected The

District Court’s Jurisdictional Label

Petitioners’ conception of what constitutes a “jurisdic-

tional” ruling was flatly rejected by this Court’s unanimous

decision in Arbaugh. As the court below explained, “a court

lacks ‘subject-matter jurisdiction’ only when Congress has

not authorized the federal judiciary to resolve the sort of is-

sue presented by the case....” Pet. App. 13a (citing Scar-

borough v. Principi, 541 U.S. 401, 413-14 (2004), and Kon-

trick v. Ryan, 540 U.S. 443, 454-55 (2004)). Petitioners con-

tend that “[nJothing in Kontrick or Scarborough suggests that

the district court[’s] authority to resolve the preemption issue

... Somehow meant that the court[’s] remand orders were not

based on a lack of jurisdiction.” Pet. Br. 37. But in Ar-

baugh, this Court confirmed that Kontrick and Scarborough

mean exactly that: Subject-matter jurisdiction refers only to

“the question whether the federal court had authority to adju-

dicate the claim in suit.” Slip op. 9-10; see also U.S. Br. in

Arbaugh, at 21-25. Because Congress clearly authorized the

district court to resolve the substantive federal question of

SLUSA preclusion, its ultimate rejection of respondents’ fed-

eral defense is an exercise of jurisdiction, not a determination

that jurisdiction was lacking.

It is well-established that removal jurisdiction (i.e., the

authority to decide the merits of a case removed from state

court) extends to all cases as “might” have been brought

originally in federal court. Tennessee v. Union & Planters’

Bank, 152 U.S. 454, 461-62 (1894). The federal courts have

original jurisdiction of, inter alia, cases presenting a federal

question that is not “wholly insubstantial” (Bell v. Hood, 327

U.S. 678, 682 (1946)), and the federal question ordinarily

must appear on the face of the complaint. Lousiville &

Nashville Ry. Co. v. Mottley, 211 U.S. 149, 152-54 (1908).

This “well-pleaded complaint” rule can be abrogated by stat-

ute, and Congress has acted on occasion to make state-law

actions removable so/e/y on the basis of a substantial federal

question presented as a defense. Mesa v. California, 489

U.S. 121, 136-37 (1989). When Congress has done so, it has

always been recognized that the removing defendants need

not prove the merits of the defense to invoke the subject-

matter jurisdiction of the federal court; rather, such a case is

within the removal jurisdiction if the federal defense is “col-

orable” (non-frivolous). Jefferson County v. Acker, 527 U.S.

423, 431-33 (1999). Ifthe federal court ultimately rejects the

federal question, that is a decision on the merits—anot a juris-

dictional determination. Steel Co. v. Citizens for Better

Env 't, 523 U.S. 83, 89 (1998). The court therefore retains

jurisdiction to decide the remainder of the case. Gutierrez de

Martinez v. Lamagno, 515 U.S. 417, 435-36 (1995) (plurality

opinion). But if state-law claims predominate following the

rejection of the federal defense on the merits, the district

court ordinarily has the discretion to remand the case to state

court. Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 354-

55 (1988). Such a remand order is not based on a lack of

subject-matter jurisdiction, and thus 28 U.S.C. § 1447(d) is

no barrier to appellate review. Quackenbush, 517 U.S. at

711-12.

SLUSA follows this established blueprint. Congress ex-

pressly waived the well-pleaded complaint rule by making

securities class actions removable on the basis of SLUSA’s

preclusion defense. 15 U.S.C. § 77p(c). The removal provi-

sion applies to “[a]ny” covered class action “involving” a

covered security as set forth in the preclusion provision, and

requires the federal court to “subject” such actions to the pre-

clusion provision upon removal; thus, the removal provision

is broader than the preclusion provision, such that some ac-

tions that are within the removal jurisdiction are not pre-

cluded. The touchstone here, as in other contexts, is whether

the federal defense is “colorable” at the time of removal; if it

is, then the district court has jurisdiction even if the defense

is ultimately rejected on the merits. The SLUSA-preclusion

defense in this case was clearly colorable; indeed, this Court

has since sustained respondents’ position on the merits.

Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 547

U.S. ___ (2006). Accordingly, the district court had subject-

matter jurisdiction when the case was removed, and its erro-

neous resolution of the preclusion defense did not serve to

divest it of jurisdiction. Verlinden B.V. v. Central Bank of

Nigeria, 461 U.S. 480, 493 (1983). Its subsequent remand

order was therefore discretionary, as authorized by Cohill,

and the court of appeals properly exercised appellate jurisdic-

tion, as authorized by Thermtron and Quackenbush.

a. SLUSA’s Removal Provision Is Broader

Than Its Preclusion Provision

The Arbaugh Court adopted a “readily administrable

bright line” rule to answer the question “[w]hether a disputed

matter concerns jurisdiction or the merits.” Slip op. 14 (in-

ternal quotation omitted). Under Arbaugh’s clear-statement

rule, statutory elements are not jurisdictional unless Congress

expressly provides otherwise: “If the Legislature clearly

states that a threshold limitation on a statute’s scope shall

count as jurisdictional, then courts and litigants will be duly

instructed and will not be left to wrestle with the issue. ...

But when Congress does not rank a statutory limitation on

coverage as jurisdictional, courts should treat the restriction

as nonjurisdictional.” /bid. (footnote omitted). Under the

standard reiterated in Arbaugh, the elements of SLUSA pre-

clusion are not jurisdictional.

SLUSA precludes certain securities actions from being

maintained in any court:

No covered class action based upon the statutory or

common law of any State or subdivision thereof

may be maintained in any State or Federal court by

any private party alleging—

(1) an untrue statement or omission of a material

fact in connection with the purchase or sale of a

covered security; or

(2) that the defendant used or employed any ma-

nipulative or deceptive device or contrivance in

connection with the purchase or sale of a covered

security.

15 U.S.C. § 77p(b). Although this is often referred to as a

“preemption” provision, “SLUSA does not actually pre-empt

any state cause of action. It simply denies plaintiffs the nght

to use the class action device to vindicate certain claims.”

Dabit, slip op. 15.

SLUSA also contains a specialized provision authorizing

removal of state-law actions on the basis of a federal defense:

Any covered class action brought in any State court

involving a covered security, as set forth in subsec-

tion (b) of this section, shall be removable to the

Federal district court for the district in which the ac-

tion is pending, and shail be subject to subsection

(b) of this section.

15 U.S.C. § 77p(c) (emphases added). Congress thereby au-

thorized removal based on the federal defense of preclusion.

See Oklahoma Tax Comm'n v. Graham, 489 U.S. 838, 841

(1989) (per curiam) (“Congress has expressly provided by

statute for removal when it desired federal courts to adjudi-

cate defenses based on federal immunities”).

’ 1. The text and structure of the statute, and its history

and purpose, establish that SLUSA’s removal provision is

broader than its preclusion provision—that is, it confers sub-

ject-matter jurisdiction in the federal courts over some claims

that are not precluded. It necessarily follows that Congress

* Where Congress has expressly provided for federal jurisdiction by

statute, the well-pleaded complaint rule-- which ordinarily requires the

federal question to appear on the face of the complaint—does not apply.

Cf. American Nat'l Red Cross v. S. G., 505 U.S. 247, 258 (1992). For the

same reason, petitioners’ reliance on the “complete preemption” doctrine

(Pet. Br. 34-36) is misplaced; that doctrine applies only where Congress

. has not expressly provided for federal jurisdiction. See Beneficial Nat'l

Bank v. Anderson, 539 U.S. 1, 8 (2003) (“a state claim may be removed

to federal court in only two circumstances—when Congress expressly so

provides, ... or when a federal statute wholly displaces the state-law

cause of action through complete pre-emption”) (emphasis added).

did not “clearly state[]” that each of the prerequisites to pre-

clusion “shall count as jurisdictional.” Arbaugh, slip op. 14.

The Seventh Circuit held that SLUSA allows removal of

all “covered class actions.” Pet. App. 13a-14a (“Because .. .

this is a ‘covered class action’ . . . a federal judge is not only

authorized but also required to decide whether any court may

entertain the litigation”). Although petitioners complain that

this holding is “without any textual basis” (Pet. Br. 37), this

Court recently read SLUSA's removal provision precisely as

the Seventh Circuit had. In Dabit, this Court explained that a

“key provision of the statute makes a// ‘covered class ac-

tions’ filed in state court removable to federal court.” Slip

op. 10 n.7 (emphasis added).

Contrary to petitioners’ suggestion (Pet. Br. 37), neither

the Dabit Court’s footnote nor the Seventh Circuit’s holding

is inconsistent with the “as set forth in subsection (b)” clause

of the removal provision, which petitioners would read to

mean that an action cannot be removed unless it conclusively

meets all of the prerequisites to preclusion. Pet. Br. 32. “To

be sure, the removal provision’s reference to the preemption

provision is not a model of clarity, but it . . . cannot possibly

mean that Congress intended to give the removal provision

precisely the same scope as the preemption provision. If the

removal provision had the same scope as the preemption

provision, it would simply reference that provision in its en-

tirety, or it would track that provision’s language exactly.

But it does neither.” Morris & Goss, Why Claims Under the

Securities Act of 1933 Are Removable to Federal Court, 36

Sec. Reg. & L. Rep. (BNA) 626, 629 (2004).

Congress chose not to repeat the preclusion provision

verbatim in the removal provision. Instead, Congress con-

ferred removal jurisdiction over “/a/ny covered class action

... involving a covered security” as set forth in subsection

(b). 15 U.S.C. § 77p(c) (emphases added). These are terms

of inclusion, not limitation. See Salinas v. United States, 522

U.S. 52, 57 (1997) (“The word ‘any’ ... undercuts the at-

tempt to impose [a] narrowing construction”); Allied-Bruce

Terminix Cos. v. Dobson, 513 U.S. 265, 273 (1995) (“the

word ‘involving’ is broad”). Congress's use of these inclu-

sive terms to modify the “as set forth” clause shows that the

removal provision is broader than the preclusion provision.

Indeed, the very title of the removal provision is “removal of

covered class actions”—not “removal of precluded class ac-

tions”—confirming that the removal provision is broader

than the preclusion provision. See NS v. National Ctr. for

Immigrants’ Rights, Inc., 502 U.S. 183, 189 (1991).°

The section-by-section analyses prepared for each cham-

ber state that subsection (c) “provides that any class action

described in [s]ubsection (b) that is brought in a State court

shall be removable to a Federal district court, and may be

dismissed pursuant to the provisions of subsection (b).”

S. Rep. No. 182, supra, at 8 (emphases added); accord, H.R.

Rep. No. 640, 105th Cong., 2d Sess. 16 (1998). The con-

gressional understanding that an action removed under

SLUSA “may be dismissed pursuant to the provisions of sub-

section (b)” necessarily means that some actions might not be

so dismissed. Jama v. ICE, 543 U.S. 335, 346 (2005) (“The

word ‘may’ customarily connotes discretion”). In other

words, an action might be “described in subsection (b)” for

purposes of removal, but nor precluded by subsection (b).

The final clause of the removal provision—which states

that removed actions “shall be subject to subsection (b)”—

provides further structural proof that the removal provision is

broader than the preclusion provision. If only precluded ac-

* ‘The Class Action Fairness Act of 2005 (CAFA), Pub. L. No. 109-2,

119 Stat. 4, exempts from its removal provision “any class action that

solely involves . . . a claim concerning a covered security as defined un-

der [SLUSA]"—nor just claims precluded by SLUSA. 28 U.S.C.

§ 1453(d)(1). The 109th Congress thus understood actions “concerning”

a covered security to be removable under SLUSA. See Gozlon-Peretz v.

United States, 498 U.S. 395, 406 (1991) (view of a later Congress has

““persuasive value’” in construing prior legislation).

tions could be removed, as petitioners contend, then there

would be no need for them to be “subject to” the preclusion

provision; they would be precluded simply by virtue of their

removability. Under the Seventh Circuit’s ruling, by con-

trast, the district court “subjects” a removed action to the

preclusion provision by determining whether the action

meets each of the limitations in subsection (b), in which case

it may not be maintained in any court as a matter of substan-

tive federal law; if the court ultimately concludes that the ac-

tion does not fall within subsection (b), then—again as a mat-

ter of substantive federal law—the action may be maintained

in the court in which it was brought.

Congress included the removal provision to ensure that

precluded actions do not proceed in state court. H.R. Rep.

No. 640, supra, at 16 (removal provision “is designed to pre-

vent a State court from inadvertently, improperly, or other-

wise maintaining jurisdiction over an action that is preempted

pursuant to subsection (b)”). And Congress made the re-

moval provision sweep wider than the preclusion provision

to ensure that the federal courts would make the determina-

tion whether a particular action is precluded by SLUSA. Cf

Willingham v. Morgan, 395 U.S. 402, 405 (1969) (“the test

for removal should be broader, not narrower, than the test for

[the federal defense of] official immunity”).

2. Petitioners maintain, however, that “the plain lan-

guage of SLUSA’s removal provision clearly mandates that a

class action cannot be removed uni/ess that action satisfies

SLUSA’s preemption provision.” Pet. Br. 32 (citation omit-

ted). This reading cannot be reconciled with the text, struc-

ture, history, or purpose of the statute.

Petitioners assert that SLUSA “provides for removal of a

covered class action if and only if it meets the preemption

criteria ‘as set forth in subsection (b).’” Pet. Br. 32. The

problem with this simplistic argument is that SLUSA does

not say that a case can be removed “if and only if” all re-

quirements for preclusion are met. The removal provision

actually authorizes removal of “/a/my covered class action

... involving a covered security, as set forth in subsection

(b).” 15 U.S.C. § 77p(c) (emphases added). As signaled by

their made-up “if and only if” condition, petitioners want to

read the “as set forth” clause in isolation; but this construc-

tion simply ignores the modifiers “any” and “involving,”

which Congress actually used in the statute. Unlike petition-

ers, however, this Court “follow[s] the cardinal rule that a

statute is to be read as a whole, since the meaning of statu-

tory language, plain or not, depends on context.” King v. St.

Vincent's Hosp., 502 U.S. 215, 221 (1991) (citation omitted).

In addition to the terms “any” and “invoiving,” petition-

ers’ construction would render the entire final clause of the

removal provision—removed actions “shall be subject to

subsection (b)”—mere surplusage, in violation of the “cardi-

nal principle of statutory construction” that “no clause, sen-

tence, or word shall be superfluous, void, or insignificant.”

Alaska Dep't of Envtl. Conservation v. EPA, 540 U.S. 461,

489 n.13 (2004) (internal quotation omitted). Petitioners

provide mute confirmation of this by omitting all reference to

that clause from the argument section of their brief.

Petitioners seek solace in the legislative history, which

States that actions “described in subsection (b)” are remov-

able. Pet. Br. 32. They have no explanation, however, for

the statement in the same passage that upon removal such

actions “may be dismissed pursuant to the provisions of sub-

section (b)” (ibid. (emphasis added)); as explained above,

this can only be read to mean that some actions that are re-

movable are not precluded.

Petitioners cite a statement prepared for the Chairman of the Securi-

ties and Exchange Commission opining that the removal and preemption

provisions are “coextensive.” Pet. Br. 32. The same statement goes on to

explain, however, that the removal provision “allows a state fraud class

action to be removed to federal court ... so that a federal court could

decide whether the state court claims are preempted.” Securities Litiga-

tion Abuses: Hearing Before the Subcomm. on Secs., Comm. on Banking,

{Footnote continued on next page]

-_—_——_

Petitioners’ final argument is that “[i}f Congress had in-

tended to author'ze the removal of all ‘covered class actions,’

it would simpiy have enacted a statute providing that ‘any

covered class action brought in any State court involving a

covered security shall be removable.” Pet. Br. 37. Of

course, if Congress had “chose[n]} to permit removal only for

those covered class actions that also meet the preemption re-

quirements in subsection (b),” as petitioners contend (ibid.),

Congress could have passed a statute saying that “any class

action that is preempted under subsection (b) shall be remov-

able.” {t did neither of these things, leaving this Court with

the task of determining which reading is better: Petitioners’,

which is predicated upon one phrase read in isolation, or the

Seventh Circuit’s, which harmonizes the statute as a whole.

In this regard, it is telling that petitioners do not even at-

tempt to maintain that the purpose of SLUSA would be ad-

vanced by limiting the scope of the removal provision to ac-

tions that are actually precluded. See Romero v. Interna-

tional Term. Oper. Co., 358 U.S. 354, 379 (1959) (a jurisdic-

tional statute should be construed in light “of the history that

produced it, the demands of reason and coherence, and the

dictates of sound judicial policy”). SLUSA is just one of

several statutes that authorize removal on the basis of a fed-

eral defense; this Court’s construction of similar statutes lays

to rest any doubt that SLUSA’s removal provision is broader

than the preclusion provision—that is, that some cases are

removable under but not precluded by SLUSA.

[Footnote continued from previous page]

Housing & Urban Affairs, 1997 WL 687807, at *26. In any event, this

Court has traditionally “decline|d] to accord any significance” to state-

ments that are not made by a Member of Congress or included in the

Committee or Conference Reports. Kelly v. Robinson, 479 U.S. 36, 5!

n.13 (1986).

b. A Colorable Defense Of SLUSA

Preclusion Is Sufficient To Confer

Removal Jurisdiction

When Congress has allowed removal on the basis of a

federal defense, this Court has consistently held that the re-

moving defendants must establish only a “colorable” (non-

frivolous) federal defense; they do not have to go further and

prove the defense in order to remove. Congress enacted

SLUSA against this backdrop, and thus is presumed to have

intended a similar construction of SLUSA’s removal provi-

sion. Davis v. Michigan Dep't of Treasury, 489 U.S. 803,

813 (1989) (“When Congress codifies a judicially defined

concept, it is presumed, absent an express statement to the

contrary, that Congress intended to adopt the interpretation

placed on that concept by the courts”); cf. Dabit, slip op. 13.

Because SLUSA’s removal provision is broader than the pre-

clusion provision, some actions are removable but not pre-

cluded; such actions include those in which the removing de-

fendant presents a colorable defense of preclusion, even if

that defense is later rejected on the merits. The Court’s

precedents establish that the federal courts have subject-

matter jurisdiction to hear such actions.

1. Under the federal officer removal statute (28 U.S.C.

§ 1442), “suits against federal officers may be removed de-

spite the nonfederal cast of the complaint; the federal-

question element is met if the defense depends on federal

law.” Acker, 527 U.S. at 431. In order to remove, a federal

officer must establish that a “colorable” federal defense could

be interposed to the action. Mesa, 489 U.S. at 139.

This Court has “rejected a ‘narrow, grudging interpreta-

tion’ of the statute, recognizing that ‘one of the most impor-

tant reasons for removal is to have the validity of the defense

of official immunity tried in a federal court.’"” Acker, 527

U.S. at 431 (quoting Willingham, 395 U.S. at 407). The

Court “therefore dofes] not require the officer virtually to

win his case before he can have it removed.” /bid. (internal

quotation omitted). In Acker, the removing defendants “ar-

gued” a particular defense; the Court held that “that argu-

ment, although we ultimately reject it, ... presents a color-

able federal defense.” Jbid. (emphases added); see also id. at

448 (Scalia, J., concurring in part and dissenting in part)

(agreeing that “their federal defense is colorable”). Removal

jurisdiction thus rested on the defensive argument advanced

by the removing defendants, regardless of its ultimate cor-

rectness. Moreover, the Acker Court “credit[ed] the [remov-

ing defendants’] theory of the case for purposes ... of our

jurisdictional inquiry.” /d. at 432.

Acker thus stands for two important propositions, both of

which are fatal to petitioners’ theory of this case. First, the

removing defendant need only present a colorable argument

that the elements of a federal defense have been satisfied to

establish removal jurisdiction, even if that argument is later

rejected on the merits. 527 U.S. at 431-32. Second, where

Congress authorizes removal on the basis of a federal de-

fense, the federal courts will accept the removing defendants’

theory of the case in determining whether the defense is col-

orable. /d. at 432-33.

Both propositions are fully consonant with the Court’s treatment of

jurisdictional grants for causes of action “brought under” a federal statute.

“It is firmly established in [this Court's} cases that the absence of a valid

(as opposed to arguable) cause of action does not implicate subject-matter

jurisdiction, i.e., the courts’ statutory or constitutional power to adjudi-

cate the case.” Steel Co., 523 U.S. at 89 (citing SA Wright & Miller,

Federal Practice & Procedure § 1350 at 196 n.8 (2d ed. 1990)). “[T)he

district court has jurisdiction if ‘the right of the petitioners to recover un-

der their complaint will be sustained if the Constitution and laws of the

United States are given one construction and will be defeated if they are

given another,"” and “[dJismissal for lack of subject-matter jurisdiction

because of the inadequacy of the federal claim is proper only when the

claim is ‘so insubstantial, implausible, foreclosed by prior decisions of

this Court, or otherwise completely devoid of merit as not to involve a

federal controversy."” /bid. (quoting Bell, 327 U.S. at 682-83, 685, and

Oneida Indian Nation v. County of Oneida, 414 U.S. 661, 666 (1974)).

2. Petitioners relegate Acker to a single footnote in their

merits brief, in which they proffer three grounds of ostensible

distinction. Pet. Br. 38 n.45. Each is unavailing.

First, petitioners say that the federal officer statute “up-

holds important federal sovereignty interests,” particularly

“the statutory purpose ‘to have the validity of the defense of

official immunity tried in a federal court,”” that “are not pre-

sent in SLUSA.” Pet. Br. 38 n.45 (quoting Acker, 527 U.S.

at 431). But “[t]he magnitude of the federal interest in pro-

tecting the integrity and efficient operation of the market for

nationally traded securities cannot be overstated.” Dabit, slip

op. 5; see S. Rep. No. 182, supra, at 5. And the sole purpose

of SLUSA’s removal provision is to have the preclusion de-

fense—which affords securities defendants with federal im-

munity from state-law class actions—decided by a federal

court. See H.R. Rep. No. 640, supra, at 16. Congress thus

expressed an unmistakable preference for a federal forum for

determining the viability of the SLUSA-preclusion defense.

Cf. El Paso Natural Gas Co. v. Neztsosie, 526 U.S. 473, 484-

85 (1999).

Petitioners also say that whereas “[t]he Court has inter-

preted (the federal officer removal statute] not to require the

removing officer to prove a ‘clearly sustainable defense’ but

only a ‘colorable defense,’ SLUSA “expressly bases remov-

ability on whether there is preemption in fact—not merely on

whether that defense is colorable.” Pet. Br. 38 n.45 (quoting

Acker, 527 U.S. at 432). But SLUSA ro more contains such

an “express” requirement than does the federal officer stat-

ute. In fact, to prevail on an official immunity defense, an

officer must prove that he is being sued for acting under

color of office (Barr v. Matteo, 360 U.S. 564, 572 (1959)),

and to remove he must “establish that the suit is ‘for a[n] act

under color of office.”” Acker, 527 U.S. at 431 (quoting 28

U.S.C. § 1442(a)(3)). The removal statute thus “cross-

references” one of the substantive elements of the defense in

much the same way that SLUSA does, but this Court has

held that “demanding an airtight case on the merits” of this

element would “defeat the purpose of the removal statute.”

Id. at 432; see also id. at 448 (Scalia, J., dissenting) (remov-

ing officer need not “prove that the act prompting suit is, be-

yond doubt, an official one”).

Finally, petitioners say that “[i]n every case removed

under SLUSA, a federal court determines the ‘validity’ of the

argument that the claims are preempted; that determination

dictates whether the case was properly removed and subject

to dismissal or improperly removed and subject to remand.”

Pet. Br. 38 n.45. But this Court has held in analogous cir-

cumstances that the “validity” of a federal defense “has no

connection whatever with the question of jurisdiction.”

Mesa, 489 U.S. at 129 (internal quotations omitted). For this

reason, petitioners err in relying (Pet. Br. 36) on the proposi-

tion that “a federal court always has jurisdiction to determine

its own jurisdiction” (United States v. Ruiz, 536 U.S. 622,

628 (2002)); to establish removal jurisdiction, the Court has

“only required [the removing defendants] to allege a color-

able defense under federal law.” Mesa, 489 U.S. at 129; see

Willingham, 395 U.S. at 407. The availability of the defense

is jurisdictional; its success is not. Petitioners have identified

no reason to apply the opposite construction to SLUSA.

c. Respondents Asserted A Colorable

Defense Of SLUSA Preclusion

A federal court has subject-matter jurisdiction if the re-

moving defendant asserts a colorable (non-frivolous) federal

defense on its theory of the case; if that defense is rejected,

the decision is not jurisdictional, but on the merits.

Fauntleroy v. Lum, 210 U.S. 230, 234-35 (1908); see also

Hartford Fire Ins. Co. v. California, 509 U.S. 764, 812-13

(1993) (Scalia, J., dissenting). And where a case is remov-

able on the basis of a federal defense, the courts look to the

removal papers to establish the bases for federal jurisdiction.

Acker, 527 U.S. at 432-33; see also Franchise Tax Bad. v.

Construction Lab. Vac. Trust, 463 U.S. 1, 11 n.9 (1983)

(where well-pleaded complaint rule is inapplicable, “the de-

fendant’s petition for removal could furnish the necessary

guarantee that the case necessarily presented a substantial

question of federal law’’) (citing Railroad Co. v. Mississippi,

102 U.S. 135, 140 (1880), and Gold-Washing & Water Co. v.

Keyes, 96 U.S. 199, 203-04 (1878)). Such a case can be dis-

missed or remanded for want of subject-matter jurisdiction

only where the district court finds the defense, on the remov-

ing defendants’ theory, to be frivolous and thus “not color-

able.” Cf Arbaugh, slip op. 12 n.10; Levering & Garrigues

Co. v. Morrin, 289 U.S. 103, 105 (1933).

It is beyond reasonable dispute that the SLUSA preclu-

sion defense advanced by respondents in this case was “col-

orable”; indeed, petitioners conceded every element of the

defense save one, and this Court has since resolved that one

in favor of respondents. The district court therefore had sub-

ject-matter jurisdiction at the time of removal. Its subsequent

rejection of the preclusion defense was not a determination

that the court lacked power to decide the parties’ dispute, but

rather an erroneous resolution of that dispute on the merits in

favor of petitioners.

1. The only disputed merits issue in the lower courts

was whether SLUSA’s “in connection with” requirement

limits the statute’s preclusive reach to actions brought by

purchasers and sellers of securities. Because respondents

stood to “win” (by securing dismissal) under one construc-

tion of SLUSA, and to “lose” (by failing to establish the pre-

clusion defense) on the other, the district court had federal

jurisdiction to construe the statute. Steel Co., 523 U.S. at 89;

see Willingham, 395 U.S. at 409 (“[The removing defen-

dants] sufficiently put in issue the questions of official justi-

: For example, because SLUSA provides that a removable action must

be brought “on behalf of more than 50 persons” (15 U.S.C.

§ 77p(f2)A)), “[a] conclusion that a suit is not a ‘covered class action’

(say, because just 40 investors stand to recover damages) would imply

that removal had been improper, and such a decision would come within

§ 1447(d).” Pet. App. 14a. Contrary to petitioners’ contention (Pet. Br.

38), there is no “interna[{1] inconsisten{cy]” in the decision below.

fication and immunity; the validity of their defenses should

be determined in the federal courts”). The district court

made no finding that respondents’ position on the “in con-

nection with” issue was “frivolous or immaterial,” as would

have been required to reject it on jurisdictional grounds.

Steel Co., 523 U.S. at 89. Nor could the district court have

made such a finding, because respondents’ position was well-

founded on extant decisions of this Court—particularly SEC

v. Zandford, 535 U.S. 813 (2002), and United States v.

O'Hagan, 521 U.S. 642 (1997)—and this Court recently, and

unanimously, agreed with respondents’ position on the mer-

its. Dabit, slip op. 16 (“For purposes of SLUSA pre-

emption, ... the identity of the plaintiffs does not determine

whether the complaint alleges fraud ‘in connection with the

purchase or sale’ of securities”) (citing Zandford and

O'Hagan). The district court’s erroneous resolution of this

issue therefore did not result in a remand for lack of subject-

matter jurisdiction.

2. In their merits brief in this Court, petitioners argue for

the first time that their actions are not precluded by SLUSA

because they “do not depend on allegations of fraud or ma-

nipulation.” Pet. Br. 42. Petitioners not only failed to make

this argument in the court below but, as the Seventh Circuit

noted, they affirmatively repudiated it at oral argument. Pet.

App. 6a (“they did not argue in their briefs—and did not

maintain at oral argument despite the court’s invitation—that

their suits allege mismanagement rather than deceit or ma-

24 Under Dabit, the Seventh Circuit’s resolution of this case on the mer-

its—i.e., that petitioners’ “claims .. . are blocked by SLUSA” (Pet. App.

9a)}—is clearly correct. And because Dabit is binding on both federal and

State courts, petitioners’ actions must be dismissed regardless of the cor-

rectness of the Seventh Circuit’s acceptance of appellate jurisdiction.

Accordingly, the Court could affirm the judgment below without resolv-

ing the jurisdictional issue. Norton v. Mathews, 427 U.S. 524, 530-31

(1976); see Steel Co., 523 U.S. at 98 (explaining Norton).

nipulation”); hear http://www.ca7.uscourts.gov/fdocs/docs.

fwx?caseno=04-1495&submit=showdkt& yr=04&num=1495

(audiofile of Seventh Circuit argument). While petitioners

now dispute this concession (Pet. Br. 44), it is not before the

Court because they did not seek, and the Court did not grant,

certiorari on this issue. Izumi Seimitsu Kogyo Kabushiki Kai-

sha v. U.S. Philips Corp., 510 U.S. 27, 31 n.5 (1993).

Undaunted by their express waiver to the Seventh Cir-

cuit, petitioners now assert that the characterization of their

complaints is a matter of “subject-matter jurisdiction” that

can “‘never be forfeited or waived.’” Pet. Br. 44 (quoting

United States v. Cotton, 535 U.S. 625, 630 (2002)). The

Court recently confronted an analogous issue in Arbaugh,

where a party who failed to contest a statutory element tried

to put it in issue later by calling it jurisdictional. This Court

disagreed on the ground that “[nJothing in the text of [the

relevant statute] indicates that Congress intended courts, on

their own motion, to assure that the [late-disputed] require-

ment is met.” Slip op. 12. So, too, here: Nothing in the text

of SLUSA indicates that Congress expected the district

courts to independently analyze the elements of a preclusion

defense that the party resisting removal failed or neglected to

put in dispute. To the contrary, the Dabit Court undertook no

such independent analysis, noting only that the plaintiff in

that case “d[{id] not dispute ... that the complaint alleges

misrepresentations and omissions of material facts.” Slip op.

11. This is an element of the preclusion defense that can be

waived, as the plaintiff did in Dabdit and petitioners did in this

case; it therefore is non-j urisdictional.

In any event, petitioners are flatly wrong to assert that their com-

plaints do not allege false statements or omissions, or manipulative or

deceptive devices, under SLUSA. See Resp. C.A. Br. 12 n.4. As respon-

dents explained in their removal papers (see, e.g., J.A. 348-50 (Kircher)),

this is made clear by the complaints themselves. See J.A. 169, 174-77

(Potter); 192, 197-200 (Kircher); 218, 223-25 (Parthasarthy), 244, 249-

[Footnote continued on next page]

d. Because It Had Removal Jurisdiction,

The District Court’s Remand Orders

Were Discretionary

The foregoing discussion establishes (a) that SLUSA’s

removal provision is broader than its preclusion provision,

such that some actions are within the removal jurisdiction

even though they are not precluded on the merits; (b) that

such actions include those in which the removing defendants

raise a colorable defense of preclusion; and (c) that respon-

dents in this case advanced a colorable defense of SLUSA

preclusion, thus investing the district court with jurisdiction

at the time of removal. Because the district court made no

finding that the federal question asserted by respondents was

frivolous or insubstantial, it necessarily follows that the cis-

trict court retained jurisdiction even after rejecting the pre-

clusion defense on the merits. Accordingly, the remand or-

ders were not based on a want of subject-matter jurisdiction,

rather, the decision to remand in these circumstances is dis-

cretionary, and appellate review of such a remand order is

not barred by § 1447(d) under Thermtron.

1. In light of the federal interest in regulating securities

(Dabit, slip op. 5), there can be no doubt that Congress has

the power to invest the federal courts with jurisdiction to hear

all cases presenting a substantial federal question of SLUSA

preclusion. Verlinden, 461 U.S. at 492 (“Congress may con-

[Footnote continued from previous page]

52 (Dudley 1); 262, 267-70 (Dudley 11); 279, 284-87 ( Vogeler); 296, 301-

03 (Jackson); 312, 316-18 (Spurgeon). Indeed, in their motions to re-

mand, petitioners argued that SLUSA does not preclude claims brought

by “current holders who are fraudulently lulled into continuing to hold”

securities. J.A. 47 (Dkt. 20), at 7 (Kircher) (emphasis added). In Dabit,

the complaint similarly “alleged that brokers were fraudulently induced

... to retain or delay selling their securities.” Slip op. 4. The Court's

recognition that such a claim “unquestionably qualifies” for SLUSA pre-

clusion (id. at 16) should be dispositive here.

fer on the federal courts jurisdiction over any case or contro-

versy that might call for the application of federal law’’); see

Osborn v. Bank of United States, 22 U.S. (9 Wheat.) 738,

822 (1824). Nor is there any question but that Congress did

so by enacting SLUSA. Dudek v. Prudential Secs., Inc., 295

F.3d 875, 879 n.3 (8th Cir. 2002) (“The express removal

provisions of SLUSA are clearly sufficient to confer Article

III ‘arising under’ jurisdiction”); see also Greenwood v. Pea-

cock, 384 U.S. 808, 833 (1966).

Because a federal court has subject-matter jurisdiction

over an action removed under SLUSA that presents a color-

able claim of preclusion, it necessarily follows that the court

retains jurisdiction even after concluding, on the merits, that

the defense is inapplicable. See Verlinden, 461 U.S. at 493

(1983) (“a suit” that “necessarily raises questions of substan-

tive federal law at the very outset ... clearly ‘arises under’

federal law, as that term is used in Art. LIT’). A plurality of

this Court has applied Verlinden to conclude in analogous

"Instead of authorizing removal of a covered class action involving

the things set forth in subsection (b), Congress could have authorized the

defendant in such an action to seek a declaratory judgment in federal

court that the action is precluded by federal law. Such a declaratory relief

action would ordinarily be barred by the well-pleaded complaint rule

(Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-72 (1950)),

but Congress can waive that aspect of the rule (Franchise Tax Board, 463

U.S. at 18 n.17)—as, indeed, it did with respect to removals in SLUSA.

Cf. Mesa, 489 U.S. at 136 (removal statute “serves to overcome the ‘well-

pleaded complaint’ rule which would otherwise preclude removal even if

a federal defense were alleged”). So long as the allegations are colorable

(non-frivolous), the federal court would have jurisdiction over the de-

claratory relief action regardless of whether each element of preclusion

was met, just as a court has jurisdiction to hear a Title VII case even if the

plaintiff does not ultimately win. And, as in the Title VII case, if the

court ultimately rejects the federal question (the claim in Arbaugh, the

defense under SLUSA), “then dismissal of the case would be on the mer-

its, not for want of jurisdiction.” Bell, 327 U.S. at 682.

circumstances that “a nonfrivolous federal question . . . when

the case was removed to federal court” is sufficient to confer

subject-matter jurisdiction over the entire case even where

the court decides the federal question against the removing

party. Gutierrez de Martinez, 515 U.S. at 435 (opinion of

Ginsburg, J.); see also, e.g., Jamison v. Wiley, 14 F.3d 222,

239 (4th Cir. 1994) (“That the federal court ultimately rejects

the federal defense that supported removal . . . does not mean

that it thereby loses subject matter jurisdiction over the re-

moved action”).

This Court has held that the district courts have discre-

tionary authority to remand state-law actions to state court

even if the federal court would have jurisdiction to see the

case through to its end. Cohill, 484 U.S. at 354-55 (“when a

court has discretionary jurisdiction over a removed state-law

claim and the court chooses not to exercise its jurisdiction,

remand is an appropriate alternative”). Cohill involved a

case that originally asserted both federal and state claims;

once the federal claims were dismissed, the district court re-

tained pendent jurisdiction over the state claims, but decided

to remand them. This Court expressly approved that proce-

dure. /bid.; see also 28 U.S.C. § 1367(c).

This case is analytically indistinguishable from Cohill:

Because jurisdiction is determined at the time of removal (Sz.

Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 293

(1938)), the district court had subject-matter jurisdiction over

a federal defense (under SLUSA) and related state claims;

once the federal defense was rejected on the merits, the court

retained jurisdiction to decide the state-law claims. See 14C

Wright & Miller, Federal Practice & Procedure § 3739 at

435 (3d ed. 1998) (“the subject matter jurisdiction of a fed-

eral court over a properly removed action will not be de-

feated by later developments in the suit”). This Court has

recognized, however, that “district courts do not overstep Ar-

ticle III limits when they decline jurisdiction of state-law

claims on discretionary grounds ....” Ruhrgas, 526 U.S. at

585. Thus, the district court had the power to remand this

case to state court after rejecting the preclusion defense on

the merits, even though it had jurisdiction to retain the case.

Construing SLUSA as authorizing a Cohill-type discre-

tionary remand in these circumstances is entirely consistent

with the statutory language: Congress specified that certain

kinds of actions removed under SLUSA (i.e., those that Con-

gress expressly exempted from preclusion) “shail be re-

manded,” but was silent on what a court is to do in other cir-

cumstances (such as when it ultimately rejects a colorable

defense of preclusion in a non-exempt case). The natural

inference from its use of “shall” in specified instances is that

Congress intended that other actions “may be remanded.”

Martin v. Franklin Capital Corp., 126 S.Ct. 704, 709

(2005).

2. “[VJarious Courts of Appeals have relied on Therm-

tron to hold that § 1447(d) bars appellate review of § 1447(c)

remands but not remands ordered under Cohill.” Things Re-

membered, 516 U.S. at 130 (Kennedy, J., concurring) (citing —

cases); see also, e.g., Trans Penn Wax Corp. v. McCandless,

50 F.3d 217, 224 (3d Cir. 1995) (holding that § 1447(d) does

not bar review of a discretionary decision not to exercise ju-

risdiction over pendent state claims and noting that “[a]t least

SLUSA states that “if the Federal court determines that the action

may be maintained in State court pursuant to this subsection, the Federal

court shall remand such action to such State court.” 15 U.S.C.

§§ 77p(d)(4), 78bb(f)(3)(D) (emphasis added). As petitioners point out —_

(Pet. Br. 39), in the context of the 1933 Act “this subsection” means sub-

section (d), which describes certain actions specifically exempted from

SLUSA preclusion; thus, the mandatory remand provision does not by its

terms apply to other actions, such as this case. In the 1934 Act, however,

“this subsection” picks up all of subsection (f), which would include not

only the express exemptions but the rest of SLUSA as well; that is how

the court of appeals read it. Pet. App. 12a-13a. The statutory history

shows that the “this subsection” language was adopted in the context of

the 1933 Act, and then transposed to the 1934 Act. H.R. Rep. No. 640,

supra, at 18. Thus, the mandatory remand provision is inapplicable here.

eight other circuit courts have agreed”). The reasoning of

those cases is undoubtedly correct: A district court’s discre-

tionary decision to remand a case over which it could retain

jurisdiction is, by definition, not based on lack of subject-

matter jurisdiction within the meaning of § 1447(c).

Shortly after Things Remembered, this Court unani-

mously confirmed that § 1447(d) does not preclude appellate

review of a discretionary remand order entered by a district

court invested with subject-matter jurisdiction. Quacken-

bush, 517 U.S. at 712. There, the district court had diversity

jurisdiction, but abstained under Burford v. Sun Oil Co., 319

U.S. 315 (1943), and on that basis “remanded the entire case

to state court.” 517 U.S. at 710. This Court held

that § 1447(d) interposes no bar to appellate review

of the remand order at issue in this case. As we held

in [Thermtron], and reiterated this Term in [Things

Remembered\, § 1447(d) must be read in pari mate-

ria with § 1447(c), so that only remands based on

grounds specified in § 1447(c) are immune from re-

view under § 1447(d). This gloss renders § 1447(d)

inapplicable here: The District Court’s abstention-

based remand order does not fall into either category

of remand order described in § 1447(c), as it is not

based on lack of subject matter jurisdiction or de-

fects in removal procedure.

Id. at 711-12 (citations and internal quotations omitted).

The remand orders entered by the district court in this

case, like the order in Quackenbush, are appealable under

Thermtron. There were no defects in removal procedure, and

the district court’s ultimate rejection of the SLUSA preclu-

sion defense was a decision on the merits, not a jurisdictional

determination. The court had removal jurisdiction by virtue

of the colorable federal defense stated in respondents’ re-_—

moval papers (Acker, 527 U.S. at 431); its decision not to

retain that jurisdiction after deciding the substantial federal

question was both permissible (Cohill, 484 U.S. at 357) and

appealable (Quackenbush, 517 U.S. at 712). As the Seventh

Circuit correctly concluded: “This suit was properly re-

moved. The district judge made a substantive decision under

authority granted by a federal statute. It follows that the re-

mand is unaffected by § 1447(d).” Pet. App. 15a. That con-

clusion should be affirmed.

B. Affirmance Would Further The Objectives Of

SLUSA Without Undermining The Policy Of

§ 1447(d)

1. The “ungainly acronym SLUSA” (Pet. App. 11a)

stands for the Securities Litigation Uniform Standards Act.

Congress sought greater uniformity in private securities liti-

gation by generally precluding state-law class actions alleg-

ing securities fraud, requiring securities suits to proceed (if at

all) in federal court under federal law. Dabit, slip op. 9-10,

15; see H.R. Conf. Rep. No. 803, supra, at 13 (SLUSA

“makes Federal court the exclusive venue for most securities

class action lawsuits” and “establishes uniform national rules

for securities class action litigation involving our national

capital markets”’).

It is not difficult to ascertain whether affirmance or re-

versal of the decision below would better serve Congress’s

expressed interest in uniformity in private secunties litiga-

tion. Petitioners’ proposal would mean that SLUSA would

be independently construed in each judicial district, with no

review by the courts of appeals or this Court in the event of a

remand. This would only serve to perpetuate uncertainty,

confusion, and disarray concerning the correct implementa-

tion of SLUSA. The Seventh Circuit’s approach, by contrast,

means that the inevitably varying district court decisions on

an important federal defense are subject to review in the re-

gional circuits, with any resulting conflicts subject to resolu-

tion by this Court. See Pet. App. 15a (“Appellate review of

decisions under [SLUSA] will promote accurate and consis-

tent enforcement of that statute, at little cost in delay beyond

what the authorized removal itself creates”). Whereas peti-

tioners’ interpretation would practically guarantee disuni-

formity, the approach adopted by the court below best helps

ensure that the uniform standards enacted by Congress actu-

ally remained uniform. See Rowinski v. Salomon Smith

Barney Inc., 398 F.3d 294, 299 (3d Cir. 2005) (Congress in-

tended “a broad interpretation of SLUSA to ensure the uni-

form application of federal fraud standards”’).

Indeed, there really is no dispute that the policies under-

lying SLUSA favor affirmance of the decision below, as

amici curiae supporting affirmance have ably demonstrated.

Petitioners and their amici do not even attempt to argue oth-

erwise: Their briefs are entirely silent on whether the deci-

sion below is consistent with the policies and goals underly-

ing SLUSA.

2. Rather than addressing the policies of SLUSA, peti-

tioners and their amici argue only that the decision below is

contrary the policies of § 1/447(d). Pet. Br. 45-48; Public

Citizen Br. 9-14. The Thermtron rule, however, has stood

the test of time and proven to be workable in practice. Al-

though petitioners’ amici assert that “Thermtron does not

give lower courts sufficient guidance about where to draw

the line between what is appealable and what is not” (Public

Citizen Br. 11), this assertion is belied by the fact that this

Court has only once in the past three decades reversed a court

of appeals for reviewing a remand order. Gravitt, 430 U.S. at

723. During that time, this Court has itself twice reviewed

remand orders (in Quackenbush, 517 U.S. at 712, and Cohill,

484 U.S. at 347), and, in its most recent decision enforcing

the § 1447(d) bar, the Court expressly endorsed the 7herm-

tron rule. Things Remembered, 516 U.S. at 127. To the ex-

tent amici’s concern is not with inconsistency, but with the

fact that Thermtron “permit[s] appellate review of district

court remand orders in a wide variety of circumstances”

(Public Citizen Br. 10-11), that is simply an attack on Therm-

tron itself that cannot be reconciled with this Court’s subse-

quent reaffirmation and implementation of the Thermtron

rule in Things Remembered and Quackenbush.

Petitioners recite the commonplace that Congress has the

power to preclude judicial review of particular cases. Pet.

Br. 46. But where Congress wishes to preclude appellate re-

view of orders that would be reviewable under Thermtron, it

well knows how. See, e.g., 28 U.S.C. § 1452(b) (authorizing

remand of certain bankruptcy cases on grounds not specified

in § 1447(c), and expressly providing that such a remand “is

not reviewable by appeal or otherwise by the court of ap-

peals”). Congress’s decision not to enact a similar limitation

in SLUSA necessarily means that it expected the 7hermtron

rule to apply.

Petitioners next contend that “Congress did not vest the

federal judiciary with exclusive power to interpret and apply

SLUSA’s preemption provision.” Pet. Br. 47. This is mere

semantics; Congress did vest the federal judiciary with the

exclusive power to decide SLUSA preclusion at the defen-

dant's election. Some defendants, for tactical or strategic

reasons, might choose not to remove a covered class action,

in which case the defense of SLUSA preclusion could be

available in state court; but such cases will be relatively rare,

and for the vast majority of cases Congress did make federal

court the exclusive forum for deciding SLUSA preclusion

14 i :

Petitioners accept Thermtron as settled law, and do not question the

distinction drawn in Thermtron between § 1447(c)-based remand orders

and all other remand orders. Pet. Br. 20-21. For this reason alone, the

Court should reject the thinly veiled request of petitioners’ amici to re-

consider or abandon the Thermtron rule. See, e.g., UPS, Inc. v. Mitchell,

451 U.S. 56, 60 n.2 (1981). In any event, “Congress has had almost 30

years in which it could have corrected [the Court's] decision in [7herm-

tron) if it disagreed with it, and has not chosen to do so.” Hilton v. South

Carolina Pub. Rys. Comm'n, 502 U.S. 197, 202 (1991). In light of the

“special force” that stare decisis carries in the statutory arena (ibid.), the

Court should continue to adhere to the construction afforded § 1447(d) in

Thermtron.

issues. Pet. App. 15a (“SLUSA ensures that only the federal

judiciary makes the [preclusion] decision”). It did so to ad-

vance the goal of uniformity that underlies SLUSA—a goal

that would be furthered by affirming the decision below.

Petitioners assert that “the absence from SLUSA of a

provision authorizing appellate review of remand orders re-

flects Congress’s decision not to saddle plaintiffs who al-

ready have suffered delay through removal with the addi-

tional delay and costs associated with appeal.” Pet. Br. 47.

To the contrary, Quackenbush and Things Remembered had

reaffirmed the Thermtron rule less than two years before

SLUSA was enacted; Congress is thus deemed to have

adopted this long-standing construction of § 1447(d). See,

e.g., Midlantic Nat'l Bank v. New Jersey Dep't of Envil.

Prot., 474 U.S. 494, 501 (1986). Because remands based on

a district court’s rejection of a colorable SLUSA preclusion

defense do not fall within either of the § 1447(c) categories,

Congress had no need to create an express exception to

§ 1447(d) to permit review of such remands.

In any event, petitioners’ purported concern with “delay”

is misplaced: Section 1447(d) is designed “to prevent delay

in the trial of remanded cases by protracted litigation of ju-

risdictional issues.” Thermtron, 423 U.S. at 351 (emphasis

added). Since the question of SLUSA preclusion is not juris-

dictional, this concern is not implicated. The issue here is

not whether petitioners’ claims are decided in federal or state

court, but whether federal law permits them to be heard at all.

By contrast, Congress clearly did need to legislate an express excep-

tion to § 1447(d) to permit appellate review of remand orders under

CAFA, which amends 28 U.S.C. § 1332 to grant district courts jurisdic-

tion over certain class actions based on minimal diversity (see 28 U.S.C.

§ 1332(d)(2)); a remand based on a district court’s conclusion that the

jurisdictional requirements set forth in § 1332 (as so amended) have not

been met clearly falls within the ambit of § 1447(c). See Gravitt, 430

U.S. at 723.

Moreover, Congress has countenanced a certain amount of

judicially supervised delay in securities litigation. The

PSLRA, for example, provides for an automatic stay of dis-

covery during the pendency of a motion to dismiss (15

U.S.C. §§ 77z-1(b)(1), 78u-4(b)(3)(B)), and SLUSA permits

a federal court to stay discovery in state court proceedings

when “necessary in aid of its jurisdiction, or to protect or ef-

fectuate its judgments, in an action subject to a stay of dis-

covery” under the PSLRA (15 U.S.C. §§ 77z-1(b)(4), 78u-

4(b)(3)(D)). And the courts of appeals have ample power to

screen out frivolous or dilatory appeals, and to expedite meri-

torious appeals if warranted. See Abney v. United States, 431

U.S. 651, 662 n.8 (1977).

Petitioners’ final argument is that “[b]y disregarding the

limits on its jurisdiction prescribed by Congress in § 1447(d),

the court of appeals impermissibly substituted its own judg-

ment for that of Congress.” Pet. Br. 47-48. But the court

below neither “disregard[ed]” § 1447(d) nor recognized “a

new implicit exception to § 1447(d)” (Public Citizen Br. 9);

rather, it engaged in a straightforward application of the 30-

year-old Thermtron rule. Continued adherence to that rule

compels affirmance of the decision below.

II. The Seventh Circuit Also Had Appellate

Jurisdiction Urder Waco

In Waco v. Unit-a States Fidelity & Guaranty Co., 293

U.S. 140 (1934), this Court held that the statutory bar on ap-

peals of remand orders does not preclude review of an other-

wise appealable decision made by a district court before it

remands an action, if that decision will be “conclusive” upon

a party in state court. 16 Moore’s Federal Practice

§ 107.44[2]}[a] at 107-254.3 (3d ed. 2005) (“[{E]}ven if the is-

sue is intrinsic to the district court’s decision to remand, if

the decision on that issue alters the contours of the remanded

action, the decision is reviewable” under Waco). Rather,

§ 1447(d) only precludes review of the remand itself-—i.e.,

the denial of the defendant’s asserted right to a federal forum.

293 U.S. at 143. Thus, even if the Court were to conclude

that the remands in this case were based on a lack of subject-

matter jurisdiction, the Court would have to decide whether

the court of appeals properly exercised appellate jurisdiction

under Waco to review (and reverse) the district court’s rejec-

tion of respondents’ SLUSA defenses.

1. Waco began as a state-court action by a citizen of

Texas against the City of Waco. The City by cross-action

joined the Fidelity Company, a citizen of Maryland, and re-

moved the entire case on the basis of diversity. The plaintiff

argued that “the company was improperly joined under state

law and such joinder could not give the federal court jurisdic-

tion.” Jd. at 141-42. In a single decree, the district court

dismissed .the cross-action because the Fidelity Company

“was an unnecessary and improper party,” and, “since, upon

that dismissal, there was no diversity of citizenship of the ~

remaining parties, the court held it lacked jurisdiction, and

remanded the cause to the state court.” 293 U.S. at 142. The

City appealed, arguing that the dismissal of the cross-action

“was contrary to the law of Texas.” Jbid. The court of ap-

peals dismissed the appeal on the ground that “no appeal lies

from an order of remand.” Jbid.

The City argued before this Court that the unavailability

of appellate review left it in an “anomalous position,” be-

cause the “District Court’s order will be treated as conclusive

upon the question of the City’s right to maintain its cross-

action.” 293 U.S. at 143. The Court agreed with the City,

explaining that

no appeal lies from the order of remand; but in logic

and in fact the decree of dismissal preceded that of

remand and was made by the District Court while it

had control of the cause. Indisputably this order is

the subject of an appeal; and, if not reversed or set

aside, is conclusive upon the petitioner.

Id. at 143>— -

Waco is not so much an exception to § 1447(d) as a rec-

ognition of that statute’s limited scope. Section 1447(d) is

designed to “‘avoid[] interruption of the litigation of the mer-

its of removed causes.” United States v. Rice, 327 U.S. 742,

752 (1946). It precludes review of a remand because “[t]he

only thing that is at stake is the forum that will hear a claim.

This is certainly not an unimportant matter, but it is not so

fundamental that a second or third layer of judges must test

its correctness.” Adkins v. Ill. Cent. R.R. Co., 326 F.3d 828,

832 (7th Cir. 2003). But Waco makes clear that where—as

here—a district court’s remand is preceded by a substantive

decision that will alter the contours of the state-court action,

the appealability of that decision is unaffected by § 1447(d).

2. Like the district court’s decision dismissing the cross-

action in Waco, the district court’s decision that these actions

are not precluded by SLUSA would have been conclusive in

state court, leaving respondents in the “anomalous position”

of having lost a total defense to liability without any oppor-

tunity to secure appellate review of the district court’s deci-

sion. 293 U.S. at 143; see Pet. App. 15a (“it is now or never

for appellate review of the question whether an action under

state law is preempted” by SLUSA). That decision was ap-

pealable even if § 1447(d) technically barred review of the

resultant decision remanding the actions to state court.

Upon removal, the district court was statutorily required

to “subject” petitioners’ actions to the preclusion provision of

SLUSA (15 U.S.C. § 77p(c)), and necessarily decided the

contested question whether the actions are, in fact and law,

precluded. Accordingly, the issue of SLUSA preclusion was

“actually litigated and determined” by the district court, and

therefore vould have precluded respondents from raising

their SLUSA defense on remand. C./.R. v. Sunnen, 333 US.

591, 598 (1948); see Baldwin v. Iowa State Traveling Men's

Ass'n, 283 U.S. 522, 525-26 (1931).

The district court’s ruling on the SLUSA preclusion de-

fense is likewise plainly “the subject of an appeal.” Waco,

293 USS. at 143. Its decision “conclusively determine(d] the

disputed question” of SLUSA preclusion; that question is one

of great importance to respondents and is “completely sepa-

rate” from the merits of the petitioners’ claims under state

law; and the district court’s decision not only will be “effec-

tively unreviewable on appeal from a final judgment,” but

will be actually unreviewable. Moses H. Cone Mem'l Hosp.

v. Mercury Constr. Corp., 460 U.S. 1, 11-12 (1983) (internal

quotations omitted). Indeed, the denial of a SLUSA preclu-

sion defense is likely immediately appealable under Cohen v.

Beneficial Industrial Loan Corp., 337 U.S. 541 (1949), even

in a Case initiated in federal court. Cf Will v. Hallock, 126 S.

Ct. 952, 959 (2006).

3. Although petitioners have elected not to address

Waco in this Court, they did do so in the court of appeals.

Since they may resurrect these arguments for their reply

brief, respondents offer some anticipatory rebuttals.

a. Petitioners argued below that this case is not within

the Waco doctrine because the district court made “only” a

jurisdictional ruling. In fact, the district court also had before

it respondents’ motions to dismiss petitioners’ actions as pre-

cluded by SLUSA, which it simultaneously denied as

“moot.” But even if, arguendo, the district court’s remand

order was based on a want of subject-matter jurisdiction, a

necessary predicate to that order was that petitioners’ actions

are not within the preclusive reach of SLUSA. On petition-

ers’ reading of the statute, a case is removable only if it is

precluded; a necessary corollary of that reading is that a case

that is not removable is not precluded. The preclusion deci-

sion itself is not jurisdictional even if its consequences can be

so described.

b. Petitioners also argued below that the district court’s

decision would not be “conclusive” in state court, staking out

Respondents relied on the Waco doctrine both before the court of

appeals (see, e.g., Juris. Memo. for the Janus Appellants (7th Cir. Mar.

16, 2004), at 7-10) and in their brief in opposition to the petition for a

writ of certiorari (at 17 & n.7). This issue is therefore properly before the

Court. Schweiker v. Hogan, 457 U.S. 569, 585 n.24 (1982). Neverthe-

less, petitioners chose not to address it in their merits brief.

several positions that are directly contrary to this Court’s

precedents.

First, petitioners argued that it is not the province of the

federal courts to prejudge a state court’s application of the

collateral estoppel doctrine. But as this Court has explained,

States cannot give federal judgments whatever preclusive

“effect they would give their own judgments”; rather, they

“must accord them the effect that this Court prescribes.”

Semtek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497,

507 (2001). This Court has prescribed that “where the judg-

ment or decree of the federal court determines a right under a

federal statute, that decision is ‘final until reversed in an ap-

pellate court, or modified or set aside in the court of its rendi-

tion.”” Stoll v. Gottlieb, 305 U.S. 165, 170 (1938).

Second, petitioners suggested that a federal court’s deci-

of a jurisdictional inquiry. “This Court has long recognized,”

however, “that ‘[t]he principles of res judicata apply to ques-

tions of jurisdiction as well as to other issues’” (Underwriters

Nat'l Assur. Co. v. North Carolina Life & Accident & Health

Ins. Guar. Ass'n, 455 U.S. 691, 706-707 & n.13 (1982)), and

has explicitly instructed that “[i]ssue preclusion in subse-

quent state-court litigation [after remand] ... may ... attend

a federal court’s subject-matter [jurisdiction] determination.”

Ruhrgas, 526 U.S. at 585; see also Chicot County Drainage

Dist. v. Baxter State Bank, 308 U.S. 371, 376 (1940) (“[Fed-

eral court] determinations of [jurisdictional] questions, while

open to direct review, may not be assailed collaterally”).

Nor does a statutory bar to appellate review vitiate the preclusive

effect of a federal court’s decision on matters of federal law. See Johnson

Co. v. Wharton, 152 U.S. 252, 261 (1894) (“The existence or non-

existence of a right, in either party, to have the judgment in the prior suit

reexamined, upon appeal or writ of error, cannot, in any case, control’);

see also United States v. Munsingwear, Inc., 340 U.S. 36, 38-39 (1950).

Third, petitioners argued that respondents could ulti-

mately seek review in this Court upon the conclusion of the

state court proceedings. This Court has held, however, that

when a federal court remands a case, and the state court

thereafter proceeds to final judgment, the action of the fed-

eral court is not reviewable on writ of error to such judgment.

Missouri Pac. Ry. Co. v. Fitzgerald, 160 U.S. 556, 582-83

(1896). “A state court cannot be held to have decided against

a Federal right when it is the [federal court], and not the state

court, which has denied its possession.” Jd. at 582.; accord,

McLaughlin Bros. vy. Hallowell, 228 U.S. 278 (1913);

Yankaus v. Feltenstein, 244 U.S. 127 (1917).

4. Waco does not swallow—or even affect—the rule

that remand orders are not appealable, because review under

Waco does not upset the district court’s determination that

the action must proceed, if at all, in state court. Section

1447(d)’s bar on continued litigation over choice of forum is

thus fully respected, as Waco itself demonstrates. Although

reversal of the dismissal of the cross-action would have dem-

onstrated that the City indeed had the right to a federal fo-

rum, it would not serve to return the case to federal court.

293 U.S. 143-44 (“A reversal cannot affect the order of re-

mand, but it will at least, if the dismissal of the petitioner’s

complaint was erroneous, remit the entire controversy, with

the Fidelity Company still a party, to the state court for such

further proceedings as may be in accordance with law’’).

Under Waco, the underlying actions here would be re-

turned to state court pursuant to the remand orders; but the

Seventh Circuit’s determination that the actions are pre-

cluded by SLUSA—-which has since been approved by this

Court in Dabit—would be binding and the cases would be

dismissed by the state courts. That is precisely what the state

courts did here upon being notified of the federal decisions.

See J.A. 5 (Parthasarthy); 11-12 (Potter); 28 (Vogeler). Ac-

cordingly, if the Court were to hold Thermtron and Quack-

enbush inapplicable to this case, the Seventh Circuit’s accep-

tance of appellate jurisdiction could be affirmed on the alter-

native ground articulated in Waco. As a treatise co-authored

by one of petitioners’ amici explains. “[t]he City of Waco

rule is correct” because “the federal judicial system is built

on the premise that district court rulings on the merits are ap-

pealable as a matter of right, and that the appeal should go to

a federal court. Appeal upon completion of the federal pro-

ceedings is the only answer available in the present systerr.~

ISA Wright & Miller, Federal Practice & Proceds~.

§ 3914.11 at 712 (2d ed. 1992).

CONCLUSION

The judgment of the court of appeals should be affirmed.

Respectfully submitted.

MARK A. PERRY

Counsel of Record

MIGUEL A. ESTRADA

AMANDA M. ROSE

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Ave. N.W.

Washington, D.C. 20036

(202) 955-8500

Counsel for Respondent

Janus Capital Management LLC

[Counsel for Other Respondents

Listed on Next Page]

March 28, 2006

(617) 951-7000

Thomas B. Smith

Ropes & GRAY LLP

700 12th Street, N.W.

19103

(215) 994-2369

Attorneys for Respondent

101 Park Avenue

New York, N.Y. 10178

(212) 309-6702

Attorneys for Respondent

Deutsche Invesimeni Man-

agement Americas Inc.

Dale R. Harris

DAVIS GRAHAM & STUBBS

LLP

1550 17th Street

Denver, Colorado 80202

(303) 892-9400

Attorneys for Respondent

Janus Investment Fund

Phil C. Neal

Mark A. Rabinowitz

NEAL, GERBER &

EISENBERG LLP

Two North LaSalle Street

Chicago, Dhnois 60602

(312) 269-8083

Attorneys for Respondent

Columbia Wanger Asset

Management LP.

John W_ Rotunno

Kenneth E. Rechtons

Bet., Bovp & LLoyd LLC

70 West Madison Street

Chicago, Dlinois 60602

(312) 807-4213

Attorneys for Respondents

Artisan Partners Limited

Partnership and Columbia

Acorn Trust

James R. Carroll

David S. Clancy

SKADDEN, ARPS, SLATE,

MEAGHER & FLOM LLP

One Beacon Street

Boston, Mass. 02108

(617) 573-4800

Attorneys for Respondent

Putnam Investment Man-

agement, LLC

Charlies F. Smith

Lee P. Garner

SKADDEN, ARPS, SLATE,

MEAGHER & FLOM LLP

333 West Wacker Drive

(312) 407-0787

Attorneys for Respondent

Van Kampen Series Fund,

Inc.

Robert Y. Sperling

David E. Koropp

WINSTON & STRAWN

35 West Wacker Drive

Chicago, Dlinois 6060!

(312) 558-5600

Attorneys for Respondent

Van Kampen Investment

Advisory Corporation

Title 28 U.S.C. § 1291 provides, in pertinent part:

§ 1291. Final decisions of district courts

The courts of appeals * * * shall have jurisdiction of

appeals from al! final decisions of the district courts

of the United States, * * * except where a direct re-

view may be had in the Supreme Court. * * *

Title 28 U.S.C. § 1367 provides, in pertinent part:

§ 1367. Supplemental jurisdiction

(a) Except as provided in subsections (b) and (c)

or as expressly provided otherwise by Federal stat-

ute, in any civil action of which the district courts

have original jurisdiction, the district courts shall

have supplemental jurisdiction over all other claims

that are so related to claims in the action within such

original jurisdiction that they form part of the same

case or controversy under Article III of the United

States Constitution. * * *

** *

supplemental jurisdiction over a claim under subsec-

tion (a) if—

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

State law,

(2) the claim substantially predominates over

the claim or claims over which the district court

has original jurisdiction,

(3) the district court has dismissed all claims

over which it has original jurisdiction, or

(4) in exceptional circumstances, there are

other compelling reasons for declining jurisdic-

tion.

s* *

Title 28 U.S.C. § 1442 provides, in pertinent part:

§ 1442. Federal officers or agencies sued or

prosecuted

(a) A civil action or criminal prosecution com-

menced in a State court against any of the following

may be removed by them to the district court of the

United States for the district and division embracing

the place wherein it is pending:

(1) The United States or any agency thereof or

any officer (or any person acting under that offi-

cer) of the United States or of any agency

thereof, sued in an official or individual capacity

for any act under color of such office or on ac-

count of any right, title or authority claimed un-

der any Act of Congress for the apprehension or

punishment of criminals or the collection of the

revenue.

x* *

(3) Any officer of the courts of the United

States, for any act under color of office or in the

performance of his duties.

(4) Any officer of either House of Congress,

for any act in the discharge of his official duty

under an order of such House.

***

Title 28 U.S.C. § 1453 provides, in pertinent part:

§ 1453. Removal of class actions

***

(b) In general.—A class action may be removed

to a district court of the United States in accordance

with section 1446 (except that the 1-year limitation

under section 1446(b) shall not apply), without re-

gard to whether any defendant is a citizen of the

State in which the action is brought, except that such

action may be removed by any defendant without

the consent of all defendants.

(1) In General.—Section 1447 shall apply to

any removal of a case under this section, except

that notwithstanding section 1447(d), a court of

appeals may accept an appeal from an order of a

district court granting or denying a motion to re-

mand a class action to the State court from which

it was removed if application is made to the court

of appeals not less than 7 days after entry of the

order.

*“* *

(d) Exception.—This section shall not apply to

any class action that solely involves—

(1) a claim concerning a covered security as

defined under section 16(f)(3) of the Securities

Act of 1933 (15 U.S.C. § 78p(f)(3)) and section

28(f)(5)(E) of the Securities Exchange Act of

1934 (15 U.S.C. § 78bb(f)(5)(E));

*“* *

Title 18 U.S.C. § 3731 provides, in pertinent part:

§ 3731. Appeal by United States

In a criminal case an appeal by the United States

shall lie to a court of appeals from a decision, judg-

ment, or order of a district court dismissing an in-

dictment or information or granting a new tnial after

verdict or judgment, except that no appeal shall lie

where the double jeopardy clause of the United

States Constitution prohibits further prosecution.

s***

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.