Opposition Brief — Federal Insurance v. Jones
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No. 01-1883 AUG 26 2002
In The
Supreme Court of the United States
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FEDERAL INSURANCE COMPANY.
Petitioner
gin,
Vv.
KENNETH R. JONES, et ai.,
Respondents.
+
On Petition For Writ Of Certiorari
To The United States Court Of Appeals
For The Sixth Circuit
¢
BRIEF IN OPPOSITION TO
PETITION FOR WRIT OF CERTIORARI
¢
ROBERT E. SOLES, JR.
Counsel of Record
JOHN L. JUERGENSEN
BLACK, MCCUSKEY,
SOUERS & ARBAUGH
1000 Unizan Plaza
220 Market Ave., S.
Canton, Ohio 44702
Tel: (330) 456-8341
Fax: (330) 456-5756
E-mail: bsoles@bmsa.com
Counsel for Respondents
Kenneth R. Jones, et al.
COCKLE LAW BRIEF PRINTING C¢
OR CALL COLLECT (402) 342-28
i
QUESTION PRESENTED
Whether a Circuit Court may review an Order of
Remand beyond its plain language to determine whether
that Order was based on a lack of subject matter jurisdic-
tion despite the fact 28 U.S.C. §1447(d) unequivocally
prohibits the review of remand orders which are based on
a lack of subject matter jurisdiction.
il
PARTIES TO THE PROCEEDINGS
Petitioner, Federal Insurance Company
15 Mountain View Road
Warren, NJ 07059
Respondents, Kenneth R. Jones and Mary B. Jones
13571 Sousa St.
N. Lawrence, Ohio 44666
American Motorists Insurance Company
1 Kemper Dr.
Long Grover, IL 60049
Energy Insurance (Bermuda), Ltd.
P.O. Box HM 2064
Hamilton HM HX, Bermuda
ill
TABLE OF CONTENTS
Page
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Reasons for Denying the Writ...................:..sccsssseesees 5
I. Certiorari should not be granted because
there is no conflict among the Circuit Courts
as to the standard of review of a remand or-
der which is based upon lack of subject mat-
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II. Certiorari should not be granted because the
District Court’s decision was a routine find-
ing that diversity of citizenship was lacking
between the parties, and, consequently, 28
U.S.C. §1447(d) applied to bar Tederal’s ap-
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III. Certiorari should not be granted because the
issue presented herein is whether 28 U.S.C.
§1447(d) bars appellate review of remand or-
ders and not whether the “direct action pro-
viso” applies to suits by putative insureds
against insurers seeking a determination of
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TABLE OF CONTENTS - Continued
Page
IV. Certiorari should not be granted because
Federal is unreasonably requesting this
Court to strike down every jurisdictional
limitation which Congress has placed on par-
ties in an actior in Federal Court..................
Conclusion
16
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V
TABLE OF AUTHORITIES
Page
CASES
/lieta v. Graham, 984 F.2d 1350 (3rd Cir. 1993) ..12, 13, 14
Bondurant v. Watson, 103 U.S. 281 (1880)..................0.. 17
Borneman v. United States, 213 F.3d 819 (4th Cir.
I vis isnsnaniagaeraccasstackeasaaocenaa sn eee 13, 14
Carr v. American Red Cross, 17 F.3d 671 (8rd Cir.
BING) ccicounsdecuddaesincactadauensenaenieeadaaiakamaeaanae 11,12, 14
Flores v. Long, 110 F.3d 730 (10th Cir. 1997).......... 7, 10, 11
Gyori v. Johnston Coca-Cola Bottling Group, 76
Olko BE. SEG Cie TOG on wseiiesichevsicerctcnccr tani 3
Kline v. Burke Construction Co., 260 U.S. 226
CRI nick ckeccnssoonsensontscncseentiateenebauanentenaa sane 17
Mangold v. Analytic Services, Inc., 77 F.3d 1442
(OE Ce FIED ceacnusitssanctatieetssecssechc encasement 8, 10, 11
Scott-Pontzer v. Liberty Mutual Ins. Co., 85 Ohio
Be Bk GS Ce FG hi cceccictasisissrncsstonvegeaes 3, 15, 16
Terral v. Burke Construction, 257 U.S. 529 (1922)............ 16
Thermtron Products, Inc. v. Hermansdorfer, 423
1) Be te CAD ksi csonssscocscnmschheiestuaneeeenaeeeinte 7
Things Remembered, Inc. v. Petrarca, 516 U.S. 124
Re hc ivcossenncxddddsateneuvscceeasabodbesteutseamtaaseesenieeaaeaes 7
STATUTES
96 UB, BERG issccsesttactce ene 1, 7, 8,10, 11
DO UTA. SIG GRGD bilenieckceoeversiscitnacnerancnien passim
BE UA. Ci 0) ck ccc ieee |
Ohio Revised Code §3937.18(A) (1999)...........ccccccceceeeeeee ees 3
JURISDICTION
By the application of 28 U.S.C. §1447(d), neither the
Sixth Circuit Court of Appezls nor the Supreme Court of
the United States has jurisdiction to review an order of
remand which is based upon a lack of subject matter
jurisdiction.
STATUTORY PROVISIONS INVOLVED
28 U.S.C. §1332(c)(1):
For the purposes of this section and section
1441 of this title — a corporation shall be deemed
to be a citizen of any State by which it has been
incorporated and of the State where it has its
principal place of business, except that in any di-
rect action against the insurer of a policy or con-
tract of liability insurance, whether incorporated
or unincorporated, to which action the insured is
not joined as a party-defendant, such insurer
shall be deemed a citizen of the State of which
the insured is a citizen, as well as of any State by
which the insurer has been incorporated and of
the State where it has its principal place of busi-
ness
28 U.S.C. §1447(c) and (d):
(c) A motion to remand the case on the ba-
sis of any defect other than lack of subject matter
jurisdiction must be made within 30 days after
the filing of the notice of removal under section
1446(a). If at any time before final judgment it
appears that the district court lacks subject mat-
ter jurisdiction, the case shall be remanded. An
order remanding the case may require payment
of just costs and any actual expenses, including
attorney fees, incurred as a result of the removal.
A certified copy of the order of remand shall be
mailed by the clerk to the clerk of the State
court. The State court may thereupon proceed
with such case.
(d) An order remanding a case to the State
court from which it was removed is not review-
able on appeal or otherwise, except that an order
remanding a case to the State court from which
it was removed pursuant to section 1443 of this
title shall be reviewable by appeal or otherwise.
+
STATEMENT OF FACTS
On March 27, 1999, Kenneth R. Jones (“Mr. Jones”)
was injured in a motorcycle collision when Leslie Billups
failed to yield the right of way at a stop sign. (Pet. App. F
at p. 38a.) As a result of the collision, Mr. Jones’ left leg
was crushed, and he suffered two cracked ribs. (Pet. App.
F at p. 38a.) Mr. Jones was forced to have his left foot,
ankle, and calf amputated, resulting in substantial medi-
cal bills and expenses, tremendous pain and suffering, and
lost wages and lost earning capacity. (Pet. App. F at p.
38a.)
STATEMENT OF THE CASE
Kenneth and Mary Jones (individually referred to as
“Mr. Jones” and “Mrs. Jones,” and collectively referred to
as the “Joneses”) filed a Complaint on May 30, 2001, in the
Stark County, Ohio, Court of Common Pleas against
Petitioner, Federal Insurance Company (“Federal”),
3
American Motorists Insurance Company (“American”), and
Energy Insurance (Bermuda), Ltd. (“Bermuda”) alleging
that the Joneses were entitled to coverage under insur-
ance policies issued by Federal, American, and Bermuda.
(Pet. App. at p. 36a.) Most importantly for the issues
involved in Federal’s Writ, the tortfeasor, Leslie Billups
is not a party to this action.
Because it is important to the Court’s understanding
of the issues involved, the Joneses will summarize the
underlying substantive law in this case. The Joneses’
claims against Federal are based upon the Ohio Supreme
Court’s decision in Scott-Pontzer v. Liberty Mutual Ins.
Co., 85 Ohio St.3d 660 (Ohio 1999). At the time of Mr.
Jones’ collision, Ohio required that every insurer offer
every insured the opportunity to accept or reject unin-
sured and/or underinsured motorist coverage (““UM/UIM
coverage”). Ohio Revised Code §3937.18(A) (1999). If an
insurer failed to offer an insured UM/UIM coverage, such
coverage arose by operation of law within the terms of the
policy. See generally Gyori v. Johnston Coca-Cola Bottling
Group, 76 Ohio St.3d 565 (Ohio 1996).
In Scott-Pontzer, supra, the Ohio Supreme Court
analyzed the definition of “Who Is An Insured” in two
Liberty Mutual policies issued to the Superior Dairy
Corporation. The policy defined an insured as “You.” Jd. at
663. The Court reasoned that the defined term “You” was
ambiguous. Jd. at 664. “You” could refer to the corporation,
or it could include the corporation’s employees because a
corporation cannot occupy an automobile, suffer bodily
injury or death, or operate a motor vehicle. Jd. at 664.
Where the term of an insurance contract is ambiguous, the
term is construed against the drafter. Jd. at 665.
Accordingly, corporate employees were deemed insur-
eds under the policy, and, because the insurer did not offer
UM/UIM coverage, such coverage arose by operation of
law. Id. at 665. Because coverage arose by operation of law,
the fact that the corporate employee was neither working
for the corporation nor operating a corporate vehicle at the
time of his injuries was irrelevant because of the insured’s
violation of Ohio law and public policy. Jd. at 665-66.
At the time of the collision, Mr. Jones was employed
by American Electric Power (“AEP”), an Ohio corporation.
(Pet. App. F at p. 38a.) Federal is a UM/UIM carrier for
AEP. (Pet. App. F at p. 38a.) The Joneses filed their claims
directly against Federal (as well as American and Ber-
muda) because Federal denied the Joneses’ claims for
UM/UIM coverage under its AEP policy. (Pet. App. F at p.
38a.)
On July 7, 2001, Federal removed this case to the
United States District Court for the Northern District of
Ohio. (Pet. App. F.) Removal was alleged to be based upon
diversity of citizenship between the parties. (Pet. App. F.
at pp. 30a, 3la.) Federal argued that the defendants were
citizens of New Jersey, Illinois, and the Bahamas and that
the Joneses were citizens of Ohio. (Pet. App. F. at p. 30a.)
On October 22, 2001, Judge Daniel Polster of the
United States District Court for the Northern District of
Ohio, ordered Federal to show cause why this case should
not be remanded to state court for lack of subject matter
jurisdiction. (Pet. App. D.) After the parties briefed their
respective positions to the court, Judge Polster issued an
Order on November 14, 2001, remanding the case back to
the Stark County, Ohio, Court of Common Pleas. (Pet.
App. B.)
The basis for remand was that, pursuant to 28 U.S.C.
§1332(c)(1), Federal was deemed to be a citizen of the
same state as its insured. (Pet. App. B at pp. 6a, 7a.)
Federal’s insured is AEP which is an Ohio corporation.
(Pet. App. B at pp. 6a, 7a.) As the Joneses are also citizens
of Ohio, complete diversity did not exist between the
parties and the court therefore lacked subject matter
jurisdiction. (Pet. App. B at pp. 6a, 7a.)
Federal timely appealed to the Sixth Circuit Court of
Appeals. (App. A.) On January 15, 2002, the Joneses filed
a Motion to Dismiss for Lack of Subject Matter Jurisdic-
tion with the Sixth Circuit. (App. B.) The basis of the
Motion to Dismiss was that 28 U.S.C. §1447(d) clearly
prohibits the review of remand orders which are based on
a lack of subject matter jurisdiction. (App. B.) The Sixth
Circuit agreed, and, on March 26, 2002, the court granted
the Joneses’ Motion to Dismiss finding that Judge Polster
remanded the case back to state court for no other reason
than because the District Court lacked subject matter
jurisdiction. (Pet. App. A.)
Not satisfied that the Sixth Circuit properly applied
28 U.S.C. §1447(d), Federal filed its Petition for Writ of
Certiorari (“Petition for Writ”).
¢
REAS%NS FOR DENYING THE WRIT
Federal’s arguments in support of its Petition for Writ
all flow from one basic contention, i.e. that the Sixth
Circuit did not ensure that the District Court’s remand
order was based on a lack of subject matter jurisdiction.
Federal argues throughout its brief that the Sixth Circuit
6
simply. “rubber stamped” the remand order because it
contains the words “subject matter jurisdiction.”
Federal argues that the Sixth Circuit refused to make
“even a limited inquiry into the basis of the District
Court’s order of remand.” (Petition for Writ at 7.) Federal
then argues that such a stance “places the Sixth Circuit in
conflict with decisions of the Tenth, Third, and Fourth
Circuits.” (Petition for Writ at 7.)
However, as is more fully set forth below, Federal
attempts to manufacture a conflict where there is none by
confusing the analysis of the circuit courts with the courts’
results. In other words, Federal tries to convince this
Court that there is a conflict among the Circuits as to how
they analyze the application of 28 U.S.C. §1447(d) to
remand orders. In rea:.cy, the Circuits all apply the same
analysis with respect to the reviewability of remand
orders. However, based upon the application of that
analysis to each case’s particular facts, the courts differ in
their results.
Just because courts arrive at different decisions based
upon different fact patterns does not mean that the analy-
sis which is applied is in conflict. As this Court will be
shown, the Sixth Circuit did nothing different than other
courts which have considered the reviewability of remand
orders.
I. Certiorari should not be granted because
there is no conflict among the Circuit Courts
as to the standard of review of a remand or-
der which is based upon lack of subject mat-
ter jurisdiction.
The Circuits are not in conflict as to the scope of
review applicable in determining whether a remand is
within the 28 U.S.C. §1447(d) prohibition on review.
Rather, Federal attempts to manufacture a conflict among
the circuits by ignoring the Sixth Circuit’s opinion and by
reading into it unsubstantiated motives.
Based upon this Court’s rulings in Thermtron Prod-
ucts, Inc. v. Hermansdorfer, 423 U.S. 336 (1976) and
Things Remembered, Inc. v. Petrarca, 516 U.S. 124 (1995),
the Sixth Circuit made a determination that the District
Court’s remand order was based on a lack of subject
matter jurisdiction. Therefore, in following United States
Supreme Court authority, the Sixth Circuit determined
that the case was immune from review under Sections
1447(c) and 1447(d).
In an effort to seek this Court’s review, Federal
attempts to argue that the decision of the Sixth Circuit is
in conflict with decisions from the Tenth and Fourth
Circuits. In support of its perceived conflict, Federal first
cites to the Tenth Circuit’s opinion in Flores v. Long, 110
F.3d 730: “The mere mention of §1447(d) or the ‘magic
words’ of subject matter jurisdiction [] do not automati-
cally render a remand order nonreviewable under
§1447(d).” Id. at 732.
-
8
It then cites to the Fourth Circuit opinion in Mangold
v. Analytic Services, Inc., 77 F.3d 1442 (1996), which stated
“powerful policy considerations and persuasive decisional
authority support our power — and responsibility — to look
past contextually ambiguous allusions and even specific
citations to §1447(c) to determine by independent review
of the record the actual grounds or basis upon which the
district court considered it was empowered to remand.”
Based upon isolated statements from each of these
cases, Federal asserts that a conflict between the circuits
exists, implies that the Sixth Circuit just tersely reviewed
the District Court’s remand order looking for the “magic
words” of §1447(d) or “subject matter jurisdiction,” and
alleges that the Sixth Circuit refused to review the appeal.
However, it is clear from the opinion that the Sixth Circuit
reviewed the District Court’s order, considered Federal’s
arguments, and dismissed them as without merit.
In its Order dismissing Federal’s appeal, the Sixth
Circuit stated: .
This Court has recognized that a remand order
may be reviewed if it is “based on a substantive
decision on the merits of a collateral issue as op-
posed to just matters of jurisdiction.” [Citations
omitted.] But when the issue sought to be ap-
pealed is subsumed into the jurisdictional deci-
sion, it is not independently appealable.
(Pet. App. A at p. 4a.) The Sixth Circuit further found that
“the legal holding with which [Federal] takes issue was in
the context of the larger jurisdictional determination.”
(Pet. App. A at p. 4a.) Based upon such analysis, the court
then determined that remand decisions based on jurisdic-
tion were not reviewable.
——————————ee
In actuality and as demonstrated above, the Sixth
Circuit made a substantial inquiry into the underlying
rationale of the District Court’s Order of Remand. First, it
recognized that an order of remand may be reviewable in
certain limited circumstances. It stated that, where an
order of remand is based on a reason other than the lack of
subject matter jurisdiction, as required by 28 U.S.C.
§1447(d), then the order is reviewable on appeal. The court
then determined that the District Court’s remand order
was based on a lack of subject matter jurisdiction, not on
the merits of a collateral issue. It applied the clear and
unambiguous requirements of Section 1447(d) and prop-
erly dismissed Federal’s appeal.
The Court clearly considered Federal’s arguments,
and it noted that, when a District Court analyzes substan-
tive issues within the larger jurisdictional context, such
that those substantive issues were “subsumed” into the
issue of subject matter jurisdiction, the remand order is
not reviewable.
The Joneses have argued and continue to argue that
orders of remand based upon a lack of subject matter
jurisdiction are not reviewable pursuant to Section
1447(d). However, in a practical sense, the Joneses realize
that to a very limited extent the order or remand must be
reviewed to determine whether or not it was based on a
lack of subject matter jurisdiction. Federal goes to great
lengths to argue in favor of that which the Sixth Circuit
did when it reviewed the remand order (i.e. a review of the
remand order to determine if it was based on a lack of
subject matter jurisdiction). Once this review is made (as
the Sixth Circuit did) and the reviewing court is satisfied
that the requirements of Section 1447(d) were met (as the
10
Sixth Circuit did), then the order of remand is subject to
no further review.
Ironically, the Tenth Circuit held in Flores that “the
remand order was based to a fair degree upon the court’s
finding that it lacked subject matter jurisdiction to hear
the case. Therefore, the district court remand was pursu-
ant to §1447(c) and under §1447(d) we have no jurisdiction
to review the remand order.” Flores, supra, at 733.
Moreover, in Mangold, the Fourth Circuit, upon
review of a remand order, concluded that the case was
remanded for a reason other than a lack of subject matter
jurisdiction. Mangold, supra, at 1451. Because the district
court remanded the case because it believed it had discre-
tion to do so (and not because of lack of subject matter
jurisdiction), the Fourth Circuit held that Section 1447(d)
did not prohibit review of the remand order. Id.
If Federal is arguing that a conflict exists among the
Circuit courts and that the standard of review is substan-
tially different, the decisions which it cites should actually
conflict with that of the Sixth Circuit. Neither of these two
cases, in fact, conflict with the analysis or standard of
review used by the Sixth Circuit.
Federal then argues that the Sixth Circuit should |
have considered Federal’s constitutional arguments. |
However, Federal cites to no conflicting opinion where a |
Circuit Court held that such a consideration is required
under the Section 1447(d) analysis.
Federal concludes this portion of its argument by
attacking the underlying analysis of District Court’s
remand order. However, such analysis is not sanctioned by
Section 1447(d) nor is it supported by the cases to which
————_st Fh
11
Federal cites in support of the supposed conflict. Flores
and Mangold stand for the proposition that a Circuit
Court may review a remand order for the limited purpose
of ensuring that the district court based its order of re-
mand on a lack of subject matter jurisdiction. There is no
conflict between Federal’s cases and the Sixth Circuit’s
opinion because the Sixth Circuit acted in accord with
those cases. Therefore, there is no conflict regarding the
standard of review employed by the circuits. Consequently,
this Court’s supervisory power is not necessary to rectify
any alleged “disparate standards” and Certiorari should be
denied.
II. Certiorari should not be granted because the
District Court’s decision was a routine find-
ing that diversity of citizenship was lacking
between the parties, and, consequently, 28
U.S.C. §1447(d) applied to bar Federal’s ap-
peal.
In further support of its request for certiorari, Federal
argues that the Sixth Circuit’s decision is also in conflict
with decisions out of the Third and Fourth Circuits.
Federal argues that the review of a remand order is not
prohibited by 28 U.S.C. §1447(d) where the “ruling which
triggered the remand order, was not the type of jurisdic-
tional determination routinely and regularly made pursu-
ant to §1447(c).” Carr v. American Red Cross, 17 F.3d 671,
682. Again, the cases to which Federal cite are distin-
guishable and, thus, inapplicable to the Sixth Circuit’s
decision. As such, there is no actual or perceived conflict
among the Circuits.
Carr involves a complicated procedural background.
Plaintiff sued his medical provider, Osteopathic Medical
12
Center, and the American Red Cross after a negligent
blood transfusion. The Red Cross then removed the case to
federal court under its charter which granted federal
courts jurisdiction over claims against the Red Cross.
However, plaintiff seemingly settled its claims against the
Red Cross. The Red Cross was dismissed, and plaintiff
moved to remand now that diversity jurisdiction was
lacking. Osteopathic sought to challenge the dismissal of
the Red Cross.
The Third Circuit first determined that “a district
court cannot prevent appellate review of a final collateral
order by contemporaneously remanding a case to state
court.” Carr at 675. Here, the collateral order was the
order dismissing the Red Cross from the suit. The prohibi-
tion on the reviewability of remand orders under Section
1447(d) would have denied Osteopathic the opportunity to
challenge the district court’s dismissal of the Red Cross. As
such, the Third Circuit held that “where a district court’s
dispositive order — whether substantive or jurisdictional —
is separable from the subsequent order of remand ... the
remand order itself must also be reviewable by the Court
of Appeals.” Carr at 680.
Likewise, in Aliota v. Graham, 984 F.2d 1350 (3rd Cir.
1993), the district court’s order of remand was based on a
preceding order which was final and appealable and
separate and distinct from the order of remand. In this
case, Plaintiffs sued various federal employees for defama-
tion. The U.S Attorney General certified that the employ-
ees were acting within the course and scope of their
employment and substituted the United States as defen-
dant. Following an evidentiary hearing, the district court
found that the employees were not acting within the
course and scope of their employment and ordered the
es
13
resubstitution of the original defendants. The district
court then remanded the case for a lack of subject matter
jurisdiction.
The Third Circuit reversed the district court and held
that the “review of the question of resubstitution in the
present case is not barred by 28 U.S.C. §1447(d) (1988).
[Whether the defendants were acting within the course
and scope of their employment] is separate from and
logically precedes the question of remand.” Aliota at 1353.
Finally, Federal cites to Borneman v. United States,
213 F.3d 819 (4th Cir. 2000) in support of a supposed
conflict among the circuits. Borneman is similar to the
Aliota decision. In that case, the Fourth Circuit reversed
the decision of the district court to remand because the
order of remand, although based on a lack of subject
matter jurisdiction, “was premised on two antecedent
decisions that are both judicially reviewable and appeal-
able: (1) that the United States’ scope-of-employment
certification was erroneous and (2) that the United States’
substitution as defendant was erroneous.” Borneman at
825.
In the instant case, there was no collateral and/or
antecedent order by the District Court. The court simply
found that, based upon the application of Section 1332(c)
to the facts of this case, diversity of citizenship was lack-
ing between the parties. This is specifically what the Sixth
Circuit referred to when it stated that “the legal holding
with which [Federal] takes issue was in the context of the
larger jurisdictional determination.” (Pet. App. A at 4a.) In
essence, the District Court’s holding that Section 1332(c)
applied was made within the context of its determination
that the court lacked subject matter jurisdiction.
14
Accordingly, the case at hand is readily distinguish-
able from Carr, Aliota, and Borneman, supra. Federal’s
perceived conflict among the circuits is without merit and
certiorari should be denied.
III. Certiorari should not be granted because the
issue presented herein is whether 28 U.S.C.
§1447(d) bars appellate review of remand or-
ders and not whether the “direct action pro-
viso” applies to suits by putative insureds
against insurers seeking a determination of
coverage.
Federal’s third reason in support of granting its
Petition for Writ is nothing more than misdirection and
irrelevant analysis of issues which have no bearing on this
case. Federal attempts to direct this Court’s attention
away from the essential issue of the case, i.e. whether 28
U.S.C. §1447(d) prohibits a review of the District Court’s
remand order, with its diatribe on the application of
Section 1332(c), the “direct action proviso,” to Ohio’s Scott-
Pontzer, supra, doctrine.
Amid the legislative history of the direct action
proviso, the application of the statute to different types of
insurance policies, and its endless line of Northern District
of Ohio cases, Federal cites to no case which conflicts with
the Sixth Circuit’s decision to dismiss Federal’s appeal in
accordance with Section 1447(d). The underlying legal
analysis of the District Court is completely and utterly
irrelevant as to whether or not Federal is entitled to Sixth
Circuit review of the Order of Remand.
Federal’s appeal to the Sixth Circuit is barred by
Section 1447(d) and the prohibition against the review of
—EEE——————eee
15
remand orders which are based on a lack of subject matter
jurisdiction. Yet, in this portion of Federal’s brief, it seeks
to skip over Congress’ clear bar to review and go right to
the underlying substantive issues. Federal is putting the
cart before the horse, or in this case, substantive matters
before procedural ones. If Federal is successful in having
the Sixth Circuit’s Order of Dismissal reversed, then the
parties will brief the underlying substantive issues to the
Sixth Circuit. Until Federal convinces this Court that the
Sixth Circuit improperly dismissed Federal’s appeal, the
underlying substantive issues are irrelevant to this
Court’s application to Section 1447(d) to the facts of this
case.
Assuming arguendo that the underlying substantive
issues are relevant to this Court’s determination, there
can be no conflict among the circuits as to the application
of Section 1332(c) to the Scott-Pontzer line of cases be-
cause, to the best of the Joneses’ knowledge, Ohio is the
only state in the country which analyzes uninsured and
underinsured motorist coverage in the manner that Ohio
does. Accordingly, Federal cites to no case in a circuit other
than the Sixth Circuit which has applied Section 1332(c)
as the federal courts in Ohio have.
Furthermore, the fact that judges within the United
States District Court for the Northern District of Ohio are
in conflict with each other over the application of Section
1332(c) to the Scott-Pontzer cases does not justify granting
a writ of certiorari. The conflict will eventually be ad-
dressed by the Sixth Circuit using the properly prescribed
jurisdictional procedures. In a case where a district court
denies a plaintiff’s motion to dismiss for lack of subject
matter jurisdiction and where the plaintiff ultimately fails
on the merits of his case, the matter may be appealed to
16
the Sixth Circuit and the lack of subject matter jurisdic-
tion issue may be raised on appeal.
At that point, the Sixth Circuit can definitively
determine whether Section 1332(c) operates to destroy
diversity in Scott-Pontzer cases. This is the only proper
jurisdictional procedure for addressing this issue unless
and until this Court grants certiorari and reverses the
decision of the Sixth Circuit to dismiss Federal’s appeal.
Regardless, Federal’s arguments with respect to the
direct action proviso were not before the Sixth Circuit on
Federal’s appeal and should not be addressed before this
Court. As such, Federal offers no conflict among the
Circuits which would warrant the granting of a writ of
certiorari, and the writ should be denied.
IV. Certiorari should not be granted because
Federal is unreasonably requesting this
Court to strike down every jurisdictional
limitation which Congress has placed on par-
ties in an action in Federal Court.
In its final, “catch-all” reason for granting its Petition
for Writ, Federal argues that somehow there is a conflict |
among the Circuits as to whether the power of the judici-
ary flows from the Constitution of the United States or
from Congress. In support of its poorly constructed argu-
ment, Federal cites to snippets of cases and quotes taken
out of their original context.
For example, Federal cites to Terral v. Burke Con-
struction, 257 U.S. 529 (1922) which deals with the issue
of whether or not a state can make a foreign corporation
waive its right to pursue an action in federal court against
that state’s residents as a condition precedent to doing
EEE eee
17
business within its borders. Interestingly, Federal also
references Bondurant v. Watson, 103 U.S. 281 (1880)
which held, in part, that as long as a suit complied with
the requirements of removal, the case could be properly
heard in federal court. Jd. at 287.
Finally, Federal cites Kline v. Burke Construction Co.,
260 U.S. 226 (1922), which is actually dispositive of
Federal’s arguments:
Only the jurisdiction of the Supreme Court is de-
rived directly from the Constitution. Every other
court created by the general government derives
its jurisdiction wholly from the authority of Con-
gress. That body may give, withhold or restrict
such jurisdiction at its discretion, provided it be
not extended beyond the boundaries fixed by the
Constitution.
Id. at 232.
Federal confuses the constitutional right to pursue a
claim in federal court with the Congressional grant of
jurisdiction to pursue the same claim. Provided a party
meets the jurisdictional requirements set forth by Con-
gress to maintain an action in federal court, a person’s
constitutional right to proceed against a citizen of another
state cannot be infringed.
Taken to its logical conclusion, Federal would have
this Court find unconstitutional the requirements that a
claim arise under the Constitution, laws, or treaties of the
United States or the requirement that there be diversity of
citizenship and a particular amount in controversy.
Federal seems to argue that the requirement that the
amount in controversy must exceed $75,000.00 or that
18
there -be complete diversity unconstitutionally limits a
person’s right to federal court. The Constitutional right to
federal court has already been reconciled with the jurisdic-
tional restrictions placed upon that right by Congress.
Kline, supra.
For good measure, Federal then argues that this
Court should determine whether or not rights to due
process and equal protection flow from the “Constitutional
presumption of local prejudice” and whether the citizen-
ship of “totally disinterested parties may be considered in
determining diversity.” Simply stated, these issues have no
bearing on whether Section 1447(d) bars appellate review
of a remand order which was based on a lack of subject
matter jurisdiction. Again, Federal attempts to blur the
distinction between legitimate constitutional questions
and the clear and unambiguous jurisdictional require-
ments set forth by Congress. The issues which Federal
raises here are irrelevant to this Court’s consideration of
the statutory requirements of Section 1447(d). Federal
merely perceives a conflict where none exists. Conse-
quently, the Petition for Writ should be denied.
ry
Vv
CONCLUSION
The provisions of 28 U.S.C. §1447(d) naturally con-
template that, on appeal, a circuit court must first review
the order of remand to ensure that the district court did,
in fact, issue the order based upon lack of subject matter
jurisdiction. This is precisely what the Sixth Circuit did. It
addressed Federal’s arguments in its decision, reviewed
the analysis of the District Court, and found that
19
the District Court in good faith determined that there was
a lack of subject matter jurisdiction. Consequently, based
upon the clear language of Section 1447(d) and congres-
sional intent, the court determined that it was prohibited
from reviewing the remand order.
Now, Federal, in an attempt to seek this Court's
review, attempts to manufacture conflicts among the
circuits where none exist. As evidenced by the cases which
Federal cites, circuit courts perform a review of remand
orders to ensure that the provisions of Section 1447(d) are
met. If the circuit court is satis ied that the order of
remand was issued because of a lack of subject matter
jurisdiction, then the remand order is not subject to
further review. Federal has cited to no case in which a
circuit court acted differently.
Furthermore, the District Court did not issue an order
prior to the remand order that would otherwise have been
appealable in the absence of Section 1447(d). Therefore,
the cases which Federal cites in support of this proposition
are inapplicable. Finally, Federal’s exposition on the
applicability of the “direct action proviso” as well as the
constitutional implications of this case are irrelevant to
this court’s determination as to whether the Sixth Circuit
properly dismissed Federal’s appeal.
In the end, Federal only hopes to convince this Court
that a conflict exists. However, the Sixth Circuit’s dis-
missal of Federal’s appeal in no way conflicts with how
other Circuit Courts are analyzing the applicable statutes.
20
As such, the Petition for Writ of Certiorari should be
denied. |
)
‘Respectfully Submitted, f
ROBERT E. SOLES, JR. ]
Counsel of Record
JOHN L. JUERGENSEN |
BLACK, MCCUSKEY, |
SOUERS & ARBAUGH |
1000 Unizan Plaza
220 Market Ave., S.
Canton, Ohio 44702
Tel: (330) 456-8341
Fax: (330) 456-5756
E-mail: bsoles@bmsa.com
Counsel for Respondent
Kenneth R. Jones, et al.
App. 1
APPENDIX A
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
KENNETH R. JONES, ) CASE NO. 5:01CV1616
et. al., 7 ‘ JUDGE
Plaintiffs DAN AARON POLSTER
vs. ) NOTICE OF APPEAL
FEDERAL INSURANCE CO.,? (Filed Dec. 11, 2001)
et. al.,
Defendants )
Notice is hereby given that Federal Insurance Com-
pany, one of Defendants in the above-named case, hereby
appeals to the United States Court of Appeals for the
Sixth Circuit from the Opinion and Order of the United
States District Court for the Northern District of Ohio,
Eastern Division, remanding the cause to state court
App. 2
entered in this action on the 14th day of November, 2001.
A copy of the Opinion and Order are attached hereto.
Respectfully submitted,
OF COUNSEL:
GALLAGHER, SHARP,
FULTON & NORMAN _/s/ D’John Travis
D’ JOHN TRAVIS
(0011247)
1501 Euclid Avenue
Seventh Floor —
Bulkley Building
Cleveland, Ohio
44115-2108
Phone: (216) 241-5310
Fax: (216) 241-1608
E-mail: Dit@gafn.com.
Attorney for —
Defendant Federal
Insurance Co.
a
App. 3
APPENDIX B
IN THE UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
KENNETH R. JONES, ) Case No.: 01-4323
et. al. : (On Appeal from U.S.
Plaintiffs-Appellees, ) District Court Case No.
) 5:01CV1616)
) APPELLEES’ MOTION
ANY -) TODISMISS APPEAL
) FOR LACK OF
Defendant-Appellant, ) JURISDICTION
and
AMERICAN MOTORISTS )
INSURANCE )
COMPANY, et al. )
Defendants. )
Plaintiffs-Appellees, Kenneth R. Jones and Mary B.
Jones (“the Joneses”), by and through counsel, hereby
move this Court, pursuant to 28 U.S.C. 1447(d) for its
Order dismissing Appellant, Federal Insurance Company’s
Appeal (“Federal”). Based on the non-reviewability of
orders of remand, this Court lacks jurisdiction over this
matter and Federal’s appeal should be dismissed.
A. Procedural Background
The Joneses filed a Complaint on May 30, 2001, in the
Stark County Court of Common Pleas against, inter alia,
Federal alleging that the Joneses were entitled to coverage
under an insurance policy issued by Federal. On July 7,
App. 4
2001, Federal removed this case to the United States
District Court for the Northern District of Ohio.
Removal was based upon diversity of citizenship
between the parties. The defendants in the case below
were citizens of New Jersey, Illinois, and the Bahamas.
The Joneses are citizens of Ohio.
On October 22, 2001, Judge Polster ordered Federal to
show cause why this case should not be remanded for lack
of subject matter jurisdiction. After the parties briefed
their respective positions to the court, Judge Polster
issued an Order on November 14, 2001, remanding the
case back to the Stark County Court of Common Pleas. A
copy of the Order is attached hereto as Exhibit “A.”
The basis for remand was that, pursuant to 28 U.S.C.
1332(c)(1), Federal is deemed to be a citizen of the same
state as its insured. Federal’s insured is American Electric
Power, Inc., an Ohio corporation. As the Joneses are also
citizens of Ohio, complete diversity did not exist between
the parties and the court below lacked subject matter
jurisdiction.
Federal now seeks review of Judge Polster’s decision
in the herein appeal.
B. Legal Argument
Under 28 U.S.C. 1447(d), an order remanding a case
to the State court from which it was removed is “not
reviewable on appeal or otherwise,” unless the case in-
volves a civil rights claim.
The United States Supreme Court has held that only
remand orders pursuant to 28 U.S.C. 1447(c) are non-
App. 5
reviewable. Thermtron Products, Inc. v. Hermansdorfer,
423 U.S. 336 (1976). That section allows for an order of
remand for defects in the removal procedure and when the
District Court lacks subject matter jurisdiction. 28 U.S.C.
1447(c).
The Supreme Court has recently re-affirmed their
decision in Things Remembered, Inc. v. Petrarca, 516 U.S.
124 (1995):
As long as a district court’s remand is based on a
timely raised defect in removal procedure or on
lack of subject-matter jurisdiction — the
grounds for remand recognized by § 1447(c) — a
court of appeals lacks jurisdiction to entertain an
appeal of the remand order under § 1447(d).
Id. at 127. (Emphasis added.)
Therefore, where a court remands a case back to the
state court from which it arose, the order is not reviewable
by the appeals court. Zuniga v. Blue Cross and Blue
Shield of Michigan, 52 F.3d 1395 (6th Cir. 1995). In fact,
this Court has previously held that remand orders based
on a lack of subject matter jurisdiction are not reviewable.
See, e.g., Godsey v. Miller, 2001 U.S. App. LEXIS 9402
(6th Cir. 2001); Thackeray v. Boats Express Corporation,
1999 U.S. App. LEXIS 19808 (6th Cir. 1999); and Anus-
bigian v. Trugreen/Chemlawn, Inc., 72 F.3d 1253 (6th Cir.
1996). Copies of the unreported opinions are attached
hereto as Exhibit “B.”
Whether Judge Polster employed the correct legal
analysis in remanding this case back to Stark County is
irrelevant. As this Court has previously stated:
App. 6
If a district court determines, rightly or
wrongly, that it lacks subject matter jurisdiction
over a removed case, and for that reason re-
mands it to the court from which it was removed,
the court of appeals lacks jurisdiction to review
the district court’s decision.
Anusbigian, supra, at 1256. (Emphasis added.) See also
State of Ohio v. Wright, 992 F.2d 616, 619 (6th Cir. 1993)
(“It makes no difference that the District Court may be
wrong in its conclusions concerning jurisdiction. . . . ”)
Judge Polster’s Order clearly states that diversity
jurisdiction is lacking in this case. Therefore, because this
case was remanded for lack of subject matter jurisdiction,
the Order of remand is not reviewable. Therefore, Fed-
eral’s appeal should be dismissed.
WHEREFORE, Appellees, Kenneth and Mary Jones,
respectfully request that this Court dismiss Appellant,
Federal Insurance Company’s appeal based upon the non-
reviewability of the Order of remand. |
Respectfully submitted,
BLACK, MCCUSKEY, SOUERS
& ARBAUGH
By: /s/ Robert E. Soles, Jr.
Robert E. Soles, Jr. (#0046707)
John L. Juergensen (#0071071)
1000 United Bank Plaza
220 Market Avenue South
Canton, Ohio 44702
Telephone: (330) 456-8341
Telefax: (330) 456-5756
Email: bsoles@bmsa.com
Counsel for Plaintiffs-Appellees
App. 7
CERTIFICATE OF SERVICE
The undersigned hereby certifies that a copy of the
foregoing was sent by ordinary U.S. Mail to D. John
Travis, Esq., Gallagher, Sharp, Fulton & Norman, 1501
Euclid Avenue, Seventh Floor-Bulkey Building, Cleveland,
Ohio 44115-2108; Ronald A. Rispo, Esq. and Robert E.
Goff, Jr., Esq., Weston Hurd Fallon Paisley & Howley,
L.L.P., 2500 Terminal Tower, Cleveland, Ohio 44113-2241;
and David Bloomfield, Jr., Porter, Wright, Morris &
Arthur, 41 South High St., Columbus, Ohio 43215, this
15th day of January, 2002.
/s/ Robert E. Soles, Jr.
Robert E. Soles, Jr.
App. 8
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
KENNETH R. JONES, ) CASE NO.
et al., ) 5:01CV1616
ss )
Plaintiffs, Judge
vs. ) Dan Aaron Polster
FEDERAL INSURANCE ?
CO. ateal ) MEMORAND OF
‘ : ) OPINION AND
Defendants. ) ORDER
)
On May 30, 2001, Plaintiffs Kenneth R. Jones and
Mary B. Jones filed a Complaint in the Stark County
Court of Common Pleas against Defendants Federal
Insurance Company (“Federal Insurance”) and American
Motorists Insurance Company. Plaintiffs’ Complaint
arises out of a March 27, 1999 accident which occurred
when a negligent driver struck Kenneth Jones as he was
riding his motorcycle. Plaintiffs allege that they are insureds
under their employers’ uninsured/underinsured motorist
insurance policies (see, e.g., Scott-Pontzer v. Liberty Mu-
tual Fire Ins. Co., 85 Ohio St. 3d 660 (1999)) and that
the defendant insurers breached their contracts of
insurance and acted in bad faith.
On July 2, 2001, Defendant Federal Insurance
removed the case to this Court pursuant to 28 U.S.C.
§ 1332 (diversity jurisdiction). (ECF No. 1). On Septem-
ber 18, 2001, Plaintiffs filed an Amended Complaint
(ECF No. 20) which added a third insurer, Energy
Insurance (Bermuda, Ltd., to the case.
App. 9
On October 19, 2001, the Court issued an opinion in
Kormanik v. St. Paul Fire and Marine Ins. Co. (Case No.
5:01CV2122), remanding a Scott-Pontzer case for lack of
jurisdiction. On October 22, 2001, the Court issued a
Show Cause Order (ECF No. 29) which attached the
Kormanik opinion and required Federal Insurance to
explain why this case should not also be remanded. On
November 1, 2001, Federal Insurance filed a response
(ECF No. 32) to the Court’s Show Cause Order. On
November 5, 2001, Plaintiffs filed a Memorandum in
Opposition (ECF No. 33) to Federal Insurance’s re-
sponse.
Having reviewed the parties’ briefs, the Court finds
that this case must be remanded for the same reasons
stated in the Kormanik opinion. Although the defendant
insurers are located in New Jersey, Illinois, and the
Bahamas, at least one of the insureds, American Elec-
tric Power Co., Inc., is a citizen of Ohio. Because Plain-
tiffs are also citizens of Ohio, diversity jurisdiction is
lacking.
For the reasons stated above, the Court hereby
Orders that the above-captioned case be remanded to
the Stark County Court of Common Pleas.
IT IS SO ORDERED.
S/Dan Aaron Polster 11/14/01
Dan Aaron Polster
United States District Judge
App. 10
MARK THACKERAY, Plaintiff-Appellee, v.
BOATS EXPRESS CORPORATION, Defendant-Appellant.
No. 99-3530
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
1999 U.S. App. LEXIS 19808
August 16, 1999, Filed
COUNSEL: For MARK THACKERAY, Plaintiff-
Appellee: Michael A. Paolucci, Cincinnati, OH.
For BOATS EXPRESS CORPORATION, Defendant-
Appellant: Paul H. Lamboley, Washington, DC.
JUDGES: Before: KRUPANSKY, BOGGS, and CLAY,
Circuit Judges.
OPINION: ORDER
The defendant appeals the district court’s order
remanding this action to the state court from which it was
removed. The plaintiff moves to dismiss this appeal on
grounds that the order is not appealable.
The plaintiff commenced the action in an Ohio com-
mon pleas court with a complaint that asserted state law
causes of action and claimed damages for the defendant’s
failure to timely deliver a boat as agreed. The defendant
removed the action to federal district court based on 49
U.S.C. § 14706 of the Interstate Commerce Act, also
referred to as the Carmack Amendment. That statute
imposes liability for “actual loss or injury to the property”
caused by a carrier. The defendant argued that the plain-
tiff’s causes of action were preempted by the Carmack
Amendment. The district court granted the plaintiff’s
motion to remand, concluding that the plaintiff’s action
App. 11
was not for damage to the property and that, in fact, the
defendant had not delivered the property. In a subsequent
order denying a motion to reconsider and in an order
denying a stay pending appeal, the court noted that its
remand was based upon a lack of subject matter jurisdic-
tion.
A court may remand a case for lack of subject matter
jurisdiction at any time before final judgment. 28 U.S.C.
§ 1447(c). The removal statute further provides, at
§ 1447(d), that an order remanding a case to state court is
not reviewable by appeal or otherwise. That section,
however, bars review only of remands for the reasons
stated in § 1447(c). Thermtron Products, Inc. v. Hermans-
dorfer, 423 U.S. 336, 46 L. Ed. 2d 542, 96 S. Ct. 584 (1976).
Thus, § 1447(d) precludes review of remand orders that
are based on either a lack of subject matter jurisdiction or
defects in removal procedure. Quackenbush v. Allstate
Insurance Company, 517 U.S. 706, 712, 135 L. Ed. 2d 1.
116 S. Ct. 1712 (1996). This court has recognized a limited
exception where the remand order is based on the merits
of a collateral, substantive decision as opposed to an issue
of jurisdiction. Anusbigian v. Trugreen/Chemlawn, 72 F.3d
1253 (6th Cir. 1996).
Although the defendant characterizes the district
court's order as something other than a conclusion that it
was without subject matter jurisdiction, the district court
twice stated that it was remanding the action for lack of
subject matter jurisdiction. Further, when a preemption
issue is addressed that is necessarily related to the ques-
tion of subject matter jurisdiction, it is not elevated to an
appealable collateral issue. See Baldridge v. Kentucky
Ohio Transportation, Inc., 983 F.2d 1341, 1349 (6th Cir.
1993).
App. 12
Therefore, the plaintiff’s motion to dismiss this
appeal for lack of jurisdiction is GRANTED.
App. 13
ELMER GODSEY, Plaintiff-Appellee, v. KEN MILLER,
CLYDE BOWLING, KANSAS SMITH, ASPLUNDH TREE
EXPERT, INC., a corporation, and AMERICAN ELEC-
TRIC POWER SERV. CORP,, a corporation, Defendants-
Appellants.
Nos. 00-5045, 00-5055
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
2001 U.S. App. LEXIS 9402: 9 Fed. Appx. 380
May 10, 2001, Filed
COUNSEL: For ELMER GODSEY, Plaintiff-Appellee
(00-5045, 00-5055); Frank R. Riley, III, Whitesburg, KY.
For AMERICAN ELECTRIC POWER SERVICE CORPO-
RATION, Defendant-Appellant (00-5045): Randall S. May,
Barrett, Haynes, May, Carter & Roark, Hazard, KY.
For AMERICAN ELECTRIC POWER SERVICE CORPO-
RATION, Defendant-Appellant (00-5045): David A. Laing,
Marc L. Fleischauer, Porter, Wright, Morris & Arthur,
Columbus, OH.
For KEN MILLER, CLYDE BOWLING, KANSAS SMITH,
ASPLUNDH TREE EXPERT COMPANY , Defendants-
Appellants (00-5055): Mark J. Hinkel, Shannon M. Naish,
Landrum & Shouse, Lexington, KY.
JUDGES: Before: KRUPANSKY, BOGGS, and BATCH-
ELDER, Circuit Judges.
OPINION: PER CURIAM. Elmer Godsey, a former
employee of defendant Asplundh Tree. Expert, Inc. (“As-
plundh”) has brought claims against all defendants alleg-
ing discrimination on the basis of age, in violation of the
Kentucky Civil Rights Act, KY. REV. STAT ANN. § 344.040
App. 14
(Michie 1999), based on his termination from Asplundh.
Godsey originally brought suit in state court, and defen-
dants attempted to remove the case to federal court on the
basis of diversity. Defendants Miller, Smith, and Bowling
are, like Godsey, residents of Kentucky, but defendants
asserted that Godsey’s complaint failed to allege properly
any genuine claim against these non-diverse parties,
essentially claiming fraudulent joinder. The district court
interpreted Godsey’s complaint as alleging that the non-
diverse parties were participants in a conspiracy in viola-
tion of KY. REV. STAT. ANN. § 344.280(2) (Michie 1999).
Because of the consequent lack of diversity, the district
court remanded the action to state court. Defendants now
appeal the district court decision, which plaintiff claims is
unreviewable under 28 U.S.C. § 1447(c). For the reasons
that follow, we dismiss the appeal while vacating any
residual effect of the district court’s order.
Defendants Miller, Smith, and Bowling are employees
of Asplundh; Asplundh was providing services under
contract to defendant American Electric Power Service
Corp. (“AEP”) at the time of Godsey’s termination. For
purposes of this appeal, the parties accept Godsey’s com-
plaint as stating the facts behind this action. Godsey was a
brush trimmer and employee of Asplundh, 65 years of age
in 1999, when he was carrying out Asplundh’s contract
with AEP to clear the foliage from power lines. Defendants
Miller, Bowling, and Smith are respectively, Foreman,
Assistant General Foreman, and Supervisor at Asplundh.
Godsey claimed that Miller had made “discriminatory
inquiries” in the spring of 1999 into when Godsey was
going to retire. On June 3, 1999, Miller, Bowling, and
App. 15
Smith approached Godsey at his job site and told him that
AEP did not want him working for them anymore. They
informed Godsey he was laid off and transported him to
his home in Perry County, Kentucky. This describes
essentially the full content of the complaint with regard to
the conduct of Miller, Bowling, and Smith (and AEP). In a
later pleading (his response to AEP’s motion to dismiss in
federal court), Godsey stated that his complaint “inferen-
tially alleged” that these defendants had conspired to “aid,
abet, incite, compel or coerce” Asplundh to discharge
Godsey, (Godsey Br. at 11), but no specific incidents of such
persuasion were adduced, nor was the complaint ever
amended.
Defendant Asplundh, not joined by-defendant AEP,
but together with Miller, Bowling, and Smith, filed a
notice of removal with the federal district court. Acknowl-
edging that Miller, Bowling, and Smith were Kentuckians,
the notice claimed that they were “sham defendants which
have been improperly joined as defendanis in the present
action for the sole purpose of defeating the jurisdiction of
this Court.” The notice argues that these defendants are a
sham because Godsey’s complaint mentioned only KY.
REV. STAT. ANN. § 344.040 (Michie 1999) as statutory
authority for his age discrimination complaint, a statute
applicable only against employers rather than individuals.
Acting separately in the federal court, defendant AEP filed
a motion to dismiss on similar grounds, since AEP was
also not Godsey’s employer. Godsey defended removal by
pointing out his complaint had alleged violations of “KRS
344.040 et seq.” and among the provisions “et seq.” is KY.
REV. STAT. ANN. 344.280(2) (Michie 1999), which allows
non-employers to be held liable as part of a conspiracy to
deprive a plaintiff of civil rights.
App. 16
In December 1999, after receiving briefs from both
side, [sic] the district court issued an order ruling on AEP’s
motion. The court concluded that Godsey had sufficiently
alleged a conspiracy claim against AEP and “using the
same rationale, Ken Miller, Clyde Bowling, and Kansas
Smith can be sued under KRS 344.280(2).” In the next
paragraph, the court then stated, “(t]he validity of this
conspiracy cause of action ... destroys the complete
diversity necessary to remove this suit under 28 U.S.C.
§ 1441. Therefore, the case will be remanded to the Perry
Circuit Court.” In meking this ruling, the district court
also adverted to the procedural flaw in the notice of
removal, which was not’ signed by all defendants, as the
court pointed out was required by 28 U.S.C. § 1446.
However the court declined to “address the procedural
error,” “as this case is being remanded based on lack of
diversity jurisdiction[.]”
The case was then stricken from the active docket, but
the order was labeled “FINAL AND APPEALABLE.”
Following this suggestion, defendants have appealed it.
Godsey, however, points to the language of 28 U.S.C.
§ 1447(d), which provides that “an order remanding a case
to the State court from which it was removed is not re-
viewable on appeal or otherwise... .”
II
Standard of Review
If we were to find the issue reviewable, the standard
of review on the district court’s decision to remand would
appear to be de novo. Cf. Jerome-Duncan, Inc. v. Auto-By-
Tel, L.L.C., 176 F.3d 904, 907 (6th Cir. 1999) (reviewing a
App. 17
denial of a motion to remand). The parties agree that this
is the proper standard should we reach the issue.
Reviewability
The review of remand orders to state courts is barred
by 28 U.S.C. § 1447(d) when the order “falls into either
category of remand order described in § 1447(c)... lack of
subject matter jurisdiction or defects in removal proce-
dure.” Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 711,
135 L. Ed. 2d 1, 116 S. Ct. 1712 ( 1996). If “a district court
remands a case based on the grounds listed in Section
1447(c), this Court cannot review the remand order.”
Zuniga v. Blue Cross and Blue Shield of Michigan, 52 F.3d
1395, 1400 (6th Cir. 1995) (citation and quotation omitted).
This is true even if the district court’s decision to remand
proceeds from an erroneous basis. Ibid.
A limited exception, asserted by defendants, exists
when the remand order is “based on a substantive decision
on the merits of a collateral issue as opposed to just
matters of jurisdiction.” Regis Associates v. Rank Hotels
(Management) Ltd., 894 F.2d 193, 194 (6th Cir. 1990). In
Regis, this principle was used to allow review of a district
court’s decision to remand based on its interpretation of a
contractual forum selection clause. The application of this
exception, however, was found inappropriate when the
district court based its remand for lack of subject-matter
jurisdiction on its legal determination of the absence of
federal preemption, Baldridge v. Kentucky Ohio Transpor-
tation, Inc., 983 F.2d 1341, 1350 (6th Cir. 1993), or the lack
of status as a federal officer. See State of Ohio v. Wright,
992 F.2d 616, 618-619 (6th Cir. 1993) (en banc).
App. 18
On the face of Godsey’s complaint, complete diversity
was lacking. Therefore, in order for removal to occur, the
defendants were required to show fraudulent joinder to
eliminate the non-diverse parties, see 14B CHARLES
ALAN WRIGHT, ET AL., FEDERAL PRACTICE AND
PROCEDURE § 3723 (3d ed. 1998), and this is what they
asserted, and what the district court was required to
assess. “When a non-diverse party has been joined as a
defendant, then in the absence of a substantial federal
question the removing defendant may avoid remand only
by demonstrating that the non-diverse party was fraudu-
lently joined. Under the doctrine of fraudulent joinder, the
inquiry is whether [plaintiff] had at least a colorable cause
of action against [defendant] in the ... state courts.”
Jerome-Duncan, Inc. v. Auto-By-Tel, L.L.C., 176 F.3d 904,
907 (6th Cir. 1999); see also Alexander v. Electronic Data
Sys. Corp., 13 F.3d 940, 949 (6th Cir. 1994). In Jerome-
Duncan we thus looked to the state law to determine
whether the non-diverse defendant was a proper party or
whether it was fraudulently joined, based on the legal
sufficiency of the claim, and we disregarded any inquiry
into plaintiff’s actual motive in joinder. 176 F.3d at 907.
The burden of proving fraudulent joinder is placed on the
party asserting the existence of complete diversity. See
Alexander, 13 F.3d at 949.
This case differs from Regis in that the issue of a
forum selection clause is an independent contractual
concern created by the actions of the parties, and is not
linked to the inherent subject-matter jurisdiction of the
court. By contrast, where review was not allowed in
Baldridge and Wright, this linkage between the issue
decided and jurisdiction was the fundamental reason
against review: the decision of the issue asserted by
App. 19
appellants to circumvent § 1447(d) was held to have been
a necessary precursor to a decision on the jurisdictional
(§ 1447(c)) issue that had been before the district court.
This also appears to be the case here, where the issue of
fraudulent joinder and diversity — the jurisdictional
question — was completely dependent on the prior deter-
mination of the adequacy of a conspiracy complaint that
could reach non-diverse defendants.
In similar circumstances, where the district court
interpreted Michigan law to determine if the amount in
controversy was present before remanding, we have held
the order to be beyond review. See Anusbigian v. Tru-
green/Chemlawn, Inc., 72 F.3d 1253 (6th Cir. 1996). In
Anusbigian, the district court had been compelled to
analyze whether the plaintiff could maintain an action
under MICH. COMP. LAWS ANN. § 600.2961, which
would have allowed his possible recovery to exceed the
necessary amount in controversy; it was determined that
he could not, which motivated the remand. Id. at 1254. In
holding the order unreviewable in the face of plaintiffs’s
assertion of the Regis exception, we stated that the “fact
that the district court based its jurisdictional determina-
tion on an interpretation of Michigan law is beside the
point.” Id. at 1257. We also noted that the district court’s
decision did not foreclose assertion of any issue for liti-
gants; it foreclosed only “further litigation of [the] claim in
federal court.” Ibid.
We have previously held in unpublished persuasive
authority that a court’s decision of issues of fraudulent
joinder does not amount to a substantive decision of the
kind that may avoid the bar to reviewability. See Calvert v.
Xerox Corp., 1995 U.S. App. LEXIS 5341, No. 94-1701,
1995 WL 109000 (6th Cir. Mar. 14, 1995) (unpublished). In
App. 20
Calvert, as here, defendants’ attempt to remove was
rejected and the federal district court remanded to state
court. Defendants then asserted Regis as a route to re-
viewability of the remand order, including as one of the
“substantive decision[s]” the district court’s adjudication of
their claims of fraudulent joinder to defeat diversity. We
stated there that in “deciding whether a party has been
fraudulently joined, the district court must consider
whether there is a reasonable basis for predicting that the
plaintiff could prevail against the non-diverse defendant.
It does not appear that the district court went beyond this
initial jurisdictional inquiry in ruling that the individual
defendant had not been fraudulently joined.” Jd. at *2
(citation omitted) (finding remand unreviewable). Simi-
larly, here the district court was required to assess the
conspiracy claim to determine its jurisdiction; the primary
reason it did so in the context of a motion to dismiss was
that AEP had, quite improperly, not joined in the notice of
removal which asserted essentially the same legal argu-
ments.
It may well be that another court would find that the
defendants carried their burden. Cf. Stacy v. Shoney’s Inc.,
1998 U.S. App. LEXIS 6659, No. 97-5393, 1998 WL 165139
(6th Cir. Mar. 31, 1998) (finding fraudulent joinder in a
similar suit despite explicit mention of the conspiracy
statute): Unfortunately for the defendants, even a clearly
erroneous decision does not provide us with a license to
revisit a remand issued on the basis of a lack of subject-
matter jurisdiction. See e.g., Page v. City of Southfield, 45
F.3d 128, 131 (6th Cir. 1995). Such orders are “beyond all
power of appellate review, even if based on erroneous
principles or analyses.” Ibid.
OO ee
App. 21
The fact that § 1447 or “subject-matter jurisdiction”
was not mentioned by the district court in its remand
order does not change the analysis, if the decision was
“clearly on jurisdictional grounds.” Anusbigian, 72 F3d at
1255; see also Wright, 992 F2d at 617. Equally, the fact
that the order was labeled as “appealable” does not make
it appealable. See Feidt v. Owens Corning Fiberglas Corp.,
153 F.3d 124, 129 (3d Cir. 1998). In Feidt, the district court
had not only certified the question for appeal, but the
Third Circuit had also granted leave to appeal. Nonethe-
less, it was held that this could “not circumvent the
jurisdictional bar of section 1447(d).” Id. at 129 n5
(finding remand order unreviewable). We hold the decision
was clearly on jurisdictional grounds.
However, there remains some confusion regarding the
district court’s denial of defendant AEP’s motion to dis-
miss, prior to its finding a lack of federal jurisdiction over
Godsey’s complaint. The district court repeated this denial
in its order, stating that the “Defendant’s motion ... is
hereby ... DENIED” and only then ordering the remand
in the next paragraph of the order. Although it is obvious
that, without subject-matter jurisdiction, the court was
without power to decide any substantive motion on the
merits of the case, this sequence of analysis and orders has
created unnecessary uncertainty regarding the nature and
preclusive effect of the district court’s ruling.
It is a well settled Principle that “the district court
must be certain that federal subject matter jurisdiction is
proper before entertaining a motion by the defendant
under Federal Rule 12 to dismiss the plaintiff’s complaint
for failure to state a claim upon which relief may be
granted.” 14C CHARLES ALAN WRIGHT, ET AL., FED-
ERAL PRACTICE AND PROCEDURE § 3739, at 423 (3d
App. 22
ed. 1998). See also Gross v. Hougland, 712 F.2d 1034, 1036
(6th Cir. 1983) (stating “disapproval of the district court’s
decision to dispose of this action on the merits without
first resolving the question of subject matter jurisdiction”).
The preferred method is to determine whether the action
has been properly removed and the court has jurisdiction
before disposing of other pending motions. In the admit-
tedly unorthodox posture of this case, this required treat-
ing AEP as the cart and the individual defendants as the
horses pulling it; AEP’s motion became moot as soon as the
similar analysis applied to the conspiracy claims against
the non-diverse parties failed to show fraudulent joinder.
See, e.g., Thompson v. Fritsch, 966 F.Supp. 543, 545 (E.D.
Mich. 1997) (refusing to address defendant’s motion for
summary judgment, which became moot after a finding of
lack of jurisdiction).
Like the district court, we have no power under
Article III to decide the merits of the case over which we
have no jurisdiction. As just discussed, the district court
has determined that the federal courts have no jurisdiction
over this matter and we cannot revisit that determination.
Nonetheless, we have the power to vacate any decision
that lacked jurisdiction, a decision “which we cannot leave
undisturbed.” Goldin v. Bartholow, 166 F.3d 710, 718 (5th
Cir. 1999). Our common solution in such cases is to vacate
the judgment and remand with orders to dismiss, in order
to clear the path for “relitigation of the issues” and prevent
an unreviewable judgment from “spawning any legal
consequences.” Brock v. UAW, 889 F.2d 685, 696-97 (6th
Cir. 1989) (citation and quotation omitted) (vacating and
remanding with instructions to dismiss because of moot-
ness). See also Ford v. Hamilton Investments, Inc., 29 F.3d
255, 260 (6th Cir. 1994) (vacating and remanding with
‘
App. 23
instructions to dismiss district court’s order issued without
subject-matter jurisdiction).
Ill
Accordingly, we VACATE those portions of the order
denying AEP’s motion to dismiss, and REMAND this
matter with instructions to dismiss this case (00-5045) for
lack of subject-matter jurisdiction. We hold the district
court's finding regarding jurisdiction and consequent order
of remand to state court to be beyond review.
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.