Thursday, April 30, 2009

Federal Court Order Not Reviewable by Eleventh Circuit When Case Subsequently Remanded

In W.R. Huff Asset Management Co., LLC v. Kohlberg Kravis Roberts & Co. (07-13114) the Eleventh Circuit held that (1) remand orders are not reviewable; (2) an order substituting a party, which divested the district court of diversity jurisdiction, is not reviewable; and (3) should a state appellate court rule that the substitution was improper the case will remain in state court and cannot be removed a second time.

The procedural history of the case is interesting and extensive. The case was filed in Alabama state court, removed to the Bankruptcy Court for the Northern District of Alabama, remanded to the Alabama state court, and removed to the Northern District of Alabama.

The federal district court judge denied plaintiff's motion to file its fourth amended complaint and granted defendants motion to dismiss with prejudice. The plaintiff appealed the dismissal and a prior panel of the Eleventh Circuit reversed. The prior decision, W.R. Huff Asset Management Co. v. Kohlberg, Kravis, Roberts, 209 Fed. App’x. 931 (11th Cir. 2006), can be found here. The eleventh circuit reversed on the basis for the dismissal, however, specifically indicated there may be other valid reasons to dismiss.

On remand from the Eleventh Circuit, the district court granted leave to amend and to file the fourth amended complaint. The amended complaint added a party and defeated diversity and, therefore, the district court remanded the case back to state court.

Back for a second time at the Eleventh Circuit, the Eleventh Circuit held it was without jurisdiction to review the district court's order. Essentially, the court held the remand order is not reviewable and the order granting leave to amend is a non-final order and, therefore, also not reviewable. The court joined the other circuits that have held there is nothing to prevent the state appellate court from reviewing the federal district court's order [in this case allowing the amendment]. Further, if the state appellate court were to reverse the case cannot be removed back to federal court. The court stated:

An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise. 28 U.S.C. § 1447(d)...Notwithstanding the force of the § 1447(d) bar, the case law has staked out limited exceptions. Thus, we may review orders 'that lead to, but are separate from, orders of remand and have a conclusive effect upon the ensuing state court action'...Section 1291 of the Judicial code generally vests courts of appeals with jurisdiction over appeals from ‘final decisions’ of the district courts.” Cunningham v. Hamilton County, 527 U.S. 199, 203 119 S. Ct. 1915, 1919, 144 L. Ed. 2d 184 (1999). The general rule is that a district court order is considered final and appealable only if it ends the litigation on the merits and leaves nothing for the court to do but execute the judgment. Catlin v. United States, 324 U.S. 229, 65 S. Ct. 631 (1945). Obviously, the instant district court order does not end the litigation on the merits. However, the Supreme Court has “interpreted the term ‘final decision’ in § 1291 to permit jurisdiction over appeals from a small category of orders that do not terminate the litigation. That small category includes only decisions [1] that are conclusive, [2] that resolve important questions separate from the merits, and [3] that are effectively unreviewable on appeal from the final judgment in the underlying action.”...Our analysis leads to the conclusion that the district court’s order is effectively reviewable on appeal from a final judgment in state court. Accordingly, the district court’s order does not satisfy the third prong of the collateral order doctrine and we have no jurisdiction to review it...


The novel question we must address is whether the district court’s order is effectively unreviewable in light of the remand...Here, Appellants cannot obtain review in federal court. Section 1447(d) prevents this Court from reviewing the remand order itself...[therefore] we join the decisions of several of our sister circuits in finding no reason why the state appellate courts cannot review the propriety vel non of the district court’s order on appeal from a final judgment...We see no reason, on the facts before us, why Appellants cannot raise in the state appellate court all the merits issues they seek to present to us in this appeal. State courts 'possess the authority, absent a provision for exclusive federal jurisdiction, to render binding judicial decisions that rest on their own interpretations of federal law.'


Appellants expressed concern over a possible ping-pong of the case between federal and state court. If the state court reverses the substitution order, Appellants claim they will again remove the action to federal court under 15 U.S.C. § 77p(c). If the federal court persists in permitting substitution, the case will again be remanded to state court for lack of subject matter jurisdiction. Appellants assert that such a vicious circle of litigation makes the substitution order effectively unreviewable. We disagree...Appellants have received an opportunity to litigate in a federal forum. The policy of Congress is that Appellants now utilize the “equally competent” state courts to resolve the claims against them. Id. If the state courts determine that substitution was improper, Appellants may ask the state court to dismiss the action under SLUSA.


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