ATLANTIC NAT. TRUST LLC v. MT. HAWLEY INS. CO. No. 09-35716.
621 F.3d 931 (2010)
ATLANTIC NATIONAL TRUST LLC, a Florida limited liability company, Plaintiff-Appellee, v. MT. HAWLEY INSURANCE COMPANY, a Delaware corporation, Defendant-Appellant, Lebanon Hardboard LLC, an Oregon limited liability company; Tritalent Funding Group, LLC, an Oregon limited liability company, Defendants-Appellees, and Crump Insurance Services, Inc., a Texas corporation; Chamberlain Insurance Agency LLC, an Oregon limited liability company, Defendants.
United States Court of Appeals, Ninth Circuit.
Filed September 2, 2010.
Brian E. Sims, Morison Holden Derekwetzky & Prough, LLP, Walnut Creek, CA, for appellant Mt. Hawley Insurance Co.
John Folawn, Folawn Alterman Richardson LLP, Portland, OR, for appellee Atlantic National Trust, LLC.
Paul G. Dodds, Brownstein, Rask, Sweeney, Kerr, Grim, DeSylvia & Hay, LLP, Portland, OR, for appellee Tritalent Funding Group, LLC.
Dean D. DeChaine, Miller Nash LLP, Portland, OR, for appellee Lebanon Hardboard, LLC.
Before ANDREW J. KLEINFELD, CARLOS T. BEA and SANDRA S. IKUTA, Circuit Judges.
IKUTA, Circuit Judge:
Today we hold that we lack appellate jurisdiction to review a federal district court order remanding a case to state court based on a ground colorably characterized as a "defect" for purposes of 28 U.S.C. § 1447(c). See 28 U.S.C. § 1447(d); Powerex Corp. v. Reliant Energy Servs., Inc., 551 U.S. 224,
In October 2008, a fire caused over $10 million in damage to buildings and property owned by Lebanon Hardboard, LLC. Atlantic National Trust, LLC ("Atlantic") had loaned money to Lebanon Hardboard secured by interests in the buildings and property. The loan agreements required Lebanon Hardboard to maintain fire insurance on the property for the benefit of Atlantic, and to assign all insurance proceeds to Atlantic. Tritalent Funding Group, LLC ("Tritalent") had also loaned
Before the fire, Lebanon Hardboard submitted an application for fire insurance to Crump Insurance Services, Inc. ("Crump") and Chamberlain Insurance Agency LLC ("Chamberlain"), both of which were agents of Mt. Hawley Insurance Company ("Mt.Hawley"). Mt. Hawley issued an insurance binder (the actual policy was not delivered until after the fire) to Lebanon Hardboard with a $4 million per occurrence limit, but the binder did not designate Atlantic or Tritalent as mortgagees or loss payees.
After the fire, Atlantic demanded payment under the policy from Lebanon Hardboard and Mt. Hawley. Mt. Hawley denied that Atlantic was covered by the insurance policy or that it had any obligation to pay Atlantic. On February 20, 2009, Atlantic filed a complaint for damages and declaratory relief against Mt. Hawley, Crump, Chamberlain, Lebanon Hardboard, and Tritalent in Oregon state court. Atlantic sought, among other things, reformation of the contract and a declaration that Atlantic's rights to the insurance proceeds were superior to Tritalent's and Lebanon Hardboard's. Atlantic gave Lebanon Hardboard and Mt. Hawley courtesy copies of the complaint on February 25, 2009.
The next day, Mt. Hawley removed the case to federal court without the consent of the other defendants. At that time, neither Mt. Hawley nor any of the other defendants had been served. Lebanon Hardboard and Tritalent waived service on March 3.
On March 19, 21 days after Mt. Hawley removed the case, Lebanon Hardboard and Tritalent filed a motion in district court to remand the case to state court. The next day, Atlantic joined the motion to remand.
A magistrate recommended that the district court remand the action because Lebanon Hardboard and Tritalent had not consented to removal and they timely exercised their right under 28 U.S.C. § 1448 to choose a state forum.
The issue in this case is whether we have appellate jurisdiction to consider the appeal of the district court's remand order. As always, "we have jurisdiction to determine whether we have jurisdiction to hear the case." Aguon-Schulte v. Guam Election Comm'n,
"The beginning point of statutory interpretation must be the language of the statute." Am. Bird Conservancy v. F.C.C.,
According to Thermtron, "[i]f a trial judge purports to remand a case on the ground that it was removed `improvidently and without jurisdiction,' his order is not subject to challenge in the court of appeals." Id. at 343, 96 S.Ct. 584. As the Supreme Court later explained, "[w]here the order is based on one of the enumerated grounds, review is unavailable no matter how plain the legal error in ordering the remand." Briscoe v. Bell,
After Thermtron, Congress amended § 1447(c) several times. See Powerex, 551 U.S. at 229-30,
In Powerex, the Court stated that it would "assume for purposes of this case" that the post-Thermtron amendments to § 1447(c) were "immaterial to Thermtron's gloss on § 1447(d)," so that § 1447(d)'s bar on appellate review is limited to remands based on subject matter jurisdiction and nonjurisdictional defects. Powerex, 551 U.S. at 230,
In applying Thermtron's rule that § 1447(d) does not preclude all appellate review of remand orders, we have held that review is appropriate in a number of situations not discussed in Thermtron. For instance, in order to determine whether we lack jurisdiction under § 1447(d) in cases where the basis of a district court's remand order is unclear, we may "look to the substance of the order to determine whether it was issued pursuant to section 1447(c)." Schmitt v. Ins. Co. of N. Am.,
We have also held that we may review remand orders where the district court exceeded the procedural limitations in § 1447(c), even where a district court purported to remand on a ground enumerated in that statute. For example, we have reasoned that the plain language of § 1447(c) precludes a district court from issuing a remand order sua sponte for a nonjurisdictional defect, see Kelton Arms Condo. Owners Ass'n, Inc. v. Homestead Ins. Co.,
However, certain statements in our cases have strayed beyond the limited review permitted under Thermtron. Most notably, we have held that "we are not bound by the district court's characterization of the basis for its remand order." Reddam v. KPMG LLP,
In 2007, the Supreme Court issued its opinion in Powerex, narrowing the scope of appellate jurisdiction to review allegedly erroneous remand orders where the district court purported to remand under § 1447(c). In Powerex, two foreign defendants (including Powerex Corp.) and two federal defendants removed a state court action, alleging that the district court had subject matter jurisdiction under 28 U.S.C. § 1441(d) (authorizing removal by a "foreign state" as defined in the Foreign Sovereign Immunities Act) and 28 U.S.C. § 1442(a) (authorizing removal by federal agencies). Powerex, 551 U.S. at 227,
First, Powerex rejected the argument that post-removal events can never constitute a defect in subject matter jurisdiction for purposes of § 1447(c). Id. at 230,
Second, Powerex enunciated the general principle "that review of the District Court's characterization of its remand as resting upon lack of subject-matter jurisdiction, to the extent it is permissible at all, should be limited to confirming that that characterization was colorable." Id. at 234,
Applying this reasoning to the facts before it, the Court stated that "[a]s an initial matter, it is quite clear that the District Court was purporting to remand" on the ground of subject matter jurisdiction, and indeed, that was the only "plausible explanation of what legal ground the District Court actually relied upon for its remand...." Id. at 233,
Although Powerex involved a remand based on subject matter jurisdiction under § 1447(c), the Court's reasons for holding that "review of the District Court's characterization of its remand ... should be limited to confirming that that characterization was colorable," id., are equally applicable to remands relying on a non-jurisdictional defect. Neither the plain language of § 1447(d) nor Thermtron's gloss on that section distinguishes between orders based on jurisdictional and non-jurisdictional grounds. See Thermtron, 423 U.S. at 343, 96 S.Ct. 584; see also Briscoe, 432 U.S. at 413 n. 13, 97 S.Ct. 2428. Moreover, appellate review of a district court's characterization of a remand based on a non-jurisdictional defect would frustrate Congress's intent to avoid "interruption of the litigation of the merits of a removed case by prolonged litigation" of procedural questions. Powerex, 551 U.S. at 238,
In light of these precedents, we must determine whether we have jurisdiction to review the district court's allegedly erroneous remand order. We first consider whether the district court remanded purporting to rely on a ground enumerated in § 1447(c). Thermtron, 423 U.S. at 343, 96 S.Ct. 584. We conduct this part of our review de novo. Kamm, 568 F.3d at 754. In this case, the district court identified the defendant unanimity rule as the basis for its remand. Because we have held that a violation of the unanimity rule is a defect under § 1447(c), Aguon-Schulte, 469 F.3d at 1240, we conclude that the district court purported to rely on a legal ground enumerated in § 1447(c) even though the district court did not cite that statute.
We must next consider whether the district court's characterization of the defect in this case was "colorable." Powerex, 551 U.S. at 234,
Mt. Hawley argues that this conclusion is wrong because there was no defendant unanimity defect that justified a remand under § 1447(c), and that we are not bound by the district court's characterization of the basis of remand. In arguing that there was no defendant unanimity defect here, Mt. Hawley primarily relies on Spencer v. United States District Court,
Mt. Hawley argues that the defendant unanimity rule in this case is equivalent to the forum defendant rule in Spencer because both are non-jurisdictional defects that apply only to defendants "properly joined and serviced in the action." Emrich v. Touche Ross & Co.,
Because in Mt. Hawley's view there was no defect at the time of removal, Mt. Hawley concludes that the district court's remand order "plainly indicates that the later occurring events were the basis for the decision." Reddam, 457 F.3d at 1059. Because "[t]hat cannot be a basis for a § 1447(c) remand order," id., the district court erred in remanding based on § 1447(c), and as in Reddam, Mt. Hawley contends, we can review and reverse this erroneous holding.
We disagree with this reasoning. Mt. Hawley's analysis is based on three propositions: (1) defendant non-unanimity is a defect under § 1447(c) only at the time of removal; (2) § 1448 does not authorize a defendant who was served after removal to move to remand the case within 30 days after removal for lack of unanimity; and (3) we can review a district court's remand order when it is plainly wrong. Under Powerex, we must ask whether these propositions are so clear that the district court's characterization of its remand as being based on a non-jurisdictional defect was not even colorable. See 551 U.S. at 234,
However, rather than enunciating clearly established law, Mt. Hawley's first two propositions raise unsettled questions that cannot be the basis for holding that the district court's remand order failed the minimum standard of being "colorable." Spencer did not resolve the issue raised in Mt. Hawley's first proposition, whether a defendant unanimity issue that arises after removal can be a defect for purposes of § 1447(c). Neither the unanimity rule nor the authority of a district court to remand based on post-removal events was before us in Spencer, because in that case we upheld a district court's denial of a remand motion based on the forum defendant rule. 393 F.3d at 869. Mt. Hawley has not cited, and we have not found, any case
Nor did Spencer address Mt. Hawley's second proposition, whether § 1448 authorizes a defendant who was served after removal to remand the case within 30 days for lack of unanimity when that defect did not exist at the time of the removal. We have not addressed this issue, and neither has the Supreme Court.
Mt. Hawley's third proposition, that under Reddam we can review a remand order when the district court's reasoning indicates it made an error of law, is plainly contrary to Powerex. As explained above, if the district court purports to remand on a ground enumerated in § 1447(c), we can look behind the district court's stated basis for its remand only if its characterization is not "colorable." Powerex, 551 U.S. at 234,
Here the district court based its remand order on a lack of defendant unanimity, which we have held to be a defect for purposes of § 1447(c). See Aguon-Schulte, 469 F.3d at 1240. Mt. Hawley's arguments, based on open legal questions and a superseded rule of law, have not established that the district court's remand on this ground failed to meet Powerex's "colorability" standard. See 551 U.S. at 234,
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