March 03, 2014 Top Story

District Court Remand Orders Are Difficult to Appeal

Circuit court reaffirms high standard for appealing a district court's remand decision

Ian S. Clement

An appellate court held that a district court did not exceed its authority in ordering a remand, and therefore, the remand order was not reviewable. The appellate court held that the district court’s remand order was properly based on lack of subject matter jurisdiction. E.D. v. Pfizer.

Non-Diverse Plaintiff Not Fraudulently Joined

Nineteen families with children who allegedly suffered birth defects from their mothers’ taking the Pfizer drug Zoloft filed a mass action against the drug company and its affiliate in West Virginia state court. Eighteen of the families were West Virginia residents. The nineteenth family, New York residents, were not diverse from the defendants. Under West Virginia Rule of Civil Procedure 3(a), when parties are not related to one another, the state court dockets each case as an individual case. Rule 3(a) created nineteen separate cases, but the state court allowed the plaintiffs to file the cases under the same complaint and considered it one action.

The defendants removed eighteen of the cases to the U.S. District Court for the Southern District of West Virginia, citing diversity, and alternatively arguing that the plaintiffs fraudulently joined the nineteenth family. Each of the removed plaintiffs filed individual motions to remand to state court, arguing that the district court should treat the case as a mass action, and that West Virginia separates them only for administrative reasons. The defendants argued that West Virginia intended Rule 3(a) to deny all unrelated persons from proceeding with a mass claim, and that when analyzed individually, each of the eighteen removed plaintiffs were diverse. The district court held that the action was one case, not nineteen, and that the plaintiffs did not fraudulently join the nineteenth family. The case thus lacked complete diversity and remand was mandatory.

The defendants appealed to the U.S. Court of Appeals for the Fourth Circuit, arguing that the district court’s decision to consider the citizenship of the nineteenth family fell outside the permissible grounds for remand. The defendants argued that the basis of the district court’s remand order was a conceptual antecedent ruling, a distinct determination from the jurisdictional analysis supporting a remand, and that this basis was reviewable as a collateral decision to the remand order. In the context of a removal, a collateral decision is one that precedes the court’s remand ruling and is not part of the jurisdictional analysis.

Decision Is in Line with Supreme Court Precedent

The Fourth Circuit noted that 28 U.S.C. § 1447(d) provides that a remand order is not reviewable, regardless of whether a circuit court deems the remand order erroneous. Section 1447(d) bars a circuit court from reviewing a district court’s decision to remand if the remand order was based on § 1447(c). Under § 1447(c), removal is permitted when there is lack of subject matter jurisdiction. The Fourth Circuit noted that a district court’s decision to remand may be reviewable if the district court “remanded a case on grounds not specified in the statute and not touching on the propriety of the removal.”

In Waco v. United States Fidelity & Guaranty Company, a district court dismissed an action against a third-party defendant. That dismissal divested the district court of diversity jurisdiction and caused the court to remand the entire case to state court. The U.S. Supreme Court held that while the defendant could not appeal the district court’s remand order because the dismissal preceded, and was separate from, the remand, the Court could review the dismissal as a collateral order. Following Waco, in Borneman v. United Statesthe Fourth Circuit held that that § 1447(d) did not preclude review of a remand order where a district court exceeded its authority under § 1447(c). In Ellenberg v. Spartan Motors Chassis, Inc., the Fourth Circuit held that it could review a conceptual antecedent ruling, even if it was an essential precursor to a remand order that was unreviewable under §1447(d). In Palmer v. City Bank of West Virginia, the Fourth Circuit restricted the applicability of the Waco exception to orders that have a preclusive effect on the parties in subsequent proceedings, and are severable from the remand order itself.

Order to Remand Not Reviewable

The Fourth Circuit held that it lacked the authority to review the district court’s remand order. The Fourth Circuit found that the district court remanded because it lacked subject matter jurisdiction under § 1447(c). The court found that the district court properly considered Rule 3(a) to determine subject matter jurisdiction. The court also found that no exception to the prohibition against review applied since the defendants failed to show that the district court’s decision to remand was collateral.

Appealing Remand Orders as Collateral Is an Uphill Climb

This case highlights the high standard for appealing a remand decision. “Section members should clearly advise their clients of the particularly tough standard for scaling the appeal bar under § 1447(d) pursuant to Waco” says William J. Cople III, Washington, D.C., cochair of the ABA Section of Litigation’s Pharmaceutical and & Health Subcommittee of the Class Actions and Derivatives Suits Committee. “In light of the Supreme Court decisions in Waco and its progeny, defendants will have a difficult time showing that a district court’s order had preclusive effect and that it was collateral to the remand itself,” adds Cople.

Ian S. Clement is a contributing editor for Litigation News.

Keywords: removal, remand, collateral order, subject matter jurisdiction, conceptual antecedent

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