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Motions to Remand – Supplemental Jurisdiction When Federal Claims Are Resolved: Class Action Defense Issues

28 U.S.C. § 1447 – Supplemental Jurisdiction When Federal Claims Are Resolved

Defendants in class actions often remove their case to federal court whenever possible. Plaintiffs invariably seek to remand class actions to state court. Thus, once a class action has been removed to federal court, it can be expected that plaintiff’s counsel will file a motion to remand the matter to state court. When removal is based on federal questions jurisdiction, then plaintiffs may seek to secure remand by dismissing their federal question claims.

What happens, then, if an action is removed to federal court based on federal question jurisdiction and the district court exercises supplemental jurisdiction (see 28 U.S.C. §1367) over the remaining state claims, but the federal question claims are later resolved (whether by voluntary dismissal, motion to dismiss or summary judgment) leaving only state law claims before the court?

Remand of cases to state court is governed by 28 U.S.C. §1447(c). “A motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal,” 28 U.S.C. § 1447(c). However, “If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” Id.

If an action is removed to federal court based on federal question jurisdiction but the federal question claims are later revolved, leaving only state law claims, then two separate questions are presented. First, how does the 30-day time period for filing a motion to remand apply? A recent district court opinion holds that the absence of a federal question goes to subject matter jurisdiction and therefore is not subject to the 30-day rule:

Clearly, the defect urged by Plaintiffs is one of subject-matter jurisdiction, and not some other defect in the removal procedure. Thus, Plaintiffs’ alternative request for discretionary remand to state court is not subject to the thirty-day time limitation in §1447(c), and is, therefore, timely. See e.g., Pierpoint v. Barnes, 94 F.3d 813, 818 (2d Cir. 1996) (stating that the thirty day time period was specifically written “in terms of a defect in ‘removal procedure’ in order to avoid any implication that remand is unavailable after disposition of all federal questions . . . .”).

Hardy v. GMRI, Inc., 2006 WL 752506, *2 (S.D. Iowa 2006).

Second, if the district court now lacks subject matter jurisdiction, must the matter be remanded to state court? In holding that remand is not mandatory in such cases, the Ninth Circuit discussed this issue in considerable detail in Albingia Versicherungs A.G. v. Schenker Int’l Inc., 344 F.3d 931, 936-38 (9th Cir. 2003). We quote from it at length:

. . . In pertinent part, the removal statute, section 1447(c), provides that motions to remand for procedural defects must be made within 30 days of removal, but “[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” [28 U.S.C. § 1447(c).] Wright & Miller says that “[a]n interpretive debate has arisen whether the language ‘lacks subject matter jurisdiction’ in the current text of Section 1447(c) refers only to defects existing at the time of removal or takes into account subsequent events.” [14C Wright, Miller & Cooper, Federal Prac. & Proc., “Jurisdiction and Related Matters,” § 3739, p. 435 (3d ed.).] The words “any time” and “lacks,” in the present tense, suggest mandatory remand, but the word “case” suggests that jurisdiction must be lacking over the entire case, not merely a claim within the case.

It was well-settled under the previous version of the removal statute that a federal district court retains “the power to hear claims that would not [have been] independently removable even after the basis for removal jurisdiction is dropped from the proceedings.” [See Harrell v. 20th Century Ins., Co., 934 F.2d 203, 205 (9th Cir.1991) (internal quotation omitted); see also Carnegie-Mellon University v. Cohill, 484 U.S. 343, 355 n.11, 108 S.Ct. 614, 98 L.Ed.2d 720 (1988) (discussing that the pre 1988 version of section 1447(c) “do[es] not apply to cases over which a federal court has pendent jurisdiction. Thus, the remand authority conferred by the removal statute and the remand authority conferred by the doctrine of pendent jurisdiction overlap not at all.”)] Our sister circuits that have ruled on the question interpret the statute as amended not to deprive the district court of jurisdiction to decide the related state claims even though the federal claim upon which removal was based is dismissed on the merits. [See Parker PPA v. Della Rocco, Jr., 252 F.3d 663, 666 (2d Cir. 2001).] Thus, in our post-amendment en banc decision in Acri v. Varian Associates, [114 F.3d 999 (9th Cir. 1997) (en banc),] we held that even if all federal claims are dismissed before trial, this “has never meant that they [state law claims] must be dismissed.” [Id. at 1000.] This interpretation preserves coherence with the new supplemental jurisdiction statute, which provides that where the district court has original jurisdiction over a federal claim, it “shall have supplemental jurisdiction” over related state law claims. [28 U.S.C. § 1367(a).]

The supplemental jurisdiction statute, section 1367, says that district courts “shall have” jurisdiction over the non-federal claims forming part of the same case or controversy, which they “may decline to exercise” under denoted circumstances, [28 U.S.C. §1367(c),] while the procedure after removal statute, section 1447, says that “[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” [28 U.S.C. § 1447(c).] Here is how we reconcile the “may decline to exercise” language of the supplemental jurisdiction statute with the “shall be remanded” language of the procedure after removal statute: if state law claims are asserted as part of the same case or controversy with a federal claim, the district court has discretion to exercise supplemental jurisdiction over the remaining state law claims and the mandatory remand provision of the procedure after removal statute does not apply. Under the plain language of the statutes, logically it cannot “appear[] that the district court lacks jurisdiction” under 1447(c) if it “shall have” jurisdiction under 1367.

The Second Circuit held in Parker PPA v. Della Rocco, Jr., [252 F.3d 663 (2d Cir. 2001)] that “§ 1447(c) merely addresses the consequences of a jurisdictional flaw, i.e. it mandates a remand rather than a dismissal.” [Id. at 666.] Parker relies on language in a Supreme Court decision, International Primate Protection League v. Administrators of Tulane Educational Fund, [500 U.S. 72, 111 S.Ct. 1700, 114 L.Ed.2d 134 (1991), superseded by statute on unrelated grounds, as explained by Dalrymple v. Grand River Dam Authority, 145 F.3d 1180, 1184 n.6 (10th Cir. 1998),] that, in somewhat different circumstances, reads the new language in section 1447(c) to mean that “a finding that removal was improper deprives that court of subject matter jurisdiction and obliges a remand.” [Id. at 87, 111 S.Ct. 1700.] That is to say, section 1447(c) does not mean that if the federal claim drops out, the district court must remand; it means that if there is no jurisdiction-federal question, supplemental, diversity, or otherwise-the district court must remand the removed case rather than dismissing it. Our cases already bear this out; now we hold explicitly what, in Acri and other cases, [see, e.g., Herman Family Revocable Trust v. Teddy Bear, 254 F.3d 802 (9th Cir. 2001) (holding that the exercise of supplemental jurisdiction over nonfederal claims was improper where there was never a valid basis for removal under federal admiralty jurisdiction); Duncan v. Al Stuetzle, 76 F.3d 1480, 1491 (9th Cir. 1996) (holding that the district court was required to remand to state courts for lack of subject matter jurisdiction under section 1447(c) where the state court complaint failed to state a federal question under the Lanham Act as it only raised state law issues). Compare with, Acri, 114 F.3d at 1000-01 (holding that properly removed nonfederal claims need not be remanded even where the district court dismissed the claim on which removal was based),] we have held implicitly: section 1447(c) means that if it is discovered at any time in the litigation that there is no federal jurisdiction, a removed case must be remanded to the state court rather than dismissed. Section 1447(c) does not mean that if a facially valid claim giving rise to federal jurisdiction is dismissed, then supplemental jurisdiction is vitiated and the case must be remanded. Once supplemental jurisdiction exists, it remains, subject to the discretionary provision for remand in section 1441.

In the case at bar, because Albingia’s state law complaint was properly removed to the district court due to the federal question asserted by Albingia’s Warsaw Convention claim, the district court had supplemental jurisdiction over the state law claims. The district court’s supplemental jurisdiction over the state law claims was not destroyed by dismissal of the Warsaw Convention claim. This is consistent with the long established approach to diversity cases, where even if the damages proved turn out to be less than the jurisdictional amount, the district court nevertheless retains jurisdiction to render a final judgment on the merits. Supplemental jurisdiction is not destroyed by elimination of the basis for original jurisdiction.

This does not mean, however, that the district court must retain jurisdiction once the federal claims have been resolved. See Hinson v. Norwest Financial South Carolina, Inc., 239 F.3d 611 (4th Cir. 2001) (affirming district court order remanding action to state court following settlement of federal claim).

Thus, while the issue remains open to some measure of debate, strong arguments can be made that the district court may retain jurisdiction over the case even after the federal question claims are resolved.