LeChase Constr. Servs. LLC v. Argonaut Ins. Co. ( 2023 )

21-1748
LeChase Constr. Servs. LLC v. Argonaut Ins. Co.
United States Court of Appeals
For the Second Circuit
August Term 2021
Argued: June 6, 2022
Decided: March 23, 2023
No. 21-1748
LECHASE CONSTRUCTION SERVICES, LLC,
Plaintiff-Appellee,
v.
ARGONAUT INSURANCE COMPANY,
Defendant-Appellant,
UNITED STRUCTURES OF AMERICA, INC.,
Defendant.
Appeal from the United States District Court
for the Western District of New York
No. 20-cv-6915, Elizabeth A. Wolford, Judge.
Before: CALABRESI, LOHIER, and SULLIVAN, Circuit Judges.
Argonaut Insurance Company (“Argonaut”) appeals from an order of the
district court (Wolford, J.) remanding this breach-of-bond action, brought by
LeChase Construction Services, LLC (“LeChase”), to New York state court after
Argonaut removed it on the basis of diversity jurisdiction. The district court
purported to issue its remand order pursuant to 28 U.S.C. § 1447(e), which
authorizes remand if, after removal, a plaintiff joins defendants whose inclusion
would destroy diversity jurisdiction. The district court expressly acknowledged
that section 1447(e) is facially inapplicable here, as LeChase was not seeking to join
a non-diverse defendant or otherwise contesting the existence of diversity
jurisdiction. Nevertheless, the district court reasoned that, since remand would
facilitate this case’s consolidation with two related actions then pending in New
York state court, thus conserving judicial resources and avoiding the risk of
inconsistent outcomes, it was appropriate under the “rubric” of section 1447(e).
On appeal, we are primarily tasked with deciding two issues: (1) whether
we have appellate jurisdiction over the district court’s remand order
notwithstanding 28 U.S.C. § 1447(d), which precludes review of remands based on
the grounds specified in other subsections of section 1447; and (2) if we do,
whether the district court issued such order in excess of its statutory authority
under section 1447(e). We conclude, as a matter of first impression, that
“[section] 1447(d) permits appellate review of a district-court remand order that
dresses in [section 1447(e)’s] jurisdictional clothing a patently nonjurisdictional
ground,” such as the prudential considerations invoked by the district court here.
Powerex Corp. v. Reliant Energy Servs., Inc., 551 U.S. 224, 234 (2007) (reserving this
question). Assured of our appellate jurisdiction, we conclude – for essentially the
reasons acknowledged by the district court itself – that its remand order here was
unauthorized under section 1447(e). As a result, we VACATE the district court’s
order, and REMAND the case for further proceedings.
VACATED AND REMANDED.
KEVIN F. PEARTREE, Ernstrom & Dreste, LLP,
Rochester, NY, for Plaintiff-Appellee LeChase
Construction Services, LLC.
CHAD W. FLANSBURG, Phillips Lytle LLP,
Rochester, NY, for Defendant-Appellant
Argonaut Insurance Company.
2
RICHARD J. SULLIVAN, Circuit Judge:
Argonaut Insurance Company (“Argonaut”) appeals from an order of the
district court (Wolford, J.) remanding this breach-of-bond action, brought by
LeChase Construction Services, LLC (“LeChase”), to New York state court after
Argonaut removed it on the basis of diversity jurisdiction. The district court
purported to issue its remand order pursuant to 28 U.S.C. § 1447(e), which
authorizes remand if, after removal, a plaintiff joins defendants whose inclusion
would destroy diversity jurisdiction. The district court expressly acknowledged
that section 1447(e) is facially inapplicable here, as LeChase was not seeking to join
a non-diverse defendant or otherwise contesting the existence of diversity
jurisdiction. Nevertheless, the district court reasoned that since remand would
facilitate this case’s consolidation with two related actions then pending in New
York state court, thus conserving judicial resources and avoiding the risk of
inconsistent outcomes, it was appropriate under the “rubric” of section 1447(e).
On appeal, we are primarily tasked with deciding two issues: (1) whether
we have appellate jurisdiction over the district court’s remand order
notwithstanding 28 U.S.C. § 1447(d), which precludes review of remands based on
the grounds specified in other subsections of section 1447; and (2) if we do,
3
whether the district court issued such order in excess of its statutory authority
under section 1447(e). We conclude, as a matter of first impression, that
“[section] 1447(d) permits appellate review of a district-court remand order that
dresses in [section 1447(e)’s] jurisdictional clothing a patently nonjurisdictional
ground,” such as the prudential considerations invoked by the district court here.
Powerex Corp. v. Reliant Energy Servs., Inc., 551 U.S. 224, 234 (2007) (reserving this
question). Assured of our appellate jurisdiction, we conclude – for essentially the
reasons acknowledged by the district court itself – that its remand order here was
unauthorized under section 1447(e). As a result, we VACATE the district court’s
order, and REMAND the case for further proceedings.
I. BACKGROUND
LeChase was a contractor on a construction project described as the Cricket
Valley Energy Project (the “Project”) at a facility located in Dover, New York.
LeChase subcontracted with United Structures of America, Inc. (“USA”) to design
and fabricate structural steel for the Project. USA, as principal, executed a Supply
Bond (the “Bond”) with Argonaut as surety for the amount of its agreement with
LeChase. The Bond provided that, for LeChase to recover against Argonaut (as
4
surety) for any alleged default in performance by USA, LeChase must bring an
action within one year of such default.
As of July 2, 2018, LeChase considered USA to be in default, for reasons that
are neither clear from the record nor ultimately relevant to this appeal. In
November 2019, LeChase submitted a claim on the Bond to Argonaut, which
Argonaut denied as untimely per the terms of the Bond.
On June 23, 2020, Enerfab (a nonparty to this action) filed a complaint
against LeChase in the Supreme Court of New York, Dutchess County
(the “Enerfab Action”), asserting breach-of-contract claims based on LeChase’s
allegedly deficient performance relating to the Project.
On July 20, 2020, LeChase commenced this action against Argonaut and
non-appealing defendant USA in the Supreme Court of New York, Monroe
County. In October 2020, USA removed the action – with Argonaut’s consent – to
the Western District of New York, invoking diversity jurisdiction. A month later,
LeChase moved to remand the case to the state court in Monroe County, pursuant
to 28 U.S.C. § 1447. On July 1, 2021, the district court granted LeChase’s motion
5
and remanded to the Monroe County court, invoking authority to do so under 28
U.S.C. § 1447(e). 1
Argonaut timely appealed. 2
II. STANDARD OF REVIEW
“We review an appeal from an order of remand de novo.” Agyin v. Razmzan,
986 F.3d 168, 173–74 (2d Cir. 2021). Where “the question . . . on appeal is . . .
whether the district court exceeded the scope of its [statutory] authority by issuing
[a] remand order” on grounds not specified in the statute invoked as authorizing
remand, we effectively are called upon to review the “district court’s
interpretation and construction of a federal statute,” Lively v. Wild Oats Mkts, Inc.,
456 F.3d 933, 938 (9th Cir. 2006), which we likewise review de novo, Fisher v. Aetna
Life Ins. Co., 32 F.4th 124, 135 (2d Cir. 2022).
1 Section 1447(e) provides that “[i]f after removal the plaintiff seeks to join additional defendants
whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit
joinder and remand the action to the State court.”
2The parties stipulate that, two weeks after the issuance of the remand order, LeChase moved in
state court (as it had averred it would in its papers on the remand motion) to have this case
consolidated with the Enerfab Action in the Supreme Court of New York, Dutchess County.
Consolidation failed, but the parties dispute the specifics of how it failed and whose fault that
was. We need not resolve the parties’ factual dispute over the post-remand proceedings in state
court, however, as it is irrelevant to the issues before the Court here, namely: (1) whether we
have appellate jurisdiction to review the remand order at all; and (2) if so, whether that remand
order, at the time issued, was in excess of the district court’s statutory authority under 28 U.S.C.
§ 1447(e).
6
III. DISCUSSION
A. Appellate Jurisdiction
“We turn first, as we must, to the issue of our [appellate] jurisdiction.”
Joseph v. Leavitt, 465 F.3d 87, 89 (2d Cir. 2006). As the party asserting jurisdiction,
Argonaut contends that we “ha[ve] appellate jurisdiction” and are “not precluded
from” exercising it “pursuant to [section] 1447(d).” Argonaut Br. at 2, 13. LeChase
disagrees, arguing that “[a]ppellate review of” the remand order below “is
precluded by 28 U.S.C. § 1447(d),” LeChase Br. at 1, which provides that “[a]n
order remanding a case to the [s]tate court from which it was removed is not
reviewable on appeal” unless the case “was removed pursuant to [28 U.S.C.
§§] 1442 or 1443,” 28 U.S.C. § 1447(d).
The words of section 1447(d), read in a vacuum, would appear to support
LeChase’s position. The order that Argonaut asks us to review is plainly “[a]n
order remanding a case to the [s]tate court from which it was removed.” Id. The
district court remanded this case to the Supreme Court of New York, Monroe
County, the same state court from which Argonaut originally removed the action.
It is likewise plain that this case was not “removed pursuant to section 1442 or
1443,”id., but rather “under 28 U.S.C. § 1441(a),” J. App’x at 5. The plain text of
section 1447(d) imposes no further conditions on, and allows no further exceptions
7
from, its bar on the appellate review of remand orders. It would therefore appear,
on the surface of section 1447(d), that we lack appellate jurisdiction to review the
district court’s order remanding this case.
But the question of our appellate jurisdiction is not nearly so
straightforward, because the Supreme Court has “interpreted” section 1447(d)’s
prohibition on review “to cover less than its words alone suggest.” Powerex, 551
U.S. at 229. Rather, the Court “has consistently held that [section] 1447(d) must be
read in pari materia with” the rest of section 1447. Carlsbad Tech., Inc. v. HIF Bio,
Inc., 556 U.S. 635, 638 (2009). In other words, its “prohibition on appellate review
remains limited to remands based on the grounds specified” elsewhere in section
1447. Powerex, 551 U.S. at 230.
Argonaut, however, asserts that “[b]ecause this appeal is [from] an order of
remand pursuant to [section] 1447(e), it is not precluded from appellate review
pursuant to [section] 1447(d).” Argonaut Br. at 13. For that assertion, Argonaut
relies on the Supreme Court’s 1976 decision in Thermtron Products, Inc. v.
Hermansdorfer, which held that “only remand orders issued under
[section] 1447(c)” are “immune from review under [section] 1447(d).” 423 U.S.
336, 346 (1976) (emphasis added), abrogated in part on other grounds by Quackenbush
8
v. Allstate Ins. Co., 517 U.S. 706 (1996), and superseded by statute in relevant part as
recognized in Wash. Suburban Sanitary Comm’n v. CRS/Sirrine, Inc., 917 F.2d 834 (4th
Cir. 1990). But Argonaut’s reliance on Thermtron is misplaced, as it overlooks the
fact that when Thermtron was decided, there was no subsection (e) in section 1447.
See 28 U.S.C. § 1447 (1976) (including only four subsections, (a) through (d)). It
was not until 1988 that Congress amended the statute “to broaden subsection (c)
and to add subsection (e)” – which has led “[e]very . . . circuit to consider the
question” to conclude that section “1447(d) is equally an impediment to review of
remands under [section] 1447(e) as it is to review of remands
under [section] 1447(c).” DeMartini v. DeMartini, 964 F.3d 813, 819 & n.1 (9th Cir.
2020) (citing Judicial Improvements and Access to Justice Act of 1988, Pub. L.
No. 100-702, § 1016(c)(2), 102 Stat. 4642, 4670 (codified as amended at 28 U.S.C.
§ 1447(e))) (emphasis added), cert. denied, 142 S. Ct. 92 (2021). 3 Argonaut has not
suggested any reason to doubt the correctness of the Fourth, Fifth, Sixth, Seventh,
Ninth, Tenth, and Eleventh Circuits’ unanimous consensus on this point. Nor do
3Accord Elite Oil Fields Enters. v. Reed, 979 F.3d 857, 865 (10th Cir. 2020); Fontenot v. Watson Pharms.,
Inc., 718 F.3d 518, 520–21 (5th Cir. 2013); Blackburn v. Oaktree Cap. Mgmt., LLC, 511 F.3d 633, 636–
37 (6th Cir. 2008); Alvarez v. Uniroyal Tire Co., 508 F.3d 639, 641 (11th Cir. 2007); In re Fla. Wire &
Cable Co., 102 F.2d 866, 868–69 (7th Cir. 1996); Wash. Suburban Sanitary Comm’n, 917 F.2d at 836
n.5.
9
we see any reason for such doubt, given that the plain text of section 1447(d) draws
absolutely no distinction between section-1447(c) remands and section-1447(e)
remands. We therefore join our sister circuits in recognizing that Congress’s 1988
amendments to section 1447 have superseded Thermtron and extended the reach
of section 1447(d)’s bar on appellate review to cover remand orders under
subsection (e) as well as those under subsection (c).
In this highly unusual case, however, that does not end the inquiry.
Although the district court’s order asserted that its remand was “pursuant to 28
U.S.C. § 1447(e),” the district court explicitly acknowledged that “section 1447(e)
is not applicable here on its face.” J. App’x at 249. Indeed, it is not.
Section 1447(e) authorizes remand “[i]f after removal the plaintiff seeks to
join additional defendants whose joinder would destroy subject[-]matter
jurisdiction,” i.e., to join non-diverse defendants in a diversity case. 28 U.S.C.
§ 1447(e). Here, “[LeChase] d[id] not contest the existence of diversity
jurisdiction” and was “not seeking to join a non-diverse defendant.” J. App’x
at 249. Instead, the district court reasoned that “[section] 1447(e) can serve as a
basis to remand” this case “because there are currently two actions pending [in
two different New York state courts] arising from disputes relating to the same
10
[construction] [p]roject” to which this case relates, such that “a failure to remand
and consolidate” with those cases would “risk[] inconsistent outcomes and wasted
judicial resources.” Id. at 249–50.
Thus, even as the district court recited that its remand was pursuant to
section 1447(e), its stated grounds for remanding – the avoidance of “inconsistent
outcomes and wasted judicial resources,” id. at 250 – were the principles of the
Colorado River abstention doctrine, which allows “a federal court [to] abstain from
exercising [its] jurisdiction” in certain “‘exceptional circumstances’ . . . when
parallel state-court litigation could result in ‘comprehensive disposition of
litigation’ and abstention would conserve judicial resources,” Niagara Mohawk
Power Corp. v. Hudson River-Black River Regulating Dist., 673 F.3d 84, 100 (2d Cir.
2012) (quoting Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 813,
817–18 (1976)). Indeed, LeChase concedes that “[t]he [d]istrict [c]ourt’s analysis,
although not invoking the term, is on all fours with a Colorado River abstention
analysis.” LeChase Br. at 28.
That is critical here. In keeping with the principle that “only remands based
on the grounds specified in” other subsections of section 1447 “are shielded by
[section 1447(d)’s] bar on [appellate] review,” Powerex, 551 U.S. at 229, the
11
Supreme Court has held that a “[d]istrict [c]ourt’s abstention-based remand order
does not fall” within the scope of section 1447(d), “as it is not based on lack of
subject[-]matter jurisdiction or defects in removal procedure,” Quackenbush, 517
U.S. at 712; see also 28 U.S.C. § 1447(c) (requiring remand “[i]f at any time before
final judgment it appears that the district court lacks subject[-]matter jurisdiction,”
and requiring that motions to remand based on “defect[s]” in removal procedure
be raised “within 30 days after the filing of the notice of removal”). Following the
Supreme Court’s holding in Quackenbush, we have long recognized that “[t]he
question . . . is whether [the district court’s remand rested on] a rule of
subject[-]matter jurisdiction or rather a prudential doctrine of abstention. If the
former, [section] 1447(d) precludes appellate review; if the latter, the appeal may
lie.” Carvel v. Thomas & Agnes Carvel Found., 188 F.3d 83, 85 (2d Cir. 1999); see also
Mitskovski v. Buffalo & Fort Erie Pub. Bridge Auth., 435 F.3d 127, 131 (2d Cir. 2006)
(“Despite the broad language of 28 U.S.C. § 1447(d) limiting appeal of remand
orders, it is settled that section 1447(d) precludes appeal only of remand orders
[based on] either a procedural defect asserted within [thirty] days of the filing of
notice of removal or a lack of subject[-]matter jurisdiction.” (footnotes omitted));
12
Price v. J & H Marsh & McLennan, Inc., 493 F.3d 55, 59 (2d Cir. 2007) (“[An]
abstention-based remand order [is] reviewable by court[s] of appeals.”).
And so, to the extent that Quackenbush and its Second Circuit progeny
control here, the remand order below – which walked and squawked just like an
abstention analysis – is indeed reviewable on appeal. But in order to confirm that
the Quackenbush line of cases does in fact control here, we must grapple with two
antecedent questions. First, do those decisions survive Congress’s broadening of
section 1447, which suggests that “remands based on grounds specified
in [section] 1447(c)” are no longer the “only remands” that “are immune from
review under [section] 1447(d)”? Quackenbush, 517 U.S. at 712 (citation omitted).
Second, is application of Quackenbush foreclosed here by the fact that the district
court purported to be remanding “pursuant to [section] 1447(e),” J. App’x at 249,
and never explicitly invoked the abstention doctrine that appears to have
undergirded its actual reasoning? We address each of these questions in turn. 4
4 LeChase does not “spell out” these questions “squarely and distinctly” in its appellate brief,
which – at most – gestures toward them only vaguely. Schneider v. Kissinger, 412 F.3d 190, 200 n.1
(D.C. Cir. 2005) (quoting United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990)). “[W]e have an
independent obligation to consider the presence or absence” of our “appellate jurisdiction . . .
[nostra] sponte,” Joseph, 465 F.3d at 89. That obligation is triggered “whenever a doubt arises as to
the existence of [our] jurisdiction,” Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274,
278, (1977) (emphasis added) – even for reasons that “neither party has suggested,” Joseph, 465
F.3d at 89. Thus, since Quackenbush would serve as the linchpin of our appellate jurisdiction here,
13
We start with the continuing viability of Quackenbush’s holding that
“[section] 1447(d) [is] inapplicable” to a “[d]istrict [c]ourt’s abstention-based
remand order.” 517 U.S. at 712. For that holding, the Quackenbush Court relied on
Thermtron’s proposition that “only remands based on grounds specified in
[section] 1447(c) are immune from review under [section] 1447(d).” Id. (quoting
Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 127 (1995) (citing Thermtron,
423 U.S. at 346)) (emphasis added). But as explained above, that proposition from
Thermtron is no longer strictly accurate, as we now recognize that in light of
Congress’s subsequent amendments, “[section] 1447(d) is equally an impediment
to review of remands under [section] 1447(e) as it is to review of remands
under [section] 1447(c).” DeMartini, 964 F.3d at 819 n.1. Having now recognized
section 1447(d)’s applicability to remand orders pursuant to subsections of 1447
other than (c), we must ask whether this subsequent development somehow
undermines Quackenbush’s holding with respect to remands on abstention
grounds.
We hold that it does not. Put simply, the “emerging consensus among the
Circuit Courts of Appeal” that we now join, LeChase Br. at 26, has no bearing on
we may not proceed until we have put to rest any doubts about its continuing viability or its
applicability to this case.
14
Quackenbush’s basic insight that discretionary abstention-based remands are
different in kind from remands on any of the grounds invoked in the various
subsections of section 1447.
For starters, abstention doctrines (and the prudential and policy
considerations that animate them) have never been among the grounds for remand
enumerated in the text of section 1447. See Elite Oil Field Enters., 979 F.3d at 863–65
(tracing historical evolution of section 1447’s text). And even as courts have taken
a progressively more expansive view of section 1447(d)’s coverage, it continues to
be true that the “only remands . . . shielded by [section 1447(d)’s] bar on review”
have been those “based on the grounds specified in” other subsections of
section 1447 as it existed at the time of the remand. Id. at 864 (quoting Powerex, 551
U.S. at 229 (citing Thermtron, 423 U.S. at 345–46)). 5 Thus, we see nothing to suggest
5 That is, when section 1447 provided only for remand of cases that had been “removed
improvidently and without jurisdiction,” Thermtron “limited [section] 1447’s application to such
remands.” Powerex, 551 U.S. at 229 (quoting Thermtron, 423 U.S. at 342 (quoting 28 U.S.C. § 1447(c)
(1976))). When Congress broadened section 1447(c) to provide also for remands “on the basis
of . . . defect[s] in removal procedure” or defects in “subject[-]matter jurisdiction” that become
apparent after removal, the Supreme Court broadened its interpretation of section 1447(d) to
cover remands on those newly enumerated grounds – but went no further. Id. (quoting Judicial
Improvements and Access to Justice Act § 1016(c)(1), 102 Stat. at 4670); see also id. at 229–30
(“When that version of [section] 1447(c) was in effect, we thus interpreted [section] 1447(d) to
preclude review only of remands for lack of subject-matter jurisdiction and for defects in removal
procedure.” (citing Quackenbush, 517 U.S. at 711–12; Things Remembered, 516 U.S. at 127–28)
(emphasis added)). And now, it is only because Congress has further amended section 1447 to
expressly provide for remand “[i]f after removal the plaintiff seeks to join additional defendants
15
that extending section 1447(d) to remand orders pursuant to subsections of 1447
other than (c) also opened the floodgates for section 1447(d) to be applied to
remands based on grounds, such as abstention, that are nowhere mentioned in the
text of any subsection of 1447. Given the well-settled rule of construction that
section 1447(d) “is ‘in pari materia’ with” the rest of section 1447 and “must be
construed together” with those “grounds for remand authorized by” and “in” its
other subsections, Stevens v. Brink’s Home Sec., Inc., 378 F.3d 944, 948 (9th Cir. 2004),
we are confident that Quackenbush and its progeny remain good law.
Support for this conclusion is found not only in section 1447’s text, but also
in its logic. As the Ninth Circuit explained in DeMartini, the crucial categorical
distinction under section 1447(d) is – and always has been – between “remands . . .
[that] are discretionary and therefore reviewable” and “remands . . . [that] are
mandatory and therefore unreviewable.” 964 F.3d at 819. Within that framework,
it makes good sense that “[s]ection 1447(c) remands” (which “are mandatory”)
and “those under [section] 1447(e)” (which “are also mandatory”), id., would be
treated differently than remands pursuant to judge-made abstention doctrines
whose joinder would destroy subject[-]matter jurisdiction,” that we have again broadened our
reading of section 1447(d) to cover remands on that ground. Judicial Improvements and Access
to Justice Act § 1016(c)(2), 102 Stat. at 4670.
16
(which are always discretionary in nature), see, e.g., Woodford v. Cmty. Action Agency
of Greene Cnty., Inc., 239 F.3d 517, 523 (2d Cir. 2001) (characterizing Colorado River
abstention as “discretion[ary]”). None of the out-of-Circuit cases that make up the
“emerging consensus” invoked by LeChase, see LeChase Br. at 1, 26–27, have
questioned the basic principle that discretionary remands are subject to appellate
review and mandatory remands are not. Instead, they have simply “rejected” the
“assert[ion] that remands pursuant to [section] 1447(e) are [in fact] discretionary
and therefore reviewable.” DeMartini, 964 F.3d at 819 (emphasis added).
Accordingly, we now reaffirm that “[section] 1447(d) [is] inapplicable” to a
“[d]istrict [c]ourt’s abstention-based remand order,” Quackenbush, 517 U.S. at 712,
and that “[a]s a result, . . . remand orders based on . . . abstention doctrines[] are
subject to appellate review,” Carvel, 188 F.3d at 85.
Satisfied that Quackenbush and Carvel remain good law, we now consider
whether they apply in cases where, as here, a district court performs an abstention-
like analysis but nevertheless purports to be remanding pursuant to section 1447.
In Quackenbush, the district court had candidly and openly characterized its
remand order as an “exercise of Burford abstention,” 517 U.S. at 710, and
“explicitly” declined to “base[]” that order “on any ground specified in [section]
17
1447[],” Garamendi v. Allstate Ins. Co., 47 F.3d 350, 352 (9th Cir. 1995), aff’d sub nom.
Quackenbush, 517 U.S. 706. Similarly, the district court in Carvel had declined to
invoke sections 1447(c) or 1447(e) in its remand order, cf. generally In re Thomas &
Agnes Carvel Found., 36 F. Supp. 2d 144 (S.D.N.Y. 1999), aff’d sub nom. Carvel, 188
F.3d 83, instead making explicit that it was “remand[ing] . . . in reliance upon” the
abstention doctrine of “Princess Lida of Thurn & Taxis v. Thompson, 305 U.S. 456 []
(1939),” Carvel, 188 F.3d at 85. 6
In this case, by contrast, the district court employed an abstention analysis
that it ultimately wrapped in section-1447 packaging. After openly recognizing
that “section 1447(e) is not applicable here on its face,” the district court
nevertheless asserted that it was remanding “pursuant to 28 U.S.C. § 1447(e).”
J. App’x at 249. That, the district court explained, was justified because “other
[district] courts have concluded that [section] 1447(e) can serve as a basis to
remand cases” in which “a failure to remand and consolidate” with pending
state-court actions “contain[ing] related factual and legal issues” would putatively
“risk[] inconsistent outcomes and wasted judicial resources.” Id. at 249–50 (citing
6To be sure, “the district court [in Carvel also] explicitly stated” – erroneously, but in apparent
good faith – that it understood “Princess Lida [to] state[] a rule of subject[-]matter jurisdiction . . .
rather [than] a prudential doctrine of abstention.” Carvel, 188 F.3d at 85.
18
Nnaji v. Fernandez, No. 21-cv-1559 (KPF), 2021 WL 2433850, at *1, *3 (S.D.N.Y.
June 15, 2021); Mensah v. World Truck Corp., 210 F. Supp. 2d 320, 321–22 (S.D.N.Y.
2002); Reyes v. Rite-Line Transp., Inc., No. 13-cv-968 (RWS), 2013 WL
3388975, at *2–*4 (S.D.N.Y. July 8, 2013); Morze v. Southland Corp., 816 F. Supp. 369,
370 (E.D. Pa. 1993)). As noted above, this analysis essentially amounted to an
application of the Colorado River abstention doctrine. See Niagara Mohawk Power,
673 F.3d at 100 (explaining Colorado River’s focus on “conserv[ing] judicial
resources” and facilitating the “comprehensive disposition of litigation” in a single
forum by abstaining during the pendency of “parallel state-court litigation”
(quoting Colorado River, 424 U.S. at 817–18)). And while the district court never
acknowledged that it was in effect performing “a Colorado River abstention
analysis” – or even so much as “invoke[ed]” Colorado River, LeChase Br. at 28 –
there can be no doubt that that is in fact what the district court did.
We must therefore decide, as a matter of first impression, whether our
appellate jurisdiction under section 1447(d) is controlled by what the district court
purported to be doing, or by what the district court was actually doing. In other words,
we must decide a question that the Supreme Court flagged, but declined to “pass
on,” in Powerex: “whether [section] 1447(d) permits appellate review of a
19
district-court remand order that dresses in jurisdictional clothing” – here, the
“clothing” of section 1447(e) – “a patently nonjurisdictional ground” such as
Colorado River abstention. 551 U.S. at 234.
The Supreme Court has provided little in the way of clear guidance on this
question. “For [two] Members of th[e] [Powerex] Court, . . . that [a] [d]istrict [c]ourt
purported to remand for lack of subject-matter jurisdiction [would] alone [be]
enough to bar review under [section] 1447(d).” Id. at 233 (citing Osborn v. Haley,
549 U.S. 225, 264 (2007) (Scalia, J., joined by Thomas, J., dissenting)) (emphasis
added). Yet elsewhere, majorities of the Supreme Court have “assum[ed]” –
without deciding – that “[section] 1447(d) permits appellate courts to look behind
the district court’s characterization” of its remand order, id. (citing Kircher v.
Putnam Funds Trust, 547 U.S. 633, 641 n.9 (2006)), to determine whether “[w]hat
the [d]istrict [c]ourt actually did . . . was to remand on nonjurisdictional grounds,”
Kircher, 547 U.S. at 649 (Scalia, J., concurring in part and concurring in the
judgment) (emphasis in original). The most explicit guidance the Supreme Court
has been willing to offer is that “when . . . the [d]istrict [c]ourt relied upon a ground
that is colorably characterized as subject-matter jurisdiction, appellate review is
barred by [section] 1447(d).” Powerex, 551 U.S. at 234 (emphasis added). But here,
20
we are faced with the inverse of that proposition – namely, whether appellate
review is not “barred by [section] 1447(d)” when a district court remands on a
ground that cannot be “colorably characterized as subject-matter jurisdiction.” Id.;
see J. App’x at 249 (district court acknowledging that LeChase neither “contest[ed]
the existence of diversity jurisdiction” nor was “seeking to join a non-diverse
defendant”). That, of course, is the very question that the Supreme Court
expressly declined to “pass on” in Powerex. 551 U.S. at 234; see also id. (recognizing
the difficulty of answering that question, given that “the line between
misclassifying a ground as subject-matter jurisdiction and misapplying a proper
ground of subject-matter jurisdiction is sometimes elusively thin”).
Yet while our Court appears to be the first to be squarely presented with this
question, others have weighed in on it in dicta and in non-controlling opinions. In
his dissent in Osborn, Justice Scalia suggested that a district court’s
characterization of its own remand order “should . . . be[] the end of the matter” –
“even if [the district court] was so badly mistaken that it misunderstood the true
basis for its order[].” 549 U.S. at 264 (Scalia, J., dissenting) (citations omitted). In
support of this position, Justice Scalia argued that “a searching inquiry into
whether the [d]istrict [c]ourt’s real reason for remand was lack of jurisdiction”
21
would “threaten[] to defeat the purpose of [section] 1447(d), which [is] ‘to prevent
delay in the trial of remanded cases by protracted litigation of jurisdictional
issues.’” Id. (quoting Kircher, 547 U.S. at 650, Thermtron, 423 U.S. at 351) (emphasis
in original; other internal quotation marks omitted).
On the other hand, the Ninth Circuit has taken the view that “[w]hen the
district court characterizes its remand as ‘resting upon lack of subject-matter
jurisdiction’ – as all [section] 1447(e) remands must – the appellate court” may
perform a limited review to determine “whether the grounds of the remand order
were colorably based on lack of subject-matter jurisdiction.” DeMartini, 964 F.3d
at 820 (quoting Powerex, 551 U.S. at 234). In support of that view, the Ninth Circuit
has drawn a distinction between “review of whether the grounds of the remand
order were colorably based on lack of subject-matter jurisdiction, which is
permitted, [and] review of whether the remand was an acceptable exercise of such
authority, which is not.” Id. In particular, DeMartini reasoned that while “[i]t
would negate [section] 1447(d) to hold . . . that a court may review the merits of a
remand order when that court suspects any legal error,” appellate courts “may”
nevertheless “peek at the remand order as part of our ‘jurisdiction to determine
our own jurisdiction.’” Id. (quoting Lively, 456 F.3d at 937) (emphasis added); see
22
also In re Cont'l Cas. Co., 29 F.3d 292, 294 (7th Cir. 1994) (holding that the Supreme
Court’s gloss on section 1447(d) “permits us to decide whether a district court has
the power to do what it did, although we cannot examine whether a particular
exercise of power was proper” (citing In re Allstate Ins. Co., 8 F.3d 219 (5th Cir.
1993))).
For several reasons, we adopt the Ninth Circuit’s approach over that urged
by Justice Scalia in the Osborn dissent.
Most fundamentally, Justice Scalia’s dissent in Osborn is openly premised
on the view that the entirety of the Supreme Court’s section-1447(d) jurisprudence
from Thermtron onward has been a wrongheaded endeavor. See generally 549 U.S.
at 262–65 (Scalia, J., dissenting); see, e.g., id. at 263 (criticizing Thermtron for
“magically” changing “the unlimited phrase ‘an order remanding a case’” to
“bec[o]me ‘an order remanding a case under this section [i.e., section 1447],’” thus
unsettling “prior law[] under which the Court had held that the predecessors of
[section] 1447(d) prohibited review of all remand orders” (emphasis added;
alterations omitted)). If one viewed Quackenbush as a misguided step along the
way to “eviscerat[ing]” the “venerable” view that section 1447(d)’s scope is
“unlimited,” then it would make perfect sense to limit its holding to remand
23
orders openly “predicated on abstention,” id. at 262–63 – and to resist extending it
to “remand order[s] that dress[] in jurisdictional clothing” their “patently
nonjurisdictional ground[s],” Powerex, 551 U.S. at 234 (Scalia, J.) (emphasis added).
It was Justice Scalia’s prerogative to take that view of his own Court’s precedents.
But it is not ours.
As an “inferior Court[],” U.S. Const. art. III § 1, “we are not at liberty to
depart from binding Supreme Court precedent ‘unless and until the [Supreme]
Court reinterprets’ that precedent,” OneSimpleLoan v. U.S. Sec’y of Educ., 496 F.3d
197, 208 (2d Cir. 2007) (quoting Agostini v. Felton, 521 U.S. 203, 238 (1997))
(alterations omitted). And if Quackenbush was right to hold that “abstention-based
remand order[s] do[] not fall” within the scope of section 1447(d), 517 U.S. at 712 –
as we must assume it was – then it would hardly make sense to allow district
courts to flout that holding simply by slapping the label of “section-1447(e)
remand” onto what “patently” was an abstention analysis, Powerex, 551 U.S.
at 234.
Furthermore, we find ample support in the Supreme Court’s precedents –
and our own – for distinguishing between “review of whether the grounds of the
remand order were colorably based on lack of subject-matter jurisdiction” and
24
“review of whether the remand was an acceptable exercise of such authority.”
DeMartini, 964 F.3d at 820. More to the point, we find ample support for
concluding that the former is “permitted” as “part of our jurisdiction to determine
our own jurisdiction.” Id. (internal quotation marks omitted). Indeed, “it is
familiar law that a federal court always has jurisdiction to determine its own
jurisdiction.” United States v. Ruiz, 536 U.S. 622, 628 (2002); see also Brownback v.
King, 141 S. Ct. 740, 750 (2021) (holding same). Thus, even when we are
“jurisdictionally barred from reviewing” particular types of decisions by a lower
court, Sharkey v. Quarantillo, 541 F.3d 75, 85 (2d Cir. 2008) – such as, “remand
orders authorized” due to “either a procedural defect” in the underlying removal,
a “lack of subject[-]matter jurisdiction,” Mitskovski, 435 F.3d at 131, or a plaintiff’s
“seek[ing] to join additional defendants whose joinder would destroy
subject[-]matter jurisdiction,” 28 U.S.C. § 1447(e) – we “may nevertheless
determine whether such a [decision] occurred,” Sharkey, 541 F.3d at 85 (emphasis
in original). Framed slightly differently, our “jurisdiction to determine [our] own
jurisdiction,” Ruiz, 536 U.S. at 628, allows us to “seek to determine what decision
was made” in a remand order and whether that decision was of the general type
shielded from appellate review by section 1447(d), Sharkey, 541 F.3d at 85. We
25
“simply” cannot inquire into “whether the decision was correct” or whether it was
“a proper exercise of” the authority granted under sections 1447(c) and 1447(e) and
made unreviewable by section 1447(d). Id. (emphasis added).
As a result, we conclude that we have appellate jurisdiction to review the
remand order in this case, notwithstanding section 1447(d). In sum, while
“[section] 1447(d) deprives us of jurisdiction to review remand orders that were
issued pursuant to [section] 1447(e) and that invoke the [jurisdictional] grounds
specified in that subsection,” DeMartini, 964 F.3d at 819 (emphasis added), it is
“inapplicable” to “abstention-based remand order[s],” Quackenbush, 517 U.S.
at 712. And a district court cannot immunize such an order from appellate review
by baldly reciting that it is issuing the order “pursuant to [section] 1447(e),”
J. App’x at 249, or by otherwise attempting to “dress[]” its “patently
nonjurisdictional ground[s]” in the “jurisdictional clothing” of sections 1447(c)
or 1447(e), Powerex, 551 U.S. at 234.
B. Merits
Having confirmed our appellate jurisdiction, we now turn to the merits. The
pertinent “question” at this stage of our analysis “is not whether the district court’s
remand order was correct, but whether the district court exceeded the scope of
its [section] 1447([e]) authority by issuing the remand order in the first place.”
26
Lively, 456 F.3d at 938; see also Thermtron, 423 U.S. at 345 n.9 (“[C]ases properly
removed from state to federal court within the federal court’s jurisdiction may not
be remanded for discretionary reasons not authorized by the controlling statute.”).
We easily conclude that the district court exceeded its statutory authority.
The plain text of section 1447(e) authorizes district courts to “remand [an]
action to the [s]tate court” only “[i]f after removal the plaintiff seeks to join
additional defendants whose joinder would destroy subject matter jurisdiction”
and the district court decides, in its discretion, to “permit [such] joinder.” 28 U.S.C.
§ 1447(e). Here, as the district court openly acknowledged, “section 1447(e) is not
applicable . . . on its face since [LeChase] is not seeking to join a non-diverse
defendant.” J. App’x at 249. Instead, the district court explicitly stated that it was
remanding in the interest of “[a]voiding inconsistent outcomes” and “wasted
judicial resources,” id. at 250 – a “patently nonjurisdictional ground,” Powerex, 551
U.S. at 234, that appears nowhere in the text of section 1447(e).
Unable to locate support for its rationale in the plain text of section 1447(e),
the district court relied on a line of cases in which “other [district] courts ha[d]
concluded that [section] 1447(e) can serve as a basis to remand” – “even where a
[plaintiff is] not seeking to add a party whose [joinder] would destroy
27
subject[-]matter jurisdiction” – if “a failure to remand and consolidate” with
pending state-court actions “contain[ing] related factual and legal issues” would
putatively “risk[] inconsistent outcomes and wasted judicial resources.” J. App’x
at 249–50 (citing Nnaji, 2021 WL 2433850, at *1, *3; Reyes, 2013 WL 3388975, at *2–*4;
Mensah, 210 F. Supp. 2d at 321–22; Morze, 816 F. Supp. at 370). But none of these
district-court decisions reached us on appeal, and as a matter of first impression,
we find their reasoning to be wholly unpersuasive.
The analysis in each of these cases is premised on the notion that
“[s]ection 1447(e) . . . compels courts to exercise discretion when deciding whether
to remand a case to state court by balancing the equities involved and weighing
the interests and prejudices to each party involved.” Mensah, 210 F. Supp. 2d at 322
(citing Morze, 816 F. Supp. at 370) (emphasis added); see also Morze, 816 F. Supp.
at 370 (noting the “flexibility” that “[section] 1447(e) ‘gives the court’” (quoting
14A C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure 2d § 3739
(Supp. 1990)) (other citation omitted)). That “confuses the nature of the district
court’s discretion under [section] 1447(e).” DeMartini, 964 F.3d at 819. Where
section 1447(e) provides that “[i]f after removal the plaintiff seeks to join additional
defendants whose joinder would destroy subject matter jurisdiction, the court may
28
deny joinder, or permit joinder and remand the action to the [s]tate court,” 28
U.S.C. § 1447(e) (emphasis added), “it is the joinder that is discretionary, not the
remand,” DeMartini, 964 F.3d at 820. That is, “once the diversity-destroying
defendant has been joined under that subsection, the district court’s only option is
to remand. Likewise, if the district court does not join the diversity-destroying
defendant, [section] 1447(e) does not authorize remand.” Id. at 819.
Beyond its fundamental misunderstanding of the discretion that is – and is
not – afforded district courts under section 1447(e), this “emerging doctrine in
[d]istrict [c]ourts [of] the Second Circuit concerning [the] application of 28 U.S.C.
§ 1447(e),” LeChase Br. at 12, is sharply at odds with “the virtually unflagging
obligation of the federal courts to exercise the jurisdiction given them,” Colorado
River, 424 U.S. at 817. In recognition of that principle, we have insisted on a “heavy
presumption” against “[a]bstention from the exercise of federal jurisdiction,”
Niagara Mohawk Power, 673 F.3d at 100, 104 (quoting Colorado River, 424 U.S. at 813),
where “animate[d]” by such prudential considerations as “judicial economy” and
“avoid[ing] duplicative simultaneous litigation,” De Cisneros v. Younger, 871 F.2d
305, 308 (2d Cir. 1989). More concretely, we have held that “[i]n abstention
cases, . . . the district court’s discretion must be exercised within the narrow and
29
specific limits prescribed by the particular abstention doctrine involved,” such that
“there is little or no discretion to abstain in a case which does not meet traditional
abstention requirements.” Niagara Mohawk Power, 673 F.3d at 99 (citation omitted);
cf. Cavanaugh v. Geballe, 28 F.4th 428, 432–33, 435 (2d Cir. 2022) (holding similarly
in connection with Younger abstention). In the context of Colorado River abstention,
that means that district courts must carefully consider each of “six factors,” and
“[w]here [any such] factor is facially neutral, that is a basis for retaining
jurisdiction, not for yielding it.” Id. at 100–01 (internal quotation marks omitted).
Likewise, we have warned that “our review” of abstention decisions is “somewhat
rigorous.” Id. at 99 (citation omitted). Thus, to allow district courts to import “the
value of judicial economy that animates Colorado River,” De Cisneros, 871 F.2d at
308, into “the rubric of section 1447(e),” Mensah, 210 F. Supp. 2d at 322, would be
to invite an end-run around the rigors of our caselaw following Colorado River. We
decline to do so. 7
7 To the extent LeChase’s appeal rests on the ground that Colorado River abstention was
appropriate, LeChase Br. at 28–30, we decline to affirm for this reason given that the abstention
doctrine permits only a stay or dismissal of the federal proceeding and not a remand back to the
state court, see Niagara Mohawk Power, 673 F.3d at 100, and the lower court did not carefully and
clearly apply the Colorado River factors to make the required showing of “exceptional
circumstances,” id. at 100–01. We invite the lower court, however, to address the issue on remand
should it believe that Colorado River abstention is warranted in the present case.
30
As a result, we find it clear that “the district court exceeded
its [section-]1447([e]) authority in ordering [its] remand” on the abstention-like
grounds set forth therein, and we must therefore “vacate the order.” Lively, 456
F.3d at 942.
IV. CONCLUSION
To sum up, there is no question we have appellate jurisdiction, for the
reasons our opinion explains. The line of district court cases tracing back to
Mensah, 210 F. Supp. 2d 320, is based on an improper application of 28 U.S.C.
§ 1447(e). The rule we announce today is that district courts may not disguise an
abstention analysis as a section-1447(e) analysis. The text of section 1447(e)
forecloses a remand for reasons related to policy or judicial economy. Instead,
district courts should apply section 1447(e) only when a “plaintiff seeks to join
additional defendants whose joinder would destroy subject matter jurisdiction,”
28 U.S.C. § 1447(e).
Accordingly, we VACATE the district court’s order remanding this case to
the Supreme Court of New York, Monroe County, and REMAND the case to the
district court for further proceedings in that court.
31