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Appeal of Interlocutory Remand Orders in Putative Class Action Cases

By Karen S. Precella and Kelli Benham – September 24, 2012


You cannot appeal a remand order based on lack of subject matter jurisdiction or defects in the removal procedure, right? That may not be so anymore for certain remand orders on cases removed pursuant to the Class Action Fairness Act (CAFA). CAFA expressly creates appellate jurisdiction to review certain orders granting or denying a remand. Exceptions to appellate jurisdiction granted by CAFA exist, and review is discretionary with the court of appeals. A short 10-day deadline governs the application for permission to appeal, and there is no automatic stay of proceedings in the district court. Nevertheless, the CAFA provisions create an avenue to appeal interlocutory orders on motions to remand that had not been available pre-CAFA for putative class action (or other) cases.


General Rules
The rules that generally preclude interlocutory appeal of orders on motions to remand are familiar to most practitioners. Only final decisions of district courts are subject to appeal unless a statutory, rule-based, or judicially created exception allows appeal of an interlocutory order. 28 U.S.C. § 1291; Coopers & Lybrand v. Livesay, 437 U.S. 463, 467 (1978). A final decision is one that “ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.”  Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 712 (1996) (quoting Catlin v. United States, 324 U.S. 229, 233 (1945)). An order on a remand motion does not terminate the entire litigation; instead, it is interlocutory in nature. Coopers & Lybrand, 437 U.S. at 467.


Moreover, section 1447(d) expressly provides that an order remanding a case is not appealable if made pursuant to the grounds set forth in section 1447(c). See Things Remembered, Inc. v. Petrarca,516 U.S. 124, 126–28 (1995); Bogle v. Phillips Petroleum, 24 F.3d 758, 761 (5th Cir. 1994) (citing Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S. 336, 350–52 (1976)). The Fifth Circuit summarized the law as follows:


[T]his Court lacks jurisdiction under § 1447 if the district court based its remand order on either a lack of subject matter jurisdiction or a defect in removal procedure. The break from its authority must be clear: “we will only review remand orders if the district court affirmatively states a non-1447(c) ground for remand.” . . . Non-§ 1447(c) grounds for which a district court might remand a case include those remands made for purely discretionary reasons, abstention-based remands, remands based on § 1367, remands based on § 1445(c), and remands based on the district court’s discretionary powers under § 1441(c), among others.


Schexnayder v. Entergy La., Inc., 394 F.3d 280, 283 (5th Cir. 2004) (citations omitted).


What is a “non-1447(c)” ground has been the subject of much litigation. But what is important for purposes of this article is that the section 1447(d) bar often meant that pre-CAFA orders remanding putative class actions evaded review.


CAFA Appeal Provisions
Against this backdrop, Congress included a provision in CAFA, 28 U.S.C. § 1453(c)(1), that expressly authorizes, and creates appellate jurisdiction for, the appeal of orders on motions to remand in certain circumstances. That provision was added “to develop a body of appellate law interpreting [ CAFA] without unduly delaying the litigation of class actions.” Nevada v. Bank of Am. Corp., 672 F.3d 661, 674 (9th Cir. 2012) (quoting Coffey v. Freeport McMoran Copper & Gold, 581 F.3d 1240, 1247 (10th Cir. 2009), which quoted S. Rep. No. 109-14, at 49, reprinted in 2005 U.S.C.C.A.N. at 46). CAFA, by design, retains certain putative class-action cases in federal court to further CAFA’s purpose of eliminating various perceived abuses in state court class actions. See Class Action Fairness Act of 2005, Pub. L. No. 109-2, § 2, 119 Stat. 4(a)(2) (“Over the past decade, there have been abuses of the class action device that have—(A) harmed class members with legitimate claims and defendants that have acted responsibly; (B) adversely affected interstate commerce; and (C) undermined public respect for our judicial system.”).


28 U.S.C. § 1453(c)(1) provides as follows:


Section 1447 shall apply to any removal of a case under this section, except that notwithstanding section 1447(d) . . . , a court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action to the State court from which it was removed if application is made to the court of appeals not more than 10 days after entry of the order.


Thus, CAFA eliminates the section 1447(d) bar and allows appeal of orders granting or denying a remand.


CAFA appellate jurisdiction is not without limitations. Congress included several statutory exceptions under which a court of appeals may not review an order on a remand motion if the putative class action solely involves the following:


  • a claim concerning a covered security as defined under section 16(f)(3) of the Securities Act of 1933 (15 U.S.C. § 78(p)(f)(3)) and section 28(f)(5)(E) of the Securities Exchange Act of 1934 (15 U.S.C. § 78bb(f)(5)(E));
  • a claim that relates to the internal affairs or governance of a corporation or other form of business enterprise and arises under or by virtue of the laws of the State in which such corporation or business enterprise is incorporated or organized; or
  • a claim that relates to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security (as defined under section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. § 77b(a)(1) and the regulations thereunder).

28 U.S.C. § 1453(d).


These exceptions mirror three exceptions to CAFA’s grant of original federal diversity jurisdiction in 28 U.S.C. § 1332(d). Thus, if the original jurisdiction exception does not apply, a court would likely hold that the exception also does not eliminate appellate jurisdiction under section 1453(c). Greenwich Fin. Servs. Distress Mortg. Fund 3 LLC v. Countrywide Fin. Corp., 603 F.3d 23, 27–28 (2d Cir. 2010).


The Application for Permission—Within 10 Days of the Order
Assuming no exception applies, the statute imposes a short deadline in which to seek appeal; this short deadline is meant to promote speedy resolution. A glitch in the original CAFA statutory deadline language made the application to appeal due “not less than 7 days” after entry of the order. Arguably, applications made within seven days were premature; ones made more than seven days later were timely. Courts refused to adopt that result and required applications be made in not more than 7 days. See, e.g., Miedema v. Maytag Corp., 450 F.3d 1322, 1326 (11th Cir. 2006). And, effective May 7, 2009, Congress amended CAFA to allow for appeal “if application is made to the court of appeals not more than 10 days after entry of the order.” 28 U.S.C. § 1453(c)(1) (emphasis added).


As in other contexts, failure to meet this 10-day deadline has been considered jurisdictional. See, e.g., Lewis v. Verizon Commc’ns, Inc., 627 F.3d 395, 398 (9th Cir. 2010) (“CAFA was also designed to settle jurisdictional issues early. Thus, appeals must be filed ‘not more than 10 days’ after a remand order.”); see BP Am. Inc. v. Oklahoma, 613 F.3d 1029, 1032–33 (10th Cir. 2010); Pritchett v. Office Depot, Inc., 420 F.3d 1090, 1093 (10th Cir. 2005); see also Main Drug, Inc. v. Aetna U.S. Healthcare, Inc., 475 F.3d 1228, 1231 (11th Cir. 2007) (Rule 2 cannot “suspend the requirements of Rule 5”).


Within the 10-day deadline, an “application [must be] made to the court of appeals” for permission to appeal as review is discretionary. 28 U.S.C. § 1453(c)(1) (emphasis added). In CAFA’s early days, some courts allowed a timely notice of appeal or a timely notice of appeal with an untimely petition to suffice to meet the deadline. Most courts, however, currently require that the application seeking permission to appeal an order on a remand motion under CAFA comply with Federal Rule of Appellate Procedure 5, “Appeal by Permission.” Amalgamated Transit Union Local 1309, AFL-CIO v. Laidlaw Transit Servs., Inc., 435 F.3d 1140, 1145 (9th Cir. 2006); Patterson v. Dean Morris, LLP, 444 F.3d 365, 368 (5th Cir. 2006); Hart v. FedEx Ground Package Sys., 457 F.3d 675, 679 (7th Cir. 2006). After reviewing the legislative history and similarities between sections 1453 and 1292(b), the Ninth Circuit concluded that “in enacting § 1453(c)(1) Congress intended to mirror the procedures for taking an appeal pursuant to § 1292(b).” Amalgamated Transit, 435 F.3d at 1145. To the extent that Rule 5 governs, a notice of appeal need not be filed. Fed. R. App. P. 5(d)(2). If a practitioner files a notice of appeal out of an abundance of caution, however, an application for permission to appeal should also be made to ensure compliance with Rule 5. A check of case law in the applicable circuit may be helpful.


Under Rule 5, a party must petition the court for permission to appeal within the time specified by statute. Fed. R. App. P. 5(a). The petition must include the facts, question presented, relief sought, reasons why the appeal is authorized and should be allowed, and the petition should include a copy of, among other things, the order being appealed. Fed. R. App. P. 5(b). The opposing party may file an answer in opposition within 10 days after the petition is served. Id.


The purpose of the initial petition is to convince the court to grant permission to appeal the order on the motion to remand. Courts have developed several factors to guide that decision; a petition should usually stress those factors (along with the standard and scope of review). See Koral v. Boeing Co., 628 F.3d 945, 946 (7th Cir. 2011); Coleman v. Estes Express Lines, Inc., 627 F.3d 1096, 1100 (9th Cir. 2010) (per curiam); Coll. of Dental Surgeons of P.R. v. Conn. Gen. Life Ins. Co., 585 F.3d 33, 38 (1st Cir. 2009); BP Am., 613 F.3d at 1034–35;  Alvarez v. Midland Credit Mgmt., 585 F.3d 890, 894 (5th Cir. 2009) . The following are among those factors:


  • the presence of and importance of the CAFA issue;
  • the likelihood that the question will evade effective review if that question is left open for consideration after judgment;
  • whether the record is sufficiently developed and the order is sufficiently final to permit an “intelligent review”;
  • the probable harm to the applicant if an immediate appeal is refused compared with the probable harm to other parties if an immediate appeal is allowed;
  • uncertainty or whether the question, at first glance, appears either incorrectly decided or fairly debatable;
  • whether addressing an issue presented in the appeal will help “to develop a body of appellate law interpreting the legislation without unduly delaying litigation of class actions”; and
  • whether deciding the appeal would advance the development of the law governing class actions.

No Automatic Stay
The remand appeals process does not automatically stay proceedings in the district court. A party may seek a stay, however. But, if a district court has denied a motion to remand, given the short deadlines discussed below, the court may prefer to continue with proceedings, such as discovery, if there will be no interference with the appellate process. See Nevada v. Bank of Am., No. 3:11-cv-00135-RCJ, 2012 U.S. Dist. LEXIS 11136, at *4–6 (D. Nev. Jan. 31, 2012); Robinson v. Cheetah Transp., No. 06-0005, 2007 U.S. Dist. LEXIS 13579, at *5 (W.D. La. Feb. 28, 2007). A party may also seek a stay in the court of appeals. See Fed. R. App. P. 8. Among other things, a stay request should show that harm will result to the moving party without the stay. See, e.g., Hilton v. Braunskill, 481 U.S. 770, 776 (1987); Cooey v. Strickland, 589 F.3d 210, 218 (6th Cir. 2009); Iowa Utils. Bd. v. FCC, 109 F.3d 418, 423 (8th Cir. 1996); Garcia-Mir v. Meese, 781 F.2d 1450, 1453 (11th Cir. 1986).


Generally, when a district court grants a motion to remand, it loses jurisdiction to grant a stay pending appeal or to otherwise modify or vacate its order once it certifies the remand order to state court. See Migis v. Autozone, Inc., No. 08-1394-KI, 2009 U.S. Dist. LEXIS 18810, at *3 (D. Or. Mar. 6, 2009) (quoting Seedman v. U.S. Dist. Ct. for Cent. Dist. of Cal., 837 F.2d 413, 414 (9th Cir. 1988)); Coy Chiropractic Health Ctr., Inc. v. Travelers Cas. & Sur. Co., No. 06-cv-678-DRH, 2007 U.S. Dist. LEXIS 54938, at *6 (S.D. Ill. July 27, 2007). However, because CAFA provides for reviewability of a remand order, the district court may retain jurisdiction even after certifying the order to the state court. See Hudson United Bank v. LiTenda Mortg. Corp., 142 F.3d 151, 159 (3d Cir. 1998); In re Shell Oil Co., 932 F.2d 1523, 1528 (5th Cir. 1991); Maui Land & Pineapple Co. v. Occidental Chem. Corp., 24 F. Supp. 2d 1083, 1085 (D. Haw. 1998). Thus, a party may want to consider various procedural mechanisms—such as a stay or abatement—in federal court, state court, or both, to protect the appeal.


The Pocket Denial Rule
In keeping with the speedy resolution purpose, 28 U.S.C. § 1453(c)(4) provides a 60-day deadline within which a court of appeals must complete all action on the appeal. Although the statute does not provide a date from which to calculate the deadline, several circuits have held that an appeals court has 60 days after granting permission to appeal to review an order on a remand motion and issue its decision. See, e.g., Lewis v. Verizon Commc’ns, Inc., 627 F.3d 395, 396 (9th Cir. 2010); Amalgamated Transit Union Local 1309, AFL-CIO v. Laidlaw Transit Servs., Inc., 435 F.3d 1140, 1144 (9th Cir. 2006); Patterson v. Dean Morris, LLP, 444 F.3d 365, 368 (5th Cir. 2006) ; Hart v. FedEx Ground Package Sys., 457 F.3d 675, 678 (7th Cir. 2006). If the court does not issue a ruling within 60 days, the appeal is deemed denied. 28 U.S.C. § 1453(c)(4).


Section 1453(c)(3) provides that the court of appeals may grant an extension of the 60-day period if all parties agree to that extension or the extension is for good cause and in the interests of justice.  If all parties agree to an extension, they may agree to any additional period of time. 28 U.S.C. § 1453(c)(3)(A); see also Greenwich Fin. Servs. Distress Mortg. Fund 3 LLC v. Countrywide Fin. Corp., 603 F.3d 23, n.1 (2d Cir. 2010) (noting that the parties agreed to a 90-day extension of the deadline for the court to render a decision on appeal). Conversely, if the court grants the extension for good cause shown and in the interests of justice, the 60-day period may be extended for no more than an additional 10 days. 28 U.S.C. § 1453(c)(3)(B); Lowdermilk v. U.S. Bank Nat’l Ass’n, 479 F.3d 994, 997 n.2 (9th Cir. 2007).


The Merits of the Permissive Appeal
Once the court grants permission to appeal, the court may allow merits briefing, most likely on an expedited schedule. See, e.g., Grimsdale v. Kash N’ Karry Food Stores, Inc. (In re Hannaford Bros. Co. Customer Data Sec. Breach Litig.), 564 F.3d 75, 77 (1st Cir. 2009); Amoche v. Guar. Trust Life Ins. Co., 556 F.3d 41, 47 (1st Cir. 2009); Patterson, 444 F.3d at 368 & n.2. Appellate fees may also be triggered if permission is granted. Fed. R. App. P. 5(d).


The court will conduct a de novo review of the legal conclusions “fairly included” in the order, including a determination of the district court’s and its own CAFA subject matter jurisdiction. See Hargis v. Access Capital Funding, LLC, 674 F.3d 783, 789 (8th Cir. 2012); Kaufman v. Allstate N.J. Ins. Co., 561 F.3d 144, 151 (3d Cir. 2009); Lanier v. Norfolk S. Corp., 256 F. App’x 629, 631 (4th Cir. 2007); Smith v. Nationwide Prop. & Cas. Ins. Co., 505 F.3d 401, 404 (6th Cir. 2007). Factual findings may be reviewed for clear error. See In re Safeco Ins. Co. of Am., 585 F.3d 326, 330 (7th Cir. 2009); Amoche, 556 F.3d at 48; Blockbuster, Inc. v. Galeno, 472 F.3d 53, 56 (2d Cir. 2006).


If a statute authorizes interlocutory appellate review, as CAFA does, the district court’s entire decision generally comes before the appellate court. See Nevada v. Bank of Am. Corp., 672 F.3d 661, 673–74 (9th Cir. 2012); Alvarez v. Midland Credit Mgmt., 585 F.3d 890, 894 (5th Cir. 2009); Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 451 (7th Cir. 2005). Moreover, reviewing all issues raised in the certified order furthers CAFA’s speedy resolution purposes by preventing a push of issues to section 1292(b) appeals, which have no time limits on resolution. But courts may choose whether to review non-CAFA issues when reviewing an order on a remand motion. See, e.g., Washington v. Chimei Innolux Corp., 659 F.3d 842, 850 (9th Cir. 2011).


Finally, various procedural actions may (or may not) affect a pending appeal. For example, a plaintiff’s voluntary dismissal of its state court claims may moot a pending federal appeal of a district court’s order on a remand motion under section 1453(c). See Dudley-Barton v. Serv. Corp. Int’l, 653 F.3d 1151, 1152 (10th Cir. 2011). However, a state court judgment of dismissal may not divest a federal appellate court of jurisdiction. See Probola v. Long & Foster Real Estate, No. 12-2199, 2012 U.S. App. LEXIS 11062, at *3, *7–9 (3d Cir. June 1, 2012). A plaintiff also may not be able to voluntarily dismiss or amend a case to bypass federal court jurisdiction under CAFA after the case has been removed. See Thatcher v. Hanover Ins. Grp., Inc., 659 F.3d 1212, 1213 (8th Cir. 2011); In re Burlington N. Santa Fe Ry. Co., 606 F.3d 379, 379 (7th Cir. 2010); Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805, 806–07 (7th Cir. 2010); Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1258 n.12 (11th Cir. 2009).


Conclusion
To take advantage of the CAFA provisions that allow appellate review of an interlocutory order on a motion to remand, care must be taken to follow the strict procedural and substantive guidelines, particularly as applied and followed in the applicable circuit. (Or, to oppose an appeal, equal care should be taken to show that those procedures do not apply or were not followed.) Make sure that an exception to the CAFA appellate jurisdictional grant does not apply. Meet the 10-day deadline to apply for permission to appeal. Consider whether a request for stay (or other procedural motion) is needed. Make the application persuasive, focusing on factors that the appellate court will use to make its decision on the application. For example, the importance, novelty, and repetitive nature of the CAFA issue involved will factor heavily into the court’s decision on whether to grant permission to appeal. Consider whether any non-CAFA issues are fairly encompassed within the order on the remand motion (and should be included in the appeal). And remember that the court has only 60 days to decide an appeal—absent agreement or good cause for an extension as provided by the statute.


Keywords: litigation, appellate practice, Class Action Fairness Act, CAFA, Federal Rule of Appellate Procedure 5, Federal Rule of Appellate Procedure 8, permissive appeal, pocket denial, 28 U.S.C. § 1453(c)(1)


Karen Precella is a partner and Kelli Benham is an associate with Haynes and Boone, LLP.


 
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