Autoridad De Energ A Electrica v. Ericsson Inc.

Decision Date08 December 1999
Docket NumberNo. 99-2140,99-2140
Citation201 F.3d 15
Parties(1st Cir. 2000) AUTORIDAD DE ENERG A ELECTRICA DE PUERTO RICO, Plaintiff, Appellee, v. ERICSSON INC., F/K/A ERICSSON GE MOBILE COMMUNICATIONS INC.; FEDERAL INSURANCE COMPANY Defendants, Appellants. JOHN DOE, Defendant. . Heard
CourtU.S. Court of Appeals — First Circuit

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO. Hon. Carmen Consuelo Cerezo, U.S. District Judge.

Roberto C. Quinones-Rivera, with whom Samuel T. Cespedes, Carmen Hilda Buso, and McConnell Valdes were on brief, for appellants.

Cornelius J. Moynihan, Jr., with whom Alberto Cuevas Trisan and Juan A. Perez Lopez were on brief, for appellee.

Before Selya, Boudin, and Lynch, Circuit Judges.

LYNCH, Circuit Judge.

In 1992, Autoridad de Energa Electrica de Puerto Rico (the Puerto Rico Electric Power Authority) entered into a $7.5 million contract with Ericsson GE Mobile Communications, Inc., to purchase a trunk radio system guaranteed to function for fifteen years. The Authority, or PREPA, generates, transmits, and distributes almost all of the electricity used in the Commonwealth. PREPA came to think that the equipment it had purchased was not Y2K-compliant. In July 1999, PREPA sued Ericsson in the courts of the Commonwealth for a declaration that Ericsson was required to upgrade the equipment (without further charge) under the contract and for injunctive relief to the same effect.

Ericsson removed the case to federal court based on diversity and moved to stay all proceedings under the Y2K Act, Pub. L. No. 106-37, 113 Stat. 185 (1999) (codified at 15 U.S.C. §§ 6601-6617). In the meantime, PREPA moved to remand to the Commonwealth court based on Article 28 of the contract, which PREPA characterized as a forum-selection clause. Without acting on Ericsson's Y2K Act stay motion, the federal district court remanded the matter to the Commonwealth court.

Ericsson appealed and this court issued a stay of the remand order. Our stay order permitted the district court to address ordinary matters that were not inconsistent with the prosecution of the appeal. PREPA had taken no action in the district court in the interim as of the time of oral argument.

The appeal raises several issues, most of which are of first impression for this court. First, does 28 U.S.C. § 1447 preclude jurisdiction in this court in a removed case to review a remand order based on a contract's forum-selection clause? The question is complicated by the need to consider the effect of the 1996 amendment to 28 U.S.C. § 1447(c). Second, does the final judgment rule nonetheless bar review of this case, or does the case fall within one of that rule's exceptions? Third, does the language of the contractual clause mean that the parties agreed only that they would consent to jurisdiction in the Commonwealth courts or, alternatively, that those courts would have exclusive jurisdiction? Fourth, should this court address Ericsson's contention that the Y2K Act mandates that a stay of the district court proceedings be issued?

We conclude that we have jurisdiction. Remand orders based on contractual forum clauses are not within the bar on appellate review in 28 U.S.C. § 1447(d). We also join every other circuit court that has addressed the issue in holding that forum clause-based remand orders fall within the collateral order doctrine, are final for the purpose of the final judgment rule, and, consequently, are subject to review by direct appeal. Further, we conclude that the district court erred in its reading of the clause and that its remand of the case to the Commonwealth courts was improper. A clause that simply consents to jurisdiction in one court does not by its terms exclude jurisdiction in another court. This case is properly in the federal courts and we conclude that the district court should address the matter of the Y2K Act stay in the first instance.

I. Jurisdiction in this Court
A. The Effect of 28 U.S.C. § 1447

This court has not previously addressed the issue of whether review is available when the remand was based on a forum-selection clause; other circuits have concluded that there is appellate jurisdiction because a forum-selection clause is not a ground stated in § 1447(c) as to which review is precluded. See Snapper, Inc. v. Redan, 171 F.3d 1249, 1255-56 nn.8 & 15 (11th Cir. 1999) (citing cases). At oral argument, PREPA's able counsel conceded that we would have jurisdiction to review the remand order unless the 1996 amendment to 28 U.S.C. § 1447(c) altered the prior analysis in the case law. He also admitted that there would be jurisdiction if this court accepted the Eleventh Circuit's analysis in Snapper.

We briefly explain what is at issue. The question is whether to apply here the bar to review of certain remand orders contained in § 1447(d):

[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise.

In 1976, the Supreme Court held that the prohibition in § 1447(d) applies only to remand orders based on the grounds specified in § 1447(c). See Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S. 336, 346 (1976). In 1988, the text of § 1447(c) was revised. It no longer spoke of remands for cases "improvidently removed" or "without jurisdiction," the language interpreted by Thermtron. Instead, the new language spoke of remands "on the basis of any defect in removal procedure" or for lack of "subject matter jurisdiction." In 1996, the statute was amended again. It now provides:

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 under section 1446(a).

Commentators have suggested a possible reading of the amendments to the effect that § 1447(c) now covers all remand orders. See David D. Siegel, Commentary on 1996 Revision of Section 1447(c), 28 U.S.C.A. § 1447 (West Supp. 1999) (the new language is "like a residuary clause"); see also Thomas R. Hrdlick, Appellate Review of Remand Orders in Removed Cases: Are They Losing a Certain Appeal?, 82 Marq. L. Rev. 535, 561-69 (1999).

The basic issue, since there is no question of lack of federal subject matter jurisdiction, is whether the term "defect," as used in the statute, encompasses a remand order that is based on an interpretation of a forum clause in a contract. We think not, for two reasons. First, the text of the statute provides a reasonable meaning for the term "defect," a meaning that refers to the failure to comply with the various requirements for a successful removal, as set forth in § 1446(a) and (b). Much less plausible would be a reading of the term "defect" that encompassed a remand based on a forum-selection clause.

There is a second consideration. If Congress had truly desired to overrule Thermtron and its progeny, we think it would have chosen less oblique means. The Eleventh Circuit's well-documented analysis of the context and history of the legislative revisions to the statute convince us that Congress had no such intent. See Snapper, 171 F.3d at 1254-59; see also Hrdlick, supra, at 576 (arguing that the legislative "history suggests Congress did not intend a radical alteration of . . . the appellate bar"). We join the Eleventh Circuit's conclusion in Snapper that § 1447(d) is not a bar to review of a remand order based on a forum-selection clause.

B. Final Judgment Rule

This circuit has never addressed the question of whether forum clause-based remand orders are reviewable by appeal, as an exception to the normal rule that only final judgments are reviewable. In Thermtron, the Supreme Court had stated that "an order remanding a removed action does not represent a final judgment reviewable by appeal." Thermtron, 423 U.S. at 352-53. But this language was limited by Quackenbush v. Allstate Insurance Co., 517 U.S. 706, 711-15 (1996), which held that an abstention-based remand order was reviewable by an interlocutory appeal. The Court found that this type of remand order was reviewable since it satisfied the collateral order doctrine and was final in the sense that it put the plaintiff out of federal court. See id. at 714-15. PREPA says that Quackenbush cannot be transferred to remand orders based on forum clauses.

The circuit courts of appeals that have addressed this issue have all concluded that remand orders based on forum-selection clauses are reviewable by interlocutory appeal. See Florida Polk County v. Prison Health Servs., Inc., 170 F.3d 1081, 1083 (11th Cir. 1999); Milk 'N' More, Inc. v. Beavert, 963 F.2d 1342, 1344-45 (10th Cir. 1992); McDermott Int'l, Inc. v. Lloyds Underwriters, 944 F.2d 1199, 1204 & n.7 (5th Cir. 1991); Foster v. Chesapeake Ins. Co., 933 F.2d 1207, 1211 & n.6 (3d Cir. 1991); Regis Assocs. v. Rank Hotels (Mgmt.) Ltd., 894 F.2d 193, 194-95 (6th Cir. 1990); Karl Koch Erecting Co. v. New York Convention Ctr. Dev. Corp., 838 F.2d 656, 658-59 & n.1 (2d Cir. 1988); Pelleport Investors, Inc. v. Budco Quality Theatres, Inc., 741 F.2d 273, 277-78 (9th Cir. 1984); see also Benson v. SI Handling Sys., Inc., 188 F.3d 780, 782 (7th Cir. 1999) (holding that remand order in successive removal is reviewable); Pennsylvania Nurses Ass'n v. Pennsylvania State Educ. Ass'n, 90 F.3d 797, 801 (3d Cir. 1996) (same for supplemental jurisdiction-based remand order); Gaming Corp. of Am. v. Dorsey & Whitney, 88 F.3d, 536, 542 (8th Cir. 1996) (same). For the same reasons the abstention-based remand order was reviewable in Quackenbush, we find that the forum-based remand order is reviewable and we join the other circuits that have so found.

The two circuit cases on which PREPA relies predate Quackenbush and have been abrogated. See Doughty v. Underwriters at Lloyd's, London, 6 F.3d 856, 864 (1st Cir. 1993) (finding no appellate jurisdiction over abstention-based remand order); Garcia v. Island Program Designer,...

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