Allied Signal Recovery Trust v. Allied Signal Inc.

Citation298 F.3d 263
Decision Date31 July 2002
Docket NumberNo. 01-1111.,No. 01-1355.,No. 01-1139.,01-1111.,01-1355.,01-1139.
Parties*ALLIED SIGNAL RECOVERY TRUST, Appellant/Petitioner, v. ALLIED SIGNAL INC., Honeywell International Inc., f/k/a Allied Signal Inc., Appellant. *(Amended — See Court's Order dated 5/16/01)
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Thomas D. Yannucci, Eugene F. Assaf, Christopher Landau (argued), Craig S. Primis, Jennifer R. Brosnahan, Kirkland & Ellis, Washington, D.C., Kevin Gross, Rosenthal, Monhait, Gross & Goddess, P.A., Wilmington, DE, for Appellant/Cross Appellee/Respondent.

Donald B. Ayer (argued), Geoffrey S. Stewart, Gregory M. Shumaker, Edward K.M. Bilich, Paul R. Reichert, Jones, Day, Reavis & Pogue, Washington, D.C., Ian Connor Bifferato, Bifferato, Bifferato & Gentilotti, Wilmington, DE, for Appellee/Cross Appellant/Petitioner.

BEFORE: MANSMANN,* ROTH and FUENTES, Circuit Judges.

OPINION OF THE COURT

ROTH, Circuit Judge.

We have before us a procedural muddle. The District Court has ordered a case remanded to state court in Delaware even though the case was removed from a state court in Florida. The parties agree that a case cannot be remanded to a state court that is a stranger to the case. They disagree, however, about the extent of our appellate jurisdiction and the remedy we should order. We conclude that we do not have jurisdiction to hear this appeal. Nevertheless, a remedy exists because plaintiff, Breed Technologies, Inc., has filed a petition for a writ of mandamus. We will grant the writ, vacate the remand order, and send the case back to the District Court.

I. Factual and Procedural History

The procedural complexities this appeal presents resulted from Breed Technology Inc.'s 1997 decision to purchase Allied Signal Inc.'s Safety Restraint Systems Division (SRS). Breed paid $710 million for SRS but, for reasons not relevant to this appeal, came to believe that Allied Signal had made misrepresentations and had withheld material information in connection with the sale. On August 2, 1999, Breed brought this suit against Allied Signal1 on two state law causes of action — fraud and negligent misrepresentation — in the Circuit Court for Polk County, Florida.

At the time it commenced the lawsuit, Breed was in serious financial trouble. Less than two months later, Breed filed for Chapter 11 bankruptcy protection in United States District Court for the District of Delaware.2 Breed also expanded its suit against Allied Signal by amending its Florida complaint to add two federal bankruptcy claims: one under 11 U.S.C. § 544(b) for avoidance of the SRS transaction as fraudulent and one under 11 U.S.C. § 550 for recovery of the proceeds from that transaction.

When Breed added its federal bankruptcy claims to the Florida action, Allied Signal removed the action to the United States District Court for the Middle District of Florida. Allied Signal asserted two grounds for removal. The first was the general removal statute, 28 U.S.C. § 1441. Allied Signal contended that Breed's federal bankruptcy claims arose under the laws of the United States and that Breed's state law claims were subject to supplemental jurisdiction under 28 U.S.C. § 1367. Allied Signal also moved for removal pursuant to the bankruptcy removal statute, 28 U.S.C. § 1452(a). It pointed out that Breed's claims either arose out of Title 11 of the United States Code or formed part of the same case or controversy as its Chapter 11 proceeding.

Once the case had been removed, Allied Signal filed a motion to compel arbitration and Breed filed a motion to remand the case to Florida state court. The District Court itself then issued an order to show cause why the case should not be transferred to the United States District Court for the District of Delaware, where Breed's bankruptcy case was proceeding. Breed opposed the transfer, and Allied Signal favored it. The District Court deemed Allied Signal's favorable response to its show cause order to be a motion to transfer and granted it. Breed did not seek review of this transfer order, either by a motion for reconsideration or by a petition for a writ of mandamus to the Eleventh Circuit.

Once in Delaware, Breed made another motion to remand the case to the Florida state court. The Delaware District Court found that it had jurisdiction of the case under 28 U.S.C. § 1334 as a bankruptcy matter but that it did not have § 1331 federal question jurisdiction. The court then determined that Breed's claims, including the §§ 544(b) and 550 claims, arose under Florida law and that the bankruptcy abstention provisions of 28 U.S.C. § 1334(c) required the court to abstain from hearing the matter. As a result, it remanded the case to the Delaware Superior Court, setting forth two reasons for doing so: (1) law of the case principles prevented it from returning the case to the District Court for the Middle District of Florida, and (2) only the Florida federal court had the necessary authority to remand to the Florida state court.

Both parties dispute this order. Allied Signal appealed it on January 8, 2001, asking us to reverse the District Court's remand order and to order the District Court to exercise its jurisdiction. Breed then filed a petition for mandamus with us. Breed sought a writ, vacating the order remanding the case to the Delaware Superior Court, and directing the District Court to remand the case to the Circuit Court for Polk County, Florida. Breed filed a cross-appeal on February 5, 2001.3

II. Standard of Review

Our review of the jurisdictional questions is plenary. See 718 Arch St Assocs. Ltd. v. Blatstein (In re Blatstein), 192 F.3d 88, 94 (3d Cir.1999); Anthuis v. Colt Indus. Operating Corp., 971 F.2d 999, 1002 (3d Cir.1992). Whether a writ of mandamus should be issued is committed to our discretion. In re Sharon Steel Corp., 918 F.2d 434, 436 (3d Cir.1990).

III. Jurisdiction

The first issue we must address is our own jurisdiction to hear this case. There is no dispute that the District Court had bankruptcy jurisdiction over Breed's Title 11 claims pursuant to 28 U.S.C. § 1334(b). It also had jurisdiction under § 1334(b) to hear the state law claims because they were related to a Title 11 claim.4

The parties do, however, dispute the nature and extent of our appellate jurisdiction. Allied Signal claims that we can address this case on direct appeal, while Breed contends that we must exercise our mandamus powers. Thus, we must first decide the issue of appellate jurisdiction.

Although in Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 714-15, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996), the Supreme Court held that a remand order is an appealable final order pursuant to 28 U.S.C. § 1291, Breed contends that we lack appellate jurisdiction of the District Court's remand order because of the bar to appellate review found in both the bankruptcy remand statute, 28 U.S.C. § 1452(b), and the general remand statute, 28 U.S.C. § 1447.5

The Supreme Court has stated that both § 1452(b) and § 1447(d) are applicable in bankruptcy related cases. In Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 116 S.Ct. 494, 133 L.Ed.2d 461 (1995), after holding that appellate review of an untimely removal was barred by § 1447(d), the Court went on to comment:

There is no express indication in § 1452 that Congress intended that statute to be the exclusive provision governing removals and remands in bankruptcy. Nor is there any reason to infer from § 1447(d) that Congress intended to exclude bankruptcy cases from its coverage. The fact that § 1452 contains its own provision governing certain types of remands in bankruptcy ... does not change our conclusion. There is no reason §§ 1447(d) and 1452 cannot comfortably coexist in the bankruptcy context. We must, therefore, give effect to both.

Id. at 129, 116 S.Ct. 494.

Our task then is to determine whether § 1447(d) or § 1452(b) is applicable to the remand in the present case. The District Court, in ordering remand to the Delaware state court, did not mention which remand statute it was applying.

Section 1452(b) provides in pertinent part that:

The court to which such claim or cause of action is removed may remand such claim or cause of action on any equitable ground. An order entered under this subsection remanding a claim or cause of action, or a decision to not remand, is not reviewable by appeal or otherwise by the court of appeals under section ... 1291 ... of this title....

(emphasis added).

Section 1452(b)'s ban on appellate review is broad in order to avoid prolonging litigation and increasing its costs in bankruptcy proceedings. See, In re Cathedral of the Incarnation in the Diocese of Long Island, 90 F.3d 28, 33 (2d Cir.1996) (holding, "Section 1452(b) reflects Congress's judgment that the rare instance of an unlawful remand order does not justify the time and dollar costs of making remands appealable."); Hernandez v. Brakegate Ltd., 942 F.2d 1223, 1226 (7th Cir.1991).

In addition, the "any equitable ground" language of § 1452(b) has been interpreted by the Supreme Court as not referring to the traditional distinction between law and equity, and thereby as not rendering reviewable bankruptcy cases that are remanded for "legal" reasons.6 Things Remembered, 516 U.S. at 132-33, 116 S.Ct. 494 (Ginsburg, J., concurring). Rather, "equitable" is defined as "signal[ling] that which is reasonable, fair, or appropriate." Id. at 133, 116 S.Ct. 494. Moreover, as Justice Ginsburg explains in her concurrence in Things Remembered, a "restrictive definition of what is `equitable' could invite wasteful controversy over the reviewability of bankruptcy case remand orders that are not reached by § 1447 and rest on grounds a common-law pleader might type `legal'." Id. at 135, 116 S.Ct. 494.

Turning to § 1447(d), it provides, "An order remanding a case to the State court from which it was removed is not reviewable on appeal or...

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