Hill v. Vanderbilt Capital Advisors, LLC

Citation702 F.3d 1220
Decision Date27 December 2012
Docket NumberNo. 11–2213.,11–2213.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)
PartiesDonna J. HILL; Yolanda Chacon–Valle, on Behalf of the New Mexico Educational Retirement Fund and its Members and Beneficiaries, or Alternatively on Behalf of Themselves and All Others Similarly Situated, Plaintiffs–Appellants, v. VANDERBILT CAPITAL ADVISORS, LLC; Bruce Malott; Gary Bland; Veronica Garcia; Douglas M. Brown; Patrick Livney; The New Mexico Educational Retirement Fund, Defendants–Appellees, and Aldus Equity; John Doe # 1; John Doe # 2; Does 3–100, inclusive; Saul Meyer; Vanderbilt Financial, LLC; Vanderbilt Financial Trust; Pioneer Investment Management, U.S.A.; Osbert M. Hood; Stephen C. Bernhardt; Kurt W. Florian, Jr.; Anthony J. Koenig, Jr.; Mark E. Bradley; Ron D. Kessinger; Robert P. Nault; James R. Stern; New England Pension Consultants, LLC, Defendants.

OPINION TEXT STARTS HERE

Jonathan W. Cuneo, Cuneo Gilbert & LaDuca, LLP, Washington, D.C. (Gordon H. Rowe, III, The Rowe Law Firm, P.C., Albuquerque, NM; Shane Youtz, Youtz & Valdez, P.C., Albuquerque, NM; Matthew E. Miller, Matthew Lee Wiener, and Brendan S. Thompson, Cuneo Gilbert & LaDuca, LLP, Washington, D.C.; and Richard D. Greenfield, Greenfield & Goodman LLC, New York, NY, with him on the briefs), for PlaintiffsAppellants.

Ellen S. Casey, Hinkle, Hensley, Shanor & Martin, LLP, Santa Fe, NM (Richard J. Shane, Riley, Shane & Keller, P.A., Albuquerque, NM; Stephen S. Hamilton, Montgomery & Andrews, P.A., Santa Fe, NM; Jaclyn M. McLean, Hinkle, Hensley, Shanor & Martin, LLP, Santa Fe, NM; Martin R. Esquivel, Basham & Basham, P.C., Santa Fe, NM, with her on the brief), for DefendantsAppellees Brown, Garcia, Bland, and Malott.

Peter L. Simmons, Fried, Frank, Harris, Shriver & Jacobson LLP, New York, NY (Andrew G. Schultz, Rodey, Dickason, Sloan, Akin & Robb, P.A., Albuquerque, NM; William C. Madison, Madison & Mroz, P.A., Albuquerque, NM; and Peter A. Silverman, Figliulo & Silverman, P.C., Chicago, IL, with him on the brief), for DefendantsAppellees Livney and Vanderbilt Capital Advisors.

Before LUCERO and HOLMES, Circuit Judges, and BRIMMER,* District Judge.

LUCERO, Circuit Judge.

Plaintiffs seek to appeal an order remanding this suit to New Mexico state court. They originally filed an action against Vanderbilt Capital Advisors, LLC, two of its operatives, and several New Mexico state officials in New Mexico state court. Plaintiffs allege that state investment decisions were made under a corrupt “pay to play” system benefitting politically connected individuals at the expense of public pensioners. The suit was removed to federal court. However, the district court remanded the entire case back to state court, concluding that it lacked subject matter jurisdiction because Plaintiffs did not have standing to sue. Under 28 U.S.C. § 1447(d), this court may not review a remand order explicitly resting on lack of subject matter jurisdiction so long as that jurisdictional characterization is colorable. See Powerex Corp. v. Reliant Energy Servs., 551 U.S. 224, 234, 127 S.Ct. 2411, 168 L.Ed.2d 112 (2007). Because we conclude that standing can be colorably characterized as an issue of subject matter jurisdiction, we dismiss.

I

We draw the following facts from the complaint.1 Plaintiffs are members of the New Mexico Education Retirement Fund (the Fund), a public pension plan established under New Mexico law to provide retirement benefits to state education employees. The New Mexico Constitution requires that money for employees be held [i]n a trust fund to be administered and invested ... for the sole and exclusive benefit of the members, retirees, and other beneficiaries.” N.M. Const. art. XX, § 22(A). The Fund holds approximately $8.5 billion in assets. It is managed by the Educational Retirement Board (“ERB”), which acts as trustee of the Fund.

In early 2006, Vanderbilt designed a trust offering composed of certain high-risk collateralized debt obligations. It hired Marc Correra as a “placement agent” to pitch the investment to the ERB and other state entities. Plaintiffs allege that Correra was hired because of his political connections as part of a “pay to play” scheme under which state entities were steered toward risky investments in exchange for political support from investment companies.

The ERB Investment Committee met to consider the Vanderbilt investment on May 12, 2006. Immediately thereafter, the ERB voted four to two in favor of investing $40 million in the Vanderbilt trust. Plaintiffs allege that all four members who voted in favor—each of whom is a named defendant—had “political ties to the Governor.” They further claim that the May 12 meeting was plagued by procedural irregularities and misrepresentations on the part of Vanderbilt. The Fund's $40 million investment ultimately proved worthless. Other than two small dividend payments, the investment generated no income and the Fund's $40 million principal investment was completely lost.

Plaintiffs initially filed suit in New Mexico state court, asserting numerous common law claims. They sought to certify a class of similarly situated individuals, or in the alternative, to press their claims derivatively on behalf of the Fund. The action was removed to federal court. In an amended complaint, Plaintiffs added claims under 15 U.S.C. § 78j(b) and Securities and Exchange Commission Rule 10B–5, over which federal courts possess exclusive jurisdiction, see15 U.S.C. § 78aa, and under the New Mexico Uniform Securities Act, N.M. Stat. § 58–13C–509.

Various defendants filed motions to dismiss. The district court granted a Fed.R.Civ.P. 12(b)(1) motion, concluding that Plaintiffs lack standing. Analogizing to ERISA case law, the court held that in order to establish standing, a defined-benefit beneficiary must allege facts suggesting that the defendants' misconduct created an appreciable risk that a fund would be unable to satisfy its defined-benefit obligations. Characterizing lack of standing as depriving the court of subject matter jurisdiction, the court remanded the entire case to the New Mexico state court from which it was removed pursuant to 28 U.S.C. § 1447(c). Plaintiffs timely appealed.

II

Vanderbilt filed a motion to dismiss in this court, arguing that we lack appellate jurisdiction. Although it later withdrew that motion, we have an independent duty to examine our own jurisdiction.” Amazon, Inc. v. Dirt Camp, Inc., 273 F.3d 1271, 1274 (10th Cir.2001) (citation omitted).

The jurisdiction of this court is circumscribed by 28 U.S.C. § 1447, which governs cases removed from state court. In such cases, [i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” § 1447(c). The statute prohibits appellate review of such remand orders: “An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise.” § 1447(d).2 We have held that § 1447(d) must be interpreted in pari materia with § 1447(c), and thus “only remands based on grounds specified in § 1447(c) are immune from review under § 1447(d).” Moody v. Great W. Ry., 536 F.3d 1158, 1162 (10th Cir.2008) (quoting Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 127, 116 S.Ct. 494, 133 L.Ed.2d 461 (1995)).

Accordingly, we must look to the basis of the district court's remand to determine whether we possess appellate jurisdiction. If the district court based its remand on a lack of subject matter jurisdiction, its order is “not reviewable on appeal or otherwise.” § 1447(d). The district court concluded that Plaintiffs lack standing. In its Memorandum Opinion and Order, the court repeatedly characterized its standing ruling as depriving it of subject matter jurisdiction, concluding that it must “remand the case to New Mexico state court for lack of subject-matter jurisdiction.” Similarly, the judgment entered below states that [t]he Court, having found that it lacks subject matter jurisdiction in this matter, will remand this case, and all of its claims, to the First Judicial District, Santa Fe County, State of New Mexico.”

Plaintiffs argue that despite the district court's characterization, standing and subject matter jurisdiction are distinct issues. They cite Rent Stabilization Ass'n of New York v. Dinkins, 5 F.3d 591 (2d Cir.1993), in which the court distinguished between the two concepts:

[S]tanding and subject matter jurisdiction are separate questions. While standing, which is an issue of justiciability, addresses the question whether a federal court may grant relief to a party in the plaintiff's position, subject matter jurisdiction addresses the question whether a federal court may grant relief to any plaintiff given the claim asserted. Thus, although both subject matter jurisdiction and standing (as well as other questions of justiciability) act to limit the power of federal courts to entertain claims, that is, act to limit the courts' “jurisdiction” in the broadest sense of the term, the two must be treated distinctly.

Id. at 594 n. 2 (citations omitted). But see Alliance for Envtl. Renewal, Inc. v. Pyramid Crossgates Co., 436 F.3d 82, 88 n. 6 (2d Cir.2006) ( “Although lack of Article III standing and subject matter jurisdiction are distinct concepts, Article III standing remains, as we have noted, a limitation on the authority of a federal court to exercise jurisdiction.” ( citing Rent Stabilization Ass'n, 5 F.3d at 594 & n. 2)).

Plaintiffs also cite several cases in which courts have considered standing and subject matter jurisdiction separately. See, e.g., Wooddell v. Int'l Bhd. of Elec. Workers, Local 71, 502 U.S. 93, 99 n. 4, 112 S.Ct. 494, 116 L.Ed.2d 419 (1991) (“As the case comes to us, however, the sole issue is whether a suit by a union member alleging a violation of a contract between two unions is within the subject-matter jurisdiction conferred by § 301. Petitioner's standing to bring the suit is not disputed...

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