933 F.2d 1207 (3rd Cir. 1991), 90-1752, Foster v. Chesapeake Ins. Co., Ltd.

Docket Nº:90-1752.
Citation:933 F.2d 1207
Party Name:Constance B. FOSTER, Insurance Commissioner of the Commonwealth of Pennsylvania, as Rehabilitator of the Mutual Fire, Marine & Inland Insurance Company, v. CHESAPEAKE INSURANCE COMPANY, LTD., Appellant.
Case Date:May 20, 1991
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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Page 1207

933 F.2d 1207 (3rd Cir. 1991)

Constance B. FOSTER, Insurance Commissioner of the

Commonwealth of Pennsylvania, as Rehabilitator of

the Mutual Fire, Marine & Inland Insurance Company,

v.

CHESAPEAKE INSURANCE COMPANY, LTD., Appellant.

No. 90-1752.

United States Court of Appeals, Third Circuit

May 20, 1991

Page 1208

[Copyrighted Material Omitted]

Argued April 15, 1991.

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David M. Zensky (Argued), Steven M. Pesner, Anderson, Kill, Olick & Oshinsky, New York City, Daniel Segal, Charles F. Forer, Hangley, Connolly, Epstein, Chicco, Foxman & Ewing, Philadelphia, Pa., for appellant.

Gaetan J. Alfano (Argued), Gregory P. Miller, Ann Krasnowiecki, Miller, Alfano & Raspanti, Philadelphia, Pa., for appellee.

Before STAPLETON, GREENBERG, and HIGGINBOTHAM, Circuit Judges.

OPINION

GREENBERG, Circuit Judge.

The appeal in this diversity of citizenship, breach of contract case, primarily involves the interplay between a contract's forum selection clause and 28 U.S.C. Sec. 1447(c) governing remand upon removal. 1 The district court determined that: (1) a motion to remand based on a such a clause is not governed by the 30-day time limit imposed on motions for remand by section 1447(c); (2) such a clause is a permissible ground for remand; (3) the clause in this case waived the right of removal; and (4) the clause is enforceable. The district court therefore remanded the case to the state court in which it had been commenced. We determine that we have jurisdiction over this appeal, and that the district court's several rulings were correct.

I.

FACTS AND PROCEDURAL HISTORY

In July 1982, Mutual Fire, Marine and Inland Insurance Company, a company organized and licensed under the laws of Pennsylvania, entered into a reinsurance agreement with defendant-appellant Chesapeake Insurance Company, Ltd., a Bermuda-based corporation. The agreement--or "treaty"--provided that Mutual Fire would "cede" to Chesapeake, and others, a portion of the risk that it, Mutual Fire, bore on its policies; Chesapeake would bear the cost of that risk once it became an actual liability; and for this Mutual Fire would pay premiums to Chesapeake. Mutual Fire entered into so many similar treaties that by the mid-1980's between 60% and 70% of its business entailed reinsurance, involving over 8,000 treaties with various insurers worldwide. The agreement between Mutual Fire and Chesapeake included the forum selection clause in issue here which required Chesapeake at Mutual Fire's request in the event of certain disputes to "submit to the jurisdiction of any court of competent jurisdiction within the United States." 2

These reinsurance treaties were apparently disadvantageous to Mutual Fire as it became insolvent, partly, it is alleged, due to the refusal of reinsurers like Chesapeake to pay their share of losses to Mutual

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Fire. 3 Accordingly, the Pennsylvania Insurance Commissioner (now plaintiff-appellee Constance B. Foster) took over Mutual Fire, and, on December 8, 1986, the Commonwealth Court of Pennsylvania appointed the commissioner Rehabilitator. Because one of Foster's duties as Rehabilitator is to marshal Mutual Fire's assets, she commenced this suit against Chesapeake in the Commonwealth Court seeking the monies allegedly owed by it to Mutual Fire under the agreement. Chesapeake is said to be in breach of its agreement with Mutual Fire in an amount in excess of $4,000,000.

On October 18, 1989, there being diversity of citizenship and an adequate amount in controversy to support district court jurisdiction, Chesapeake--in a manner which was timely and without procedural defect--removed this suit to the United States District Court for the Eastern District of Pennsylvania, but on December 11, 1989--the 54th day after the notice of removal was filed--, Foster moved to remand the case to the Commonwealth Court.

The district court granted the motion in an oral opinion, first holding that section 1447(c) did not bar the motion as untimely. That section provides, in part:

A motion to remand the case on the basis of any defect in removal procedure must be made within 30 days after the filing of the notice of removal under section 1446(a). If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.

Then holding that the grounds for remand specified by section 1447(c) were not exclusive, and that waiver of the right to remove constituted a proper ground for remand, the court found that Chesapeake had waived its right to remove pursuant to the forum selection clause in its agreement with Mutual Fire. Finally, holding that the clause was enforceable, the district court ordered the case remanded by order of September 27, 1990. This appeal followed and the district court has stayed its order of remand pending appeal.

II.

DISCUSSION

  1. Appellate Jurisdiction

    Although the parties in their original briefs contended that this court has jurisdiction over the appeal from the district court's order of remand under 28 U.S.C. Sec. 1291, we sua sponte ordered supplemental briefing on this issue in light of 28 U.S.C. Sec. 1447(d), which provides, in part: "An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise...." 4 Having reviewed the supplemental submissions and the authority cited therein, we determine that we have jurisdiction over this appeal.

    The Supreme Court in Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 96 S.Ct. 584, 46 L.Ed.2d 542 (1976), held that an order remanding a case for reasons not mentioned in the statute governing removal upon remand, 28 U.S.C. Sec. 1447(c), is reviewable. In Thermtron, the district court remanded a properly removed diversity case because of the crowded state of its docket, an action the court of appeals held on an application for a writ of mandamus or prohibition unreviewable because of section 1447(d). The Supreme Court, however, held that subsections (c) and (d) of section 1447 are in pari materia and must be read accordingly. "This means that only remand orders issued under Sec. 1447(c) and invoking the grounds specified therein ... are immune from review under Sec. 1447(d)." 423 U.S. at 346, 96 S.Ct. at 590. Thus, whereas section 1447(c) then specified as grounds for remand that "the case was

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    removed improvidently and without jurisdiction," and whereas the district court had remanded for a reason not mentioned by section 1447(c), the Court held that review of the order of remand was not barred by section 1447(d). The Court then reversed the judgment of the court of appeals, and remanded the case to that court for it to issue a writ of mandamus "to prevent nullification of the removal statutes by remand orders resting on grounds having no warrant in the law." 423 U.S. at 353, 96 S.Ct. at 594.

    Accordingly, while section 1447(d) was intended "to prevent delay in the trial of remanded cases by protracted litigation of jurisdictional issues," 423 U.S. at 351, 96 S.Ct. at 593--and the district court is therefore given the last word on whether it has jurisdiction to hear the case--, that policy does not apply when the district court has reached beyond jurisdictional issues or issues of defective removal, and has remanded for other reasons. Accordingly, the order of remand here, based on the forum selection clause in the contract between Mutual Fire and Chesapeake, is not rendered unappealable by section 1447(d). In the words of another court of appeals that has considered this issue:

    [W]here a district court bypasses the jurisdictional arguments and reaches the merits of a contract dispute, the policy [behind section 1447(d) ] is inapplicable. Any delay caused by an appeal of the contract issue is a delay that must be countenanced. To apply section 1447(d) to the district court's decision on the enforceability of the forum selection clause would extend the scope of section 1447(d) far beyond its intended parameters and would leave matters of substantive contract law unreviewable. We refuse to impute such an intent to Congress.

    Pelleport Investors, Inc. v. Budco Quality Theatres, Inc., 741 F.2d 273, 277 (9th Cir.1984).

    In a similar vein, the Court of Appeals for the Sixth Circuit has stated, in a case also involving remand due to a forum selection clause: "[A] remand order is reviewable on appeal when it is based on a substantive decision on the merits of a collateral issue as opposed to just matters of jurisdiction." Regis Associates v. Rank Hotels (Management) Ltd., 894 F.2d 193, 194 (6th Cir.1990). See also Clorox Co. v. United States District Court for the Northern District of California, 779 F.2d 517, 520 (9th Cir.1985) (same; reviewing on appeal remand due to claimed waiver of removal); In re Delta America Re Ins. Co., 900 F.2d 890, 892 (6th Cir.1990) (following Regis; reviewing on appeal remand due to forum selection clause after removal by retrocessionaire); Karl Koch Erecting Co. v. New York Convention Center Dev. Corp., 838 F.2d 656, 658 (2d Cir.1988) (same; reviewing on appeal remand due to forum selection clause). 5

    Furthermore, an order remanding a case pursuant to a forum selection clause is "final" for the purposes of 28 U.S.C. Sec. 1291 under the collateral order doctrine as it conclusively determines a disputed issue wholly separate from the merits of the litigation, i.e., the legal construction of the clause; it ends the litigation in the federal forum, amounting to a dismissal since its purpose and effect is to surrender jurisdiction to the state court; and if not appealable now the order will be unreviewable. See Pelleport, 741 F.2d at 278.

    Accordingly, 28 U.S.C. Sec. 1447(d) does not bar review...

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