Acad. of Country Music v. Cont'l Cas. Co.

• Citation: 991 F.3d 1059
• Decision Date: 22 March 2021
• Docket Number: No. 20-55589,20-55589
• Parties: ACADEMY OF COUNTRY MUSIC, a California nonprofit corporation, Plaintiff-Appellee, v. CONTINENTAL CASUALTY COMPANY, an Illinois corporation, Defendant-Appellant, and Does, 1 through 10, Defendants.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

991 F.3d 1059

ACADEMY OF COUNTRY MUSIC, a California nonprofit corporation, Plaintiff-Appellee,
v.
CONTINENTAL CASUALTY COMPANY, an Illinois corporation, Defendant-Appellant,
and
Does, 1 through 10, Defendants.

No. 20-55589

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 8, 2021 Pasadena, California
Filed March 22, 2021

Richard A. Simpson (argued), Wiley Rein LLP, Washington, D.C.; Robert C. Christensen, CNA Coverage Litigation Group, Oakland, California; for Defendant-Appellant.

Kayla Robinson (argued) and Kirk Pasich, Pasich LLP, Los Angeles, California, for Plaintiff-Appellee.

Before: Richard C. Tallman, Consuelo M. Callahan, and Kenneth K. Lee, Circuit Judges.

CALLAHAN, Circuit Judge:

We confront two jurisdictional issues. First, we consider whether the district court's transmittal of its sua sponte order remanding this civil action to a state court based solely on the notice of removal deprives federal courts of jurisdiction. Second, we consider whether review of the remand order is barred by 28 U.S.C. § 1447(d). We determine that the transmittal of the remand order does not deprive federal courts of jurisdiction and that review in this case is not barred by § 1447(d). The district court's requirement that a notice of removal prove subject matter jurisdiction is contrary to Dart Cherokee Basin Operating Co., LLC v. Owens , 574 U.S. 81, 89, 135 S.Ct. 547, 190 L.Ed.2d 495 (2014),¹ and accordingly, is not a "colorable" ground under 28 U.SC. § 1447(c). See Powerex Corp. v. Reliant Energy Servs., Inc. , 551 U.S. 224, 234, 127 S.Ct. 2411, 168 L.Ed.2d 112 (2007). Therefore, we vacate the district court's remand order.

991 F.3d 1061

I

On February 24, 2020, the Academy of Country Music (Academy) filed a lawsuit in a California Superior Court alleging that Continental Casualty Company (Continental) breached an insurance policy by denying coverage for a claim asserted against it by a former executive. On April 1, 2020, Continental removed the case to the U.S. District Court for the Central District of California. The Notice of Removal stated that the parties were diverse; the amount in controversy exceeded $75,000, exclusive of interest and costs; and that prior to the commencement of the action, Academy had made a demand on Continental for an amount in excess of $75,000.

On April 10, 2020, the district court issued a sua sponte order remanding the case to state court. The order's critical paragraphs read:

The Court is not satisfied that Defendant has satisfied its burden to show that the amount in controversy meets the jurisdictional requirement. Defendant makes no attempt to calculate damages, nor does it offer evidentiary support as to the existence and amount of punitive damages. The Court is unable to find a plausible allegation that the amount in controversy has been met. That Plaintiff's Complaint alleges damages "in an amount exceeding the Court's jurisdictional limit" is not persuasive, given that this likely refers to the jurisdictional limit of $25,000 for unlimited civil cases in California state court. There is nothing from which the Court could conclude that this reference to the "jurisdictional limit" refers to the jurisdictional limit for diversity jurisdiction.

The fact that Plaintiff, at one time, made a settlement demand in excess of $75,000 does not alter the result that the amount in controversy has not been established. A settlement demand is "relevant evidence of the amount in controversy if it appears to reflect a reasonable estimate of the plaintiff's claim," but it is not dispositive. Cohn v. Petsmart, Inc ., 281 F.3d 837, 840 (9th Cir. 2002). Here, Defendant offers no evidence to suggest that Plaintiff's demand reasonably estimates the value of its claims. "The removal statute is strictly construed against removal jurisdiction, and the burden of establishing federal jurisdiction falls to the party invoking the statute." California ex rel. Lockyer v. Dynegy, Inc. , 375 F.3d 831, 838 (9th Cir. 2004) (citing Ethridge v. Harbor House Rest. , 861 F.2d 1389, 1393 (9th Cir. 1988) ). "Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Gaus [v. Miles, Inc.] , 980 F.2d [564] at 566 [(9th Cir. 1992)]. Thus, the Court concludes that it lacks subject matter jurisdiction over this case.

The same day that the district court issued its sua sponte remand order it transmitted a certified copy of that order to the Los Angeles County Superior Court.

On April 27, 2020, Continental filed a motion to alter or amend the April 10 order pursuant to Federal Rule of Civil Procedure 59(a). The motion was supported by a declaration of one of Continental's claims professionals affirming the underlying policy's $2 million limit. It was also supported by a stipulation that the litigation concerned "(i) damages in the amount of $621,824.65; (ii) prejudgment interest of $85,681.17; and (iii) attorneys’ fees and costs of $562,893.95, for a total amount of $1,270,399.77."

On June 1, 2020, the district court denied the motion. The district court stated that its sua sponte order was a determination that it lacked subject matter jurisdiction

991 F.3d 1062

and that review of its decision was precluded by 28 U.S.C. § 1447(d). On June 8, 2020, Continental filed a timely notice of appeal.

II

There are two challenges to our jurisdiction in this appeal. First, did the district court's transmittal of its remand order to the state court deprive us, as well as the district court, of jurisdiction? See Seedman v. U.S.D.C ., 837 F.2d 413 (9th Cir. 1988). Second, if the transmittal of the remand order does not deprive the courts of jurisdiction, is review prohibited by 28 U.S.C. § 1447(d) ? These are questions of law which we review de novo. See Lively v. Wild Oats Markets, Inc. , 456 F.3d 933, 938 (9th Cir. 2006).

We have not always recognized the distinct natures of these two questions. However, we conclude that controlling case law holds that the district court's transmittal of its remand order does not immunize that order from review. We further conclude that despite the district court's characterization of its order, § 1447(d) does not bar our review because jurisdiction could not be determined when the district court issued its sua sponte order.

III

The distinction between federal court jurisdiction and jurisdiction to review a remand order was suggested in City of Waco, Texas v. United States Fidelity & Guaranty Co ., 293 U.S. 140, 55 S.Ct. 6, 79 L.Ed. 244 (1934). In an action that had been removed from a Texas court, the district court issued a single order that overruled the motion to remand, granted the motion to dismiss the cross-complaint, and remanded the balance of the action to state court. Id . at 142, 55 S.Ct. 6.

The City appealed alleging that the dismissal of its action was contrary to the law of Texas. Id . The Fifth Circuit held "that, as no appeal lies from an order of remand, the cause was irrevocably out of the District Court, the action of that court in dismissing the city's cross-action was moot, and its propriety could not be reviewed." Id. at 142–43, 55 S.Ct. 6. The Fifth Circuit further stated that "all matters concerning the entire controversy, both those presented by the cross bill, and those presented by the main suit are now, because of the remand, pending in the State court and for its action, unaffected by the attempt of the Federal court to dismiss the City's cross action." Id. at 143, 55 S.Ct. 6.

The Supreme Court did not agree. It reasoned that "[i]f the District Court's order stands the cross-action will be no part of the case which is remanded to the state court." Id . Critically, the Court stated: "True, no appeal lies from the order of remand; but in logic and in fact the decree of dismissal preceded that of remand and was made by the District Court while it had control of the cause. Indisputably this order is the subject of an appeal; and, if not reversed or set aside, is conclusive upon the petitioner." Id . In other words, even accepting that the remand order was not reviewable, its issuance and the pendency of the underlying suit in state court did not deprive the Court of jurisdiction.²

991 F.3d 1063

The distinction between federal court jurisdiction and review jurisdiction pursuant to § 1447(d) and its predecessors appears to have remained dormant until the Supreme Court decided Thermtron Products, Inc. v. Hermansdorfer , 423 U.S. 336, 96 S.Ct. 584, 46 L.Ed.2d 542 (1976). In Thermtron , the district court remanded an action to the state court because of its crowded docket. Id . at 340, 96 S.Ct. 584. Thermtron filed an alternate petition for writ of mandamus or prohibition with the Sixth Circuit, which held that it had no jurisdiction to review the removal order because of the prohibition against review in § 1447(d). Id . at 341–42, 96 S.Ct. 584.

The Supreme Court held that the district court had "exceeded its authority in remanding on grounds not permitted by the controlling statute," and that § 1447(d) was "not dispositive of the reviewability of remand orders in and of itself." Id . at 345, 96 S.Ct. 584. The Court ruled that ...