Adair v. Lease Partners, Inc.

• Decision Date: 28 October 2009
• Docket Number: No. 08-60674.,08-60674.
• Citation: 587 F.3d 238
• Parties: Glenn Allen ADAIR, doing business as Super D #229; Dallas Little, doing business as Little's Pharmacy; Southern Discount Drugs of Charleston, doing business as Southern Discount Drugs/Robert T. Salmon; May's Pharmacy, doing business as Coldwater Pharmacy/James A. May; Animal Medical Center of Ellisville, Inc.; et al., Plaintiffs-Appellees, v. LEASE PARTNERS, INC.; Bancorpsouth Bank, Defendants-Appellants, First Bank Richmond, S B, doing business as First Federal Leasing and Interstate Financial, Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

587 F.3d 238

Glenn Allen ADAIR, doing business as Super D #229; Dallas Little, doing business as Little's Pharmacy; Southern Discount Drugs of Charleston, doing business as Southern Discount Drugs/Robert T. Salmon; May's Pharmacy, doing business as Coldwater Pharmacy/James A. May; Animal Medical Center of Ellisville, Inc.; et al., Plaintiffs-Appellees, v. LEASE PARTNERS, INC.; Bancorpsouth Bank, Defendants-Appellants, First Bank Richmond, S B, doing business as First Federal Leasing and Interstate Financial, Appellant.

No. 08-60674.

United States Court of Appeals, Fifth Circuit.

October 28, 2009.

Paul N. Davis (argued), Butler, Snow, O'Mara, Stevens & Cannada, Jackson, MS, for Plaintiffs-Appellees.

Roy Hamilton Liddell, Trey Christian Dellinger (argued), Wells, Marble & Hurst, Ridgeland, MS, for Lease Partners, Inc., and Appellant.

James Patrick Caldwell (argued), Kevin Bryan Smith, Riley, Caldwell, Cork & Alvis, P.A., Tupelo, MS, for Bancorpsouth Bank.

Appeal from the United States District Court for the Southern District of Mississippi.

Before REAVLEY, JOLLY, and WIENER, Circuit Judges.

REAVLEY, Circuit Judge:

This is an appeal from the district court order remanding this case to state court. The Federal Deposit Insurance Corporation ("FDIC") — an intervening Defendant — had removed the case to federal court but was later dismissed as a party. The district court held that once the FDIC was dismissed, only supplemental jurisdiction remained over Appellees' remaining claims. The court subsequently exercised its claimed discretion to remand the case. We reverse.

I.

This case is a collection of claims brought by many individual pharmacies, pharmacists, veterinarians and veterinary clinics ("Plaintiffs") against individual salesmen and different financial institutions ("Defendants"). Plaintiffs filed the case in 1996 in Mississippi state court, alleging state law fraud, negligence, breach of contract, and usury claims. Plaintiffs allege that Defendants participated in a Ponzi scheme in which Defendants leased Recomm electronic advertising banners to Plaintiffs, fraudulently misrepresented their identity as lessors, and charged usurious interest rates on the finance charges.

After more than eleven years of litigation, the FDIC entered the case in 2007 as a receiver for a successor bank to one of the original Defendants.¹ The FDIC timely removed the case to federal district court pursuant to 12 U.S.C. § 1819(b)(2). In 2008 Plaintiffs filed a motion to dismiss all claims against the FDIC. Plaintiffs also filed a motion to remand the case to state court. The FDIC joined in Plaintiffs' motion to dismiss but not in their motion to remand.

The district court granted both of Plaintiffs' motions. With the FDIC no longer a party, the court held that no original federal jurisdiction remained over Plaintiffs' remaining claims and that it retained only supplemental jurisdiction over the remaining claims. As the court saw no reason to continue exercising jurisdiction over a case composed of what it saw as predominantly state claims, the court stated that it would exercise its discretion to remand the case to state court.

Defendants appeal the district court's remand order.

II.

An order remanding a case to state court is typically not reviewable on appeal.² However, this court has jurisdiction over a remand order where the district court based its decision on an affirmative exercise of discretion rather than on a finding of lack of jurisdiction. See Regan v. Starcraft Marine, LLC.³ A district court's remand order is final for appeal purposes. Quackenbush v. Allstate Ins. Co.⁴

Whether a district court has the discretion to remand a case to state court is a legal question this court reviews de novo. See Poche v. Tex. Air Corps, Inc.⁵ If the district court has the discretion to remand a case, this court reviews its decision for abuse of discretion.⁶

III.

None of the parties disputes that the district court had jurisdiction over the case at the time of remand. The issue is whether the court was obligated to retain jurisdiction and hear the case or whether it had discretion to remand. To answer this question, we must determine what kind of jurisdiction existed at the time of remand. See Buchner v. FDIC.⁷

When the federal court has original subject-matter jurisdiction over a claim, that jurisdiction is "not discretionary with the district court" and "can neither be conferred nor destroyed by the parties' waiver or agreement."⁸ However, if a court has only supplemental jurisdiction over a claim, Congress has granted authority to adjudicate the claim or remand the claim based on the court's discretion.⁹ Appellants argue that the district court had no authority to remand the case because 12 U.S.C. § 1819(b)(2) continues to provide original jurisdiction over all claims in the case, even after the FDIC's dismissal. Appellees argue that the district court had the discretion to remand the case pursuant to 28 U.S.C. § 1367(c) because the court retained only supplemental jurisdiction over the remaining claims once the FDIC was dismissed. Although the district court had very good reasons for remanding, our precedent supports the position of Appellants.

It is undisputed that the FDIC properly removed this case pursuant to 12 U.S.C. § 1819(b)(2). This statute states in relevant part:

(A) In general

[Except in situations irrelevant to the instant case], all suits of a civil nature at common law or in equity to which the Corporation [FDIC], in any capacity, is a party shall be deemed to arise under the laws of the United States.

(B) Removal

[Except in situations irrelevant to the instant case], the Corporation may, without bond or security, remove any action, suit, or proceeding from a State court to the appropriate United States district court before the end of the 90-day period beginning on the date the action, suit, or proceeding is filed against the Corporation or the Corporation is substituted as a party.¹⁰

Congress enacted § 1819(b)(2) as part of the Financial Institutions Reform, Recovery, and Enforcement Act ("FIRREA").¹¹ FIRREA is a comprehensive regulatory scheme that Congress passed in response to the savings-and-loan crisis of the late 1980s and early 1990s. See In re Meyerland Co.¹² Pursuant to FIRREA, the FDIC succeeded the Federal Savings and Loan Insurance Corporation ("FSLIC") as conservator and receiver for defaulting federally-insured financial institutions.¹³ FIRREA is specifically designed to "`enhance and clarify enforcement powers of the financial institution regulatory agencies,'" and "greatly expands the FDIC's role in regulating and supervising such institutions."¹⁴

Among the many powers granted to the FDIC by FIRREA, "[t]he power ... to invoke federal jurisdiction and to remove from state court is substantial."¹⁵ Pursuant to § 1819(b)(2)(A), all suits to which the FDIC is a party and all component claims in those suits are "conclusively presumed to arise under the laws of the United States, and thus ... within the original subject matter jurisdiction of the proper federal district court."¹⁶ Because a suit and all its component claims are conclusively deemed to arise under federal law once the FDIC is a party, § 1819(b)(2) provides jurisdiction over suits whose causes of action may otherwise largely depend on state law and which may not otherwise be subject to federal-question jurisdiction under the general federal-question statute of 28 U.S.C. § 1331.¹⁷ Ultimately, in enacting FIRREA, "Congress used very strong language to afford the FDIC every possibility of having a federal forum within the limits of Article III."¹⁸

The language of § 1819(b)(2)(A) states that all claims in a suit "arise under the laws of the United States" when the FDIC "is a party." Nothing in the statute specifically addresses what happens to a court's jurisdiction, if anything, when the FDIC is dismissed as a party. Consequently, the circuits are split on whether § 1819(b)(2) continues to provide original federal subject matter jurisdiction over a case after the FDIC is dismissed. Only three circuits have specifically addressed this issue. In the majority are the Fifth Circuit and the Second Circuit, which hold that § 1819(b)(2) continues to provide federal jurisdiction after the FDIC has been dismissed from a case or has transferred its assets to a third party. See FSLIC v. Griffin;¹⁹ FDIC v. Four Star Holding Co.²⁰ In the minority is the Third Circuit, which holds that original federal jurisdiction ceases with the dismissal of a FIRREA federal corporation and only supplemental jurisdiction remains.²¹ New Rock Asset Partners, L.P. v. Preferred Entity Advancements, Inc.²²

In Griffin, the FSLIC entered a state court action as receiver for the plaintiff and subsequently removed the case to federal court pursuant to 12 U.S.C. § 1730(k)(1), a statute which was later repealed and retroactively superseded by 12 U.S.C. § 1819.²³ During the pendency of the case, Congress passed FIRREA, and the FDIC succeeded the FSLIC as receiver.²⁴ The district court then granted Griffin's motion to dismiss its counterclaims against the FDIC, but the court retained jurisdiction over the case between Griffin and the FDIC's successor in interest, who had intervened against Griffin.²⁵ The district court ultimately held against Griffin.²⁶ Griffin appealed to this court, arguing that the federal court lacked jurisdiction once the FDIC was dismissed.²⁷

We disagreed, holding that federal jurisdiction continued to exist pursuant to § 1819 after the FDIC's dismissal.²⁸ The court provided two rationales for its decision. The court first stated that "[t]he power to remove is evaluated at the time of removal."²⁹ Although § 1730(k)(1) controlled when the FSLIC removed, FIRREA was enacted to "correct any possible jurisdictional defects existing at the time of removal."³⁰ Accordingly, the enacting of § 1819(b)(2) after removal and the FDIC's later dismissal...