Allstate Ins. Co., In re

• Citation: 8 F.3d 219
• Decision Date: 16 November 1993
• Docket Number: No. 93-1179,93-1179
• Parties: In re ALLSTATE INSURANCE COMPANY, Petitioner.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 219

8 F.3d 219

62 USLW 2327

In re ALLSTATE INSURANCE COMPANY, Petitioner.

No. 93-1179.

United States Court of Appeals Fifth Circuit.

Nov. 16, 1993.

Dwight C. Hartley, Liles, Hartley & Jensen, L.L.P., Fort Worth, TX, for appellant.

Jay K. Gray, Law Offices of Charles M. Noteboom, P.C., Hurst, TX, for appellee.

Petition for Writ of Mandamus to the United States District Court for the Northern District of Texas.

Before HIGGINBOTHAM, SMITH, and DeMOSS, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

This petition for writ of mandamus presents an issue of first impression in the circuit courts, and one we expressly reserved in FDIC v. Loyd, 955 F.2d 316, 321 n. 4 (5th Cir.1992), to wit: whether the federal removal statute, 28 U.S.C. § 1441 et seq., permits a district court to remand a case sua sponte for a "defect in removal procedure" where the remand occurs within the thirty-day period allowed by § 1447(c) for motions to remand. We conclude that the 1988 amendments to § 1447(c) divested the district courts of any such discretion.

I.

Oran Washburn filed suit in Texas state court on October 5, 1992, against Allstate Insurance Company ("Allstate") for breach of contract arising from his uninsured/underinsured motorist insurance policy. Although the original petition did not allege more than $50,000 in damages, Washburn's amended petition, which added several statutory causes of action, alleged a breach of the duty of good faith and fair dealing, and sought punitive damages, would, if he were successful, entitle him to recover greater than the $50,000 jurisdictional minimum needed to support diversity jurisdiction.

On December 30, 1992, Allstate filed its notice of removal in the United States District Court for the Northern District of Texas. The same day, the district court entered its order of remand, citing as its reason Allstate's failure adequately to allege Washburn's residence at the time the state petition was filed. ¹ Allstate now seeks a writ of mandamus to vacate the order of remand.

II.

We first address whether we have jurisdiction to review the district court's order. Our authority to review a remand order is severely circumscribed by 28 U.S.C. § 1447(d), which provides, in pertinent part, that "[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise...." ² Despite the broad sweep of the statute, the Court in Thermtron Prods. v. Hermansdorfer, 423 U.S. 336, 345-46, 96 S.Ct. 584, 590, 46 L.Ed.2d 542 (1976), limited its purview by holding that "only remand orders issued under § 1447(c) and invoking the grounds specified therein ... are immune from review under § 1447(d)." The Court concluded that mandamus is an appropriate remedy "where the district court has refused to adjudicate a case, and has remanded it on grounds not authorized by the removal statutes." Id. at 353, 96 S.Ct. at 594.

We may review a remand order on petition for writ of mandamus, therefore, provided that it was entered on grounds not authorized by § 1447(c). As we explain in greater detail below, the district court acted without statutory authority when it sua sponte remanded the case on procedural grounds. Consequently, § 1447(d) poses no bar to our review.

III.

As amended by the Judicial Improvements and Access to Justice Act of 1988, Pub.L. No. 100-702, 102 Stat. 4642, 4670, § 1016(c) states, in pertinent 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.

28 U.S.C. § 1447(c) (Supp.1993). In the recent cases of In re Shell Oil Co., 932 F.2d 1518, 1519 (5th Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 914, 116 L.Ed.2d 814 (1992), and Loyd, we granted the petitions for writs of mandamus and directed the district courts to vacate their remand orders, respectively, where the court had granted a motion to remand for a defect in removal procedure made outside § 1447(c)'s thirty-day limit, and where the court sua sponte had entered an untimely order on the same ground. ³

Here, the district court remanded on the same day Allstate filed its notice of removal, explaining that "[Allstate] has failed to adequately plead Plaintiff's residence at the time of filing of the original petition. Thus, [Allstate] has failed to properly remove this case, and this case must be remanded." Plainly, the district court's order was nothing if not timely; the question that concerns us is whether it was made in response to a defect in removal procedure, and, if so, whether § 1447(c) authorizes a court's sua sponte remand on such grounds.

Although it is "well settled that a removing party must allege diversity both at the time of the filing of the suit in state court and at the time of removal," Schwinn Bicycle Co. v. Brown, 535 F.Supp. 486, 487 (W.D.Ark.1982); Hubbard v. Tripp, 611 F.Supp. 895, 896 (E.D.Va.1985), a "procedural defect" within the meaning of § 1447(c) refers to "any defect that does not go to the question of whether the case originally could have been brought in federal district court...." Baris v. Sulpicio Lines, 932 F.2d 1540, 1544 (5th Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 430, 116 L.Ed.2d 449 (1991); see also Shell, 932 F.2d at 1522 (" '[A]ny defect in removal procedure' includes all non-jurisdictional defects existing at the time of removal."). By this standard, Allstate's failure to allege, in its notice of removal, the plaintiff's citizenship at the time the original petition was filed constitutes a procedural, rather than jurisdictional, defect; although Allstate failed conclusively to demonstrate diversity, the record discloses no dispute that it in fact existed. ⁴

Thus, we are faced squarely with the question left undecided in Loyd: whether § 1447(c)'s use of the word "motion" refers exclusively to motions made by parties or includes sua sponte remands. In Loyd, the district court concluded that the state court defendants had removed untimely, and it remanded sua sponte after twenty-one months had elapsed since the date of removal. On petition for writ of mandamus, we rejected the district court's contention (i) that § 1447(c)'s thirty-day limit for filing remand motions did not constrain the district court, and (ii) that the court possessed inherent authority to remand sua sponte for procedural defects even after the time limit had passed. See Loyd, 955 F.2d at 318.

Finding use of the word "motion" inconclusive as to whether it includes sua sponte actions, the Loyd panel reasoned, from the caselaw and the legislative history of the 1988 amendments, that the district court had no authority to remand on its own motion after the expiration of the thirty-day limit. The court expressly reserved the question whether § 1447(c) authorizes a court to remand sua sponte within the thirty-day limit. See Loyd, 955 F.2d at 321 n. 4. ⁵

Prior to the 1988 amendments to § 1447(c), a court undoubtedly possessed the power to remand sua sponte "[i]f at any time before final judgment it appear[ed] that the case was removed improvidently and without jurisdiction...." 28 U.S.C. § 1447(c) (1973) (repealed 1988). Respondent Washburn points to our statement in Medscope Marine, 972 F.2d at 109-10, that the amended statute "is a mere reconstitution of the existing statute and jurisprudence, with the addition of a strict time limitation on the privilege of filing remand motions," to advance his argument that the court still may remand sua sponte. ⁶ While we acknowledge the thrust of Medscope's reading, we find it more than balanced in this regard by the dictum in Ziegler v. Champion Mortgage Co., 913 F.2d 228, 230 (5th Cir.1990), which states that

considering a motion to remand is both procedurally and substantively different from inquiring into the existence of subject matter jurisdiction. Procedurally, a court may consider remand only if the parties raise the issue; conversely, a court must consider the existence of subject matter jurisdiction on its own motion.

(Emphasis added.) See also Loyd, 955 F.2d at 323 (incorporating Ziegler's dictum into its holding).

Beginning, as we must, with the language of the statute, we note that the phrase, "[a] motion to remand the case ... must be made," implies that only a party to the case may initiate it. ⁷ Respondent's argument that "[t]he court's power to monitor its cases for defects is inherent in its authority" fails to recognize that Loyd implicitly rejected the district court's related argument that its inherent authority to remand sua sponte (even outside the thirty-day limit) had survived the 1988 amendments. Loyd, 955 F.2d at 318. Our reading of Loyd leaves no room for inherent authority; either the statute confers upon the court power to remand on its own initiative, or the court has no such power.

Given Thermtron and Loyd, moreover, we are persuaded that the better reading precludes the existence of discretion in the district court to remand for procedural defects on its own motion. Section 1447(c)'s second sentence assigns to the court concern for its jurisdictional prerequisites; the first consigns procedural formalities to the care of the parties. We believe this to be a wise and warranted distribution.

Where a removed plaintiff, by its inaction, has acquiesced in federal jurisdiction, for example, it hardly will do for the court sua sponte to interfere with the parties' apparent choice of forum. In such circumstances, where subject matter jurisdiction exists and any procedural shortcomings may be cured by resort to § 1653, we can surmise no valid reason for the court to decline the exercise of jurisdiction. ⁸ Congressional intent seems to sanction such a result, for as the legislative history of the 1988 amendments states,

[s]o long as the defect in...