Certain Underwriters at Lloyd's v. Warrantech

• Decision Date: 17 August 2006
• Docket Number: No. 04-11168.,04-11168.
• Citation: 461 F.3d 568
• Parties: CERTAIN UNDERWRITERS AT LLOYD'S, LONDON AND OTHER INSURANCE SUBSCRIBING TO RINSURANCE AGREEMENTS F96/2922/00 AND NO. F97/2992/00, Plaintiff-Appellee, v. WARRANTECH CORP.; Warrantech Consumer Products Services, Inc.; Warrantech Help Desk, Inc.; Joel San Antonio, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

461 F.3d 568

CERTAIN UNDERWRITERS AT LLOYD'S, LONDON AND OTHER INSURANCE SUBSCRIBING TO RINSURANCE AGREEMENTS F96/2922/00 AND NO. F97/2992/00, Plaintiff-Appellee, v. WARRANTECH CORP.; Warrantech Consumer Products Services, Inc.; Warrantech Help Desk, Inc.; Joel San Antonio, Defendant-Appellant.

No. 04-11168.

United States Court of Appeals, Fifth Circuit.

August 17, 2006.

Ben Taylor (argued), Walter A. Herring, Oscar Rey Rodriguez, Fulbright & Jaworski, Dallas, TX, for Plaintiff-Appellee.

Kent Geoffrey Rutter, Patricia L. Casey, Mark R. Trachtenberg, Haynes & Boone, Houston, TX, Karen S. Precella (argued), Haynes & Boone, Fort Worth, TX, for Defendants-Appellants.

Marshall M. Searcy, Jr. (argued), William Nolan Warren, Kelly, Hart & Hallman, Fort Worth, TX, for Joel San Antonio.

Appeal from the United States District Court for the Northern District of Texas.

Before REAVLEY, HIGGINBOTHAM and GARZA, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

This case brings questions of our jurisdiction to review an order remanding the case to state court after its removal as a case that "relates to" an earlier arbitration proceeding. Certain Underwriters at Lloyd's, London and Other Insurers Subscribing to Reinsurance Agreements F96/2922/00 and No. F97/2992/00 seek dismissal for lack of jurisdiction of the appeal filed by Warrantech Corporation and Joel San Antonio (collectively, "Appellants"). Appellants appeal (1) the district court's order remanding all "unresolved" issues back to state court; (2) the district court's order granting Underwriters partial summary judgment on Appellants' res judicata and collateral estoppel affirmative defenses; and (3) the district court's order dismissing with prejudice Warrantech's counterclaims.¹

I

This case arises out of the administration of consumer warranties and extended service plans on computers, printers, and related items sold by CompUSA, a national electronics retailer. CompUSA contracted with Warrantech to administer the warranties on CompUSA's consumer goods. The contract required Warrantech to obtain insurance to cover the cost of paying warranty claims, which Warrantech did with Houston General Insurance Company, a nonparty to this litigation. Houston General, in turn, reinsured a portion of the risk with Underwriters.

After approximately one year, Underwriters contended that Warrantech was paying unauthorized claims and refused to reinsure Houston General for any unauthorized amounts. Houston General instituted arbitration proceedings to determine Underwriters' obligations, which took place under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter, "the New York Convention").² After five weeks of hearings, the arbitration panel ordered Underwriters to pay Houston General $39 million, and the order was confirmed by the United States District Court for the Southern District of New York.³

On September 19, 2002, one month after the arbitral panel's decision, Underwriters filed the instant lawsuit against Warrantech in Texas state court, seeking to recoup as damages the reinsurance payments that Underwriters was ordered to pay Houston General.⁴ Warrantech filed counterclaims, asserting causes of action for fraud, unfair and deceptive insurance practices in violation of Article 21.21 of the Texas Insurance Code,⁵ and violation of the duty of good faith and fair dealing.⁶ After Underwriters added San Antonio to the litigation, the case was removed under 9 U.S.C. § 205,⁷ with Appellants asserting res judicata and collateral estoppel affirmative defenses based on the arbitration award to Houston General.

Underwriters moved to remand the matter to state court. In consideration of its jurisdiction, the district court, relying upon Beiser v. Weyler,⁸ stated that its only task was to determine whether Appellants' arbitration-related affirmative defenses were "facially frivolous."⁹ Concluding that they were not, the district court denied Underwriters' motion to remand. In its order, the court supplied a caveat: "If the court later makes a summary ruling that the arbitration award does not provide a defense to any of [Underwriters'] claims, the court will then consider whether the action should be remanded to the state court."¹⁰

Subsequently, Underwriters moved for partial summary judgment on Appellants' res judicata and collateral estoppel affirmative defenses and on Warrantech's state-law counterclaims. On August 24, 2004, the district court granted summary judgment for Underwriters, concluding that the affirmative defenses were without merit and dismissing Warrantech's counterclaims with prejudice. After determining that "there [was] no just reason for delay," the district court entered final judgment dismissing Warrantech's counterclaims.¹¹ That decision forms the basis of part of this appeal.

After its August 24 order, the district court requested additional briefing on whether Underwriters' remaining state-law claims should be remanded to state court given that the issues related to the arbitration award were no longer part of the lawsuit. After briefing, the district court granted Underwriters' motion to remand, concluding that Appellants were not asserting any "non-frivolous" defense based on the arbitration award.¹² Finding no "policy" reasons in support of exercising jurisdiction over this case and concluding that there were "no other grounds for federal jurisdiction," the district court remanded all "unresolved claims and causes of action" to state court.¹³

II

We must first decide what we can decide. Prior to remanding all "unresolved" matters to the Texas state court, the district court granted Underwriters' motion for partial summary judgment on Appellants' res judicata and collateral estoppel affirmative defenses and Warrantech's state-law counterclaims. Appellants seek merits review of each of the district court's orders. Underwriters seeks dismissal for lack of appellate jurisdiction.

A

Our analysis of the district court's remand order begins with 28 U.S.C. § 1447(d): "An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise."¹⁴ The Supreme Court instructs that § 1447(d) must be read in pari materia with § 1447(c),¹⁵ which provides two bases for remanding cases to state court: (1) a defect in the removal procedure (which must be made within 30 days of the date of removal) and (2) the lack of subject matter jurisdiction.¹⁶

It is plain that with any remand based on the enumerated grounds of § 1447(c), the clear language of § 1447(d) is an absolute bar to appellate review.¹⁷ Since there is no contention, here, of a defect in the removal procedure, we only lack appellate jurisdiction to review the district court's remand order if it is based on a lack of subject matter jurisdiction.

Our analysis is complicated by the Supreme Court's recognition, in a narrow category of cases,¹⁸ that a district court can remand a case to state court on the basis of a non-§ 1447(c) ground.¹⁹ In Carnegie-Mellon University v. Cohill, the Supreme Court held that where all federal claims have been eliminated a federal district court "has discretion to remand to state court a removed case involving pendent claims upon a proper determination that retaining jurisdiction over the case would be inappropriate."²⁰ To the Court, under limited circumstances "a remand may best promote the values of economy, convenience, fairness, and comity."²¹ Thus, it is also plain that with any remand based on the policy considerations offered in Carnegie-Mellon, § 1447(d) is no longer a bar to appellate review.²² Should we find jurisdiction to review the district court's remand order, our review is for an abuse of discretion.²³

So framed, we must determine whether the district court's order remanding all "unresolved" matters to state court was based on jurisdictional grounds, i.e., § 1447(c), which bars appellate review, or nonstatutory grounds, i.e., Carnegie-Mellon, which allows for discretionary review. Our inquiry is guided by a clear statement requirement: for a remand order to be reviewable on appeal, the district court must "clearly and affirmatively" state a non-§ 1447(c) ground for remand.²⁴ Our clear-statement requirement allows a quick inquiry into jurisdiction, preventing delay through protracted litigation of jurisdictional issues,²⁵ and it avoids having this Court decipher the tea-leaves of a district court's remand order to determine whether it was "jurisdictional" or not. When the matter is remanded to state court (often following removal from state court initially), the district court has determined that the plaintiff's choice of forum should stand. Our clear-statement requirement best serves this policy.

Moreover, our clear-statement requirement focuses our inquiry away from the merits of the district court's decision. Section 1447(d) precludes examination of the merits of the district court's actions; we only must determine what the district court perceived it was doing, as "no matter how erroneous,"²⁶ a remand order based on a § 1447(c) ground precludes review on appeal. A contrary rule—one requiring a thorough and exhaustive examination of the district court's reasons for remand — risks tainting the limited, jurisdictional-inquiry mandated by § 1447(d) with a merits-inquiry, a process that, as noted, would only lead to a lengthier appeals process. Although we are not in search of magic words, our clear-statement requirement carefully delimitates our jurisdiction — neither expanding it beyond statutorily imposed limits, nor eschewing it when matters are appropriately before us.

Nothing in the Supreme Court's recent decision in Kircher v. Putnam Funds Trust requires us to back away from our clear statement requirement. There, the Court held that § 1447(d)'s ban on appellate review of remand orders applied to cases removed under the Securities Litigation Uniform Standards ...