City of Albuquerque v. Soto Enters., Inc.

• Citation: 864 F.3d 1089
• Decision Date: 25 July 2017
• Docket Number: No. 16-2065,16-2065
• Parties: CITY OF ALBUQUERQUE, Plaintiff-Appellee, v. SOTO ENTERPRISES, INC., d/b/a Miracle Delivery Armored Services, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

864 F.3d 1089

CITY OF ALBUQUERQUE, Plaintiff-Appellee,

v.SOTO ENTERPRISES, INC., d/b/a Miracle Delivery Armored Services, Defendant-Appellant.

No. 16-2065

United States Court of Appeals, Tenth Circuit.

FILED July 25, 2017

Bradley H. Bartlett and David M. Mirazo, Mounce, Green, Myers, Safi, Paxson & Galatzan, P.C., El Paso, Texas, for Defendant-Appellant.

Christopher J. Tebo, Assistant City Attorney (Jessica M. Hernandez, City Attorney, and Nicholas Bullock, Assistant City Attorney, with him on the brief), City Attorney's Office, Albuquerque, New Mexico, for Plaintiff-Appellee.

Before MATHESON, PHILLIPS, and McHUGH, Circuit Judges.

PHILLIPS, Circuit Judge.

The district court remanded this case after concluding that the defendant had waived its right to remove by filing a motion to dismiss in state court. We hold that we have appellate jurisdiction over this appeal, and affirm.¹

BACKGROUND

The City of Albuquerque ("the City") provides public-bus services to Albuquerque residents. As part of those services, the City charges a fare payable by cash or coin. The City hired Soto Enterprises, Inc., d/b/a Miracle Delivery Armored Services ("Soto") to count the fare money, transport it by armored car to the City's bank for deposit, and verify the daily deposit amount with the City.

In the second half of 2014, the City noticed irregularities between the amount of fare money that it internally recorded and the amount Soto deposited. After investigating these irregularities, on October 30, 2015, the City sued Soto in New Mexico state court, alleging contract and tort claims. In its complaint, the City pleaded that it was a New Mexico municipal corporation and that Soto was a Texas corporation transacting business in New Mexico. The City claimed damages of $246,057.54.

On February 9, 2016, though the City had not yet served process on Soto, Soto filed three documents in state court in response to the complaint. At 2:18 p.m., Soto filed a partial motion to dismiss (the "motion to dismiss"), asserting that the City had failed to state a claim on its tort claims. At 2:23 p.m., Soto filed an answer. And at 3:38 p.m., Soto filed a notice of removal under 28 U.S.C. §§ 1441 and 1446, alleging diversity jurisdiction under 28 U.S.C. § 1332. So an hour and twenty minutes passed between Soto's motion to dismiss and its notice of removal.

In federal court, the City moved for a remand to state court, arguing that Soto had waived its right to remove the case to federal court after participating in the state court by filing the motion to dismiss. The district court agreed with the City's position and remanded the case. Soto now appeals.

DISCUSSION

Recognizing that Congress has limited our appellate jurisdiction to review remand orders, the City filed a motion to dismiss Soto's appeal, arguing that we lack jurisdiction. So, before we can address whether the district court erred in its waiver ruling, we must determine whether we have appellate jurisdiction to do so. W. Ins. Co. v. A & H Ins., Inc. , 784 F.3d 725, 727-28 (10th Cir. 2015). We review questions of our appellate jurisdiction de novo. Montez v. Hickenlooper , 640 F.3d 1126, 1130 (10th Cir. 2011).

I. Appellate Jurisdiction

To decide whether we have appellate jurisdiction to review the district court's waiver ruling, we are guided by two statutory subsections. The first is 28 U.S.C. § 1447(d), which provides as follows:

An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise, except that an order remanding a case to the State court from which it was removed pursuant to section 1442 or 1443 of this title shall be reviewable by appeal or otherwise.

Because Soto removed the case under § 1441, neither 28 U.S.C. § 1442 (which governs federal-officer removal) nor 28 U.S.C. § 1443 (which governs removal of civil-rights cases) applies here. On its face, § 1447(d) would lead us to believe that we lack appellate jurisdiction to review the district court's remand order, but we don't read that subsection in isolation. Instead, we read § 1447(d)in pari materia with its close neighbor, § 1447(c), and confine the reach of § 1447(d) to the two remands mentioned in § 1447(c). In re Stone Container Corp. , 360 F.3d 1216, 1218 (10th Cir. 2004).

Thus, the second guiding statutory subsection is 28 U.S.C. § 1447(c), which provides in part as follows:

A motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction 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.

So § 1447(c) speaks to two bases of remand: (1) those based on a lack of subject-matter jurisdiction, which have no time limit, and (2) those based on "any defect other than lack of subject matter jurisdiction," which must be filed within 30 days of removal. This means that under the governing interpretation, § 1447(d) limits our jurisdiction "only when the district court remands on grounds permitted by § 1447(c)." In re Stone , 360 F.3d at 1218 (quoting Dalrymple v. Grand River Dam Auth. , 145 F.3d 1180, 1184 (10th Cir. 1998) ). When a district court remands on other bases, we have appellate jurisdiction to review those remand orders. Am. Soda, LLP v. U.S. Filter Wastewater Grp., Inc. , 428 F.3d 921, 924 (10th Cir. 2005).

Here, the district court remanded the case to state court on a ground not expressly specified in § 1447(c), namely, that Soto waived its removal right by filing a motion to dismiss in state court (which we will refer to as "waiver by participation").² Our sister circuits disagree about whether waiver by participation falls within either of § 1447(c)'s two bases, and, until now, this court has not "wade[d] into" that conflict. Harvey v. U TE Indian Tribe of the Uintah & Ouray Reservation , 797 F.3d 800, 804 (10th Cir. 2015) (noting circuit split). To determine whether § 1447(d) limits our jurisdiction, we must determine whether waiver by participation falls within either of the § 1447(c) bases—(1) lack of subject-matter jurisdiction, or (2) any defect.

A. Subject-Matter Jurisdiction

"Subject matter jurisdiction defines the court's authority to hear a given type of case." Carlsbad Tech., Inc. v. HIF Bio, Inc. , 556 U.S. 635, 639, 129 S.Ct. 1862, 173 L.Ed.2d 843 (2009) (quoting United States v. Morton , 467 U.S. 822, 828, 104 S.Ct. 2769, 81 L.Ed.2d 680 (1984) ). "[I]t represents ‘the extent to which a court can rule on the conduct of persons or the status of things.’ " Id. (quoting Black's Law Dictionary 870 (8th ed. 2004)). And because parties cannot waive subject-matter jurisdiction, they can challenge it "at any time prior to final judgment." Grupo Dataflux v. Atlas Global Grp., L.P. , 541 U.S. 567, 571, 124 S.Ct. 1920, 158 L.Ed.2d 866 (2004). Moreover, the district courts have an independent obligation to address their own subject-matter jurisdiction and can dismiss actions sua sponte for a lack of subject-matter jurisdiction. United States v. Lugo , 170 F.3d 996, 1002 (10th Cir. 1999).

But procedural rules set by the Supreme Court and by common law "do not create or withdraw federal jurisdiction," Kontrick v. Ryan , 540 U.S. 443, 453, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004) (quoting Owen Equip. & Erection Co. v. Kroger , 437 U.S. 365, 370, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978) ), and "a court's subject-matter jurisdiction cannot be expanded to account for the parties' litigation conduct," id. at 456, 124 S.Ct. 906. This stems from a fundamental principle that "[o]nly Congress may determine a lower federal court's subject-matter jurisdiction." Id. at 452, 124 S.Ct. 906 (citing U.S. Const. art. III, § 1 ).

Waiver by participation is a common-law creation. Rothner v. City of Chicago , 879 F.2d 1402, 1408 (7th Cir. 1989). It concerns the situation where a defendant has participated in the state court before seeking removal. See 14B Charles Alan Wright et al., Federal Practice and Procedure § 3721 (4th ed. 2017) ("A state court defendant also may lose or waive the right to remove a case to a federal court by taking some substantial offensive or defensive action in the state court action...."). For instance, the defendant may have engaged in discovery, moved for summary judgment, or argued at a hearing. See id. (collecting cases). As such, waiver by participation functions as a procedural limitation. Harvey , 797 F.3d at 809 (Hartz, J., concurring) (stating that waiver by participation is a "defect in removal procedure "). And as a procedural, common-law limitation, waiver by participation doesn't implicate subject-matter jurisdiction. See Kontrick , 540 U.S. at 453, 124 S.Ct. 906 (explaining that procedural rules established by courts don't create or withdraw federal jurisdiction).

Indeed, a court could not say otherwise without contradicting two of subject-matter jurisdiction's core characteristics—(1) that only Congress can create or destroy subject-matter jurisdiction, U.S. Const. art. III, § 1, and (2) that a party's litigation conduct can't affect subject-matter jurisdiction, Kontrick , 540 U.S. at 453, 124 S.Ct. 906. Also, unlike jurisdictional defects (which cannot be waived and can be raised sua sponte by the court), courts lack authority to remand sua sponte for procedural defects, and the parties can waive such defects by failing to raise them in a timely manner. See, e.g. , Smith v. Mylan Inc. , 761 F.3d 1042, 1044 (9th Cir. 2014) (holding that a district court "cannot remand sua sponte based on a non jurisdictional defect because procedural deficiencies are waivable"). So we cannot characterize a procedural defect such as waiver by participation as jurisdictional.³

The Eleventh Circuit also treats waiver by participation as nonjurisdictional. Cogdell v. Wyeth , 366 F.3d 1245, 1248-49 (11th Cir. 2004). In Cogdell , the court declared that "[w]aiver may be a proper basis...