Dirauf v. Berger
| Decision Date | 28 December 2022 |
| Docket Number | 21-1044 |
| Parties | Kunlgunda DIRAUF; Ludwig Dirauf; Bruno Eckl; Hildegard Eckl; Doris Fabian; Alexander Fischer; Gerhard Flaig; Karin Flaig; Daniel Gebert; Fritz Gebert; Monika Gebert; Thomas Gebert ; Helga Haag ; Martin Haag; Anny Hanisch; Anton Hell; Alfred Herrmann; Irene Herrmann; Walter Horber; Christina Klenk; Hermann Klenk, (Deceased); Alfons Eckl, (Deceased); Volodymyr Koltyarov; Andreas Lober; Erika Marquardt; Manfred Marquardt; Daniel Neff; Marliese Neff; Werner Neff ; Erwin Pfeifroth; Dobernek Rainer; Gabriele Reichel; Walter Schmidt ; Waltraud Schmidt; Edwin Schott; Ingrid Schott; Ingrid Schott (as successor to Hermann Schott ); Melanie Schroth; Friedrich Schumann; Gudrun Schumann ; Karl Stahl; Hans Stein ; Christian Strobel ; Friedrich Strobel ; Hildegard Strobel; Timo Strobel; Dieter Vogt; Karl Weckert; Georg Weybrecht; Eugen Wolz; Gunther Fabian v. Lawrence S. BERGER; Berger and Bornstein Limited Liability Company ; 18 Central Shopping Center, L.P.; Success Theuhandgesellschaft GMBH; 299 Jefferson Road Limited Partnership; Bank Building Associates Limited Partnership ; Blair Road Associates LP ; Branchburg Plaza Investors LP; Carlstadt Building Associates, L.P.; Express Distribution Building Associates, L.P.; Hazelwood Avenue Associates, Limited Partnership; Industrial Avenue Investors, Limited Partnership; King Shopping Center LP ; MacArthur Plaza, Limited Partnership; Milik Street Associates Limited Partnership; New Milik Street Property LP; Route 206 Shopping Center Limited Partnership; Union Shopping Plaza Associates, L.P.; United States Land Resources LP; United States Realty Resources, Inc. ; USLR New Durham Road Associates, L.P.; Washington Shopping Center Inc.; Washington Shopping Center Investors, Limited Partnership; Waterford Investors LP; Eckart R. Straub Eckart R. Straub; Success Theuhandgesellschaft GMBH, Appellants |
| Court | U.S. Court of Appeals — Third Circuit |
Elliot D. Ostrove, Vahbiz P. Karanjia, Epstein Ostrove, 200 Metroplex Drive, Suite 304, Edison, NJ 08817, Counsel for Appellants
Alexander G. Benissatto, Shapiro Croland Reiser Apfel & Di Iorio, 411 Hackensack Avenue, Sixth Floor, Hackensack, NJ 07601, Daniel Schreck, Law Offices of G. Oliver Koppell & Associates, 99 Park Avenue, Suite 1100, New York, NY 10016, Counsel for Appellees
Before: SHWARTZ, MATEY and FUENTES, Circuit Judges.
Federal appellate courts have limited authority to review remand orders. We may not, for example, review remand orders where remand is based upon a lack of subject matter jurisdiction or a defect in the removal procedure. 28 U.S.C. § 1447(c) - (d). Here, Plaintiffs dismissed their sole federal claim, and the District Court thereafter sua sponte remanded the case to state court, stating that its remand was based upon both a lack of subject matter jurisdiction and a removal defect. The order was silent, however, as to whether the Court declined to exercise its discretion to consider the state law claims under 28 U.S.C. § 1367(c). For the reasons set forth below, we conclude that the District Court declined to exercise supplemental jurisdiction in ordering remand, and it thus had jurisdiction to issue the vacatur order now on appeal, and we have jurisdiction to review that order. Because remand was proper and vacatur of the remand order is not warranted, we will affirm.
Plaintiffs filed a lawsuit in New Jersey state court against Defendants, who are German citizens, and certain New Jersey-based individuals and entities, alleging, among other things, fraud arising from a real estate investment venture.1 The complaint included one federal claim under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962, 1964, and 120 state law claims.
Defendant Eckart Straub removed the case to federal district court with the consent of the other defendants, including Defendant Success Theuhandgesellschaft GMBH.2 Straub cited 28 U.S.C. §§ 1441 and 1446 as the bases for removal, asserting that the District Court had jurisdiction under 28 U.S.C. §§ 1331 and 1332.
Five days later, the New Jersey-based defendants sought permission to file a motion to dismiss. The next day, Plaintiffs voluntarily dismissed their RICO claim, leaving only the state-law claims. In the hours that followed, the New Jersey- and Germany-based defendants filed motions to dismiss.
Plaintiffs then filed a letter requesting, among other things, a "prompt remand to the state Superior Court." JA 229-31. Later that day, the District Court issued an order remanding the case back to state court ("Remand Order"), which explained among other things, that (1) a court must "examine its own subject matter jurisdiction," (2) the "basis for federal-question removal ... ha[d] been mooted" by Plaintiffs' dismissal of their federal claim, (3) diversity jurisdiction was lacking, and (4) one of the defendants was precluded by 28 U.S.C. § 1441(b)(2) from removing the case as a forum-defendant. JA 45-46. The District Court mailed a certified copy of the Remand Order the same day.
Approximately two weeks later, Defendants moved pursuant to Federal Rule of Civil Procedure 60(b) to vacate the Remand Order. The District Court denied the Rule 60(b) motion, Dirauf v. Berger, 506 F. Supp. 3d 254 (D.N.J. 2020) ("Vacatur Order"), concluding that remand was proper and explaining, among other things, that (1) § 1332(a)(2) does not "confer[ ] diversity jurisdiction over suits between alien plaintiffs and a group of defendants consisting of both citizens of a state and aliens," id. at 264 (); (2) it was not required to explain why it was declining to exercise supplemental jurisdiction, id. at 265-66 (citing Figueroa v. Buccaneer Hotel, 188 F.3d 172, 181 (3d Cir. 1999) ), though its "rationale should have been clear from the surrounding circumstances," id. at 266 ; and (3) its decision was correct because, among other things, the case had been in federal court for only seven days, no discovery had occurred, the state court was equally able to decide the motions to dismiss, there was "no strong reason of federal policy or judicial economy favoring retention of [the] state claims," and there was no apparent forum manipulation, which is only one factor in the remand analysis in any event, id. at 266-67 (citing Trans Penn Wax Corp. v. McCandless, 50 F.3d 217, 233 (3d Cir. 1995) ).
Defendants appealed. This Court initially dismissed the appeal for lack of jurisdiction but we thereafter vacated the dismissal order and referred the case to a merits panel. Meanwhile, the state court proceeding recommenced, and the court granted Defendants' motion to dismiss for lack of personal jurisdiction without prejudice. Dirauf v. Berger, No. MRS-L-001953-19, slip op. at 11 ( .
We first address whether we have appellate jurisdiction to review the Vacatur Order. See, e.g., Bumberger v. Ins. Co. of N. Am., 952 F.2d 764, 766 (3d Cir. 1991). Appellate jurisdiction turns on whether the District Court remanded under 28 U.S.C. § 1447(c) and (d) or consistent with 28 U.S.C. § 1367(c). Remands under § 1447(c) and (d) are predicated on a lack of subject matter jurisdiction or a defect in the removal procedure. Remands that occur consistent with § 1367(c) are based upon a court's decision not to exercise supplemental jurisdiction over state law claims. If a case is remanded under § 1447(d) for a reason set forth in § 1447(c), then appellate review is barred. Powerex Corp. v. Reliant Energy Servs., Inc., 551 U.S. 224, 229-30, 127 S.Ct. 2411, 168 L.Ed.2d 112 (2007) (citation omitted). If a case is remanded consistent with § 1367(c) as an exercise of discretion, then this Court has appellate jurisdiction to review the remand order. Carlsbad Tech., Inc. v. HIF Bio, Inc., 556 U.S. 635, 640, 129 S.Ct. 1862, 173 L.Ed.2d 843 (2009).
Here, to determine whether the remand was based on § 1447(c) or consistent with § 1367, we consider both the Remand and Vacatur Orders. Cf. Powerex Corp., 551 U.S. at 235, 127 S.Ct. 2411 (). Together with the District Court's actions, those orders make clear that the Remand Order cannot be characterized as a remand based on either of the grounds set forth in § 1447(c), but that it was instead an exercise of the Court's discretion under § 1367(c). First, the Vacatur Order expressly states that the District Court had, in fact, declined to exercise supplemental jurisdiction and that it "should have been clear from the surrounding circumstances" that it had done so. Dirauf, 506 F. Supp. 3d at 266. Second, the complaint contains over one hundred state-law claims, and the case had been in the federal court for only a few days before it was remanded, thus making the decision not to exercise supplemental jurisdiction facially warranted. Third, the purported forum-defendant defect does not make it arguable that the District Court's ground for remand was the absence of subject matter jurisdiction because a ruling regarding a removal defect would not have been required if the Court remanded solely based upon the lack of subject matter jurisdiction. Remand based upon a defect in the removal process is also not a jurisdictional defect, and there is no indication the District Court thought it was. Cf. Ariel Land Owners, Inc. v. Dring, 351 F.3d 611, 614 (3d Cir. 2003). Fourth, just as an exercise of discretion under § 1367 cannot be characterized as a subject matter jurisdiction remand, see Carlsbad, 556 U.S. at 640, 129 S.Ct. 1862, a sua sponte...
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