A Fla. Ltd. Liab. Co. v. Mt. Hawley Ins. Co.

• Citation: 621 F.3d 931
• Decision Date: 02 September 2010
• Docket Number: No. 09-35716.,09-35716.
• Parties: ATLANTIC NATIONAL TRUST LLC, a Florida limited liability company, Plaintiff-Appellee, v. MT. HAWLEY INSURANCE COMPANY, a Delaware corporation, Defendant-Appellant, Lebanon Hardboard LLC, an Oregon limited liability company; Tritalent Funding Group, LLC, an Oregon limited liability company, Defendants-Appellees, and Crump Insurance Services, Inc., a Texas corporation; Chamberlain Insurance Agency LLC, an Oregon limited liability company, Defendants.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

621 F.3d 931

ATLANTIC NATIONAL TRUST LLC, a Florida limited liability company, Plaintiff-Appellee,

v.MT. HAWLEY INSURANCE COMPANY, a Delaware corporation, Defendant-Appellant,Lebanon Hardboard LLC, an Oregon limited liability company; Tritalent Funding Group, LLC, an Oregon limited liability company, Defendants-Appellees,andCrump Insurance Services, Inc., a Texas corporation; Chamberlain Insurance Agency LLC, an Oregon limited liability company, Defendants.

No. 09-35716.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted May 7, 2010.

Filed Sept. 2, 2010.

Brian E. Sims, Morison Holden Derekwetzky & Prough, LLP, Walnut Creek, CA, for appellant Mt. Hawley Insurance Co.

John Folawn, Folawn Alterman Richardson LLP, Portland, OR, for appellee Atlantic National Trust, LLC.

Paul G. Dodds, Brownstein, Rask, Sweeney, Kerr, Grim, DeSylvia & Hay, LLP, Portland, OR, for appellee Tritalent Funding Group, LLC.

Dean D. DeChaine, Miller Nash LLP, Portland, OR, for appellee Lebanon Hardboard, LLC.

Appeal from the United States District Court for the District of Oregon, Ann L. Aiken, Chief District Judge, Presiding. D.C. No. 6:09-cv-06054-TC.

Before ANDREW J. KLEINFELD, CARLOS T. BEA and SANDRA S. IKUTA, Circuit Judges.

OPINION

IKUTA, Circuit Judge:

Today we hold that we lack appellate jurisdiction to review a federal district court order remanding a case to state court based on a ground colorably characterized as a “defect” for purposes of 28 U.S.C. § 1447(c). See 28 U.S.C. § 1447(d); Powerex Corp. v. Reliant Energy Servs., Inc., 551 U.S. 224, 127 S.Ct. 2411, 168 L.Ed.2d 112 (2007).

I

In October 2008, a fire caused over $10 million in damage to buildings and property owned by Lebanon Hardboard, LLC. Atlantic National Trust, LLC (“Atlantic”) had loaned money to Lebanon Hardboard secured by interests in the buildings and property. The loan agreements required Lebanon Hardboard to maintain fire insurance on the property for the benefit of Atlantic, and to assign all insurance proceeds to Atlantic. Tritalent Funding Group, LLC (“Tritalent”) had also loaned money to Lebanon Hardboard and had likewise obtained a security interest in the buildings and property.

Before the fire, Lebanon Hardboard submitted an application for fire insurance to Crump Insurance Services, Inc. (“Crump”) and Chamberlain Insurance Agency LLC (“Chamberlain”), both of which were agents of Mt. Hawley Insurance Company (“Mt.Hawley”). Mt. Hawley issued an insurance binder (the actual policy was not delivered until after the fire) to Lebanon Hardboard with a $4 million per occurrence limit, but the binder did not designate Atlantic or Tritalent as mortgagees or loss payees.

After the fire, Atlantic demanded payment under the policy from Lebanon Hardboard and Mt. Hawley. Mt. Hawley denied that Atlantic was covered by the insurance policy or that it had any obligation to pay Atlantic. On February 20, 2009, Atlantic filed a complaint for damages and declaratory relief against Mt. Hawley, Crump, Chamberlain, Lebanon Hardboard, and Tritalent in Oregon state court. Atlantic sought, among other things, reformation of the contract and a declaration that Atlantic's rights to the insurance proceeds were superior to Tritalent's and Lebanon Hardboard's. Atlantic gave Lebanon Hardboard and Mt. Hawley courtesy copies of the complaint on February 25, 2009.

The next day, Mt. Hawley removed the case to federal court without the consent of the other defendants. At that time, neither Mt. Hawley nor any of the other defendants had been served. Lebanon Hardboard and Tritalent waived service on March 3.

On March 19, 21 days after Mt. Hawley removed the case, Lebanon Hardboard and Tritalent filed a motion in district court to remand the case to state court. The next day, Atlantic joined the motion to remand.

A magistrate recommended that the district court remand the action because Lebanon Hardboard and Tritalent had not consented to removal and they timely exercised their right under 28 U.S.C. § 1448 to choose a state forum. ¹ The magistrate reasoned that removal of a case to federal court is subject to the “unanimity rule” set forth in Chicago Rock Island & Pacific Railway Co. v. Martin, 178 U.S. 245, 248, 20 S.Ct. 854, 44 L.Ed. 1055 (1900), which holds that all defendants must consent to or join in a removal, and here Mt. Hawley had violated that rule by failing to obtain the consent of its co-defendants. The district court adopted the magistrate's findings and recommendation and remanded the case to state court. ² This timely appeal followed.

II

The issue in this case is whether we have appellate jurisdiction to consider the appeal of the district court's remand order. As always, “we have jurisdiction to determine whether we have jurisdiction to hear the case.” Aguon-Schulte v. Guam Election Comm'n, 469 F.3d 1236, 1239 (9th Cir.2006). Because the scope of our authority to review an allegedly erroneous remand order is not entirely clear, we begin with a review of the legal framework.

A

“The beginning point of statutory interpretation must be the language of the statute.” Am. Bird Conservancy v. F.C.C., 545 F.3d 1190, 1193 (9th Cir.2008) (internal quotation marks omitted). Under 28 U.S.C. § 1447(d), “[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise....” ³ The Supreme Court has interpreted this section more narrowly than its plain language would indicate. See Thermtron Prods. Inc. v. Hermansdorfer, 423 U.S. 336, 343, 96 S.Ct. 584, 46 L.Ed.2d 542 (1976), superseded by statute on other grounds, 28 U.S.C. § 1447(c). As explained in Thermtron, § 1447(d) prohibits review only of remand orders issued pursuant to a ground enumerated in § 1447(c). Id. At the time Thermtron was decided, § 1447(c) stated, in part: “If at any time before final judgment it appears that the case was removed improvidently and without jurisdiction, the district court shall remand the case, and may order the payment of just costs.” Thermtron, 423 U.S. at 342, 96 S.Ct. 584. Thermtron indicated that the case at issue had not been removed “improvidently” because there was “no express statutory provision forbidding the removal” of the action and the case had been “timely removed in strict compliance with 28 U.S.C. § 1446.” Id. at 344 & n. 8, 96 S.Ct. 584. Moreover, the case had not been removed “without jurisdiction” because the case could have been filed initially in the district court pursuant to 28 U.S.C. § 1331. Id. at 344, 96 S.Ct. 584.

According to Thermtron, “[i]f a trial judge purports to remand a case on the ground that it was removed ‘improvidently and without jurisdiction,’ his order is not subject to challenge in the court of appeals.” Id. at 343, 96 S.Ct. 584. As the Supreme Court later explained, “[w]here the order is based on one of the enumerated grounds, review is unavailable no matter how plain the legal error in ordering the remand.” Briscoe v. Bell, 432 U.S. 404, 413 n. 13, 97 S.Ct. 2428, 53 L.Ed.2d 439 (1977); see also Gravitt v. Southwestern Bell Tel. Co., 430 U.S. 723, 97 S.Ct. 1439, 52 L.Ed.2d 1 (1977) (per curiam). Nevertheless, an appellate court can review a remand order when a trial judge “exceeded his statutorily defined power” by remanding “a properly removed case on grounds that he had no authority to consider.” Thermtron, 423 U.S. at 351, 96 S.Ct. 584. In the matter before it, Thermtron noted that the district court had remanded the case based on its concern about its “heavy docket,” which the district court “thought would unjustly delay plaintiffs in going to trial on the merits of their action.” Id. at 344, 96 S.Ct. 584. Because docket congestion was not a ground enumerated in § 1447(c), Thermtron held that there was appellate jurisdiction to review and reverse the district court's decision. Id. at 345, 96 S.Ct. 584.

B

After Thermtron, Congress amended § 1447(c) several times. See Powerex, 551 U.S. at 229-30, 127 S.Ct. 2411. At present, § 1447(c) states, in relevant part: 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.

In Powerex, the Court stated that it would “assume for purposes of this case” that the post- Thermtron amendments to § 1447(c) were “immaterial to Thermtron's gloss on § 1447(d),” so that § 1447(d)'s bar on appellate review is limited to remands based on subject matter jurisdiction and nonjurisdictional defects. Powerex, 551 U.S. at 230, 127 S.Ct. 2411 (citing Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 711-12, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996)). This assumption is consistent with the Court's practice of applying Thermtron's rule despite the changes in statutory language. See, e.g., Carlsbad Tech. Inc. v. HIF Bio, Inc., --- U.S. ----, 129 S.Ct. 1862, 1865-66, 173 L.Ed.2d 843 (2009); Kircher v. Putnam Funds Trust, 547 U.S. 633, 640-41, 126 S.Ct. 2145, 165 L.Ed.2d 92 (2006); Quackenbush, 517 U.S. at 711-12, 116 S.Ct. 1712; Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 127-28, 116 S.Ct. 494, 133 L.Ed.2d 461 (1995); Briscoe, 432 U.S. at 413 n. 8, 97 S.Ct. 2428; Gravitt, 430 U.S. at 724, 97 S.Ct. 1439. Our cases have followed the Court's lead in assuming that amendments to § 1447(c) are immaterial to Thermtron's gloss on § 1447(d). See, e.g., Kamm v. ITEX Corp., 568 F.3d 752, 754 (9th Cir.2009) (applying Thermtron to the present form of § 1447(c) without addressing the changed statutory language); Executive Software N. Am., Inc. v. U.S. Dist. Ct., 24 F.3d 1545, 1549 (9th Cir.1994) (same for 1988 amendments to § 1447(c)).

In applying Thermtron's rule that § 1447(d) does not preclude all appellate review of remand orders, we have held that review is appropriate in a number of situations...