Korea Exchange Bank, New York Branch v. Trackwise Sales Corp.

• Decision Date: 14 September 1995
• Docket Number: No. 94-5672,94-5672
• Citation: 66 F.3d 46
• Parties: KOREA EXCHANGE BANK, NEW YORK BRANCH v. TRACKWISE SALES CORP.; Moo Sung Ko; and Young S. Ko., Appellants.
• Court: U.S. Court of Appeals — Third Circuit

Page 46

66 F.3d 46

KOREA EXCHANGE BANK, NEW YORK BRANCH v. TRACKWISE SALES CORP.; Moo Sung Ko; and Young S. Ko., Appellants.

No. 94-5672.

United States Court of Appeals Third Circuit.

Argued July 21, 1995.

Decided Sept. 14, 1995.

Michael S. Kimm (argued), Hackensack, NJ, for appellants.

Benjamin P. De Sena (argued), Wayne, NJ, for appellee.

Before: SLOVITER, Chief Judge, SCIRICA, and McKEE, Circuit Judges.

OPINION OF THE COURT

SLOVITER, Chief Judge.

In this case, we consider a challenge to a district court's order remanding a diversity case as improperly removed by a defendant who was a citizen of the forum state. Under the facts of this case, our jurisdiction to consider this appeal is inextricably intertwined with the district court's authority to remand this action to state court, and thus we consider them together.

I. Facts and Procedural History

On September 28, 1993, plaintiff Korea Exchange Bank, New York Branch, a citizen of New York State, filed a complaint against defendants Trackwise Sales Corporation, Moo Sung Ko, and Young S. Ko in the Superior Court of New Jersey, Bergen County, Law Division. All three defendants are citizens of New Jersey. In the complaint, Korea Exchange sought to recover on loans it made to defendant Trackwise and to enforce personal guarantees made by the two individual defendants. According to the complaint, the amount in dispute exceeds $300,000.

The complaint was served on Trackwise on December 28, 1993. On January 27, 1994, Trackwise filed a Notice of Removal in the United States District Court for the District of New Jersey, alleging diversity jurisdiction pursuant to 28 U.S.C. Sec. 1332. The other two defendants were served after the removal. It appears that thereafter the case lay dormant in the district court for seven and one-half months, although there is a docket entry by a magistrate judge setting a scheduling conference for September 30, 1994. On September 23, 1994, however, the district court sua sponte issued an order summarily remanding the case to state court. In that order, the court stated that "pursuant to 28 U.S.C. [Sec.] 1441(b)" the case was "improperly removed because the defendant is a citizen of the State in which the action was originally brought," and "this deficiency clearly appears on the face of the defendant's Notice of Removal." The court concluded that "pursuant to 28 U.S.C. [Sec.] 1441(c)(4), this court should make an Order for Summary Remand...." Defendants filed a notice of appeal.

II. Discussion

Korea Exchange contends that we lack jurisdiction over defendants' appeal. It relies primarily on 28 U.S.C. Sec. 1447(d), which provides that "[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise...." In adopting 28 U.S.C Sec. 1447(d), "Congress sought to make the judgment of a district court remanding a case final and conclusive in order to avoid the delay caused by appellate review of remand decisions." Liberty Mut. Ins. Co. v. Ward Trucking Corp., 48 F.3d 742, 745 (3d Cir.1995).

The leading case on the preclusion of review effected by section 1447(d) is Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 346, 96 S.Ct. 584, 590, 46 L.Ed.2d 542 (1976). A district judge had remanded a properly removed diversity case because of an overcrowded docket, rather than because the "case was removed improvidently and without jurisdiction," the grounds for remand set forth in 28 U.S.C. Sec. 1447(c) at that time. In Thermtron, the Court rejected a challenge to the right of an appellate court to review the remand order, because it construed section 1447(d) as applicable only to those remand orders that rely upon the grounds contained in 28 U.S.C. Sec. 1447(c). Remands issued for reasons "not recognized by the controlling statute," such as the reason given by that district judge, were not insulated from review by section 1447(d). Thermtron, 423 U.S. at 351, 96 S.Ct. at 593.

Section 1447(c) was amended by the Judicial Improvements and Access to Justice Act of 1988 to impose a 30-day limit on the time the plaintiff has to file a motion "to remand the case on the basis of any defect in removal procedure." At the same time Congress deleted the "remand improvidently" language from section 1447(c). Thus, the relevant portion of section 1447(c) now reads:

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. Sec. 1447(c).

In Air-Shields, Inc. v. Fullam, 891 F.2d 63 (3d Cir.1989), the defendant had filed an untimely removal petition and had failed to accompany it with the required surety bond. More than 30 days after the notice of removal was filed, the district court sua sponte remanded the case as having been "improvidently removed," language no longer in the statute. Id. at 65. We first considered whether we had jurisdiction to consider a petition for mandamus challenging that remand, and held that, under Thermtron, section 1447(d) did not preclude review under these circumstances. We concluded that section 1447(d) does not bar review where a district court issues an untimely order of remand pursuant to section 1447(c) due to a "procedural defect" in removal, because "[b]y remanding the case for procedural defects after the thirty day limit imposed by the revised Section 1447(c) had expired, the district court 'exceeded [its] statutorily defined power.' " Id. at 66 (quoting Thermtron, 423 U.S. at 351, 96 S.Ct. at 593); accord Hamilton v. Aetna Life & Cas. Co., 5 F.3d 642, 644 (2d Cir.1993), cert. denied, --- U.S. ----, 114 S.Ct. 1100, 127 L.Ed.2d 413 (1994); In re Shell Oil Co., 932 F.2d 1518, 1520-21 (3d Cir.1991), cert. denied, 502 U.S. 1049, 112 S.Ct. 914, 116 L.Ed.2d 814 (1992).

Thus, under this court's prior interpretation of Thermtron, we are precluded by section 1447(d) from reviewing remand orders based on "routine jurisdictional determinations," Liberty Mutual, 48 F.3d at 749; see also Carr v. American Red Cross, 17 F.3d 671, 682 (3d Cir.1994), but we may review untimely remand orders that are based on "procedural defects." Air-Shields, 891 F.2d at 66.

There is no dispute that defendants' removal of this case did not comply with 28 U.S.C. Sec. 1441(b), which provides that actions not involving federal questions "shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." 28 U.S.C. Sec. 1441(b). Because defendants are citizens of New Jersey and the case was originally filed in New Jersey state court, the action was not removable.

The question before us then is whether this was a "jurisdictional" defect, which would bar our jurisdiction to review, or whether it was a "procedural" defect, which Air-Shields holds is reviewable. Korea Exchange argues that because the district court's "jurisdiction" is based upon the removal statute, the court lacks "jurisdiction" over any diversity case that is removed by a defendant who is a citizen of the forum state.

Neither of the parties cites controlling Supreme Court precedent, but we are informed by a series of cases in which the Supreme Court consistently refused to treat the removal statute as imposing independent jurisdictional requirements. For example, in Baggs v. Martin, 179 U.S. 206, 21 S.Ct. 109, 45 L.Ed. 155 (1900), a receiver for a railroad appointed by a federal court was sued in state court for injuries and death of a passenger. The receiver removed the action, alleging a federal question because a federal court had appointed him. After the receiver lost on the merits, he appealed, contending, inter alia, that the federal court had not acquired jurisdiction through the removal because his federal appointment did not create a federal question. The Supreme Court assumed that there was no federal question supporting the original removal, but noted that the federal court would have had subject matter jurisdiction over any action brought by the injured party affecting the railroad and its property in the hands of the receiver. Therefore, according to the Baggs Court, the federal court "plainly had jurisdiction to entertain and determine the controversy, whether that jurisdiction was invoked by the parties seeking redress, or, as in this case, by the receiver." Id. at 209, 21 S.Ct. at 110. The distinction between subject matter jurisdiction and the detail as to which party may or did bring the case to federal court is an important one, because it arises in the case before us as well.

A comparable issue involving a removed case was presented in Mackay v. Uinta Dev. Co., 229 U.S. 173, 33 S.Ct. 638, 57 L.Ed. 1138 (1913). A Wyoming plaintiff filed an action in state court against a citizen of Utah for less than the amount required for diversity jurisdiction in federal court, but the defendant's related counterclaim was for an amount that exceeded the jurisdictional threshold. After the defendant removed the action to federal court, the case was tried without objection. On appeal, the court of appeals certified to the Supreme Court the question whether the manner in which the jurisdiction of the federal court had been invoked by removal undermined its jurisdiction.

The Supreme Court responded that where "there was the requisite amount and the diversity of citizenship necessary to give the United States circuit court [then the trial court] jurisdiction of the cause ... [t]he case ... resolves itself into an inquiry as to whether, if irregularly removed, it could be lawfully tried and determined." Id. at 176, 33 S.Ct. at 639. The Court concluded that there was no jurisdictional defect, noting that "[r]emoval proceedings are in the nature of process to bring the parties...