Schuler v. Adams
| Decision Date | 07 March 2022 |
| Docket Number | No. 21-1613,21-1613 |
| Citation | 27 F.4th 1203 |
| Parties | Robert J. SCHULER, husband; Nancy D. Schuler, wife; Windemere Property Owners Association, Inc., a Michigan non-profit corporation, Plaintiffs-Appellees, v. Robert P. ADAMS, husband; Carol A. Adams, wife, Defendants-Appellants, Michigan Department of Environment, Great Lakes and Energy; United States Army Corps of Engineers, Third-Party Defendants-Appellees. |
| Court | U.S. Court of Appeals — Sixth Circuit |
ON BRIEF: David E. Hart, Matthew Mitchell, MADDIN, HAUSER, ROTH & HELLER, P.C., Southfield, Michigan, for Appellants. Matthew T. Nelson, WARNER NORCROSS JUDD LLP, Grand Rapids, Michigan, for the Schuler and Windemere Property Owners Association Appellees. Daniel P. Bock, OFFICE OF THE MICHIGAN ATTORNEY GENERAL, Lansing, Michigan for State of Michigan Appellees.
Before: SILER, CLAY, and MURPHY, Circuit Judges.
It is black-letter law that federal courts of appeals generally have jurisdiction only over "final decisions" of federal district courts. 28 U.S.C. § 1291. It is also black-letter law that, as one exception to this rule, parties may immediately appeal a district court's nonfinal order granting a preliminary injunction. Id. § 1292(a)(1). But what happens if a state court grants the preliminary injunction, and a defendant then removes the case to federal court? Does the right to an early appeal of an injunction order cover the state court's order too? This appeal raises that question—one that falls in a gray area between these two black-letter principles.
Robert and Carol Adams want to build a home on their property, but their neighbors, Robert and Nancy Schuler, believe that their plans violate a restrictive covenant running with the land. A state court granted the Schulers a preliminary injunction stopping the construction. After the court's order, the Adamses filed a third-party complaint against the U.S. Army Corps of Engineers, which responded by removing the case to federal court. The Adamses then filed a notice of appeal of the state court's injunction order. But we have jurisdiction only over injunction orders "of" district courts, not state courts. Id. So we dismiss this appeal for lack of appellate jurisdiction.
In 1978, Heinz and Adriene Moellering paid $150,000 for just under 15 acres of pristine property abutting Lake Michigan in a county at the northernmost tip of mainland Michigan. Years later, the Moellerings proposed to divide their property into three parcels with three homes. They executed and recorded a "Declaration of Restriction on Land Use" to accomplish this division. Decl., R.1-1, PageID 36. The Declaration expressed their desire to construct an access road and septic line in wetlands on the property. Id. It also recognized that the proposal required "the discharge of fill material into wetlands" and that they needed to obtain permits from a state agency (the Michigan Department of Natural Resources) and a federal agency (the U.S. Army Corps of Engineers). Id. In exchange for the permits, the Moellerings covenanted that they would keep the remaining wetlands "in an unaltered natural condition." Id. The Declaration's terms made it binding on the Moellerings' successors and expressly gave the state and federal agencies a right to enforce it. Id.
The Moellerings sold one of the three parcels to the Schulers. The Schulers' deed stated that it was "subject to easements, restrictions, reservations and right-of-ways of record[.]" Deed, R.1-1, PageID 41. The Schulers now live at a home on this site.
The Moellerings sold the neighboring parcel to other purchasers. The Adamses eventually came to acquire this part of the Moellerings' property in 2020. Each deed in the Adamses' chain of title contains language like that in the Schulers' deed subjecting their parcel to recorded land-use restrictions.
No home has been built on the Adamses' property. Before selling the property to the Adamses, though, the prior owners applied with the U.S. Army Corps of Engineers for a permit to construct a home on it. The Corps told these owners that it had decided that their land fell within an area over which a separate state agency—the Michigan Department of Environment, Great Lakes and Energy—now had jurisdiction.
The prior owners thus applied for a permit with this state agency, which we will call the "Department." When the Department informed nearby property owners about the requested permit, the Schulers objected because the application proposed to build a much larger home than the one contemplated by the Moellerings' Declaration. The professional who prepared this application also failed to mention the land-use restrictions in the Moellerings' Declaration; instead, the application noted that no conservation easements or other deed restrictions existed. The Schulers' objections apparently did not refer to the Declaration either. In May 2020, despite those objections, the Department granted a permit that authorized the clearing of over 12,000 square feet of wetlands and the construction of the larger home. The Schulers took no action to dispute the grant of the permit at this time. The Department later approved the transfer of this permit to the Adamses.
The Adamses began construction of the home. On July 2, 2021, the Schulers (along with the Windemere Property Owners Association) sued them in Michigan state court. The Schulers noted that the Adamses' proposed home would substantially encroach on the wetlands that the Moellerings promised to preserve in their Declaration. They thus sought an injunction to stop the construction on the basis that it violated a restrictive covenant in that document. The state court issued a temporary restraining order on the same day.
At some point in time that the parties dispute, the Corps and the Department learned of the Declaration. The Corps noted that it could not enforce this Declaration because of its decision that it lacked jurisdiction of the property. The Department, by contrast, issued a violation notice asserting that the Adamses had submitted a "false, incomplete, or inaccurate" permit application by failing to mention the Declaration. Notice, R.19, PageID 955. The Adamses continue to negotiate with the Department about the issue.
Back in this suit, the parties prepared for a preliminary-injunction hearing in state court. The Adamses argued, among other things, that the Declaration's terms allowed only the Corps or Department (not the Schulers) to enforce it. They also argued that the equitable doctrine of laches should bar the Schulers from invoking the Declaration because they failed to appeal the Department's grant of a permit and waited until only after the Adamses began construction to assert their rights. On August 13, the state court rejected these arguments and converted its temporary restraining order into a preliminary injunction. It concluded that the Schulers could likely enforce the Declaration and that the remaining state-law injunction factors favored an injunction. The Adamses sought reconsideration of this preliminary-injunction decision, but the state court denied the motion on September 10.
Around the time of the state court's injunction order, the Adamses filed a third-party complaint that made the Corps and the Department parties to this suit. On September 23, the Corps responded by removing the case to federal district court under 28 U.S.C. § 1442(a)(1), the federal-officer removal statute.
Since then, the Adamses have dismissed all claims against the Corps with prejudice and against the Department without prejudice. The Schulers have also filed a motion to remand the suit to state court for lack of subject-matter jurisdiction. Their motion remains pending.
This case landed in our court on October 8, 2021. On that date, the Adamses filed a notice of appeal of the state court's preliminary-injunction order (from August 13) and its order denying reconsideration of the injunction (from September 10). Before assessing the validity of this injunction, we must confront several jurisdictional questions.
The parties initially disagree over whether the district court has subject-matter jurisdiction. The Schulers ask us to order a remand to state court for lack of subject-matter jurisdiction because the Adamses have dismissed the Corps—the party that gave the district court jurisdiction under 28 U.S.C. § 1442(a)(1). The Adamses respond that a district court retains discretionary supplemental jurisdiction over a case even after it dismisses the federal entity that gave it original jurisdiction. See 28 U.S.C. § 1367 ; compare Parker v. Della Rocco , 252 F.3d 663, 665–67 (2d Cir. 2001) (per curiam), with District of Columbia v. Merit Sys. Prot. Bd. , 762 F.2d 129, 133–34 (D.C. Cir. 1985) (per curiam); see also 14C Charles A. Wright et al., Federal Practice and Procedure § 3726, at 521–23 & n.83 (rev. 4th ed. 2018). In this case, moreover, the district court has yet to rule on the Schulers' motion to remand or decide whether to exercise its discretion to keep the case. Alternatively, the Adamses assert that the district court might have federal-question jurisdiction because, notwithstanding the well-pleaded complaint rule, substantial federal questions lurk in the record. See 28 U.S.C. § 1331 ; compare Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg. , 545 U.S. 308, 312, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005), with Merrell Dow Pharms. Inc. v. Thompson , 478 U.S. 804, 817, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986).
The parties next disagree over whether the Adamses filed a timely notice of appeal. Highlighting the jurisdictional nature of the general 30-day time limit to appeal, the Schulers note that the Adamses did not appeal within that time from the state court's original injunction order. See Bowles v. Russell , 551 U.S. 205, 211–13, 127 S.Ct. 2360, 168 L.Ed.2d 96 (2007) ; 28 U.S.C. § 2107(a) ; Fed. R. App. P. 4(a)(1)(A). They further argue that the Adamses cannot take an...
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