The State Of N.J. v. Fuld, 09-2891.

• Citation: 604 F.3d 816
• Decision Date: 17 May 2010
• Docket Number: No. 09-2891.,09-2891.
• Parties: The State of NEW JERSEY, DEPARTMENT OF TREASURY, DIVISION OF INVESTMENT, Appellantv.Richard FULD, Jr.; Christopher M. O'Meara; Joseph M. Gregory; Erin Callan; Ian Lowitt; David Goldfarb; Herbert H. McDade, III; Thomas Russo; Mark Walsh; Michael Anslie; John F. Akers; Roger S. Berlind; Thomas H. Cruikshank; Marsha Johnson Evans; Christopher Gent; Roland A. Hernandez; Henry Kaufman; Ernst & Young LLP; John D. Macomber.(Amended as per the Clerk's 09/02/09 Order).
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

604 F.3d 816

The State of NEW JERSEY, DEPARTMENT OF TREASURY, DIVISION OF INVESTMENT, Appellant

v.Richard FULD, Jr.; Christopher M. O'Meara; Joseph M. Gregory; Erin Callan; Ian Lowitt; David Goldfarb; Herbert H. McDade, III; Thomas Russo; Mark Walsh; Michael Anslie; John F. Akers; Roger S. Berlind; Thomas H. Cruikshank; Marsha Johnson Evans; Christopher Gent; Roland A. Hernandez; Henry Kaufman; Ernst & Young LLP; John D. Macomber.

(Amended as per the Clerk's 09/02/09 Order).

No. 09-2891.

United States Court of Appeals, Third Circuit.

Argued April 12, 2010.

Filed May 17, 2010.

Merrill G. Davidoff (Argued), Lawrence J. Lederer, Peter B. Nordberg, Robin Switzenbaum, Berger & Montague, Philadelphia, PA, Jeffrey W. Herrmann, Peter S. Pearlman, Cohn, Lifland, Pearlman, Herrmann & Knopf, Saddle Brook, NJ, for Appellant.

Mary E. McGarry (Argued), Michael J. Chepiga, Simpson, Thacher & Bartlett, New York, NY, Jeffrey J. Greenbaum (Argued), James M. Hirschhorn, Sills, Cummis & Gross, Newark, NJ, for Appellees Lehman Defendants.

David J. McLean, Latham & Watkins, Newark, NJ, Jamie L. Wine, Latham & Watkins New York, NY, for Appellee Ernst & Young LLP.

Robert J. Cleary, Proskauer Rose, New York, NY, for Appellee Erin Callan.

Before: SLOVITER, HARDIMAN, Circuit Judges, and RESTANI ^*, Judge.

OPINION OF THE COURT

SLOVITER, Circuit Judge.

The State of New Jersey, Department of Treasury, Division of Investment (“New Jersey”) appeals the District Court's order denying its motion to remand the action it brought under the Securities Act of 1933, a statute that specifically precludes removal, which defendants had removed to federal court. Defendants/Appellees Richard S. Fuld and various other officers and directors of Lehman Brothers Holdings, Inc., (collectively, “the Directors”) have filed a motion to dismiss the appeal for lack of appellate jurisdiction. We proceed to examine our jurisdiction over the District Court's order denying remand.

I.Background

New Jersey manages the pension and retirement plan funds for over 700,000 of its active and retired state employees. In April and June of 2008, New Jersey purchased over $180 million of investment securities from Lehman Brothers Holdings, Inc. (“Lehman”) consisting of preferred stock and common stock in Lehman. Three months after New Jersey's June purchases of these securities, Lehman filed for bankruptcy protection.

In March 2009, New Jersey filed a complaint in the Superior Court of New Jersey against the Directors and Ernst & Young LLP, an accounting firm, alleging violation of state law and the federal Securities Act of 1933 (the “Securities Act”), 15 U.S.C. §§ 77k, 77 l , 77 o, because of alleged material misstatements and omissions regarding the value of Lehman's assets. Lehman, protected by the automatic stay, 11 U.S.C. § 362(a)(1), was not named as a defendant.

New Jersey's complaint was one of dozens filed against the Directors by investors seeking to recover their investment losses. Those actions have been consolidated by the Judicial Panel on Multidistrict Litigation and are pending in the Southern District of New York. See In re Lehman Bros. Holdings, Inc., Sec. & Employee Ret. Income Sec. Act (ERISA) Litig. (“In re Lehman Bros.”), 598 F.Supp.2d 1362, 1364 (J.P.M.L.2009). Many of the actions, similar to the one brought by New Jersey in state court, were brought by state and local government investment funds.

The Directors removed New Jersey's action to federal court, asserting that it was “related to” the Lehman bankruptcy and hence removable under 28 U.S.C. §§ 1334(b) and 1452(a). New Jersey filed a motion to remand, arguing that section 22(a) of the Securities Act prohibits the removal from state courts of cases arising under the Act.¹ See 15 U.S.C. § 77v(a) (“Except as provided in section 77p(c) of this title [relating to class actions], no case arising under this subchapter and brought in any State court of competent jurisdiction shall be removed to any court of the United States.”). After considering the conflict between the Bankruptcy Code (which allows removal) and the Securities Act (which prohibits it), the District Court denied New Jersey's motion to remand, finding persuasive the decision of the Second Circuit that the bankruptcy removal statute, 28 U.S.C. §§ 1334(b) and 1452(a), trumps the anti-removal provision of the Securities Act. See State of N.J., Dep't of Treasury, Div. of Inv. v. Fuld, No. 09-1629(AET), 2009 WL 1810356, at *2 (D.N.J. June 25, 2009) (citing Cal. Pub. Employees' Ret. Sys. v. WorldCom, Inc., 368 F.3d 86 (2d Cir.2004) cert. denied, 543 U.S. 1080, 125 S.Ct. 862, 160 L.Ed.2d 824 (2005)). The statutory conflict raises an issue of first impression for our court, and to date the Second Circuit in WorldCom is the only court of appeals to have addressed it. 368 F.3d at 90.

In June 2009, New Jersey filed a notice of appeal from the District Court's order denying remand, citing 28 U.S.C. § 1291 and the collateral order doctrine as the bases for our appellate jurisdiction. New Jersey also filed, in the alternative, a petition for interlocutory appeal under 28 U.S.C. § 1292(b). The District Court granted in part New Jersey's motion for certification under § 1292(b), certifying for appeal the question of “how to resolve the statutory conflict between 28 U.S.C. § 1452(a) and Section 22(a) of the Securities Act of 1933, 15 U.S.C. § 77v(a).” State of N.J., Dep't of Treasury, Div. of Inv. v. Fuld, No. 09-1629(AET), 2009 WL 2905432, at *1 (D.N.J. Sept.8, 2009). A motions panel of this court denied the petition in a one-line order. See Order State of N.J., Dep't of Treasury, Div. of Inv. v. Fuld, No. 09-8068 (3d Cir. Oct. 16, 2009). The motions panel also denied New Jersey's petition for panel rehearing, which requested “that the Petition be referred for decision to the merits panel” in this appeal. N.J.'s Pet. for Panel Rehr'g at 1 State of N.J., Dep't of Treasury, Div. of Inv. v. Fuld, No. 09-8068 (3d Cir. Oct. 30, 2009). Accordingly, appellate jurisdiction must be found, if at all, in 28 U.S.C. § 1291 and the collateral order doctrine.² Before us is the Directors' motion to dismiss the appeal for lack of jurisdiction.

II.Discussion

The courts of appeals “have jurisdiction of appeals from all final decisions of the district courts of the United States, ... except where a direct review may be had in the Supreme Court.” 28 U.S.C. § 1291. A “final decision” is a decision by the district court that “ends the litigation on the merits and leaves nothing for the court to do but execute the judgment,” Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 89 L.Ed. 911 (1945), or one “by which a district court disassociates itself from a case,” Swint v. Chambers County Comm'n, 514 U.S. 35, 42, 115 S.Ct. 1203, 131 L.Ed.2d 60 (1995). However, the Supreme Court “has long given § 1291 a practical rather than a technical construction.” Mohawk Indus., Inc. v. Carpenter, --- U.S. ----, 130 S.Ct. 599, 605, --- L.Ed.2d ---- (2009) (quoting Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949) (internal quotations omitted)). Under the collateral order doctrine enunciated in Cohen over a half-century ago, the courts of appeals have appellate jurisdiction over “that small class [of orders] which finally determine claims of right separable from, and collateral to, rights asserted in the action, too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated.” 337 U.S. at 546, 69 S.Ct. 1221. The collateral order doctrine “permits appeals not only from a final decision ... but also from a small category of decisions that, although they do not end the litigation, must nonetheless be considered ‘final’ ” for purposes of § 1291. Swint, 514 U.S. at 42, 115 S.Ct. 1203 (citing Cohen, 337 U.S. at 546, 69 S.Ct. 1221).

To be appealable under the collateral order doctrine, an order must “[1] conclusively determine the disputed question, [2] resolve an important issue completely separate from the merits of the action, and [3] be effectively unreviewable on appeal from a final judgment.” Coopers & Lybrand v. Livesay, 437 U.S. 463, 468, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978). “[A] failure to meet any one of the three factors renders the doctrine inapplicable as a basis for appeal, no matter how compelling the other factors may be.” In re Pressman-Gutman Co., 459 F.3d 383, 396 (3d Cir.2006) (citing Virgin Islands v. Hodge, 359 F.3d 312, 320 (3d Cir.2004)).

The criteria are “stringent,” Digital Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863, 868, 114 S.Ct. 1992, 128 L.Ed.2d 842 (1994), and the scope of the doctrine is “narrow” and “modest,” Will v. Hallock, 546 U.S. 345, 350, 126 S.Ct. 952, 163 L.Ed.2d 836 (2006). The Supreme Court has stressed that the collateral order doctrine “must ‘never be allowed to swallow the general rule that a party is entitled to a single appeal, to be deferred until final judgment has been entered,’ ” Mohawk, 130 S.Ct. at 605 (quoting Digital Equip., 511 U.S. at 868, 114 S.Ct. 1992), since “[p]ermitting piecemeal, prejudgment appeals ... undermines ‘efficient judicial administration’ and encroaches upon the prerogatives of district court judges, who play a ‘special role’ in managing ongoing litigation,” id. (quoting Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 374, 101 S.Ct. 669, 66 L.Ed.2d 571 (1981)). “The justification for immediate appeal must therefore be sufficiently strong to overcome the usual benefits of deferring appeal until litigation concludes.” Id.

The parties in this appeal agree that the first two Cohen criteria are satisfied: the District Court's order “conclusively determine[s] the disputed question” and it “resolve[s] an important issue completely separate from the merits of the action.” Coopers & Lybrand, 437 U.S. at 468, 98 S.Ct. 2454. The parties dispute only whether the right at issue...