Todd v. Richmond
| Decision Date | 27 February 1995 |
| Docket Number | No. 94-4001-SAC.,94-4001-SAC. |
| Citation | 877 F. Supp. 1485 |
| Parties | Ron TODD, Commissioner of Insurance, Insurance Department of Kansas, as Liquidator for National Colonial Insurance Company, Plaintiff, v. Murray RICHMOND, in his capacity as Trustee of certain Trusts, Defendant. |
| Court | U.S. District Court — District of Kansas |
Miriam Glueck, Polsinelli, White, Vardeman & Shalton, Overland Park, KS, Frank A. Caro, Jr., Richard H. Ralston, Mary Jo Shaney, Polsinelli, White, Vardeman & Shalton, Kansas City, MO, for plaintiff.
Stephen M. Kerwick, Wichita, KS, James L. Grimes, Jr., Foulston & Siefkin, Topeka, KS, Steven A. Berger, Berger, Stern & Webb, New York City, for defendant.
The case comes before the court on the defendant's motion to certify the court's order filed May 3, 1994, for immediate appeal pursuant to 28 U.S.C. § 1292(b). Before going to the merits, the court will explain its reasons for waiting until now to decide this pending motion. A brief procedural history to the case will help one to understand those reasons.
In January of 1994, the plaintiff, the state court-ordered liquidator for National Colonial Insurance Company ("NCIC") filed in the District Court of Shawnee County, Kansas, an action against Murray Richmond as the trustee of certain irrevocable trusts created by the DSN Dealer Service Network, Inc. ("DSN"). The ongoing business relationship between DSN and NCIC was built around the following transactions. DSN sold and administered extended warranty service contracts. DSN deposited some of the contract sale proceeds into trust funds that were then used to reimburse dealers for claims made on the service contracts. NCIC insured some of DSN's extended warranty service contract programs, that is, NCIC essentially guaranteed the dealers they would be reimbursed in the event the trust funds were insufficient to meet all contract claims.
In its suit, the plaintiff liquidator alleged that the trustee had misused trust funds and had refused to cooperate in the state's liquidation proceeding of NCIC. Three days after the state suit was filed, the defendant removed it to federal court alleging diversity jurisdiction. Four days after that, the plaintiff filed its motion to remand on abstention grounds.
Giving the motion to remand the expedited treatment requested by the parties, the court denied the motion in an order published at Todd v. Richmond, 844 F.Supp. 1422 (D.Kan. 1994). The court therein agreed with the plaintiff that even though abstention was not one of the two grounds for remand mentioned in 28 U.S.C. § 1447(c) the court had authority to remand on the basis of Burford1 abstention. 844 F.Supp. at 1425. In the court's judgment, the factors favoring abstention that were argued by the plaintiff lacked the weight and number to defeat the strong preference for exercising federal jurisdiction. 844 F.Supp. at 1430-31.
The plaintiff took a second swing at remand in the form of a motion to reconsider. The plaintiff sharpened its analysis of the legal issues presented by current case law. The new analysis persuaded the court that it had "misapprehended the factual and legal basis of the plaintiff's intended case." Todd v. Richmond, 853 F.Supp. 1309, 1314 (D.Kan. 1994) (footnote omitted). Specifically, the court came to appreciate that a determination of NCIC's potential liability exposure turned on a number of legal issues that were to be decided in the state liquidation proceeding or that were inextricably intertwined with that proceeding. Consequently, the court granted the plaintiff's motion to reconsider and remanded the case to state court. 853 F.Supp. at 1315. This is the same order from which the defendant now seeks to take an interlocutory appeal.
The day after the court filed its order granting the plaintiff's motion to reconsider, the defendant moved to stay the remand (Dk. 41). To preserve the status quo pending its decision on the motion to stay, the court directed the clerk of the court to withhold mailing the court's remand order to the state court (Dk. 43). The defendant filed its notice of appeal on the same day, May 4, 1994. (Dk. 44).
On May 18, 1994, the defendant filed the instant motion to certify pursuant to 28 U.S.C. § 1292(b) for immediate appeal. (Dk. 50). In its opposition to this motion, the plaintiff questioned the district court's authority to decide the motion citing the well-established rule that a district court's jurisdiction over a case divests upon the filing of a proper notice of appeal. (Dk. 52 at n. 1). On June 20, 1994, the district court received the Tenth Circuit's mandate that it had dismissed the appeal on the appellant's own motion. (Dk. 53). The next day the plaintiff filed the following notice with the district court:
Plaintiff Rod (sic) Todd, in his capacity as Liquidator of National Colonial Insurance Company, hereby notifies this Court that Defendant Murray Richmond, who filed a Notice of Appeal alternatively seeking mandamus on May 4, 1993, voluntarily dismissed his appeal on or around June 13, 1994, and that on June 20, 1994, the Plaintiff and Appellee Ron Todd filed with the Tenth Circuit Court of Appeals its Motion to Consider and Modify the Court Order Dismissing Appellant's Voluntary Dismissal. There is presently pending, therefore, a matter before the Tenth Circuit Court of Appeals in connection with this case.
(Dk. 55). The district court learned the first week in February of 1995 that the plaintiff's motion pending before the Tenth Circuit had been denied in November of 1994.
From the filing of the notice of appeal until the Tenth Circuit's issuance of the mandate in June of 1994, the court assumed it did not have control of the case to decide the motion to certify. But cf. Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 378-79, 105 S.Ct. 1327, 1330-31, 84 L.Ed.2d 274 (1985). By what the plaintiff had filed, the court also assumed the plaintiff's position to be the same on the district court's apparent lack of jurisdiction. Upon the Tenth Circuit's issuance of the mandate on June 20, 1994, the court knew it probably regained jurisdiction of the case. See Caldwell v. Puget Sound Elec. Apprenticeship and Training Trust, 824 F.2d 765, 767 (9th Cir.1987). The plaintiff, however, filed on June 21, 1994, in the Tenth Circuit a motion to modify the dismissal order and mandate so as to have the defendant's appeal dismissed with prejudice and to have the district court ordered to remand the case immediately to state court. At that time the district court believed the more prudent use of judicial resources was to wait for the Tenth Circuit's decision on the plaintiff's motion. In hindsight, that was the wrong decision, and the court apologizes for the delay resulting from it.
Pursuant to 28 U.S.C. § 1292(b), the defendant asks the court to amend its order on reconsideration adding that the order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation. Analysis of this motion to certify tracks the following three issues: (1) whether 28 U.S.C. § 1447(d) precludes review of the remand order; (2) if review is available, whether an extraordinary writ is the only permissible means for seeking review; and (3) whether certification for interlocutory appeal is the proper avenue for review.
28 U.S.C. § 1447(d)
This provision reads:
An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise, except that an order remanding a case to the State court from which it was removed pursuant to section 1443 of this title shall be reviewable by appeal or otherwise.
A straightforward reading of this provision suggests the court's order is not reviewable on a direct or interlocutory appeal "or otherwise" as upon an extraordinary writ. "`Straightforward' is about the last word judges attach to § 1447(d) these days, however." Matter of Amoco Petroleum Additives Co., 964 F.2d 706, 708 (7th Cir.1992).
The Supreme Court in Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 345-52, 96 S.Ct. 584, 590-94, 46 L.Ed.2d 542 (1976), construed § 1447(d)'s immunity from review as applying only to cases remanded pursuant to § 1447(c), when there is a "defect in removal procedure" or "the district court lacks subject matter jurisdiction." "Thus, all remand orders made pursuant to 1447(c) are unreviewable `whether erroneous or not and whether review is sought by appeal or by extraordinary writ.'" Westinghouse Credit Corp. v. Thompson, 987 F.2d 682, 683 (10th Cir.1993) (quoting Thermtron, 423 U.S. at 343, 96 S.Ct. at 589). Put another way, Thermtron leaves open the possible review of orders remanding cases on grounds not listed in § 1447(c).
This court did not order remand because of an improvident removal or because of a lack of subject matter jurisdiction. In deciding to abstain, this court necessarily assumed it had subject matter jurisdiction but in its discretion abstained from exercising that jurisdiction because it would unduly interfere with state matters. See Doughty v. Underwriters at Lloyd's, London, 6 F.3d 856, 860 (1st Cir.1993). "A remand based on a district court's perceived discretion is not ordered pursuant to § 1447(c)." Albertson's, Inc. v. Carrigan, 982 F.2d 1478, 1480 (10th Cir.1993). Section 1447(d) does not bar appellate review of abstention-driven remands. Minot v. Eckardt-Minot, 13 F.3d 590, 592 (2nd Cir.1994); Doughty, 6 F.3d at 860; Garcia v. Island Program Designer, Inc., 4 F.3d 57, 59 (1st Cir.1993); Melahn v. Pennock Ins., Inc., 965 F.2d 1497, 1501 (8th Cir.1992). The next issue is the proper means for reviewing the remand order, and it is a matter over which there is more of a dispute.
In Thermtron, the district court had not remanded the case...
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