Williams v. Afc Enterprises, Inc.

• Decision Date: 05 November 2004
• Docket Number: No. 04-10104.,04-10104.
• Citation: 389 F.3d 1185
• Parties: Mary T. WILLIAMS, on behalf of herself and all others similarly situated, Plaintiff-Appellee, v. AFC ENTERPRISES, INC., Frank J. Belatti, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

389 F.3d 1185

Mary T. WILLIAMS, on behalf of herself and all others similarly situated, Plaintiff-Appellee, v. AFC ENTERPRISES, INC., Frank J. Belatti, et al., Defendants-Appellants.

No. 04-10104.

United States Court of Appeals, Eleventh Circuit.

November 5, 2004.

Lex M. Erwin, M. Robert Thornton, John P. Brumbaugh, Michael R. Smith, King & Spaulding, Atlanta, GA, for Defendants-Appellants.

Christi A. Cannon, Corey Daniel Holzer, Holzer, Holzer & Cannon, LLC, Atlanta, GA, S. Gene Cauley, Randell K. Pulliman, J. Allen Carney, Cauley, Geller, Bowman, Coates & Rudman, LLP, Little Rock, AR, for Plaintiff-Appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before BIRCH, BARKETT and COX, Circuit Judges.

COX, Circuit Judge:

I. Introduction

The plaintiff filed in state court this putative class action asserting claims under the Securities Act of 1933. The defendants removed the case to federal court. Plaintiff filed a timely motion to remand to state court, arguing that the Securities Litigation Uniform Standards Act of 1998 precludes removal. The district court granted plaintiff's motion to remand, then sua sponte stayed its order and certified it for interlocutory review. Because we conclude that 28 U.S.C. 1447(d) proscribes our jurisdiction to review a remand order based upon lack of removal jurisdiction entered in response to a timely motion, we dismiss this appeal.

II. Background and Procedural History

This putative class action was filed in the Superior Court of Fulton County Georgia. Plaintiff seeks to recover on behalf of all persons who purchased AFC Enterprises, Inc. common stock in the secondary offering of December 2001. In connection with this secondary offering, AFC filed a Registration Statement and Prospectus with the Securities and Exchange Commission. Several months later, the company announced that it would restate its earnings for 2001 and the first three quarters of 2002. As a result of this announcement, the price of AFC stock plummeted.

In her state court complaint, the plaintiff alleges that the defendants violated the Securities Act of 1933, 15 U.S.C. § 77k (2004), by issuing a Registration Statement and Prospectus that was materially false and misleading. The plaintiff's action is a "covered class action"¹ involving a "covered security"² as defined by the Securities Litigation Uniform Standards Act of 1998, 15 U.S.C. § 77p (2004) ("SLUSA"). The defendants removed the action to federal court, invoking the court's federal question jurisdiction under 28 U.S.C. § 1441(a) and jurisdiction under 15 U.S.C. § 77p(c), the removal provision of SLUSA. The plaintiff filed a timely motion to remand, contending that SLUSA precludes the removal of a securities action asserting only federal claims.

The district court struggled with what it described as the "murky" language of SLUSA's removal provisions. The court concluded that the defendants right of removal is unclear under SLUSA and remanded the case. The court then certified its remand order for interlocutory appeal pursuant to 28 U.S.C. 1292(b).

III. Issue on Appeal and Contentions of the Parties

We must first determine whether we have jurisdiction to review the district court's order. See Russell Corp. v. Am. Home Assurance Co., 264 F.3d 1040, 1043 (11th Cir.2001) ("This court has a duty to independently examine our appellate jurisdiction and dismiss when our jurisdictional limits are exceeded."). While a district court's remand order constitutes a final judgment for the purpose of appellate jurisdiction, Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996), we must determine whether 28 U.S.C. 1447(d) bars appellate review. Russell Corp., 264 F.3d at 1043.³

"Congress has placed broad restrictions on the power of federal appellate courts to review district court orders remanding removed cases to state courts." Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 116 S.Ct. 494, 133 L.Ed.2d 461 (1995). Our jurisdiction is limited by § 1447(d), which states that "[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise...."⁴ Though § 1447(d) appears to broadly prohibit review of any remand order, the Supreme Court has held that § 1447(d)'s broad restriction on appellate review "`must be read in pari materia with § 1447(c), so that only remands based on grounds specified in § 1447(c) are immune from review under § 1447(d).'" Id. (citing Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 345-346, 96 S.Ct. 584, 590, 46 L.Ed.2d 542 (1976)). Section 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.

Thus, reading 1447(c) and 1447(d) together, we are without jurisdiction to review a remand order if it is based on either lack of "subject matter jurisdiction" or a "defect other than lack of subject matter jurisdiction" entered in response to a timely motion to remand.⁵ These kinds of remand orders — and only these kinds — are contemplated by § 1447(c).

The plaintiff contends that the district court remanded this case to state court because the district court did not have subject matter jurisdiction within the meaning of § 1447(c) under SLUSA. Thus, plaintiff argues, we are barred from reviewing the remand order by § 1447(d). The plaintiff's argument is grounded on her assertion that SLUSA precludes removal of federal securities claims under the 1933 Act. Defendants counter by noting that the district court never explicitly mentioned subject matter jurisdiction in its remand order. Rather, the defendants argue, the district court's remand order is based upon the "substantive issue of the interpretation and construction of an ambiguous removal provision." (Appellant Reply Br. at 6). According to the defendants, because the remand order was not based on want of subject matter jurisdiction, § 1447(d) does not apply and we have jurisdiction.

Our precedent instructs us to independently review the grounds upon which the district court based its decision to remand. See First Union Nat'l Bank v. Hall, 123 F.3d 1374, 1377 (11th Cir.1997) ("In order to decide whether a remand order is reviewable, we look to the terms of the remand order itself...."); Ariail Drug Co. v. Recomm Int'l Display, Inc., 122 F.3d 930, 932 (11th Cir.1997) ("[T]he district court's grounds for remand are of central importance to our jurisdiction...."). Thus we turn to the district court's remand order.

The district court's remand order was based upon its consideration of the Securities Act of 1933 and two SLUSA provisions. The court noted that prior to the passage of SLUSA, the Securities Act prohibited the removal of actions asserting claims under the 1933 Act that were filed in state court. SLUSA amended the jurisdictional section of the Securities Act. That section now states:

Except as provided in section 77p(c)of this title, no cases arising under this subchapter and brought in any State court of competent jurisdiction shall be removed to any court of the United States.

15 U.S.C. § 77v(a) (amendment in italics). SLUSA's removal provision, 15 U.S.C. § 77p(c), to which § 77v(a) refers, provides:

Any covered class action brought in any State court involving a covered security, as set forth in subsection (b), shall be removable to the Federal district court for the district in which the action is pending, and shall be subject to subsection (b).

This removal provision makes reference to subsection (b), SLUSA's preemption provision. The preemption provision, 15 U.S.C. § 77p(b), provides:

No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging — (1) an untrue statement or omission of a material fact in connection with the purchase or sale of a covered security; or (2) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.

According to the plaintiff, the plain language of these provisions precludes removal of securities actions based exclusively upon federal law. The district court, finding these provisions "murky" and poorly drafted, reviewed the legislative history to determine Congress's intent in enacting SLUSA. The court noted that the purpose of this legislation was to make the federal courts the exclusive venue for securities class actions. Given this intent, the court concluded that it made no sense to accept plaintiff's reading of SLUSA, which would prohibit the removal of securities cases based upon federal law.

Despite this analysis, the court granted the plaintiff's motion to remand the case. The court relied on dicta from one of our prior decisions,⁶ as well as the principle that "removal statutes are construed narrowly; where plaintiff and defendant clash about jurisdiction, uncertainties are resolved in favor of remand." Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir.1994).

Examining the terms of the court's order, we conclude that the district court granted the plaintiff's timely motion to remand because it determined that it was without removal jurisdiction to hear the case. We must therefore decide whether § 1447(d) proscribes appellate review of this remand order based on lack of removal jurisdiction.

IV. Discussion

Our decision in Ariail Drug Co., Inc. v. Recomm Int'l Display, 122 F.3d 930 (11th Cir.1997) controls this case. In Ariail Drug, plaintiff filed a complaint in state court asserting claims for negligence and fraud as well as claims under the Securities Act of 1933, 15 U.S.C. §§...