Removal to federal court can be a hotly contested procedural step during litigation. Clients may prefer federal court for a variety of procedural and legal reasons. Given the potential advantages, defendants frequently seek to remove civil lawsuits filed in state court to a federal forum.
Still, it is by now axiomatic that federal courts “possess only that power authorized by Constitution and statute,” and generally presume “that a cause lies outside this limited jurisdiction.” Given these well-established jurisdictional limitations, district courts scrutinize removal applications closely and do not hesitate to remand actions without the requisite jurisdictional hook.
Moreover, the federal remand statute places limits on parties’ ability to appeal a potentially unfavorable remand order – a notably harsh approach in light of the outsized role played by forum considerations in shaping the course of subsequent litigation.
While conventional wisdom suggests a federal district court’s decision to remand an action is virtually unchallengeable, uncertainty remains regarding whether a district court can reconsider a remand pursuant to Rule 59(e) of the Federal Rules of Civil Procedure. In certain circumstances, therefore, quickly filing a motion for reconsideration could give parties a second chance at securing a place in federal court, even after an initial rejection.
While 28 U.S.C. Section 1447(d) provides that “[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise,” directly precluding appellate review of remand orders falling within its purview, the statute does not speak explicitly to the issue of reconsideration by the district court. Some courts have concluded that Section 1447(d)’s bar on review “on appeal or otherwise” applies equally to review by district courts, effectively preventing reconsideration of remand orders.
But other courts have taken a different approach, concluding that a district court loses jurisdiction to reconsider a remand order when the district court clerk actually mails a certified copy of the remand order to the state court. The Fifth Circuit has generally adopted this latter position and held that “[t]he federal court is completely divested of jurisdiction once it mails a certified copy of the [remand] order to the clerk of the state court.”Under this analysis, it may be possible for a district court to reconsider its remand order before the order is mailed to the state court and federal jurisdiction terminates. This issue has yet to be conclusively determined, and counsel seeking reconsideration of a remand order has, at the least, a colorable basis to argue that until a certified copy of the remand order has been provided to the clerk of the state court, the district court may, in fact, retain a jurisdictional basis to reconsider its order.
Moreover, putting this jurisdictional issue aside, Section 1447(d) does not apply to actions removed “pursuant to section 1442 or 1443 of this title.” Section 1442 applies generally to the removal of suits against federal officers or agencies, and Section 1443 applies to the removal of civil rights cases. Also, Section 1447(d) precludes appellate review only when the remand order is based on one of the criteria specified in Section 1447(c), i.e., “lack of subject matter jurisdiction or defects in removal procedure.” That is, Section 1447(d)’s “bar on reviewability is not applicable where the district court remands a case on grounds other than those authorized by [Section] 1447(c).” Accordingly, given these limits on the reach of Section 1447(d), the statute may not even apply to exclude reconsideration in the first instance.
While litigants commonly assume that a district court’s decision to remand an action to state court is virtually unchallengeable, a careful examination of Section 1447(d), in conjunction with the jurisdictional limits of federal court, reveal that a remand decision is not as inviolable as it might first appear. Indeed, Section 1447(d)’s reach is surprisingly narrow, precluding review of only particular categories of cases and remand orders based on particular grounds. To the extent that a remand order is not based on a specified category, or the litigation falls into an exempt class of cases, Section 1447(d) will not apply and the district court’s order is properly subject to both direct appeal and to reconsideration.
Additionally, uncertainty persists among the circuits regarding the precise moment that a district court loses jurisdiction over the remanded proceeding. It remains, at the least, arguable that an alert litigant could request reconsideration before the district court is divested of jurisdiction.
While the doctrinal contours of this area of law continue to evolve, litigants should carefully evaluate the strategic options available to them at every stage of the case. An initially unfavorable decision might not be as forbidding as it first appears.
Yvette Ostolaza is the managing partner of Sidley Austin’s Dallas office, member of the firm’s Management and Executive Committees, and co-head of Sidley Austin’s Global Litigation Practice. Daniel Driscoll is a Dallas associate in Sidley Austin’s Complex Litigation and Disputes practice.