Lead Opinion
LIVELY, J., delivered the opinio'n of the court, in which SILER, J., joined. RYAN, J. (pp. 1257-60), delivered a separate dissenting opinion.
The question in this case is whether this court has jurisdiction to review a district court order remanding a removed action to the state court from which it was removed. The district court ordered the remand sua sponte upon concluding that it lacked subject matter jurisdiction because the amount in controversy did not exceed $50,000 as required for federal court jurisdiction over actions based on diversity of citizenship. For the reasons that follow, we conclude that this court has no jurisdiction to review the district court’s remand order. Accordingly, we dismiss the appeal.
I.
The plaintiff Michael K. Anusbigian commenced this action in the Circuit Court for Kent County, Michigan on October 29, 1993, seeking $21,817 in damages from his former employer for the defendant’s failure to pay sales commissions. He also sought statutory damages under Michigan Compiled Laws Annotated (M.C.L.A.) § 600.2961. M.C.L.A. § 600.2961(5) provides that an employer who fails to pay a commission when due is liable for the actual amount due plus an amount equal to two times the amount due if the
Following the removal, Mr. Anusbigian filed a motion to remand, claiming that the amount in controversy requirement was not satisfied, and the defendant filed a motion for change of venue. Mr. Anusbigian subsequently withdrew the motion to remand. In a memorandum opinion addressing both motions, the district court ruled that the motion to remand was withdrawn and denied as moot. The court granted the motion for change of venue and transferred the case to the United States District Court for the Eastern District of Michigan. The defendant then filed a motion for summary judgment in the transferee district court.
Meanwhile, the transferee district court entered an order requiring the parties to show cause why the case should not be remanded. Following a telephone conference, the district court entered an order that states in part:
As established in the complaint, plaintiff was not entitled to commissions on sales made until the sales in the specified area had met or exceeded a set quota. Such an arrangement constitutes a “bonus” plan, not commissions. Gravely v. Pfizer, Inc.,170 Mich.App. 262 , 267 [427 N.W.2d 613 ] (1988). Accordingly, any cause of action which plaintiff has for recovery of an amount earned must be brought pursuant to the Wage and Fringe Benefits Act.... We find that plaintiff may not avail himself of the provisions contained in M.C.L.A. § 600.2961.
* * *
Plaintiff asserts that even if we find § 600.2961 is not applicable, he may still maintain an action for breach of contract. The amount in issue, however, totals only $21,817. Thus, whether plaintiff brings a cause of action under the Wage and Fringe Benefits Act or for breach of an employment contract, the action would not satisfy the amount in controversy necessary to vest this court with diversity jurisdiction.
Accordingly, it is ordered that this matter is remanded to the Circuit Court for Kent County.
Mr. Anusbigian then filed a notice of appeal. The parties waived oral argument and the appeal was submitted on the district court record and appellate briefs.
II.
A district court must remand a removed action when it appears that the court lacks subject matter jurisdiction. 28 U.S.C. § 1447(c) (1988). (“If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded”). With one exception not applicable here, the next subsection of the removal statute appears to bar all appellate review of remand orders. 28 U.S.C. § 1447(d). (“An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise ... ”, except civil rights cases removed pursuant to 28 U.S.C. § 1443). The courts, including the Supreme Court, however, have grafted judicially created exceptions onto the statute.
The plaintiff seeks to rely on one of these exceptions — the “substantive decision” exception. The plaintiff argues that this exception holds that a remand accompanied by a ruling on the merits of a plaintiff’s claim may be appealed. Because the district court in this case reached its conclusion that the amount in controversy does not satisfy the statutory requirement by construing Michigan law, Mr. Anusbigian argues that the court decided the merits of his claim. The defendant, on the other hand, asserts that the remand order is not reviewable because it was based on the district court’s determination that it lacked subject matter jurisdiction and that the court’s reasoning in reaching this conclusion is immaterial.
A.
Lower federal courts generally treated 28 U.S.C. § 1447(d)’s prohibition against appeal from remand orders as absolute, until the Supreme Court decided Thermtron Products, Inc. v. Hermansdorfer,
The Supreme Court emphasized the narrow reach of its Thermtron decision in Grav-itt v. Southwestern Bell Tel. Co.,
This court has made a distinction between jurisdictional and substantive aspects of district court’s orders of remand by indicating that where a district court makes a decision that is necessary for determining whether the court has subject matter jurisdiction, the decision falls within the scope of § 1447(d)’s prohibition against appellate review. Baldridge v. Kentucky-Ohio Transp., Inc.,
In State of Ohio v. Wright,
Particularly pertinent to our determination in the present case is our conclusion in Wright that a district court’s evidentiary determination does not constitute a decision on the merits, because the district court is required to determine whether there is a color-able claim of a valid federal defense under § 1442(a)(1) in order to determine if it has subject matter jurisdiction to hear the case. Wright,
It makes no difference that the District Court may be wrong in its conclusions*1256 concerning jurisdiction or the plausibility of the federal defense asserted. The federalism principle overrides this concern.
Id. at 617 (footnote omitted).
We disagree with the dissent’s interpretation of controlling case law. If a district court determines, rightly or wrongly, that it lacks subject matter jurisdiction over a removed case, and for that reason remands it to the court from which it was removed, the court of appeals lacks jurisdiction to review the district court’s decision.
In a very recent opinion the Supreme Court has again emphasized the rule that § 1447(c) remands are not reviewable. See Things Remembered, Inc. v. Petrarca, — U.S. -,
As long as a district court’s remand is based on a timely raised defect in removal procedure or on lack of subject-matter jurisdiction — the grounds for remand recognized by § 1447(c) — a court of appeals lacks jurisdiction to entertain an appeal of the remand order under § 1447(d).
Id. at -,
The dissent cites In re General Motors Corp.,
B.
The “substantive decision” exception to § 1447(d)’s prohibition is based on the Supreme Court’s decision in Waco v. United States Fidelity & Guar. Co.,
When applying the substantive decision exception, we have held that the exception is applicable only where a remand order is “based on a substantive decision on the merits of a collateral issue as opposed to just matters of jurisdiction.” Regis Associates v. Rank Hotels (Management) Ltd.,
IY.
The district court’s order of removal in the present case is not within the substantive decision exception. It was the dismissal of the cross-action that led the Waco Court to hold the district court’s tripartite order reviewable; the Court did not hold that the remand order, per se, was reviewable or that a remand for lack of diversity jurisdiction, standing alone, would have been reviewable. Indeed, the Court stated:
[N]o appeal lies from the order of remand; but in logic and in fact the decree of dismissal preceded that of remand and was made by the District Court while it had control of the cause.... We are of the opinion that the petitioner was entitled to have the Circuit Court of Appeals determine whether the dismissal of its cross-action ... was proper.
Waco,
The district court did not rule on the merits of the plaintiffs claim or on the defendant’s affirmative defense that M.C.L.A. § 600.2961 is unconstitutional. Thus, contrary to the plaintiffs fear, expressed in his brief, that he might be foreclosed from seeking damages in state court under the doctrines of res judicata or “law of the case,” the remand order forecloses nothing except further litigation of his claim in federal court.
The district court’s remand order was clearly “issued under § 1447(c),” Thermtron,
The appeal is DISMISSED.
Dissenting Opinion
dissenting.
Because I conclude that the majority is mistaken about the nature of the district court’s order, and incorrectly interprets and applies controlling and indeed settled Sixth Circuit precedent, I respectfully dissent. Additionally, I think the majority’s reinterpretation of this court’s dispositive precedents has the practical effect of changing the settled scope of the existing exceptions to 28 U.S.C. § 1447(d)’s appellate bar.
I.
This court has held repeatedly that the appellate bar to section 1447(c) remand orders applies only to cases where the remand was based on either of the two statutory grounds set forth therein: on a defect in removal procedures, or on a lack of subject matter jurisdiction at the time of removal. See, e.g., Page v. City of Southfield,
We have interpreted, discussed, and applied Thermtron on numerous occasions. We have established Thermtron to mean “that a remand order is reviewable on appeal when it is based on a substantive decision on the merits of a collateral issue as opposed to just matters of jurisdiction.” Regis Associates,
Directly on point to the issues in this case is In re General Motors Corp.,
On appeal, we held that the decision to remand after a lower court decides that a federal statute provides no private right of action falls within the Thermtron exception to the section 1447(d) appellate bar. Id. at 983. We concluded that because the district court’s order divested it of subject matter jurisdiction after defendants had properly removed the case from state court, its order was “not issued pursuant to section 1447(c), and this court had jurisdiction to review that order.” Id.
Similarly, we held that a district court’s remand order based on a dismissal of a claim that originally had formed the basis for removal to federal court was a final decision for purposes of 28 U.S.C. § 1291 and appellate review was not precluded by section 1447(d). In re Romulus Community Sch.,
And, in Baldridge, which the majority cites as support for its holding, we explicitly recognized that there is a “substantive decision” exception to the section 1447(d) appellate bar. We explained briefly the difference between the section 1447 appellate bar and the substantive decision exception to that bar:
“If the district court believed that the case was properly removed, but that the stipulation [affecting the amount in controversy] justified a remand, then we may review the order. If, however, the district court believed ... that jurisdiction was missing at the outset, then 28 U.S.C. § 1447(d) would block any review, even though we might disagree with that decision.”
Baldridge,
Stated even more succinctly, where “a district court determines subject matter jurisdiction to have existed at the time of removal, yet remands for alleged lack of subject matter jurisdiction based on some post-removal event(s), the remand order is not a Section 1447(c) remand order and is reviewable.” Van Meter,
These precedents are clear. They reveal that the majority opinion does not appreciate the difference between a jurisdictional decision resulting in an order to remand, and a substantive decision defeating subject matter jurisdiction after proper removal. A jurisdictional decision examines the validity of “removal”; whereas a substantive decision examines the validity of a claim. State of Ohio v. Wright,
II.
In this case, the district court’s determination that it lacked subject matter jurisdiction was made only after it decided that the plaintiff failed to state a claim under the Michigan Sales Commission statute. It dismissed the action for failure to plead an actionable claim, believing the plaintiff, on the facts pleaded, asserted the wrong statutory cause of action. Generally, dismissals for failure to state a claim are final decisions from which an appeal may be sought under 28 U.S.C. § 1291. The court’s decision to dismiss, sua sponte, was final and on the merits because it was a determination of the plaintiffs legal rights under the Michigan statute, “as distinguished from mere matters of practice, procedure, jurisdiction or form.” Fairmont Aluminum Co. v. Commissioner of Internal Revenue,
Rather, the language of the order, cryptic as it otherwise is, clearly states that the plaintiff “may not avail himself of the provisions contained in [the Michigan Sales Commission statute],” but instead “must” bring his claim under the Michigan Wage and Fringe Benefits Act. To make this determination, the lower court held that the term “commissions” as expressed in the contract binding both parties, was “not a binding characterization under Michigan law.” Without inquiring into the meaning of the term under the explicit language of the contract governing the relationship of the parties before it, and without the benefit of having the issue addressed by the parties, the court determined sua sponte that “commissions” as used in the sales agreement was not really “commissions” but a “bonus plan” under Michigan law. To support its decision, the court cited a Michigan case wholly inapplicable to the facts of this case.
Having so concluded, the court found that it had no jurisdiction to hear plaintiffs remaining claims because, having been barred from bringing an action for treble damages under the plaintiffs statute of choice, the only possible causes of action left would only entitle him to relief of less than $50,000. The court explicitly stated that “whether plaintiff
III.
I am satisfied that there was subject matter jurisdiction at the time of removal; the amount in controversy would have been over $50,000 had plaintiff been permitted to proceed on his claim. Consequently, the district court’s remand was necessarily based on a post-removal event. The “matter” remanded to state court did not — and logically could not — include the cause of action under the Michigan Sales Commission statute. Because the court, in essence, stripped itself of jurisdiction by a substantive (and in my judgment erroneous) interpretation of Michigan statutory and contract law, its remand order is not subject to the section 1447(d) appellate bar.
Contrary to the majority’s assertions, the plaintiff does not appeal the district court’s remand order. Rather, Anusbigian appeals the substantive decision of the court holding that the Michigan Sales Commission statute is unavailable as authority for his claim. If review had been granted, this court would not have reviewed the remand order, but instead would have had to review de novo the decision to dismiss for failure to state a claim. That is, we would have had to treat the order as a Fed.R.Civ.P. 12(b)(6) motion. Simply stated, the district court’s order was not a jurisdictional decision.'
To be sure, section 1447(d) has not yet been interpreted to prohibit “review of remand orders so as to extinguish the power of an appellate court to correct a district court that has'not merely erred in applying the requisite provision for remand but has remanded a case on grounds not specified in the statute and not touching the propriety of the removal.” Thermtron,
I respectfully dissent.
Notes
. See also 27 Words and Phrases, 147: "The judgment is upon the merits when it amounts to a declaration of the law as to the respective rights and duties of the parties, based on the ultimate facts or state of facts disclosed by the pleadings, and evidence upon which the right of recovery depends, irrespective of formal, technical, or dilatory objections or contentions.”
. I note that the underpinnings of this case reveal a defendant playing troubling procedural games. This is a relatively small claim which plaintiff filed in state court almost three years ago. After defendant Chemlawn availed itself of the removal and transfer privileges granted to defendants in diversity cases, it now seeks completely to bar review for plaintiff's cause of action. The result of the court's order is that the litigants are back in state court, where they started three years ago.
