The Second and Ninth Circuits previously have held that a district court's decision to remand a case that has been removed under the Securities Litigation Uniform Standards Act of 1998 ("SLUSA") is not appealable. In a decision issued this week, the Seventh Circuit has disagreed.
SLUSA generally prohibits the bringing of a securities class action based on state law in state court. The defendants are permitted to remove the case to federal district court for a determination on whether the case is preempted by the statute. If so, the district court must dismiss the case; if not, the district court must remand the case back to state court.
A remand based on a district court's decision that it does not have subject-matter jurisdiction over a case cannot be reviewed on appeal. In Kircher v. Putnam Funds Trust, 2004 WL 1470350 (7th Cir. June 29, 2004), however, the Seventh Circuit found that this general proposition is inapplicable to a case removed and remanded under SLUSA. The Supreme Court "has observed that a court lacks 'subject-matter jurisdiction' only when Congress has not authorized the federal judiciary to resolve the sort of issue presented by the case (or the Constitution forbids adjudication)." In contrast, SLUSA expressly authorized the district court to accept the removal of the Kircher case and "[o]nly after making the substantive decision that Congress authorized it to make [i.e., whether the case was preempted] did the district court remand." This means that the district court had "no adjudicatory competence to do more," the Seventh Circuit concluded, not that it lacked subject-matter jurisdiction. Accordingly, a SLUSA remand may be appealed.
Holding: Appeal will proceed to briefing and a decision on the merits.
Quote of note: "Both the second and ninth circuits were mesmerized by the word 'jurisdiction' and did not see the difference between a case that never should have been removed and a case properly removed and remanded only when the federal job is done."
Quote of note II: "Appellate consideration of what amounts to a venue dispute slows things down to little good end, for the state court is competent to address the merits. SLUSA means, however, that one specific substantive decision in securities litigation must be made by the federal rather than the state judiciary. Appellate review of decisions under [SLUSA] will promote accurate and consistent implementation of that statute, at little cost in delay beyond what the authorized removal itself creates."Posted by Lyle Roberts at July 2, 2004 7:03 PM | TrackBack