Adair v. Lease Partners, Inc.
Opinion of the Court
This is an appeal from the district court order remanding this case to state court. The Federal Deposit Insurance Corporation (“FDIC”) — an intervening Defendant — had removed the case to federal court but was later dismissed as a party. The district court held that once the FDIC was dismissed, only supplemental jurisdiction remained over Appellees’ remaining claims. The court subsequently exercised its claimed discretion to remand the case. We reverse.
This case is a collection of claims brought by many individual pharmacies, pharmacists, veterinarians and veterinary clinics (“Plaintiffs”) against individual salesmen and different financial institutions (“Defendants”). Plaintiffs filed the case in 1996 in Mississippi state court, alleging state law fraud, negligence, breach of contract, and usury claims. Plaintiffs allege that Defendants participated in a Ponzi scheme in which Defendants leased Reeomm electronic advertising banners to Plaintiffs, fraudulently misrepresented their identity as lessors, and charged usurious interest rates on the finance charges.
After more than eleven years of litigation, the FDIC entered the case in 2007 as a receiver for a successor bank to one of the original Defendants.
The district court granted both of Plaintiffs’ motions. With the FDIC no longer a party, the court held that no original federal jurisdiction remained over Plaintiffs’ remaining claims and that it retained only supplemental jurisdiction over the remaining claims. As the court saw no reason to continue exercising jurisdiction over a ease composed of what it saw as predominantly state claims, the court stated that it would exercise its discretion to remand the case to state court.
Defendants appeal the district court’s remand order.
II.
An order remanding a case to state court is typically not reviewable on appeal.
Whether a district court has the discretion to remand a case to state court is a legal question this court reviews de novo. See Poche v. Tex. Air Corps, Inc.
III.
None of the parties disputes that the district court had jurisdiction over the case at the time of remand. The issue is whether the court was obligated to retain jurisdiction and hear the case or whether it had discretion to remand. To answer this question, we must determine what kind of jurisdiction existed at the time of remand. See Buchner v. FDIC.
It is undisputed that the FDIC properly removed this case pursuant to 12 U.S.C. § 1819(b)(2). This statute states in relevant part:
(A) In general
[Except in situations irrelevant to the instant case], all suits of a civil nature at common law or in equity to which the Corporation [FDIC], in any capacity, is a party shall be deemed to arise under the laws of the United States.
(B) Removal
[Except in situations irrelevant to the instant case], the Corporation may, without bond or security, remove any action, suit, or proceeding from a State court to the appropriate United States district court before the end of the 90-day period beginning on the date the action, suit, or proceeding is filed against the Corporation or the Corporation is substituted as a party.10
Congress enacted § 1819(b)(2) as part of the Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”).
Among the many powers granted to the FDIC by FIRREA, “[t]he power ... to invoke federal jurisdiction and to remove from state court is substantial.”
The language of § 1819(b)(2)(A) states that all claims in a suit “arise under the laws of the United States” when the FDIC “is a party.” Nothing in the statute specifically addresses what happens to a court’s jurisdiction, if anything, when the FDIC is dismissed as a party. Consequently, the circuits are split on whether § 1819(b)(2) continues to provide original federal subject matter jurisdiction over a case after the FDIC is dismissed. Only three circuits have specifically addressed this issue. In the majority are the Fifth Circuit and the Second Circuit, which hold that § 1819(b)(2) continues to provide federal jurisdiction after the FDIC has been dismissed from a case or has transferred its assets to a third party. See FSLIC v. Griffin;
In Griffin, the FSLIC entered a state court action as receiver for the plaintiff and subsequently removed the case to federal court pursuant to 12 U.S.C. § 1730(k)(l), a statute which was later repealed and retroactively superseded by 12 U.S.C. § 1819.
We disagreed, holding that federal jurisdiction continued to exist pursuant to § 1819 after the FDIC’s dismissal.
The Second Circuit followed Griffin in Four Star Holding.
“Adopting a rule which would make federal jurisdiction contingent on who owned an interest in certain property at a particular time ‘could well have the effect of deterring normal business transactions during the pendency of what might be lengthy litigation,’ ” CIT, Inc. v. 170 Willow Street Assoc., No. 93 Civ. 1201 CSH, 1997 WL 528163, at *7 (S.D.N.Y. Aug.26, 1997) (quoting Free-port-McMoRan, Inc., 498 U.S. at 428[, 111 S.Ct. 858]), and could also deter*244 transactions by FDIC that presumably are in the public interest.39
Meanwhile, the Third Circuit expressly rejected the Griffin court’s holding that original federal jurisdiction continues pursuant to § 1819(b)(2) after the FDIC is dismissed from a ease.
All three of these cases make it clear that a court following Griffin will recognize continued federal jurisdiction when the FDIC removes a case but is later dismissed, and that this jurisdiction is pursuant to 12 U.S.C. § 1819 and not any other statute.
Because federal jurisdiction continues in this case pursuant to § 1819(b)(2), that jurisdiction extends to all claims in the “suit,” regardless of their state or federal
We recognize that the party in Griffin arguing for federal jurisdiction was a successor in interest to the FDIC, and no successor in interest remains in the instant case.
IV.
We follow the rule that “a district court exceeds its authority if it remands a case on grounds not expressly permitted by controlling statute.”
. By this time, the case had gone from state court to federal court and was once again in state court.
. See 28 U.S.C. § 1447(d).
. 524 F.3d 627, 631 (5th Cir. 2008).
. 517 U.S. 706, 715, 116 S.Ct. 1712, 1720, 135 L.Ed.2d 1 (1996).
. 549 F.3d 999, 1001 (5th Cir. 2008) (citing Hook v. Morrison Milling Co., 38 F.3d 776, 780 (5th Cir. 1994)).
. See id. (citing Hook, 38 F.3d at 780).
. 981 F.2d 816, 818 (5th Cir. 1993).
. Id. at 820-21.
. See, e.g., 28 U.S.C. §§ 1367(c), 1441(c).
. § 1819(b)(2)(A)-(B).
. Pub.L. No. 101-73, 103 Stat. 183 (1989).
. 960 F.2d 512, 514-15 (5th Cir. 1992) (en banc).
. See id.
. Id. (quoting and citing H.R.Rep No. 101—54(I) 291, 310-11, reprinted in 1989 U.S.C.C.A.N. 86, 106-07).
. Id. at 515 (citing Carrollton-Farmers Branch Indep. Sch. Dist. v. Johnson & Cravens, 13911, Inc., 889 F.2d 571, 572 (5th Cir. 1989); Triland Holdings & Co. v. Sunbelt Serv. Corp., 884 F.2d 205, 207 (5th Cir. 1989)).
. Buchner, 981 F.2d at 819 (emphasis added); see also FSLIC v. Mackie, 962 F.2d 1144, 1150 (5th Cir. 1992) (recognizing removal jurisdiction over pendent party claims pursuant to 12 U.S.C. § 1730(k)(1) (repealed 1989), § 1819(b)(2)’s predecessor).
. See Meyerland, 960 F.2d at 518-19 (comparing the grant of jurisdiction under § 1819(b)(2) to that recognized in Pacific Railroad Removal Cases, 115 U.S. 1, 5 S.Ct. 113 (1885), and Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738, 822, 6 L.Ed. 204 (1824)).
. Id. at 519 (citation and footnote omitted).
. 935 F.2d 691, 697 (5th Cir. 1991).
. 178 F.3d 97, 100-01 (2d Cir. 1999).
. While not expressly addressing the issue of continuing original jurisdiction, the Eighth Circuit has reviewed a district court’s remand for abuse of discretion in a case where the Resolution Trust Corporation ("RTC”) removed the case under an analogous statute but was later dismissed, thus implicitly adopting New Rock's holding, if not its reasoning. See Myers v. Moore Eng’g Inc., 42 F.3d 452, 455 (8th Cir. 1994) (holding the district court did not abuse its discretion in denying remand when the RTC had previously removed pursuant to 12 U.S.C. § 1441a(l)(1)).
. 101 F.3d 1492, 1494-95 (3d Cir. 1996).
. See Griffin, 935 F.2d at 694-95.
. Id.
. Id.
. Id.
. Id. at 695.
. Id. at 696.
. Id.
. Id.
. Id.
. Id.
. Id. at 697 (citing D’Oench Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942)). Congress partially codified D’Oench Duhme in 12 U.S.C. § 1823(e).
. Id. at 696.
. See 178 F.3d at 101.
. Id. at 99.
. Id. at 100.
. See id. (citing Griffin, 935 F.2d at 699; Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 830, 109 S.Ct. 2218, 104 L.Ed.2d 893 (1989); Freeport-McMoRan, Inc. v. K N
. Id. at 100-01. Although the Second Circuit follows Griffin in Four Star Holding, other Second Circuit cases have not recognized original jurisdiction over pendent state claims. See, e.g., King v. Crossland Sav. Bank, 111 F.3d 251, 255-56 (2d Cir. 1997) (finding exercise of supplemental jurisdiction appropriate over pendent party claims pursuant to § 1367 in case removed pursuant to § 1819(b)(2)); Mizuna, Ltd. v. Crossland Fed. Sav. Bank, 90 F.3d 650, 657 (2d Cir. 1996) (same). However, because original jurisdiction pursuant to § 1819 applies to all cases in a "suit,” these latter cases inconsistently apply § 1819(b)(2).
. See New Rock Asset Partners, L.P., 101 F.3d at 1502.
. Id. at 1495. Section 1441a(l)(1) states:
Notwithstanding any other provision of law, any civil action, suit, or proceeding to which the Corporation is a party shall be deemed to arise under the laws of the United States, and the United States district courts shall have original jurisdiction over such action, suit, or proceeding.
. Id.
. Id. at 1501-02 (citing Mill Invs., Inc. v. Brooks Woolen Co., 797 F.Supp. 49 (D.Me. 1992)).
. Id. at 1503-04.
. Id.
. Id. at 1504.
. See Griffin, 935 F.2d at 696 (“In sum, federal jurisdiction is proper in this case because according to ... § 1819, the case arises under federal law.”) (emphasis added); Four Star Holding, 178 F.3d at 101 (following Griffin to hold that FDIC’s dismissal "does not divest the court of subject matter jurisdiction under Section 1819") (emphasis added); New Rock Asset Partners, L.P., 101 F.3d at 1502, 1504 (disagreeing with Griffin and holding that supplemental jurisdiction, not original jurisdiction, existed after RTC's dismissal).
. See § 1819(b)(2)(A) (“suit” shall "arise under the laws of the United States”); Meyerland, 960 F.2d at 518-19; Buchner, 981 F.2d at 819; see also Mackie, 962 F.2d at 1150 (holding that the term "suit” in § 1730(k)(1) covers the "entirety of the civil proceeding”); Brockman v. Merabank, 40 F.3d 1013, 1015—16 (9th Cir. 1994) (holding that the term "suit” in § 1441a(Z)(l) includes all claims in a case, and that the addition of RTC to the action "transformed the 'entire suit’ into one that arose under federal law.”) (citation omitted); Spring Garden Assoc. v. RTC, 26 F.3d 412, 415-16 (3d Cir. 1994) (same). Indeed, as even courts that disagree with the Fifth Circuit recognize, the disputed issue in the circuits regarding § 1819(b)(2) is ultimately one of jurisdictional "duration” rather than of jurisdictional "breadth.” See New Rock Asset Partners, L.P., 101 F.3d at 1499 n. 4 (distinguishing the question before it from the holding in Spring Garden).
. See Buchner, 981 F.2d at 821.
. See Griffin, 935 F.2d at 696.
. See id.; see also Four Star Holding, 178 F.3d at 100.
. See Griffin, 935 F.2d at 696.
. See, e.g., Bank One Tex. Nat'l Ass’n v. Morrison, 26 F.3d 544, 547 (5th Cir. 1994) (citing the time-of-filing rationale in Griffin as the sole basis for continued jurisdiction despite D’Oench Duhme being at issue in guarantor's defense); Walker v. FDIC, 970 F.2d 114, 120 (5th Cir. 1992); First Gibraltar Bank, FSB v. Bradley, 98 F.3d 1338, No. 95-20500, 1996 WL 556852, at *5 (5th Cir. Sept. 10, 1996) (unpub.) (citing Morrison, 26 F.3d at 547-48).
. See Walker, 970 F.2d at 120.
. Buchner, 981 F.2d at 820 (citing Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S. 336, 345, 96 S.Ct. 584, 590, 46 L.Ed.2d 542 (1976), abrogated on other grounds by Quackenbush, 517 U.S. at 714-15, 116 S.Ct. at 1720).
. See Buchner, 981 F.2d at 821.
. Because we find original federal jurisdiction over all claims in the instant case pursuant to § 1819(b)(2), we do not address whether Appellees’ federally preempted usury
Concurring Opinion
Circuit Judge, concurring in the judgment:
I fully appreciate the efficient and judicially economical approach of the majority. I am unable, however, to agree that our precedent or the text of § 1819 requires that state claims cannot be remanded when no party to the case is a successor-in-interest to the FDIC and no federal interests remain in the case. Although the court clearly has jurisdiction over the case, including all state claims, that fact does not in itself mean that the court lacks discretion to remand state claims. Whether to remand is a discretionary matter subject to the abuse of discretion standard. Regan v. Starcraft, 524 F.3d 627, 631 (5th Cir. 2008). Once the FDIC and its interests have been dismissed, there is no federal character in the state claims. See FSLIC v. Griffin, 935 F.2d 691, 696 (5th Cir. 1991) (justifying continued federal-question jurisdiction based on presence of successor-in-interest to FSLIC). The statute gives original jurisdiction to cases in which the FDIC “is a party.” 12 U.S.C. § 1819(b)(2)(A). The statute does not, through some feat of alchemy, make the case’s state-law claims federal-law claims. Nor does the text “is a party” mean that all state-law claims in any case to which the FDIC ever was a party continue to arise under federal law after dismissal of all federal interests.
Here, I concur in the result reached by the majority because there remain federal usury claims and related state-law claims, which cannot be remanded. Laurents v. Arcadian Corp., No. 94-41183, 1995 WL 625394, at *2, 69 F.3d 535 (5th Cir. Oct. 4, 1995) (setting forth rule that properly removed questions of federal law cannot be remanded under 28 U.S.C. § 1441(c)).
Reference
- Full Case Name
- Glenn Allen ADAIR, Doing Business as Super D # 229; Dallas Little, Doing Business as Little’s Pharmacy; Southern Discount Drugs of Charleston, Doing Business as Southern Discount Drugs/Robert T. Salmon; May’s Pharmacy, Doing Business as Coldwater Pharmacy/James A. May; Animal Medical Center of Ellisville, Inc.; Et Al., Plaintiffs-Appellees, v. LEASE PARTNERS, INC.; Bancorpsouth Bank, Defendants-Appellants, First Bank Richmond, S B, Doing Business as First Federal Leasing and Interstate Financial, Appellant
- Cited By
- 29 cases
- Status
- Published