Appealing § 1447(e) Remands, Genuine & Otherwise

In LeChase Construction Services, LLC v. Argonaut Insurance Co., the Second Circuit held that 28 U.S.C. § 1447(d)’s bar on remand appeals applied to remands under § 1447(e). But the court also held that it could review a remand that, while purportedly under § 1447(e), was actually based on “a patently nonjurisdictional ground, such as prudential considerations.” (Cleaned up.) So the Second Circuit reviewed a remand that—though nominally done under § 1447(e)—was really an exercise of Colorado River abstention.

The Remand in LeChase

Simplifying a bit, LeChase arose from a dispute over a construction project. The main contractor was sued in New York state court due to allegedly deficient performance on the project. That contractor apparently blamed one of its subcontractors for any deficiencies. So it filed a separate lawsuit—the one from which the LeChase appeal stems—in New York state court to recover on a bond that the subcontractor had executed to secure its performance.

The defendants (the subcontractor and the guarantor of the bond) removed the case to the Western District of New York. Shortly thereafter, the contractor sought a remand. The district court eventually granted that request. In doing so, the court invoked its authority under 28 U.S.C. § 1447(e), which says:

If after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court.

The defendants then appealed.

Remand Appeals & § 1447(e)

The Second Circuit ultimately held that it had appellate jurisdiction to review the remand. But reaching that conclusion required a bit of effort.

§ 1447(d)’s Bar on Remand Appeals

The first jurisdictional hurdle was § 1447(d). With exceptions irrelevant to the present discussion, that provision generally bars appeals from remand orders:

An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise, except that an order remanding a case to the State court from which it was removed pursuant to section 1442 or 1443 of this title shall be reviewable by appeal or otherwise.

The statute’s language would seem to bar all remand appeals. But the Supreme Court has long held that § 1447(d) must be read in the context of the rest of § 1447. So in Thermtron Products, Inc. v. Hermandsdorfer, the Court held that § 1447(d)’s prohibition on remand appeals applied only to remands authorized by the neighboring § 1447(c).

Thermtron’s holding regarding § 1447(c) led the defendants in LeChase to contend that § 1447(d)’s bar on remand appeals did not apply to § 1447(e). But when the Supreme Court decided Thermtron, § 1447(e) was not part of the statute; Congress added it in 1988. Since then, every court of appeals to address the issue has held that the bar on remand appeals also extends to § 1447(e) remands.

The Second Circuit joined those circuits. It saw no reason to create a split, nor did it see any language in § 1447(d)’s text that would draw a distinction between subsections (c) and (e).

Reviewing the True Grounds for Remand

So the district court’s remand—which invoked § 1447(e)—seemed non-appealable. The thing was, no one really seemed to contend that the remand was actually one under that subsection.

Recall that subsection (e) permits remands when “the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction.” That wasn’t the case in LeChase—the plaintiff did not seek to join anyone. Remand was instead justified by the related state court case concerning the construction project. Remand and consolidation would protect against duplicative litigation and inconsistent outcomes. So the remand was actually an exercise of Colorado River abstention.

The true grounds for the remand raised two additional appellate-jurisdiction issues. First, if the remand was actually an exercise of abstention, would it be appealable? And second, if it was, could the court of appeals look beyond the district court’s invocation of § 1447(e) and review the remand?

Appealing Abstention-Based Remands

On the first question, the court held that it could review an abstention-based remand. The Supreme Court held in Quackenbush v. Allstate Insurance Co. that § 1447(d) did not apply to abstention-based remands. In so holding, the Court had relied on Thermtron’s conclusion that § 1447(d) applied only to remands under § 1447(c). But that conclusion (as just explained) is no longer accurate—the bar on remand appeals also applies to remands under § 1447(e).

The Second Circuit concluded that the extension of § 1447(d)’s bar on remand appeals to § 1447(e) did not undermine “Quackenbush’s basic insight that discretionary abstention-based remands are different in kind from remands on any of the grounds invoked in the various subsections of section 1447.” Abstention-based remands have never fallen under § 1447(d). And merely extending subsection (d)’s prohibitions to § 1447(e) did not “open[] the floodgates for section 1447(d) to be applied to remands based on grounds, such as abstention, that are nowhere mentioned in the text of any subsection of 1447.” It also made some sense that mandatory remands (those under § 1447(c) and (e)) “would be treated differently than remands pursuant to judge-made abstention doctrines (which are always discretionary in nature).”

Abstention Dressed in § 1447(e)’s “Jurisdictional Clothing”

So appeals from abstention remands were still on the table. The last question was whether the Second Circuit could treat the district court’s purported § 1447(e) remand as what it really was—an abstention-based remand.

The Supreme Court declined to answer this question in Powerex Corp. v. Reliant Energy Services, Inc. And views on the matter vary. In his dissent in Osborn v. Haley, Justice Scalia contended that the district court’s characterization “should be the end of the matter”—“even if the district court was so badly mistaken that it misunderstood the true basis for its order.” (Cleaned up.) The Ninth Circuit, in contrast, has held that the courts of appeals “may perform a limited review to determine whether the grounds of the remand order were colorably based on lack of subject-matter jurisdiction.”

The Second Circuit sided with the Ninth. The court thought that district courts should not be able to insulate remands from review by characterizing them as jurisdictional. The Second Circuit found further support in the proposition that it has jurisdiction to determine its own jurisdiction. That power “allow[ed] [the court of appeals] to seek to determine what decision was made in a remand order and whether that decision was of the general type shielded from appellate review by section 1447(d).” (Quotation marks omitted.) The court was simply barred from determining whether a remand order was correct.

The Merits

Turning to the appeal’s merits, the Second Circuit vacated the remand—the district court could not dress up an abstention remand as one under § 1447(e).

LeChase Construction Services, LLC v. Argonaut Insurance Co., 2023 WL 2604253 (2d Cir. Mar. 23, 2023), available at CourtListener and Westlaw