Jurisdictional Remands and the Amount in Controversy

28 U.S.C. § 1447(d) generally bars review of district court orders remanding a case to state court. But only certain kinds of remands fall under § 1447(d)’s bar. Last week, in Academy of Country Music v. Continental Casualty Co., the Ninth Circuit held that § 1447(d) did not apply when the district court had not given the defendant a chance to establish the amount in controversy for purposes of diversity jurisdiction. The notice of removal itself did not need to prove that amount. And the district court needed to give the defendant an opportunity to show it. So the remand—though ostensibly for a lack of subject-matter jurisdiction—was not a “colorable” jurisdictional remand. The Ninth Circuit could review it despite § 1447(d).

The Academy of Country Music Remand

Academy of Country Music was an insurance-coverage dispute. The plaintiff sued its insurer in state court, alleging that the insurance company breached a policy by denying coverage. The insurance company removed the case to federal court. Shortly thereafter, the district court—on its own initiative—remanded the case to state court. According to the district court, the insurance company’s notice of removal had failed to establish the amount in controversy, which was necessary for the district court to have diversity jurisdiction. That same day, the district court transmitted its order to state court, thereby transferring the case.

A few weeks later, the insurance company sought reconsideration in the district court. In support of its motion, the insurance company offered evidence about the underlying policy and a stipulation of over $1.2 million in damages. The district court denied this motion, believing that it lacked jurisdiction to revisit its remand order. The insurance company then appealed.

“Colorable” Jurisdictional Remands & the Scope of § 1447(d)

The Ninth Circuit ultimately concluded that it had jurisdiction over the appeal. But in doing so, the court had to address two jurisdictional issues.

The District Court’s Jurisdiction to Reconsider the Remand

First, the court determined that the district court’s immediate transfer of the case to state court did not necessarily deprive the district court of jurisdiction to reconsider the remand.

28 U.S.C. § 1447(d) generally bars review of remand decisions “on appeal or otherwise.” (The statute contains two exceptions that are irrelevant to the present discussion, but are the subject of a case currently pending in the Supreme Court.) The statute can accordingly apply to bar a district court’s reconsideration of a remand—that would be one kind of “otherwise” review.

But the Supreme Court has held that this bar applies only to remands authorized under § 1447(c): remands (1) due to a lack of federal jurisdiction or (2) on a timely motion pointing out a defect in removal. If a district court remands a case on grounds that § 1447(c) does not authorize, § 1447(d) does not bar review of that remand. An immediate transfer to state court does not alter this analysis. The question remains whether the remand was one that § 1447(c) authorized.

It was thus possible that the district court retained jurisdiction over the dispute.

The Need for an Opportunity to Prove the Amount in Controversy

The second issue—which mattered to both the district court’s jurisdiction to decide the motion to reconsider and the Ninth Circuit’s jurisdiction over the appeal—was whether the remand in Academy of Country Music fell under § 1447(c).

The Ninth Circuit concluded that it didn’t. Again, § 1447(c) authorizes remands for a lack of subject-matter jurisdiction or a defect in removal. Normally a district court’s characterization of its decision is determinative. And the district court in Academy of Country Music had said that it was remanding for a lack of jurisdiction. But the district court’s characterization must be “colorable”—that is, arguably correct.

The remand here did not meet that low standard. Although failure to meet diversity’s jurisdiction amount-in-controversy requirement is a jurisdictional defect, the party invoking federal jurisdiction must have an opportunity to establish that amount. The “notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” And a district court cannot remand for failure to meet that threshold “without first giving the defendant an opportunity to show by a preponderance of the evidence that the jurisdictional requirements are satisfied.”

The district court in Academy of Country Music thus erred in requiring the notice of removal alone to establish the amount in controversy and in not giving the insurance company the chance to establish that amount. So the remand was not even colorable. The Ninth Circuit accordingly vacated the remand order.

Academy of Country Music v. Continental Casualty Co., 2021 WL 1082850 (9th Cir. Mar. 22, 2021), available at the Ninth Circuit and Westlaw.