Michael K. Anusbigian v. Trugreen/chemlawn, Inc. , 72 F.3d 1253 ( 1996 )

LIVELY, J., delivered the opinio'n of the court, in which SILER, J., joined. RYAN, J. (pp. 1257-60), delivered a separate dissenting opinion.

LIVELY, Circuit Judge.

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 employer is found to have intentionally failed to pay. The defendant Ecolab Inc., the successor in interest to Chemlawn Services Corporation (incorrectly identified in the complaint as Trugreen/Chemlawn, Inc.), removed the action to the United States District Court for the Western District of Michigan pursuant to 28 U.S.C. §§ 1332 and 1441 (1988).

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 In a memorandum opinion addressing both motions, the district court ruled that the motion to remand was withdrawn and denied as moot.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.

III.

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, 423 U.S. 336, 96 S.Ct. 584, 46 L.Ed.2d 542 (1976). In Thermtron, a district judge remanded an action over which he had subject matter jurisdiction because of the crowded condition of his court’s docket. The Supreme Court held that § 1447(d) did not bar review by mandamus because the district court’s remand order was not based on a ground specified in § 1447(c). Id. at 346, 96 S.Ct. at 590. The Court made clear that its decision did not “disturb [or] take issue with the well-established general rule that § 1447(d) and its predecessors were intended to forbid review by appeal or extraordinary writ of any order remanding a case on the grounds permitted by the statute.” Id. at 351-52, 96 S.Ct. at 593.

The Supreme Court emphasized the narrow reach of its Thermtron decision in Grav-itt v. Southwestern Bell Tel. Co., 430 U.S. 723, 97 S.Ct. 1439, 52 L.Ed.2d 1 (1977). In Gravitt the district court remanded a removed case upon concluding there was not complete diversity among the parties. The court of appeals granted mandamus and ordered the district court to vacate its remand order “because the latter had employed erroneous principles in concluding that it was without jurisdiction.” Id. at 723, 97 S.Ct. at 1440. The Supreme Court reversed, finding that the remand for lack of subject matter jurisdiction “was plainly within the bounds of § 1447(c) and hence was unreviewable by the Court of Appeals, by mandamus or otherwise.” Id. The Court distinguished Therm-tron because in that case the district court remanded on grounds other than those set out in § 1447(c). The Court stated that “Thermtron did not question but reemphasized the rule that § 1447(c) remands are not reviewable.” Id. at 724, 97 S.Ct. at 1440.

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., 983 F.2d 1341, 1343-49 (6th Cir.1993). As this court has stated, “[a] distinction must be made ... between subsequent events that change the amount in controversy and subsequent revelations that, in fact, the required amount was or was not in controversy at the commencement of the action.” Jones v. Knox Exploration Corp., 2 F.3d 181, 183 (6th Cir.1993). In the present case, the district court’s subsequently-acquired understanding of the case revealed that the required amount in controversy had never existed; thus, it never had subject matter jurisdiction.

In State of Ohio v. Wright, 992 F.2d 616 (6th Cir.1993), this court, sitting en banc, held that a remand order based on the district court’s belief that it lacked subject matter jurisdiction was not reviewable even though the district court did not cite or refer to § 1447(c). Because the remand was clearly on jurisdictional grounds, the plain language of § 1447(d) deprived the court of appeals of jurisdiction to review the remand order. We referred to the “narrow exception” found in Thermtron and held that it did not apply. Id. at 617.

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, 992 F.2d at 618-19. The Wright court stated that “[i]f the district court must examine and discuss the federal defense in all such cases and if such an examination ipso facto makes the remand order appealable, nothing is left of the statutory language in § 1447(d).... ” Wright, 992 F.2d at 619. Further, in discussing the importance to federal-state court relations of the rule of non-reviewability, Chief Judge Merritt wrote:

It makes no difference that the District Court may be wrong in its conclusions 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. -, 116 S.Ct. 494, 133 L.Ed.2d 461 (1995). In Things Remembered, the Court stated:

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 -, 116 S.Ct. at 497 (emphasis added).

The dissent cites In re General Motors Corp., 3 F.3d 980 (6th Cir.1993) as being directly on point to the issue presented in this appeal. We find In re General Motors Corp. distinguishable. The In re General Motors Corp. court held that where a district court remands a case after determining that a federal statute does not provide a private right of action, the court of appeals has jurisdiction to hear an appeal, because the order of remand was not issued pursuant to § 1447(c). However, the In re General Motors Corp. court specifically noted that federal courts have jurisdiction to decide whether a federal statute provides a private right of action. 3 F.3d at 983 (citing Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946)). Thus, the In re General Motors Corp. court divested itself of jurisdiction after determining there was no private right of action, which, is a substantive determination on the merits of an issue that it had jurisdiction to examine, not a finding that it lacked subject matter jurisdiction.

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., 293 U.S. 140, 143, 55 S.Ct. 6, 7, 79 L.Ed. 244 (1934). In Waco, the plaintiff commenced a lawsuit in state court against the City of Waco. The City of Waco “vouched in” a third party defendant by cross-action. That party then removed the case on diversity grounds. Once the case was removed, the plaintiff filed a motion to remand the entire case. The district court’s decree resolving the motion contained three separate orders. The first order overruled the motion to remand the entire action to state court; the second order dismissed the cross-action, which destroyed diversity jurisdiction; and the third order remanded the remaining claims to state court. Id. at 142, 55 S.Ct. at 6-7. The City of Waco appealed the dismissal of the third party claim, but the court of appeals dismissed the appeal as from a non-reviewable order. Waco v. United States Fidelity & Guar. Co., 67 F.2d 785 (5th Cir.1933), rev’d, 293 U.S. 140, 55 S.Ct. 6, 79 L.Ed. 244 (1934). The Supreme Court reversed, ruling that where a district court dismisses a cross-claim prior to remanding the ease, the substantive decision dismissing the cross-claim is reviewable by the court of appeals, because such a ruling is binding on the parties and is, therefore, separable from the order of remand. Waco, 293 U.S. at 143-44, 55 S.Ct. at 7.

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., 894 F.2d 193, 194-95 (6th Cir.1990). Thus, this court makes a distinction between jurisdictional and substantive aspects of district court orders of remand. In Baldridge v. Kentucky-Ohio Transp., Inc., we held that where a district court rejects a defendant’s claim of complete federal preemption as a basis for removing a case to federal court, the court of appeals does not have jurisdiction to hear the appeal from a remand order. This is so because the district court’s determination that there is not complete federal preemption is “necessarily related to the question of jurisdiction.” 983 F.2d 1341, 1343-49 (6th Cir.1993).

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, 293 U.S. at 143, 55 S.Ct. at 7. In the present case the district court did not dismiss the action or any part of it. Rather, the court remanded the case and noted that the plaintiff might choose to amend his complaint in state court following remand. The fact that the district court based its jurisdictional determination on an interpretation of Michigan law is beside the point. And it matters not that the court’s conclusions about Michigan law may have been erroneous. In Page v. City of Southfield, 45 F.3d 128, 131 (6th Cir.1995), we stated that an order of remand issued pursuant to § 1447(e) is “beyond all power of appellate review, even if based on erroneous principles or analyses.”

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, 423 U.S. at 346, 96 S.Ct. at 590, and it invoked a ground specified therein — lack of subject matter jurisdiction. Thus, it is immune from review under § 1447(d).

The appeal is DISMISSED.