Camsoft Data Systems, Inc. v. Southern Electronics Supply, Inc.

Case: 12-31013 Document: 00512670512 Page: 1 Date Filed: 06/19/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 12-31013 June 19, 2014
Lyle W. Cayce
CAMSOFT DATA SYSTEMS, INC., Clerk
Plaintiff - Appellee-Cross-Appellant
v.
SOUTHERN ELECTRONICS SUPPLY, INCORPORATED; ACTIVE
SOLUTIONS, L.L.C.; BRIAN FITZPATRICK; HENRY J. BURKHARDT;
IGNACE PERRIN,
Defendants - Third Party Plaintiffs
- Appellants-Cross-Appellees
DELL, INCORPORATED; CIBER, INCORPORATED; DELL MARKETING,
L.P.; MARK KURT,
Defendants - Appellants - Cross-
Appellees
STEVE RENECKER; BILLY RIDGE; HEATHER SMITH; BILL TOLPEGIN;
DONALD BERRYMAN; EARTHLINK, INCORPORATED; MOTOROLA,
INCORPORATED; MMR CONSTRUCTORS, INCORPORATED, doing
business as MMR COMMUNICATIONS,
Defendants - Cross-Appellees
v.
ZURICH AMERICAN INSURANCE COMPANY; AMERICAN ZURICH
INSURANCE COMPANY; CONTINENTAL CASUALTY COMPANY,
Third Party Defendants -
Appellants-Cross-Appellees
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Appeals from the United States District Court
for the Middle District of Louisiana
Before BENAVIDES, CLEMENT, and GRAVES, Circuit Judges.
FORTUNATO P. BENAVIDES, Circuit Judge:
Before the court is the appeal of a district court’s decision not to exercise
supplemental jurisdiction over the case. Defendants-Appellants argue that the
court erred in remanding the case to state court. Plaintiff-Appellee moves to
dismiss the case, arguing that removal was improper and that we lack
jurisdiction to review the remand order. An untimely cross-appeal raises
various issues regarding several court orders.
The central issue in this case is whether a district court has jurisdiction
over an inventorship dispute where the contested patent has not yet issued.
The case was removed from Louisiana court pursuant to 28 U.S.C. §§ 1331,
1338(a), 1441(a) (2006). The parties stipulate that the only possible basis for
removal was an inventorship assertion implicit in the plaintiff’s ownership
claim under articles 513 and 514 of the Louisiana Civil Code. After reviewing
the case, we conclude that the controversy must be remanded to the state.
Regardless of whether the removed complaint included an inventorship
dispute, that dispute was inadequate to establish the district court’s
jurisdiction because the allegations indicated that no patent had issued. And
by raising a timely objection to removal, the plaintiff properly preserved its
jurisdictional argument. Therefore, because removal was improper and the
case has not yet been tried on the merits, binding precedent dictates that we
remand the case to state court. We thus affirm the district court’s remand
order as amended. Plaintiff’s motion and cross-appeal are dismissed for the
reasons stated herein.
I. Background
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The present case relates to an ongoing controversy regarding a wireless
urban surveillance system installed in New Orleans beginning in 2005. Prior
to the implementation of that system, Camsoft Data Systems, Inc., had worked
with two defendants 1—Active Solutions, L.L.C., and Southern Electronics
Supply, Inc.—on a pilot project involving wireless surveillance cameras.
Southern Electronics then entered into a contract with the City of New Orleans
to install the system at issue here. Camsoft was not party to that contract, nor
did it have a written agreement with Active Solutions or Southern Electronics.
There was, however, allegedly an understanding that Camsoft technology and
labor would be used in conjunction with the project. Ultimately, Camsoft did
not participate in the implementation of the system, which was mired in
political scandal after reports revealed that certain officials may have accepted
kickbacks during the municipal bidding process.
Extensive civil and criminal litigation resulted, with Active Solutions
and Southern Electronics winning a $12 million dollar jury award from
technology vendors and the city’s chief technology officer. 2 After
unsuccessfully attempting to intervene in that suit, Camsoft filed the present
action against Active Solutions and Southern Electronics in Louisiana court in
September of 2009, alleging various claims afforded by state statutory and
common law. Camsoft claimed, inter alia, to have “invented” and “developed”
the disputed system, which it alleged was the subject of a pending patent
application. Pursuant to articles 513 and 514 of the Louisiana Civil Code,
Camsoft sought judgment declaring its rightful ownership of the surveillance
system and any “intellectual property” arising out of work performed in
1 Camsoft currently names 20 defendants. The twelve parties who filed this appeal
(see caption) are collectively referred to as “Defendants-Appellants” or “Appellants.”
2 Active Solutions, L.L.C. v. Dell, Inc., No. 2007-3665, Div. “B”, Civil District Court for
the Parish of New Orleans, State of Louisiana (unpublished).
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conjunction with Active Solutions and Southern Electronics. Camsoft then
amended the complaint, pleading additional claims and naming seventeen
more defendants.
On December 14, 2009, the case was removed on the basis of federal
question jurisdiction under 28 U.S.C. §§ 1331 and 1338(a) (2006). Camsoft
vigorously opposed removal and moved to remand, but the district court found
that the allegations of inventorship necessarily invoked patent law and gave
rise to jurisdiction. 3 After unsuccessfully challenging the removal, Camsoft
further amended the complaint, adding over a dozen additional defendants and
emphasizing a joint ventureship—rather than inventorship—as the basis for
ownership. Camsoft also added federal anti-trust and racketeering claims.
See, respectively, Sherman Act, 15 U.S.C. § 1 et seq.; Racketeer Influenced and
Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961–1968. Camsoft later
elaborated on these federal claims in a third amended complaint.
The district court presided over the case for over three years,
adjudicating various dispositive motions and ultimately dismissing several
claims with prejudice. The court found that Camsoft had failed to adequately
plead several of its state claims, resulting in dismissal under Rule 12(b)(6). In
addition, the court dismissed the federal anti-trust and racketeering claims,
finding that Camsoft had no standing under the governing statutes. The court
also granted a defendant’s motion for summary judgment on the issue of joint
ventureship, which served as the foundation for most of Camsoft’s remaining
state claims. The court later denied Camsoft’s motion to certify these dismissal
orders as final judgments for interlocutory appeal.
3 Camsoft Data Sys., Inc. v. S. Elecs. Supply Inc., No. 09-1047-C, 2010 WL 763508
(M.D. La. March 4, 2010) (unpublished).
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Most recently, after Camsoft moved to file a fourth amended complaint
and to recuse the judge, the district court remanded the case by sua sponte
declining to exercise supplemental jurisdiction over remaining claims. 4 When
some of the defendants appealed the remand to the Federal Circuit, Camsoft
cross-appealed, seeking review of every adverse decision. Camsoft later filed
a motion to dismiss, arguing that jurisdiction never existed, or, in the
alternative, that the court lacked jurisdiction to review the remand. After
requesting briefs on the question of jurisdiction, the Federal Circuit
transferred the appeal to this court. 5 We now consider the parties’ arguments.
II. Appellate Jurisdiction
Camsoft moves to dismiss this case for lack of appellate jurisdiction,
arguing that this court has no authority to review the remand order. This
court has jurisdiction to review a remand order unless the case was remanded
for lack of subject matter jurisdiction or a defect in removal procedure. 28
U.S.C. §§ 1447(c), (d); Carlsbad Tech., Inc. v. HIF Bio, Inc., 556 U.S. 635, 637
(2009). Where a district court simply declines to exercise supplemental
jurisdiction over a case, the court’s decision is not jurisdictional. Carlsbad, 556
U.S. at 637. A district court may decline supplemental jurisdiction where: (1) a
state claim raises a novel or complex issue of state law; (2) the state claims
substantially predominate over any remaining federal claims; (3) the district
court has dismissed all claims over which it has original jurisdiction; or
(4) there are other compelling reasons for declining jurisdiction. 28 U.S.C.
§ 1367(c). In the present case, after dismissing Camsoft’s RICO and anti-trust
claims, the district court ordered briefs outlining the parties and claims that
4 Camsoft Data Sys., Inc. v. S. Elecs. Supply Inc., No. 09-1047-C (M.D. La. Sept. 28,
2012) (unpublished).
5 Camsoft Data Sys., Inc. v. S. Elecs. Supply Inc., No. 2013-1016 (Fed. Cir. May 31,
2013) (unpublished).
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remained at bar. When the briefs revealed that the patent issue had
apparently been abandoned and that the federal claims had been dismissed,
the court carefully weighed each statutory factor and then decided not to
exercise supplemental jurisdiction over remaining claims. There is no
indication that the court was remanding for lack of jurisdiction. Accordingly,
we have jurisdiction to review the order.
Camsoft nevertheless contends that the court effectively remanded for
lack of jurisdiction because the federal claims were dismissed under Rule
12(b)(1). See Fed. R. Civ. P. 12(b)(1) (allowing dismissal for lack of subject
matter jurisdiction). This argument is without merit. The district court
dismissed Camsoft’s federal claims after finding that Camsoft had no standing
under the respective governing statutes. The court presumed the lack of
statutory standing to be a jurisdictional defect and dismissed under 12(b)(1).
Yet statutory standing is not indicative of Article III jurisdictional standing.
See Harold H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787, 795 n.2 (5th
Cir. 2011). In fact, we have emphasized that “whether or not a particular cause
of action authorizes an injured plaintiff to sue is a merits question . . . not a
jurisdictional question.” Blanchard 1986, Ltd. v. Park Plantation, LLC, 553
F.3d 405, 409 (5th Cir. 2008). As a consequence, to the extent that statutory
standing was lacking, the federal claims should have been dismissed under
Rule 12(b)(6) rather than for lack of jurisdiction. Id.
Our jurisdiction exists notwithstanding the Federal Circuit’s decision
not to entertain the present appeal. The Federal Circuit has exclusive
jurisdiction over any appeal where the district court’s “jurisdiction was based,
in whole or in part, on 28 U.S.C. § 1338,” which confers jurisdiction where
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claims “arise under” the patent laws. 6 Camsoft points out that removal
jurisdiction was solely predicated upon the existence of a question of patent
law. Camsoft assumes, then, that because the Federal Circuit found no patent
question on appeal, 7 there must be no basis for federal appellate jurisdiction.
Camsoft is mistaken.
“This court necessarily has the inherent jurisdiction to determine its own
jurisdiction.” Scherbatskoy v. Halliburton Co., 125 F.3d 288, 290 (5th Cir.
1997). We also have jurisdiction to evaluate district court jurisdiction. See
Filer v. Donley, 690 F.3d 643, 647 (5th Cir. 2012). This is true even where the
asserted jurisdiction arises from patent law. Scherbatskoy, 125 F.3d at 290.
The issues before this court are not questions of patent law such that the
appeal must be adjudicated by the Federal Circuit. Instead, the parties dispute
the existence of jurisdiction over a complaint that allegedly implicates patent
law. Accordingly, we may entertain the appeal. This conclusion is not
inconsistent with the Federal Circuit’s order. If that court had found a lack of
appellate jurisdiction, it would have remanded to the district court instead of
transferring the appeal to this circuit.
Camsoft’s motion to dismiss is therefore denied. Insofar as Camsoft’s
motion raises any arguments not addressed by the foregoing discussion, those
arguments are rendered moot in light of the remainder of this opinion. See ITL
628 U.S.C. § 1295(a)(1) (2006); see also id. §§ 1331, 1338 (2006). Sections 1295 and
1338 were amended by the America Invents Act, Pub. L. No. 112–29, § 19, 125 Stat. 284,
331–32 (2011). Because that amendment does not affect suits filed prior to September 16,
2011, all references are to the previous text. See id. § 19(e), 125 Stat. at 333.
7 The Federal Circuit’s order reads:
This court lacks subject matter jurisdiction over this appeal under 28
U.S.C. § 1295(a)(1). See HIF Bio, Inc. v. Yung Shin Pharma. Indus. Co., 600
F.3d 1347 (Fed. Cir. 2010). Accordingly, this case is hereby transferred to the
United States Court of Appeals for the Fifth Circuit. This court does not decide
whether there is any reviewable order, leaving that question to the Fifth
Circuit.
Camsoft, No. 2013-1016, at 1.
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Int’l, Inc. v. Constenia, S.A., 669 F.3d 493, 501 (5th Cir. 2012) (dismissing
ancillary motion as moot after finding district court lacked jurisdiction over
claims).
III. Removal
Before reviewing the contested remand, we consider whether removal
was proper in the first place. All issues of subject matter jurisdiction are
questions of law that this court reviews de novo. Oviedo v. Hallbauer, 655 F.3d
419, 422 (5th Cir. 2011). Any underlying findings of fact are subject to review
for clear error. Young v. United States, 727 F.3d 444, 446 (5th Cir. 2013). A
case originating in state court may be removed where the district court has
original jurisdiction over any claim. 28 U.S.C. § 1441(a). “If at any time before
final judgment it appears that the district court lacks subject matter
jurisdiction, the case shall be remanded.” Id. § 1447(c). The parties stipulate
that the only possible basis for jurisdiction at removal was an inventorship
assertion implicit in Camsoft’s ownership claim. After reviewing the removed
complaint and relevant law, we conclude that regardless of whether Camsoft
asserted a theory of inventorship, removal was improper because district
courts have no jurisdiction over an inventorship dispute until the disputed
patent has issued.
As a threshold matter, the parties disagree as to whether we should even
entertain Camsoft’s objections to removal. After unsuccessfully contesting
removal, Camsoft seemingly resigned itself to its jurisdictional fate by
amending its complaint to include federal anti-trust and RICO claims.
Appellants ask this court to hold that Camsoft waived its jurisdictional
arguments by voluntarily pleading these causes of action. We have indeed held
that “[w]here the disgruntled party takes full advantage of the federal forum
and then objects to removal only after losing at the district court level, that
party has waived all objections to removal jurisdiction.” Kidd v. Sw. Airlines,
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Co., 891 F.2d 540, 546 (5th Cir. 1990) (emphasis added). Yet where—as here—
a plaintiff objects to jurisdiction at removal, that plaintiff does not waive her
jurisdictional arguments via post-removal amendment to her complaint.
Caterpillar, Inc. v. Lewis, 519 U.S. 61, 74 (1996). Instead, “by timely moving
for remand, [Camsoft] did all that was required to preserve [its] objection to
removal.” Id.
Camsoft’s objection having been properly preserved, we now turn to the
merits of its argument. District courts have original jurisdiction over any civil
action arising under patent law. 28 U.S.C. §§ 1331, 1338(a). This jurisdiction,
however, extends “only to those cases in which a well-pleaded complaint
establishes either that federal patent law creates the cause of action or that
the plaintiff’s right to relief necessarily depends on the resolution of a
substantial question of federal patent law.” HIF Bio, 600 F.3d at 1352 (quoting
Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 808–09 (1988)).
Inventorship is an issue “unique” to federal patent law, and raises a
substantial question thereof. Id. at 1352–53.
The district court lacked removal jurisdiction because inventorship
served as the only possible basis for removal, and Camsoft’s complaint did not
allege that a patent had issued. At the time of removal, the district court noted
the complaint’s lack of specificity with respect to the disputed patent.
Camsoft’s complaint clearly alleged that Active Solutions or Southern
Electronics had tried to patent the surveillance technology and had falsely
claimed sole inventorship. Yet the court was unable to ascertain the status of
the patent application. In fact, Camsoft had “no proof that the Active
Defendants [had] even filed a patent application” at all. 8 Nevertheless,
Camsoft, 2010 WL 763508, at *3 n.14. “Active Defendants” was the court’s short-
8
hand method of referring to both Active Solutions and Southern Electronics, as well as certain
employees of those entities. See id. at *1.
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because the complaint clearly referred to a pending patent, and because
neither Active Solutions nor Southern Electronics denied applying for a patent,
the district court analyzed jurisdiction under the assumption that an
application was pending. At oral argument before this court, the parties
indicated that an application had been filed but that no patent had issued. 9
The federal courts have no authority to adjudicate inventorship with
respect to pending patents. Congress has explicitly vested the Patent and
Trademark Office with sole discretion over the “granting and issuing of
patents.” 35 U.S.C. § 2(a)(1). Where an inventorship dispute involves a
pending patent application, an assertion of inventorship is “tantamount to a
request for either a modification of inventorship on pending patent
applications or [to] an interference proceeding.” HIF Bio, 600 F.3d at 1353
(referring to 35 U.S.C. § 116(c), which allows for modification of application,
and id. § 135, which establishes interference proceedings). 10 A request for
application modification must be adjudicated by the Director of Patent and
Trademark Office:
Whenever through error a person is named in an application for
patent as the inventor, or through error an inventor is not named
in an application, and such error arose without any deceptive
intention on his part, the Director may permit the application to
be amended accordingly, under such terms as he prescribes.
35 U.S.C. § 116(c). Similarly, where the disputed patent application interferes
with another inventor’s existing patent or application, the alleged interference
9 Even now, the record appears devoid of any indication that the application existed.
10 35 U.S.C. §§ 116, 135, and 256 were amended by The America Invents Act, Pub. L.
No. 112–29, 125 Stat. 284 et seq. (2011). See, respectively, § 20(a), 125 Stat. 333; §3(i), 125
Stat. 289–90; § 20(f), 125 Stat. 334. Interference proceedings, for example, have been
replaced by “derivation proceedings.” See 35 U.S.C. § 135 (2012). The Act and any
subsequent amendments do not apply to the present case, so we analyze the earlier text here.
Nevertheless, a review of the amended statutory sections reveals that the Patent and
Trademark Office still retains jurisdiction over disputed inventorship with respect to pending
patents, for essentially the reasons stated herein.
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must be submitted to the Director such that “[t]he Board of Patent Appeals
and Interferences shall determine questions of priority of the inventions and
may determine questions of patentability.” 11
Congress then explained the role of the courts in adjudicating contested
inventorship:
Whenever through error a person is named in an issued patent as
the inventor, or through error an inventor is not named in an
issued patent and such error arose without any deceptive intention
on his part . . . [t]he court before which such matter is called in
question may order correction of the patent on notice and hearing
of all parties concerned and the Director shall issue a certificate
accordingly.
Id. § 256 (emphasis added). As the Federal Circuit has observed, Congress has
thereby “limited the avenues” by which a plaintiff may contest inventorship in
the federal courts. HIF Bio, 600 F.3d at 1353. We conclude from these
statutory sections that only the Director of the Patent and Trademark Office
has jurisdiction to entertain arguments regarding inventorship with respect to
patents that have not yet issued. The sections that refer to unissued patents
make no mention of courts at all. “[W]here Congress includes particular
language in one section of a statute but omits it in another section of the same
Act, it is generally presumed that Congress acts intentionally and purposely
in the disparate inclusion or exclusion.” Russello v. United States, 464 U.S. 16,
23 (1983) (citation omitted) (alteration original). Consequently, a “district
court lack[s] jurisdiction to review the inventorship of an unissued patent.”
E.I. Du Pont de Nemours & Co. v. Okuley, 344 F.3d 578, 584 (6th Cir. 2003).
Admittedly, it seems paradoxical that disputed inventorship is
exclusively a question of federal law and yet sometimes fails to imbue the
11 35 U.S.C. § 135 (2006). The America Invents Act replaced interference hearings
with derivation proceedings. See supra note 10.
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district courts with federal question jurisdiction. Yet such a scenario is hardly
unusual. There are many federal questions whose jurisdiction has been vested
outside the district courts. Citizenship and naturalization, for example, are
exclusively issues of federal law. See U.S. Const. art. I., § 8. Nevertheless, the
federal courts have no jurisdiction over immigration disputes until those issues
have been adjudicated by an immigration judge and the Board of Immigration
Appeals. In fact, the district courts generally have no jurisdiction over removal
orders at all. See 8 U.S.C. § 1252(a)(5) (2012) (establishing the courts of
appeals as the “exclusive means of judicial review”). Similarly, “collective
bargaining agreement disputes raise a question arising under federal law.”
Oakey v. U.S. Airways Pilots Disability Income Plan, 723 F.3d 227, 238 (D.C.
Cir. 2013) (quoting Emswiler v. CSX Transp., Inc., 691 F.3d 782, 789 (6th Cir.
2012)) (internal quotation marks omitted). Even so, Congress has “expressly
and unequivocally consign[ed]” certain disputes—such as those arising under
the Railroad Labor Act—“to the appropriate adjustment board, with no
mention of federal court jurisdiction.” Id. (punctuation revised). As a
consequence, when such matters are brought before the district court, the court
must dismiss under Rule 12(b)(1). Id. Similarly, and notwithstanding the
inherently federal nature of inventorship, district courts must dismiss
premature questions of inventorship for lack of jurisdiction.
We recognize the lack of judicial consensus as to this issue. Compare
HIF Bio, Inc., 600 F.3d 1347 (the Federal Circuit finding jurisdiction), with
Okuley, 344 F.3d 578 (the Sixth Circuit finding none). The Federal Circuit has
held that inventorship disputes regarding pending patents give rise to subject
matter jurisdiction. HIF Bio, Inc., 600 F.3d at 1353. In HIF Bio, that court
considered a removed complaint in which the plaintiffs sought a declaration
that they were the “true” inventors of certain chemical compound. Id. at 1352.
Noting that a patent had not issued at the time of removal, the court construed
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the claim as an action under 35 U.S.C. § 116, which authorizes the Patent and
Trademark Office to correct erroneous patent applications. Id. at 1353. The
court further explained that § 116 “plainly does not create a cause of action in
the district courts.” Id. “Once a patent issues,” however, “35 U.S.C. § 256
provides a private right of action to challenge inventorship and such a
challenge arises under § 1338(a).” Id. at 1354. Without further explanation,
the Federal Circuit concluded that the district courts therefore have
jurisdiction over pre-patent inventorship disputes but must dismiss under
Rule 12(b)(6) until a patent has issued such that a valid § 256 action might be
brought. Id.
We respectfully disagree with our sister circuit’s interpretation. There
is no doubt that the district courts have jurisdiction to review the inventorship
of patents pursuant to 35 U.S.C. § 256. That fact, however, does not establish
jurisdiction over patent applications. It seems like splitting jurisdictional
hairs to suggest that the federal courts entertain some kind of pending
jurisdiction over a dispute whose immediate resolution Congress delegated to
another forum. Moreover, to conceive of a prospective patent as an eventual
issued patent is to focus on a dispute that might someday exist at the expense
of the dispute immediately before the court. Yet federal courts only have
jurisdiction over live cases and controversies that are “definite and concrete,
not hypothetical.” Cross v. Lucius, 713 F.2d 153, 158–59 (5th Cir. 1983).
Indeed, it is well settled that the federal courts have no jurisdiction over claims
that “rest[] upon contingent future events that may not occur as anticipated,
or indeed may not occur at all.” Texas v. United States, 523 U.S. 296, 300 (1998)
(citations and internal quotation marks omitted). As a consequence, we are
unable to establish jurisdiction based on the theory that a disputed pending
patent might eventually ripen into a patent controversy that Congress has
authorized the federal courts to adjudicate. We hold, therefore, that until a
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patent has actually issued, any questions of inventorship are not justiciable
outside of the Patent and Trademark Office. Consequently, removal was not
proper and the case should have been remanded in response to Camsoft’s
timely motion. 28 U.S.C. § 1447(c).
IV. Remand
Our analysis does not end with the improper removal, however, because
Appellants argue that the subsequently pleaded federal causes of action
preclude remand. This court is, of course, bound by its own precedent. United
States v. Guanespen-Portillo, 514 F.3d 393, 402 n.4 (5th Cir. 2008). We do not
generally recognize post-filing or post-removal amendment as cure for
jurisdictional defect. “Although 28 U.S.C. § 1653 and [Rule] 15(a) allow
amendments to cure defective jurisdictional allegations, these rules do not
permit the creation of jurisdiction when none existed at the time the original
complaint was filed” or removed. Arena v. Graybar Elec. Co., Inc., 669 F.3d
214, 218 (5th Cir. 2012) (referring to Fed. R. Civ. P. 15(a)); see also In re Katrina
Canal Breaches Litig., 342 F. App’x 928, 931–32. (5th Cir. 2009) (unpublished)
(collecting authorities). Appellants nevertheless point to a well-established
exception for cases in which removal was improper but the claims subsequently
tried would otherwise give rise to subject matter jurisdiction. In these cases,
remand is not necessary because “considerations of finality, efficiency, and
economy” prevail over the prior removal deficiency. Caterpillar, 519 U.S. at
75. Here, Camsoft’s federal causes of action could have properly been brought
in district court. Yet because Camsoft’s claims have not yet been tried on the
merits, the case does not fall into the exception asserted by Appellants, and
instead must be remanded to Louisiana.
In arguing for and against remand, both parties rely heavily on
Caterpillar, Inc. v. Lewis, 519 U.S. 61 (1996). Caterpillar involved state claims
removed on the basis of diversity jurisdiction. Id. at 64. The plaintiff
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vigorously opposed removal, but its motion to remand was denied. Id. Later,
the undisputed facts indicated that diversity had not existed at the time of
removal. Id. at 70. But prior to final judgment, the plaintiff had voluntarily
settled with the sole non-diverse defendant, thereby creating the diversity
necessary to give rise to federal jurisdiction. Id. at 64. After a jury returned a
verdict in favor of the defendant, the plaintiff appealed on the ground that the
district court had never entertained jurisdiction over the case. Id. at 66–67.
After acknowledging that the jurisdictional challenge had been preserved and
holding that removal had been improper, the Supreme Court explained that
the removal defect was cured via the dismissal of the lone non-diverse
defendant. Id. at 73. The Court then declined to remand for a new trial in
state court, noting that where a removal defect has been cured and a case has
proceeded to trial on the merits, “considerations of finality, efficiency, and
economy” are “overwhelming.” Id. at 75, 77–78.
So Caterpillar analysis involves three considerations: first, whether a
meritorious removal challenge has been preserved; second, whether a post-
removal development cured the defect that existed at removal; and third,
whether the case was tried on the merits such that finality and economy
preclude remand. See Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567,
572 (2004) (explaining that whether the defect is cured and whether economy
precludes remand are distinct inquiries). Remand is proper here because there
has been no trial on the merits, as required by Caterpillar’s third analytical
prong. Courts have long made an exception to the time-of-filing and time-of-
removal jurisdictional rules for cases tried on the merits. See Grubbs v. Gen.
Elec. Credit Corp., 405 U.S. 699, 702–03 (1972) (tracing the distinction back to
1900). As the Supreme Court observed in Grubbs, “where after removal a case
is tried on the merits without objection and the federal court enters judgment,
the issue in subsequent proceedings on appeal is not whether the case was
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properly removed, but whether the federal district court would have had
original jurisdiction of the case had it been filed in that court [at the time of
judgment].” Id. (emphasis added). The Caterpillar Court merely extended that
rule by holding that even where a timely and meritorious objection was raised,
remand is no longer necessary once the case has been tried on the merits. 519
U.S. at 77–78. Here, there has been no trial on the merits, so the case must be
remanded.
Appellants disagree, arguing that the district court’s Rule 12 dismissals
are the functional equivalent of trial on the merits. This court, however, has
already held that claim dismissal does not forestall remand under Caterpillar.
See Waste Control Specialists, L.L.C. v. Envirocare of Tex., Inc., 199 F.3d 781
(5th Cir. 2000), opinion withdrawn and superseded in part, 207 F.3d 225 (5th
Cir. 2000) (superseding allocation of attorney’s fees). In Waste Control, we
relied on the Supreme Court’s reasoning in Caterpillar to analyze facts similar
to those of the instant case. The district court had allowed removal after
erroneously concluding that federal anti-trust law preempted the plaintiff’s
claims. Id. at 782–84. After its motion to remand was denied, the plaintiff
added a federal cause of action. But when the entire case was dismissed on a
Rule 12(b)(6) motion, the plaintiff appealed, arguing that the case must be
remanded because the district court never had jurisdiction over the case. Id.
at 782–83. After finding that removal had been improper and that the
jurisdictional argument had been preserved, we held that remand was not
precluded by Caterpillar. Id. at 787. In reaching that conclusion, we
emphasized that whereas Caterpillar had been tried to verdict, Waste Control
involved “no trial on the merits.” Id. at 786. Before instructing the district
court to remand the case, we explicitly stated that Caterpillar’s reach “stops
short of a Rule 12(b)(6) dismissal.” Id. In fact, we are aware of no improperly
removed case in which this court denied remand following a Rule 12 dismissal.
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Appellants nevertheless contend that we once anticipated an untried
case that had “remain[ed] in the federal court system for [such] a significant
length of time” that “considerations of finality and economy [would] result in
affirming a judgment.” McAteer v. Silverleaf Resorts, Inc., 514 F.3d 411, 416
(5th Cir. 2008). First of all, it is not clear exactly what the McAteer court
intended with that comment, as that language was not explained and was not
used to resolve the case. Id. That case—much like this one—involved the
improper removal of claims that were later dismissed under Rule 12(b)(6). Id.
at 414. On appeal from that dismissal, we vacated the dismissal and instructed
the district court to remand to the state, notwithstanding the fact that a post-
removal development resulted in a case that could have been filed in federal
court. Id. at 416. So McAteer is not a particularly strong case for Appellants.
On the contrary, it only serves to illustrate this court’s consistent treatment of
12(b)(6) adjudication as insufficient to forestall an otherwise proper remand.
Regardless, to whatever extent McAteer implies that some improperly
removed cases must remain in federal court based solely on considerations of
finality and economy, we are not persuaded that this is such a case. There is
no finality here, as this is an interlocutory appeal. In fact, the heart of this
dispute—Camsoft’s original breach of contract claim against Southern
Electronics and Active Solutions—has not been adjudicated at all. Nor is there
a prevailing economy interest in retaining the case. Although the case has
been pending in the district court for several years, it was stayed twice due to
ongoing litigation in state court. Consequently, relatively little progress has
been made on the merits, and the potential loss of economy is not as significant
as the timeline alone might suggest. And while Appellants argue that remand
will result in four wasted years of litigation, the Supreme Court has expressly
rejected such arguments. “When the stakes remain the same and the players
have been shown each other’s cards, they will not likely play the hand all the
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No. 12-31013
way through just for the sake of the game.” Grupo Dataflux, 541 U.S. at 581.
The Court further reasoned that upon remand the case, “having been through
[ ] years of discovery and pretrial motions, . . . would most likely proceed
promptly to trial.” Id. (punctuation revised).
In fact, due to the related cases, the Louisiana bench may be able to
handle this litigation more efficiently than the federal court. The Louisiana
courts have already presided over multiple cases involving the same parties
and arising out of the same set of underlying facts, so the state court may be
better positioned to efficiently discern the merits of Camsoft’s allegations,
which are based largely on facts already litigated. Indeed, the intensely local
nature of this litigation only underscores the propriety of remand. After all,
improper removal undermines federalism by depriving a sovereign state of the
right to adjudicate its own cases and controversies. Gasch v. Hartford Accident
& Indem. Co., 491 F.3d 278, 281 (5th Cir. 2007). For that reason, this court
resolves any jurisdictional doubt “in favor of remand.” Id. at 281–82.
In any event, there is little doubt that remand will result in a certain
degree of inconvenience. Yet we must respect the outer limit of our jurisdiction
“regardless of the costs” imposed. Grupo Dataflux, 541 U.S. at 571. As one of
our brothers observed, “the so-called ‘waste’ of judicial resources that occurs
when we dismiss a case for lack of jurisdiction is the price that we pay for
federalism.” Atlas Global Group, L.P. v. Grupo Dataflux, 312 F.3d 168, 177
(5th Cir. 2002) (Emilio Garza, J., dissenting to cure of defective diversity
removal, and anticipating the Supreme Court’s eventual reversal). In Grupo
Dataflux, the Supreme Court cautioned this court against creating new
jurisdictional exceptions for the sake of immediate judicial economy. 541 U.S.
at 580–81. We had established a new rule whereby defective diversity
jurisdiction is cured when a lone non-diverse party establishes new citizenship.
312 F.3d at 171 (majority opinion). The Supreme Court rejected the rule,
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explaining that even a significant investment of judicial resources will not
preclude an otherwise proper remand. 541 U.S. at 571, 577–78. The Court
further emphasized the short-sightedness of establishing a new jurisdictional
exception for the sake of a case immediately at bar: “the policy goal of
minimizing litigation over jurisdiction is thwarted whenever a new exception
to the time-of-filing rule is announced.” Id. at 580–81. Consequently, rules
introduced to avoid immediate jurisdictional implications serve only to
undermine judicial economy rather than to facilitate it.
Returning to the case at hand, Appellants propose a new rule whereby
12(b)(6) adjudication sometimes constitutes “trial on the merits” such that
remand is precluded by Caterpillar and Grubbs. Given that the Supreme
Court has expressly discouraged this court from creating new jurisdictional
exceptions, and given that jurisdictional rules “of indeterminate scope” are
disfavored, we decline the invitation. Id. at 575, 582. We therefore hold that
because there has been no trial on the merits, any interest in economy or
finality is not sufficient to override Camsoft’s timely and meritorious challenge
to removal. Accordingly, the case must be remanded to the state of Louisiana.
Because the case should have been remanded for the reasons stated herein, we
affirm the remand order in judgment only. The court’s discussion and
reasoning are vacated. See In re Golden Rests., Inc., 402 F. App’x 5, 10 (5th
Cir. 2010) (unpublished) (“The district court lacked jurisdiction to make any
decisions beyond the remand . . . .”).
V. Conclusion
This case should have been remanded upon Camsoft’s timely motion
following removal. As explained herein, the patent laws could not provide a
basis for removal because any inventorship allegation did not implicate a
perfected patent or allege that such a patent existed. Furthermore, our
examination of the removed complaint reveals no alternate basis for removal,
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No. 12-31013
and Appellants have identified no authority that precludes remand.
Accordingly, as the district court had no jurisdiction to remove this case, the
remand order is AFFIRMED as amended herein. The district court’s other
orders are vacated for lack of jurisdiction. Camsoft’s motion to dismiss is
DENIED, and its cross-appeal is DISMISSED as moot in light of the foregoing.
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