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Federal Circuit Lacked Jurisdiction to Review a District Court Remand Declining Supplemental Jurisdiction over State Law Claims

06-1522
November 13, 2007

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Last Month at the Federal Circuit - December 2007

Judges: Michel, Gajarsa (author), Holderman (Chief District Judge sitting by designation)

[Appealed from: C.D. Cal., Judge Pregerson]

 In HIF Bio, Inc. v. Yung Shin Pharmaceuticals Industrial Co., No. 06-1522 (Fed. Cir. Nov. 13, 2007), the Federal Circuit held that it lacked jurisdiction to review an appeal of a district court remand order declining to exercise supplemental jurisdiction over state law claims.

Plaintiffs HIF Bio, Inc. and BizBiotech Co., Ltd. filed a complaint in state court against numerous defendants, including Carlsbad Technology, Inc. (“CTI”), relating to a dispute over the inventive use of a particular compound as an anticancer agent. After CTI removed the action to federal court, plaintiffs filed an amended complaint asserting twelve causes of action including DJ for ownership and inventorship of the invention, violations of the RICO Act, and nine state law causes of action. The district court dismissed the RICO Act claim and then declined supplemental jurisdiction over the rights of inventorship and ownership ofinventions claims, which it found were state law claims, and also declined supplemental jurisdiction over the plaintiffs’ nine other state law claims. Having declined supplemental jurisdiction over the state claims, the district court remanded the case to state court, whereupon CTI appealed the decision to the Federal Circuit.

In the appeal, CTI asserted that the remand order was improper because the question of inventorship is a claim that arises under federal law. Plaintiffs countered that remanding the case was proper because inventorship is solely a state law issue. Before reaching these arguments, though, the Federal Circuit disposed of the appeal on a threshold issue, holding that it lacked appellate jurisdiction to review the district court’s remand order.

The Federal Circuit began by explaining that 28 U.S.C. § 1447(d) provides that “[a]n order remanding a case to the state court from which it was removed is not reviewable on appeal or otherwise.” Slip op. at 7(alteration in original). The Court noted, however, that interpretation of this section is narrower than the plain text suggests. Specifically, the Federal Circuit observed that the Supreme Court has repeatedly held that application of section 1447(d) should be limited to the specific grounds enumerated in section 1447(c).

The Federal Circuit further explained that the language of section 1447(c) indicates that section 1447(d) bars appellate review of remand orders based on (i) a lack of subject matter jurisdiction, or (ii) on “any defect other than a lack of subject matter jurisdiction.” Id. at 9 (citation omitted). In this case, the Federal Circuit noted that if the district court had not had supplemental jurisdiction over the state claims, the remand would have been based on a lack of federal question or diversity jurisdiction. Such a remand would clearly be a matter of subject matter jurisdiction as recited in section 1447(c), and therefore barred from review by section 1447(d). Here, however, the district court had subject matter jurisdiction over the RICO Act claim, which in turn conferred supplemental jurisdiction under section 1367(a) over the other claims. The remand order was based on declining supplemental jurisdiction over these other claims. The Federal Circuit addressed, as a matter of first impression, whether a remand based on declining supplemental jurisdiction under section 1367(c) is within the class of remands described in 1447(c), and therefore barred from review by section 1447(d).

The Federal Circuit noted that several other circuit courts have held that review of a remand order based on declining supplemental jurisdiction is not barred under section 1447(d). The support for this interpretation derives from a 1988 Supreme Court case that, although it held that a district court may in its discretion remand a case in which only pendent state law claims remained, also stated that “the remand authority conferred by the removal statute and the remand authority conferred by the doctrine of pendent jurisdiction overlap not at all.” Id. at 11 (citation omitted). Based on this apparent partitioning of the jurisdictional issues, Courts of Appeal have continued to hold that remand orders based on section 136 (c) are not barred under 1447(d) and may be reviewed on appeal.

More recently, another Supreme Court decision, Powerex Corp. v. Reliant Energy Servs., Inc., 127 S. Ct. 2411 (2007), questioned the basis for separating out pendent claims from the analysis under section 1447(c). In fact, the Federal Circuit observed that Powerex states that a remand order need only be colorably characterized as a remand based on lack of subject matter jurisdiction to be beyond the reach of appellate courts under § 1447(d).

CTI relied on the Supreme Court’s decision in Quackenbush v. Allstate Insurance Co., 517 U.S. 706 (1996), which held that § 1447(d) interposes no bar to appellate review of “abstention-based” remand orders. A court “abstains” from hearing claims over which it has an independent basis of subject matter jurisdiction, whether it be federal question jurisdiction or diversity jurisdiction. CTI argued by analogy that § 1447(d) imposes no bar to review of discretionary remands under § 1367(c). The Federal Circuit disagreed, reasoning that a remand premised on abstention cannot be colorably characterized as a remand based on lack of jurisdiction because, in that case, the claims at issue have an independent basis of subject matter jurisdiction. By contrast, the Court noted, when a court declines supplemental jurisdiction, it is declining to extend its jurisdiction to claims over which it has no independent basis of subject matter jurisdiction, i.e., state claims.

In short, the Court concluded that because every § 1367(c) remand necessarily involves a predicate finding that the claims at issue lack an independent basis of subject matter jurisdiction, a remand based on declining supplemental jurisdiction can be colorably characterized as a remand based on lack of subject matter jurisdiction and, therefore, barred from appellate review under § 1447(c) and (d). Accordingly, the Court found it lacked jurisdiction over the appeal and dismissed the case.