Thursday, August 18, 2016

Polo v. Innoventions Int'l (9th Cir. - Aug. 18, 2016)

Judge Milan Smith authors a smart opinion today about when (if ever) you have to remand a putative class action case that was removed under CAFA once you find out that Article III standing is absent over the named plaintiff.  That's a neat little topic for civil procedure academics (and/or buffs), and I count myself as at least one of these.  It's also practically important for class action practitioners.

So the opinion stands on its own as one potentially worth reading in full.

I generally find Judge Smith's opinion pretty darn persuasive.  I nonetheless wanted to identify one particular paragraph that stuck out to me as much less powerful than the rest of the opinion, as well as being potentially dispositive.

The question is whether Section 1447(c) requires the district court to remand a CAFA-removed case to state court, rather than dismissing it, once the plaintiff is found to lack standing.  There are a wide variety of arguments that Judge Smith dismisses about why Section 1447(c) is allegedly inapplicable to cases removed under CAFA, and those I totally understand, and he seems right.

But then there's this paragraph:

"Finally, Innoventions argues that because Polo’s lack of injury was established as part of the summary-judgment process, it was established at final judgment, rather than “before final judgment” as required by § 1447(c). What the statute requires is remand “[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction”—and the district court necessarily must have determined that it lacked subject-matter jurisdiction before entering judgment to that effect. [Footnote:   Indeed, the record shows that the district court made its determination on May 1, 2014, but entered judgment almost two weeks later on May 12, 2014.]  Therefore, this case falls within the purview of § 1447(c)."

Wait a minute.  Not so fast.  I'm not sure this is right at all.

Here, defendant moved for entry of summary judgment -- a dismissal on the merits -- because the plaintiff lacked any actual injury.  That's indeed an element of the cause of action.  So if defendant is right, then, yeah, they're entitled to a dismissal on the merits.

So defendant says that Section 1447(c) only requires a remand if it appears before a final judgment, whereas here, the court found out that the cause of action was deficient -- as, not so coincidentally, was subject matter jurisdiction -- once it resolved the summary judgment motion.  As a result, says the defendant, the court only found out that subject matter jurisdiction was lacking once it resolved the summary judgment motion, but once it resolved the summary judgment motion, that was a decision on the merits that entitled defendant to entry of a final judgment in its favor.  So, the argument goes, the decision on the merits transpired first, or (at worst) at the same time, as the determination that there was no subject matter jurisdiction.  So the latter determination wasn't "before" the final judgment on the merits, hence Section 1447(c) doesn't apply.  That's the argument.

Judge Smith's opinion responds by saying that the district court "necessarily must have determined that it lacked subject-matter jurisdiction before entering judgment" on the merits, hence that it indeed found out about the lack of jurisdiction "before" that judgment and thus Section 1447(c) applies.  But I'm not at all sure that's the case -- much less "necessarily" the case.

Defendant moved for summary judgment.  The court read the papers for and against.  Yes, at some point -- Time X -- the court must have decided "Yes, defendant is right.  There's no standing here."  And at that exact moment, Time X, the district court necessarily "decided" (at least in its own mind) that both (1) defendant was entitled to win on the merits (since the required element of injury in fact was absent), and (2) there was no subject matter jurisdiction (since there was no Article III standing).

In other words, those determinations happen -- indeed, necessarily happen -- at the same time.  One is the other side of the coin of the other.  The one means the other, and vice-versa.

Which in turns means that a court doesn't decide the absence of subject matter jurisdiction "before" the determination of the merits.  Which is what Section 1447(c) requires in order to compel a remand instead of a dismissal.  Which seems to mean that defendant is right; the requirements of that statute don't apply, and the district court is free to adjudicate the merits instead of remanding, since the two determinations happen at the same time.

Now, the footnote he drops might perhaps reveal Judge Smith's potential reasoning to the contrary.  He points out that, in the present case, the actual final judgment wasn't actually entered until 11 days after the entry of the order on the summary judgment motion.  So I think he's thinking that since a final judgment was entered after the motion was resolved, and the statute says "before", Section 1447(c) must be satisfied.

Okay, I get that.  At least here.

But the truth is that once you've decided the summary judgment motion, that's the end of the case.  It is an adjudication on the merits.  The entry of a final judgment is a ministerial matter at that point.  I don't see that the temporal difference there -- even an 11 day one -- matters.

Plus, Judge Smith says that the decision on subject matter jurisdiction "necessarily" comes before the decision on the merits.  Really?  What if the trial judge here simultaneously filed her decision on the summary judgment motion as well as the final judgment that reflected that decision?  Then it wouldn't be "before", right?  I can't fathom that whether you're entitled to a remand and the resulting ability to continue to litigate in state court, on the one hand, versus a dismissal on the merits on the other is in fact meant to depend under Section 1447(c) on which document the district court decides to file first, or whether one document is filed 11 days, 11 minutes, or 11 seconds after the other (or at the same time).  Seems to me the actual decision is made at the same time; once there's no injury, there's no standing and no ability to prevail on the merits.  One's not actually "before" the other at all.

Moreover, wouldn't Judge Smith have the same view about other adjudications on the merits, where the law is clear that you're not entitled to a remand under Section 1447(c)?  For example, imagine that the district court decides a summary judgment motion that holds that the underlying federal cause of action that authorized the removal is meritless, but the clerk or court holds off (as here) on entering the actual resulting final judgment for 11 days.  Whoopsies!  Under Judge Smith's view, the absence of federal subject matter jurisdiction (since the federal claim is now gone) was now "before" the entry of a final judgment, so Section 1447(c) applies and requires a remand.  Fine.  But it's crystal clear that that's not the current rule.  So it seems like Judge Smith's rule is inconsistent with the remand cases with respect to other entries of summary judgment and merit-based determinations.

As a result, I just really wonder about this one paragraph.  As well as how the today's decision is consistent (or inconsistent) with how we read 1447(c) in analogous precedent.

'Cause I'm just not sure that you "necessarily" decide subject matter jurisdiction before you decide the merits when the two are just different sides of the same coin.  Seems to me you almost "necessarily" decide 'em at the same time.