Monday, June 18, 2007

Powerex Corp. v. Reliant Energy Services

Prof. Scott Dodson offers his thoughts on today's Powerex decision:

Today, the Supreme Court decided Powerex Corp. v. Reliant Energy Services, Inc. and, in the process, discussed the implications of remanding for lack of subject-matter jurisdiction under 28 U.S.C. § 1447(c) and for appellate jurisdiction (or, more accurately,  the lack thereof) over such remand orders under § 1447(d).  Removal is a little hobby of  mine (see this post here on my article "In Search of Removal Jurisdiction," forthcoming in Northwestern University Law Review), so I thought I'd present the case and a few of its implications.

The state of California sued various energy companies for conspiring to fix energy prices in violation of California law.  Some of the defendants filed cross-claims seeking indemnity from Bonneville Power Administration ("BPA"), Western Area Power Administration ("WAPA"), British Columbia Hydro and Power Authority ("BC Hydro"), and Powerex.  BPA and WAPA are agencies of the U.S. government. BC Hydro is a crown corporation of British Columbia and a "foreign state" under the Foreign Sovereign Immunities Act.  Powerex is a wholly-owned subsidiary of BC Hydro. The cross-defendants removed the case to federal court.  BC Hydro and Powerex relied upon § 1441(d), which permits removal by a foreign state.  BPA and WAPA relied upon § 1442(a), authorizing removal by federal agencies.  California sought remand, arguing that Powerex was not a "foreign state" under the FSIA.

The district court concluded that BC Hydro's status as a foreign state and BPA's and WAPA's statuses as U.S. agencies entitled them to remove the entire case, irrespective of Powerex's status.  Thus, the district court held that the case was properly removed at the time of removal.  Nevertheless, it held that BC Hydro, BPA, and WAPA were all immune from suit in state court, and that that immunity deprived it of jurisdiction to hear the state claims against them.  In addition, it concluded that Powerex was not a "foreign state" under the FSIA and therefore had no authority to remove the case.  Therefore, the district court remanded the entire case for lack of subject-matter jurisdiction.

Powerex appealed, arguing that it was a foreign state.  BPA and WAPA also appealed, arguing that they should have been dismissed instead of remanded.  California opposed the appeal, arguing that the Ninth Circuit lacked appellate jurisdiction under § 1447(d).  The Ninth Circuit rejected California's jurisdictional argument and determined that Powerex was not a foreign state entitled to removal under § 1441(d), that BPA and WAPA were both entitled to immunity, and that BPA and WAPA should have been dismissed instead of remanded.  Accordingly, the Ninth Circuit affirmed the district court as to Powerex but ordered BPA and WAPA dismissed.

Powerex sought certiorari on the issue of whether it was a foreign state under the FSIA.  The Supreme Court granted certiorari but then asked the parties to brief whether the Ninth Circuit had jurisdiction to reach that question under § 1447(d).

The Court, per Justice Scalia in a 7-2 decision, held that the Ninth Circuit lacked appellate jurisdiction.  Justice Scalia began by covering familiar territory: Section 1447(d) renders remand orders under § 1447(c) non-appealable.  After that, though, things get murky.  The Solicitor General argued that § 1447(d)'s bar applies only to defects in subject-matter jurisdiction that occur at the time of removal, not defects that arise after a jurisdictionally proper removal.  Under that construction, the bar would not have applied because the district court concluded that the defect in subject-matter jurisdiction arose after removal and that removal was, at the time, proper.

The SG's argument went like this.  The pre-1988 version of § 1447(c) mandated remand if "the case was removed improvidently and without jurisdiction."  By all accounts, that version limited § 1447(c) to defects in subject-matter jurisdiction that existed at the time of removal.  But the provision was amended in 1988 to read: "A motion to remand the case on the basis of any defect in removal procedure must be made within 30 days . . . . If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded."  The SG argued that the 1988 amendments meant only to impose time limits on non-jurisdictional defects and not to broaden the provision's scope on subject-matter jurisdiction defects.

The Court rejected that construction, holding that the current text of § 1447(c) does not distinguish between defects in subject-matter jurisdiction depending upon when they arise.  That seems true enough, and 1988 version's elimination of the pre-1988 limiting language restricting the provision to cases "removed . . . without jurisdiction" suggests that the SG's interpretation of the scope of § 1447(c) is wrong.  The text belies a solitary purpose of providing time limits for non-jurisdictional defects.

Justice Scalia also relied upon § 1447(e), which was added as part of the 1988 amendments.  Section 1447(e) requires remand if, after removal, the plaintiff joins additional defendants whose presence destroys subject-matter jurisdiction.  Justice Scalia reasoned that § 1447(e) describes a case in which removal is jurisdictionally proper at the time but which develops a defect in subject-matter jurisdiction later that requires remand.  Such a case explains why § 1447(c) is necessarily broader than the SG's reading.

Under this broader interpretation of § 1447(c), the Court then turned to discerning what the grounds for the remand were, for if the remand were under § 1447(c), the appeal was barred under § 1447(d).  Justice Scalia noted that he and Justice Thomas would rely simply upon the district court's purported grounds of § 1447(c) and be done with it, but because (presumably) he could not convince a majority of the Justices to join him on this point, he looked behind the district court's characterization and found only one plausible explanation for the remand-the district court's lack of power to adjudicate the claims.  Whether the district court actually lacked the power to adjudicate the claims was irrelevant; it was enough that its correctness was "debatable" and that the remand grounds were "colorably characterized as subject-matter jurisdiction." Under such conditions, the remand order was non-appealable under § 1447(d).

The Court also addressed the Ninth Circuit's practice of reviewing merits rulings issued prior to a remand order that would itself be barred by § 1447(d).  Relying prior precedent, the Court held that if the rulings are contained in separate orders, then the appellate bar of § 1447(d) may not apply to the non-remand orders.  But, if all of the rulings are encompassed in a single order that remands for lack of subject-matter jurisdiction, then § 1447(d) bars review of all rulings contained in that order.  Otherwise, the appellate court would either issue an advisory opinion or contravene § 1447(d).

Finally, the Court addressed the one point of disagreement among the Justices-whether § 1447(d) is inapplicable to FSIA removals.  I'll not go into much detail in this civil procedure forum because the issue has a more FSIA-substantive flavor.  In brief, the majority noted that § 1447(d) itself contains no such exception even though Congress has provided specific exceptions in other contexts, such as in civil rights lawsuits. Justice Breyer, joined by Justice Stevens, dissented from this portion and would have found an implicit FSIA exception to § 1447(d).  Justice Kennedy, joined by Justice Alito, joined Justice Scalia's majority opinion but noted the concerns raised by Justice Breyer and called for legislative action to address any inconsistencies between the Court's textual interpretation and the intent of Congress.

A couple of thoughts.  First, the decision does shed some light on when a remand order purportedly issued pursuant to § 1447(c) is entitled to the appeal bar of § 1447(d).  Justice Scalia and Justice Thomas would impose a rule that the district court's characterization of the remand grounds-regardless of its plausibility-controls.  But, presumably, their view does not command a majority of the Court (at least not for now).  Thus, the Court adopts a more flexible (and less Scalia-esque) test: an appellate court can look behind the district court's characterization of the defect as one of subject-matter jurisdiction to determine whether that characterization is "colorable."  If so, then § 1447(d) bars review of the appropriateness of the characterization.  This should provide some clarity to the lower courts, which diverge in their interpretations of what level of review is permitted by § 1447(d).  I also note that the Court's standard is less like a jurisdictional bar to appellate review and more like an authorization of appellate review, albeit at a very high level of deference. 

Second, this case sets up a nice contrast between the jurisprudence of Justice Scalia and Justice Breyer.  Without going into too much detail on this civil procedure-based forum, I merely quote from Justice Breyer's dissent: "Were the Court to pay greater attention to statutory objectives and purposes and less attention to a technical parsing of language, it might agree [with me].  Were it to agree, we would exercise our interpretive obligation, not lawmaking power, with increased fidelity to the intention of those to whom our Constitution delegates that lawmaking power, namely the Congress of the United States.  And, law in this democracy would be all the better for it."

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