Court: Court of Appeals for the Third Circuit; May 17, 2010; Federal Appellate Court
New Jersey’s Department of Treasury, Division of Investment, appeals the District Court's denial of its motion to remand a case under the Securities Act of 1933, which prohibits removal from state court. The defendants, including Richard S. Fuld and Lehman Brothers’ directors, removed the case asserting it was related to Lehman's bankruptcy. New Jersey's complaint, filed after Lehman's bankruptcy, alleges violations of state law and the Securities Act due to misstatements regarding Lehman's asset values. The District Court ruled that the bankruptcy removal statute supersedes the Securities Act's anti-removal provision, referencing the Second Circuit’s ruling in a similar case. New Jersey's appeal cites 28 U.S.C. 1291 and the collateral order doctrine, and it also sought an interlocutory appeal regarding the statutory conflict between the bankruptcy and Securities Act provisions, which the District Court partially granted for certification.
A motions panel denied New Jersey's petition for rehearing regarding an appeal in the case of State of N.J. Dep’t of Treasury, Div. of Inv. v. Fuld, establishing that appellate jurisdiction must be based on 28 U.S.C. § 1291 and the collateral order doctrine. The jurisdiction of courts of appeals extends to final decisions by district courts, defined as those that conclude litigation on the merits or disassociate the court from a case. The Supreme Court interprets § 1291 practically rather than technically. The collateral order doctrine allows for immediate appeals of certain orders that, while not concluding litigation, are deemed 'final' under specific criteria: they must conclusively determine a disputed question, resolve an important issue separate from the merits, and be effectively unreviewable on appeal from a final judgment. Failure to meet any of these stringent criteria renders the doctrine inapplicable. The scope of the collateral order doctrine is narrow, and the Supreme Court emphasizes that it should not allow for piecemeal appeals, which could disrupt judicial efficiency and the management of ongoing litigation by district courts.
The justification for immediate appeal requires a strong rationale to outweigh the benefits of waiting until litigation is complete. The parties concur that the first two Cohen criteria are met: the District Court’s order decisively addresses a disputed question and resolves a significant issue independent of the case's merits. The contention lies in whether the right in question is "effectively unreviewable" post-judgment. New Jersey asserts that the denial of remand is "effectively unreviewable" because it jeopardizes the state's ability to have its Securities Act claim heard in state court, thereby contradicting Congress's intent to prevent the removal of such cases to federal court. New Jersey argues that without interlocutory review, it would face complicated and costly bankruptcy proceedings, rendering years of litigation fruitless if the appeal were to void prior orders. The state emphasizes that the remand motion's basis is the protection of its judicial system interests and the rights of pension plan participants.
In contrast, the Directors contend that New Jersey does not meet Cohen’s third criterion, as removal jurisdiction can be contested during the final judgment appeal. They reference the Supreme Court's ruling in Mohawk, which determined that the disclosure of privileged information is not "effectively unreviewable" post-judgment since appellate courts can address such errors by vacating judgments and remanding for a new trial. The Court acknowledged the significance of attorney-client privilege but noted that there are mechanisms, such as interlocutory appeals and mandamus, available for litigants facing detrimental rulings. This perspective aligns with previous Supreme Court rulings, including Firestone and Richardson-Merrell, which established that certain orders, such as those refusing to disqualify counsel, are reviewable only post-judgment, reinforcing the general principle against immediate appeal under the collateral order doctrine.
The Supreme Court has recognized the collateral order doctrine in cases involving absolute and qualified immunity, emphasizing the importance of immediate appeal to protect public interests and governmental efficiency. In Nixon v. Fitzgerald, the Court highlighted the need for immediate appeal to uphold the separation of powers and prevent disruption to governmental functions. Similarly, in Mitchell v. Forsyth, the Court noted that delaying appeal could inhibit public officials from exercising their discretion. In Puerto Rico Aqueduct and Sewer Authority v. Metcalf & Eddy, the importance of a state's dignitary interests was emphasized as a reason for immediate appeal of Eleventh Amendment immunity claims.
The doctrine has also been applied in a limited number of criminal cases, such as Stack v. Boyle, where the Court ruled that certain orders must be reviewed before trial to be effective, particularly concerning constitutional rights like those under the Double Jeopardy and Speech or Debate Clauses. However, New Jersey's interlocutory appeal does not present similar circumstances justifying collateral order review, as it lacks separation of powers issues, claims of immunity, or criminal implications. Instead, it involves a civil dispute over monetary losses similar to other investors affected by the Lehman collapse.
The court concludes that it lacks collateral order jurisdiction to review the denial of remand in this civil case, noting that such an order is not final or immediately appealable by right, and neither 28 U.S.C. 1291 nor 28 U.S.C. 1292 provides jurisdiction for reviewing remand denials. The court is not convinced that the denial fits within the limited category of decisions that, while not terminating litigation, should nonetheless be considered final for the sake of a healthy legal system.
New Jersey's arguments for remand are not persuasive, as any potential error in the lower court's ruling does not warrant setting aside the finality requirement of 28 U.S.C. § 1291. The Supreme Court has established that the fear of increased litigation costs does not justify bypassing this finality rule, which aims to prevent delays from interlocutory appeals. The court has consistently rejected claims that litigation expenses render orders unreviewable, as such costs are inherent in all litigation outcomes. New Jersey's reference to a non-precedential opinion, Dieffenbach, lacks authoritative support for its stance on the collateral order doctrine and does not substantiate its claims regarding remand. While the court acknowledges New Jersey's unique status as a state sovereign and its concerns about federal litigation, it is bound by the prior decisions rejecting New Jersey's petitions for review. Ultimately, the court grants the Directors' motion to dismiss the appeal due to lack of jurisdiction, leaving unresolved the conflict between § 1452(a) and the Securities Act's anti-removal provision. The case was conditionally transferred to the Southern District of New York in April 2009.
The order was vacated while the appeal is pending, referencing In re Lehman Bros. MDL No.2017 (J.P.M.L. Aug. 10, 2009), which vacated a conditional transfer order. New Jersey did not pursue a writ of mandamus, and there is no need to explore that avenue further. The state's attempt to compare its interest in protecting its judicial administration to its interest in the Newcomer case is found to be inadequate, as Newcomer involved a mandamus petition for a state criminal prosecution, which is not applicable here. The Bankruptcy Code addresses potential comity issues by allowing for abstention in suitable cases, permitting district courts to abstain from hearing matters under Title 11 in the interest of justice or respect for state law, as outlined in 28 U.S.C. 1334(c)(1). Additionally, the Bankruptcy Code does not mandate that all 'related to' claims be heard by the Bankruptcy Court.
