Do federal district courts retain jurisdiction to reconsider after issuing a remand order?
By Yvette Ostolaza and Daniel Driscoll
Removal to federal court can be a hotly contested procedural step during litigation as clients sometimes prefer federal court for a variety of procedural and legal reasons. Given the potential advantages, defendants frequently seek to remove civil lawsuits filed in state court to a federal forum. Still, it is by now axiomatic that federal courts “possess only that power authorized by Constitution and statute,” and generally presume “that a cause lies outside this limited jurisdiction.”1 Given these well-established limitations, district courts scrutinize removal applications closely and do not hesitate to remand actions lacking the requisite jurisdictional hook. Moreover, the federal remand statute, 28 U.S.C. § 1447, limits the ability to appeal a potentially unfavorable remand order—a notably harsh approach in light of the outsized role forum considerations play in shaping the course of subsequent litigation. While conventional wisdom suggests a district court’s decision to remand an action is virtually unchallengeable, uncertainty remains over whether a district court can reconsider a remand pursuant to Rule 59(e) of the Federal Rules of Civil Procedure. In certain circumstances, therefore, quickly filing a motion for reconsideration could allow a second chance at securing a place in federal court following an initial rejection.
While 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,” directly precluding appellate review of remand orders falling within its purview, the statute does not address the issue of reconsideration by the district court. Still, courts that have considered the question have generally concluded that Section 1447(d) applies equally to district courts, effectively barring reconsideration of remand orders.2
Authority is divided, however, over whether the provisions of Section 1447(d) are triggered by the entry of the remand order or by the district court clerk actually mailing a certified copy of the order to the state court.3 The U.S. Court of Appeals for the 5th Circuit has generally adopted the latter position and held that “[t]he federal court is completely divested of jurisdiction once it mails a certified copy of the [remand] order to the clerk of the state court.”4 Still, this issue has yet to be conclusively determined, and counsel seeking reconsideration of a remand order has, at the least, a colorable basis to argue that until a certified copy of the remand order has been provided to the clerk of the state court, the district court retains a jurisdictional basis to reconsider its order.
Moreover, putting this jurisdictional issue aside, Section 1447(d) does not apply to actions removed “pursuant to section 1442 or 1443 of this title.” Section 1442 applies generally to the removal of suits against federal officers or agencies, see 28 U.S.C. § 1442, and Section 1443 applies to the removal of civil rights cases.5 Additionally, Section 1447(d) only applies when the remand order is based on one of the criteria specified in Section 1447(c), i.e., “lack of subject matter jurisdiction or defects in removal procedure.”6 That is, Section 1447(d)’s “bar on reviewability is not applicable where the district court remands a case on grounds other than those authorized by § 1447(c).”7 Accordingly, given the relatively narrow reach of Section 1447(d), the statute may not even apply to exclude reconsideration in the first instance.
While litigants commonly assume that a district court’s decision to
remand an action to state court is virtually unchallengeable, a careful
examination of Section 1447(d) in conjunction with the jurisdictional
limits of federal court reveals that a remand decision is not as
inviolable as it might first appear. Indeed, Section 1447(d)’s reach is
surprisingly narrow as the bar it imposes on review applies only to
particular categories of cases and to remand orders based on particular
grounds. To the extent that a remand order is not based on a specified
category, or the litigation falls into an exempt class of cases, Section
1447(d) will likely not apply and the district court’s order is properly
subject to both direct appeal and to reconsideration. Additionally,
uncertainty persists among the circuits regarding the precise moment
that a district court loses jurisdiction over the remanded proceeding.
It remains, at the least, arguable that an alert litigant could request
reconsideration before the district court is divested of jurisdiction
and the restraints of Section 1447(d) are triggered in the first
instance. While the doctrinal contours of this area of law continue to
evolve, litigants should carefully evaluate the strategic options
available to them at every stage of the case. An initially unfavorable
decision might not be as forbidding as it first appears. TBJ
YVETTE OSTOLAZA is the managing partner of Sidley Austin’s Dallas office, a member of the firm’s Management and Executive Committees, and co-head of Sidley Austin’s global litigation practice. She focuses on commercial litigation and leads complex internal investigations on behalf of companies, board committees, and individual directors and defends companies and directors in shareholder and securities class actions. Ostolaza can be reached at firstname.lastname@example.org.
DANIEL DRISCOLL is a Dallas associate of Sidley Austin’s Complex Litigation and Disputes practice.