UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
RICHARD F. PAYNE; SHELBY H.
PAYNE, on behalf of themselves and
all other persons similarly situated,
Plaintiffs-Appellees,
v. No. 02-2291
MERRILL LYNCH, PIERCE, FENNER AND
SMITH, INCORPORATED, a Delaware
Corporation,
Defendant-Appellant.
Appeal from the United States District Court
for the District of Maryland, at Greenbelt.
Peter J. Messitte, District Judge.
(CA-00-2012-PJM)
Argued: May 7, 2003
Decided: August 14, 2003
Before WIDENER, MICHAEL, and GREGORY, Circuit Judges.
Vacated and remanded by unpublished per curiam opinion.
COUNSEL
ARGUED: Glenn Richard Reichardt, KIRKPATRICK & LOCK-
HART, L.L.P., Washington, D.C., for Appellant. Joseph N. Kravec,
Jr., SPECTER, SPECTER, EVANS & MANOGUE, P.C., Pittsburgh,
Pennsylvania, for Appellees. ON BRIEF: Rebecca L. Kline, KIRK-
2 PAYNE v. MERRILL LYNCH
PATRICK & LOCKHART, L.L.P., Washington, D.C., for Appellant.
Bernice L. Latou, LAW OFFICES OF BERNICE LATOU, P.A.,
Glen Burnie, Maryland, for Appellees.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill
Lynch) challenges the remand to state court of two cases filed by
Richard and Shelby Payne (the Paynes) in the Circuit Court for Mont-
gomery County, Maryland, and the U.S. District Court for the District
of Maryland, respectively. Because we conclude that the two cases
should not have been considered as a single, consolidated case for
purposes of determining whether to remand, we return the matter to
the district court for further proceedings consistent with this opinion.
I.
The procedural history of the two cases is complicated. On May
25, 2000, the Paynes filed a class action complaint in the Circuit
Court for Montgomery County against Merrill Lynch on behalf of
themselves and all other persons similarly situated. The complaint
alleged various state common law claims related to investments,
including the purchase of mutual funds, that the Paynes had made and
that were held in custodial accounts, including Roth Individual Retire-
ment Accounts (IRAs), for which Merrill Lynch served as custodian.
On June 30, 2000, Merrill Lynch removed the Paynes’ state class
action (the removed case) to the U.S. District Court for the District
of Maryland, asserting the removal provisions of the Securities Litiga-
tion Uniform Standards Act of 1998 (SLUSA), 15 U.S.C. § 78bb(f)
et seq., and diversity jurisdiction as the grounds for removal. Merrill
Lynch cited SLUSA as a ground for removal on the theory that the
PAYNE v. MERRILL LYNCH 3
Paynes’ claims rested on allegations of fraud, misrepresentation, and
omissions on the part of Merrill Lynch in connection with the pur-
chase of "covered securities" as defined in SLUSA. The Paynes did
not challenge the removal. Instead they amended the removed case to
add a federal securities law claim under Section 10(b) of the Securi-
ties Exchange Act of 1934, 15 U.S.C. § 78j(b), and its implementing
regulation, Rule 10b-5, 17 C.F.R. § 240.10b-5. The Paynes also filed
a separate class action (the federal case) in U.S. District Court in
Maryland, alleging state and federal claims identical to those in the
amended complaint in the removed action. At the request of the par-
ties, the district court consolidated the two cases.
On September 12, 2000, Merrill Lynch moved, under Fed. R. Civ.
P. 9(b) and 12(b)(6), to dismiss the federal and state law claims
asserted in the Paynes’ consolidated action. Specifically, Merrill
Lynch argued that the Paynes’ state law claims were preempted and
barred by SLUSA. Merrill Lynch also argued that, like the Paynes’
federal securities law claim, the state law claims should be dismissed
because the Paynes had ratified Merrill Lynch’s conduct by failing to
object in a timely manner to the transactions that were the subject of
those claims and because the Paynes had failed to state claims upon
which relief could be granted. Merrill Lynch also argued that the
Paynes’ federal securities law claim was time-barred. On February
20, 2002, the district court dismissed all of the Paynes’ federal and
state law claims. The district court dismissed the federal securities
law claim on the grounds that it was barred by the applicable statute
of limitations; that the complaint failed to allege that Merrill Lynch
omitted or misstated material facts; that the suit did not involve cov-
ered securities; and that the Paynes had ratified Merrill Lynch’s con-
duct. The district court also dismissed the Paynes’ state law claims on
ratification grounds. In dismissing the Paynes’ state law claims, the
district court expressly declined to reach Merrill Lynch’s SLUSA pre-
emption argument.
On March 6, 2002, the Paynes moved under Fed. R. Civ. P. 59(e)
for reconsideration of the district court’s dismissal of their state law
claims on the grounds that documents provided to the district court
after the hearing on the motion to dismiss raised factual issues regard-
ing Merrill Lynch’s ratification defense. The Paynes submitted five
letters they had written to Merrill Lynch showing that they had timely
4 PAYNE v. MERRILL LYNCH
complained about the transactions at issue. The Paynes also asked the
district court to remand their state law claims to state court. The
Paynes did not challenge the district court’s dismissal of their federal
securities law claim. Merrill Lynch agreed that in light of the factual
issues raised by the documents provided to the district court, it would
not rely on ratification as a ground for dismissal as a matter of law
of the Paynes’ state law claims. Merrill Lynch did, however, oppose
the Paynes’ motion for reinstatement and remand of their state law
claims on the ground that those claims were preempted and should be
dismissed with prejudice under SLUSA. In the alternative, Merrill
Lynch argued that the district court should exercise its supplemental
jurisdiction and dismiss the state law claims. On October 1, 2002, the
district court granted the Paynes’ motion for reconsideration and
remand. The district court concluded that with ratification eliminated
as a defense, the state claims should be reinstated. The district court
then treated the consolidated cases as one action and declined to exer-
cise supplemental jurisdiction over the Paynes’ state law claims. The
district court noted that SLUSA was no longer available as a basis for
jurisdiction in light of its earlier determination that "the suit does not
involve a ‘covered security.’" J.A. 530 n.4. The district court also
noted that the amount in controversy, less than $1,000, was insuffi-
cient to allow diversity jurisdiction. After suggesting that it might be
obliged to remand under SLUSA’s remand provisions, the district
court concluded that "in the exercise of its discretion to accept or
decline supplemental jurisdiction despite the dismissal of the federal
claim, [the court] will decline jurisdiction." J.A. 531 (internal citation
omitted). Merrill Lynch now appeals.
II.
As a preliminary matter we must satisfy ourselves that we have
jurisdiction to hear this appeal. Betty B. Coal Co. v. Director, OWCP,
194 F.3d 491, 495 (4th Cir. 1999). Appellate review of remand orders
is limited by 28 U.S.C. § 1447(d). That provision states that "[a]n
order remanding a case to the State Court from which it was removed
is not reviewable on appeal." This circuit, in keeping with Supreme
Court precedent, interprets § 1447(d) as providing that "where the
order is based on one of the enumerated grounds [i.e., lack of subject
matter jurisdiction], review is unavailable no matter how plain the
legal error in ordering the remand." Severonickel v. Gaston Reyme-
PAYNE v. MERRILL LYNCH 5
nants, 115 F.3d 265, 268-69 (4th Cir. 1997) (internal quotation marks
and citation omitted). Appellate review of remand orders is permitted,
however, when it is clear from the language of the district court that
the court was remanding not because it believed it lacked subject mat-
ter jurisdiction over the removed action, but because it thought it had
subject matter jurisdiction and the discretion to decline to exercise it.
See Jamison v. Wiley, 14 F.3d 222, 233 (4th Cir. 1994). In this case
the court specifically noted that "[w]hether to remand the state claims
is not an altogether easy call. . . . All things considered, therefore, the
Court . . . will REMAND the case to [state court]." J.A. 531-32
(emphasis added). The district court’s opinion shows that the court,
having dismissed the Paynes’ federal claim, believed it had the discre-
tionary authority to exercise supplemental jurisdiction over the
remaining state law claims. The district court, therefore, did not order
remand because it believed that it lacked subject matter jurisdiction.
Under such circumstances, we have jurisdiction to review the district
court’s remand decision. Cf. Green v. Ameritrade, Inc., 279 F.3d 590,
594-95 (8th Cir. 2002) (reviewing remand of state law claims not pre-
empted by SLUSA under 28 U.S.C. § 1367).
III.
This case presents a rather unusual situation. The district court did
not distinguish between the removed case and the federal case, but
simply treated the two (consolidated) cases as a single unit, for pur-
poses of remand. See J.A. 531 ("[S]ince the Paynes’ second case was
consolidated with the present removed case, the non-remandability of
the consolidated case is an academic point."). "[C]onsolidation is per-
mitted as a matter of convenience and economy in administration, but
does not merge the suits into a single cause." Johnson v. Manhattan
Ry. Co., 289 U.S. 479, 496-97 (1933). A case originally filed in fed-
eral court cannot be remanded to state court. See First Nat’l Bank of
Pulaski v. Curry, 301 F.3d 456, 461 (6th Cir. 2002). It follows then
that "while a district court has the discretion to remand a case
removed from state court, it may not remand a case that was never
removed from state court, even though the two cases have been con-
solidated for purposes of convenience and administration." Id. at 467-
68. See also Bradgate Assocs., Inc. v. Fellows, Read & Assocs., Inc.,
999 F.2d 745, 750-51 (3rd Cir. 1993). Thus, the district court should
have addressed the propriety of remanding the two cases — the
6 PAYNE v. MERRILL LYNCH
removed case and the federal case — independently. To the extent
that the district court remanded the Paynes’ federal case to state court,
that remand was in error. See First Nat’l Bank of Pulaski, 301 F.3d
at 467-68. And it is not clear from the district court’s order what it
would have done with the removed case if it had been determining the
propriety of remand as to that case alone. (When "determining the
existence of removal jurisdiction, based upon a federal question, the
court must look to the complaint as of the time the removal petition
was filed. Jurisdiction is based on the complaint as originally filed and
not as amended." Abada v. Charles Schwab & Co., Inc., 300 F.3d
1112, 1117 (9th Cir. 2002) (internal quotation marks and citation
omitted).) The district court noted that it did not have subject matter
jurisdiction over the state claims based on SLUSA preemption or
diversity jurisdiction — the two bases asserted by Merrill Lynch for
removal — but the court did not base its remand order on these
grounds. (Had it done so, that order would not be reviewable on
appeal. See Severonickel, 115 F.3d at 268-69.) We thus vacate the dis-
trict court’s remand order and remand for the district court to decide
(1) as to the federal case, whether (a) to decline supplemental jurisdic-
tion over the Paynes’ state law claims and dismiss the claims without
prejudice or (b) to consider the claims on the merits pursuant to 28
U.S.C. § 1367; and (2) as to the removed case, whether to remand to
state court.
IV.
In light of the foregoing, we vacate the district court’s remand
order and remand the matter to the district court for further proceed-
ings consistent with this opinion.
VACATED AND REMANDED