PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 09-2891
THE STATE OF NEW JERSEY,
DEPARTMENT OF TREASURY,
DIVISION OF INVESTMENT,
Appellant
v.
RICHARD FULD, JR.; CHRISTOPHER M. O’MEARA;
JOSEPH M. GREGORY; ERIN CALLAN;
IAN LOWITT; DAVID GOLDFARB;
HERBERT H. MCDADE, III; THOMAS RUSSO;
MARK WALSH; MICHAEL ANSLIE;
JOHN F. AKERS; ROGER S. BERLIND;
THOMAS H. CRUIKSHANK; MARSHA JOHNSON EVANS;
CHRISTOPHER GENT; ROLAND A. HERNANDEZ;
HENRY KAUFMAN; ERNST & YOUNG LLP;
JOHN D. MACOMBER
(Amended as per the Clerk’s 09/02/09 Order)
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 3-09-cv-01629)
District Judge: Honorable Anne E. Thompson
Argued April 12, 2010
Before: SLOVITER, HARDIMAN, Circuit Judges, and
RESTANI*, Judge
(Filed: May 17, 2010)
____
Merrill G. Davidoff (Argued)
Lawrence J. Lederer
Peter B. Nordberg
Robin Switzenbaum
Berger & Montague
Philadelphia, PA l9l03
Jeffrey W. Herrmann
Peter S. Pearlman
Cohn, Lifland, Pearlman, Herrmann & Knopf
Saddle Brook, NJ 07663
Attorneys for Appellant
Mary E. McGarry (Argued)
Michael J. Chepiga
Simpson, Thacher & Bartlett
New York, NY 10017
Jeffrey J. Greenbaum (Argued)
James M. Hirschhorn
Sills, Cummis & Gross
Newark, NJ 07102
Attorneys for Appellees Lehman Defendants
David J. McLean
Latham & Watkins
Newark, NJ 07101
Jamie L. Wine
Latham & Watkins
*
Hon. Jane A. Restani, Chief Judge, United States Court of
International Trade, sitting by designation.
2
New York, NY 10022
Attorneys for Appellee Ernst & Young LLP
Robert J. Cleary
Proskauer Rose
New York, NY 10036
Attorneys for Appellee Erin Callan
OPINION OF THE COURT
SLOVITER, Circuit Judge.
The State of New Jersey, Department of Treasury,
Division of Investment (“New Jersey”) appeals the District
Court’s order denying its motion to remand the action it brought
under the Securities Act of 1933, a statute that specifically
precludes removal, which defendants had removed to federal
court. Defendants/Appellees Richard S. Fuld and various other
officers and directors of Lehman Brothers Holdings, Inc.,
(collectively, “the Directors”) have filed a motion to dismiss the
appeal for lack of appellate jurisdiction. We proceed to examine
our jurisdiction over the District Court’s order denying remand.
I.
Background
New Jersey manages the pension and retirement plan
funds for over 700,000 of its active and retired state employees.
In April and June of 2008, New Jersey purchased over $180
million of investment securities from Lehman Brothers
Holdings, Inc. (“Lehman”) consisting of preferred stock and
common stock in Lehman. Three months after New Jersey’s
June purchases of these securities, Lehman filed for bankruptcy
protection.
3
In March 2009, New Jersey filed a complaint in the
Superior Court of New Jersey against the Directors and Ernst &
Young LLP, an accounting firm, alleging violation of state law
and the federal Securities Act of 1933 (the “Securities Act”), 15
U.S.C. §§ 77k, 77l, 77o, because of alleged material
misstatements and omissions regarding the value of Lehman’s
assets. Lehman, protected by the automatic stay, 11 U.S.C. §
362(a)(1), was not named as a defendant.
New Jersey’s complaint was one of dozens filed against
the Directors by investors seeking to recover their investment
losses. Those actions have been consolidated by the Judicial
Panel on Multidistrict Litigation and are pending in the Southern
District of New York. See In re Lehman Bros. Holdings, Inc.,
Sec. & Employee Ret. Income Sec. Act (ERISA) Litig. (“In re
Lehman Bros.”), 598 F. Supp. 2d 1362, 1364 (J.P.M.L. 2009).
Many of the actions, similar to the one brought by New Jersey in
state court, were brought by state and local government
investment funds.
The Directors removed New Jersey’s action to federal
court, asserting that it was “related to” the Lehman bankruptcy
and hence removable under 28 U.S.C. §§ 1334(b) and 1452(a).
New Jersey filed a motion to remand, arguing that section 22(a)
of the Securities Act prohibits the removal from state courts of
cases arising under the Act.1 See 15 U.S.C. § 77v(a) (“Except as
provided in section 77p(c) of this title [relating to class actions],
no case arising under this subchapter and brought in any State
court of competent jurisdiction shall be removed to any court of
the United States.”). After considering the conflict between the
Bankruptcy Code (which allows removal) and the Securities Act
1
In April 2009, after the removal, the Judicial Panel on
Multidistrict Litigation issued a conditional transfer order
transferring this case from the District of New Jersey to the
consolidated proceedings in the Southern District of New York.
See In re Lehman Bros., MDL No. 2017 (J.P.M.L. Apr. 30, 2009)
(order for conditional transfer). The order was vacated pending
this appeal. See In re Lehman Bros., MDL No. 2017 (J.P.M.L.
Aug. 10, 2009) (order vacating conditional transfer order).
4
(which prohibits it), the District Court denied New Jersey’s
motion to remand, finding persuasive the decision of the Second
Circuit that the bankruptcy removal statute, 28 U.S.C. §§
1334(b) and 1452(a), trumps the anti-removal provision of the
Securities Act. See State of N.J., Dep’t of Treasury, Div. of Inv.
v. Fuld, No. 09-1629 (AET), 2009 WL 1810356, at *2 (D.N.J.
June 25, 2009) (citing Cal. Pub. Employees’ Ret. Sys. v.
WorldCom, Inc., 368 F.3d 86 (2d Cir. 2004), cert. denied, 543
U.S. 1080 (2005)). The statutory conflict raises an issue of first
impression for our court, and to date the Second Circuit in
WorldCom is the only court of appeals to have addressed it. 368
F.3d at 90.
In June 2009, New Jersey filed a notice of appeal from
the District Court’s order denying remand, citing 28 U.S.C. §
1291 and the collateral order doctrine as the bases for our
appellate jurisdiction. New Jersey also filed, in the alternative, a
petition for interlocutory appeal under 28 U.S.C. § 1292(b). The
District Court granted in part New Jersey’s motion for
certification under § 1292(b), certifying for appeal the question
of “how to resolve the statutory conflict between 28 U.S.C. §
1452(a) and Section 22(a) of the Securities Act of 1933, 15
U.S.C. § 77v(a).” State of N.J., Dep’t of Treasury, Div. of Inv. v.
Fuld, No. 09-1629 (AET), 2009 WL 2905432, at *1 (D.N.J.
Sept. 8, 2009). A motions panel of this court denied the petition
in a one-line order. See Order, State of N.J., Dep’t of Treasury,
Div. of Inv. v. Fuld, No. 09-8068 (3d Cir. Oct. 16, 2009). The
motions panel also denied New Jersey’s petition for panel
rehearing, which requested “that the Petition be referred for
decision to the merits panel” in this appeal. N.J.’s Pet. for Panel
Rehr’g at 1, State of N.J., Dep’t of Treasury, Div. of Inv. v. Fuld,
No. 09-8068 (3d Cir. Oct. 30, 2009). Accordingly, appellate
jurisdiction must be found, if at all, in 28 U.S.C. § 1291 and the
collateral order doctrine.2 Before us is the Directors’ motion to
dismiss the appeal for lack of jurisdiction.
II.
2
New Jersey did not seek a writ of mandamus, and we have
no occasion to discuss that option.
5
Discussion
The courts of appeals “have jurisdiction of appeals from
all final decisions of the district courts of the United States, . . .
except where a direct review may be had in the Supreme Court.”
28 U.S.C. § 1291. A “final decision” is a decision by the district
court that “ends the litigation on the merits and leaves nothing
for the court to do but execute the judgment,” Catlin v. United
States, 324 U.S. 229, 233 (1945), or one “by which a district
court disassociates itself from a case,” Swint v. Chambers
County Comm’n, 514 U.S. 35, 42 (1995). However, the
Supreme Court “has long given § 1291 a practical rather than a
technical construction.” Mohawk Indus., Inc. v. Carpenter, 130
S. Ct. 599, 605 (2009) (quoting Cohen v. Beneficial Indus. Loan
Corp., 337 U.S. 541, 546 (1949) (internal quotations omitted)).
Under the collateral order doctrine enunciated in Cohen over a
half-century ago, the courts of appeals have appellate
jurisdiction over “that small class [of orders] which finally
determine claims of right separable from, and collateral to, rights
asserted in the action, too important to be denied review and too
independent of the cause itself to require that appellate
consideration be deferred until the whole case is adjudicated.”
337 U.S. at 546. The collateral order doctrine “permits appeals
not only from a final decision . . . but also from a small category
of decisions that, although they do not end the litigation, must
nonetheless be considered ‘final’” for purposes of § 1291.
Swint, 514 U.S. at 42 (citing Cohen, 337 U.S. at 546).
To be appealable under the collateral order doctrine, an
order must “[1] conclusively determine the disputed question, [2]
resolve an important issue completely separate from the merits
of the action, and [3] be effectively unreviewable on appeal from
a final judgment.” Coopers & Lybrand v. Livesay, 437 U.S. 463,
468 (1978). “[A] failure to meet any one of the three factors
renders the doctrine inapplicable as a basis for appeal, no matter
how compelling the other factors may be.” In re Pressman-
Gutman Co., 459 F.3d 383, 396 (3d Cir. 2006) (citing Virgin
Islands v. Hodge, 359 F.3d 312, 320 (3d Cir. 2004)).
The criteria are “stringent,” Digital Equip. Corp. v.
Desktop Direct, Inc., 511 U.S. 863, 868 (1994), and the scope of
6
the doctrine is “narrow” and “modest,” Will v. Hallock, 546 U.S.
345, 350 (2006). The Supreme Court has stressed that the
collateral order doctrine “must ‘never be allowed to swallow the
general rule that a party is entitled to a single appeal, to be
deferred until final judgment has been entered,’” Mohawk, 130
S. Ct. at 605 (quoting Digital Equip., 511 U.S. at 868), since
“[p]ermitting piecemeal, prejudgment appeals . . . undermines
‘efficient judicial administration’ and encroaches upon the
prerogatives of district court judges, who play a ‘special role’ in
managing ongoing litigation,” id. (quoting Firestone Tire &
Rubber Co. v. Risjord, 449 U.S. 368, 374 (1981)). “The
justification for immediate appeal must therefore be sufficiently
strong to overcome the usual benefits of deferring appeal until
litigation concludes.” Id.
The parties in this appeal agree that the first two Cohen
criteria are satisfied: the District Court’s order “conclusively
determine[s] the disputed question” and it “resolve[s] an
important issue completely separate from the merits of the
action.” Coopers & Lybrand, 437 U.S. at 468. The parties
dispute only whether the right at issue is “effectively
unreviewable” after a final judgment. Id. New Jersey argues
that the District Court’s order denying remand is “effectively
unreviewable” because the interest sought to be protected –
namely, its interest in having the Securities Act claim heard in a
New Jersey state court – will be lost if the case proceeds to final
judgment. According to New Jersey, “[t]he matter at issue . . .
flies directly in the face of Congress’s express intent to prevent
removal of 1933 Securities Act cases filed in state court to
federal court,” N.J.’s Resp. to Directors’ Mot. to Dismiss at 17,
and without interlocutory review “New Jersey . . . will be forced
into a web of complex, time consuming and costly bankruptcy
proceedings,” id. at 18. New Jersey contends that “an appeal
that voids every order entered in the case will be too late and
years of expensive litigation will have been fruitless.” Id. at 18-
19.
The crux of New Jersey’s argument is that the order
denying remand “implicate[s] [the] state’s interest in protecting
certain aspects of the administration of its judicial system”
inasmuch as “a motion to remand on the basis of subject matter
7
jurisdiction seeks to invoke [a] congressional policy to protect
the interest of a state sovereign which is seeking to vindicate the
rights of its pension plan participants.” Id. at 17-18. In
response, the Directors argue that New Jersey fails to satisfy
Cohen’s third criterion because “the existence of removal
jurisdiction can be raised on appeal of the eventual final
judgment in the case.” Directors’ Mot. to Dismiss at 7.
In Mohawk, the Court held that the court of appeals had
no jurisdiction under the collateral order doctrine over the
interlocutory appeal by a defendant/employer of the trial court’s
order requiring it to disclose information that it sought to protect
as privileged. 130 S. Ct. at 603. The Supreme Court, speaking
through Justice Sotomayor, “acknowledge[d] the importance of
the attorney-client privilege” as “one of the oldest recognized
privileges for confidential communications,” id. at 606 (citation
and internal quotations omitted), but nonetheless held that the
disclosure of privileged materials was not “effectively
unreviewable” after final judgment because “[a]ppellate courts
can remedy the improper disclosure of privileged material in the
same way they remedy a host of other erroneous evidentiary
rulings: by vacating an adverse judgment and remanding for a
new trial in which the protected material and its fruits are
excluded from evidence,” id. at 605, 606-07. In those cases
where “litigants [are] confronted with a particularly injurious or
novel privilege ruling,” the Court noted that litigants have
“useful ‘safety valves’” available to them, including
interlocutory appeal of a certified order under 28 U.S.C. §
1292(b) and mandamus relief. Id. at 607-08 (quoting Digital
Equip., 511 U.S. at 883) (alteration omitted).
The Court’s decision in Mohawk is consistent with earlier
decisions that declined to apply the collateral order doctrine. In
Firestone, the Supreme Court held that “[a]n order refusing to
disqualify counsel plainly falls within the large class of orders
that are indeed reviewable on appeal after final judgment, and
not within the much smaller class of those that are not.” 449
U.S. at 377. In Richardson-Merrell, Inc. v. Koller, the Court
held that an order disqualifying counsel in a civil case did not
qualify for immediate appeal under the collateral order doctrine.
472 U.S. 424, 426 (1985). The Court reached the same result in
8
a criminal case in Flanagan v. United States, notwithstanding
the Sixth Amendment rights at stake. 465 U.S. 259, 260 (1984).
In contrast, the Supreme Court has applied the collateral
order doctrine in cases involving orders rejecting absolute
immunity, Nixon v. Fitzgerald, 457 U.S. 731, 742-43 (1982), and
qualified immunity, Mitchell v. Forsyth, 472 U.S. 511, 530
(1985). In Nixon, the Court stressed the “compelling public
ends,” 457 U.S. at 758, “rooted in . . . the separation of powers,”
id. at 749, that would be compromised by failing to allow
immediate appeal of a denial of absolute Presidential immunity,
id. at 743. In examining collateral order review when a qualified
immunity claim was at issue in Mitchell, the Court noted “the
threatened disruption of governmental functions, and fear of
inhibiting able people from exercising discretion in public
service if a full trial were threatened whenever they acted
reasonably in the face of law that is not ‘clearly established.’”
Will, 546 U.S. at 352 (citing Mitchell, 472 U.S. at 526).
Similarly, in Puerto Rico Aqueduct & Sewer Authority v. Metcalf
& Eddy, Inc., 506 U.S. 139 (1993), the Court “explained the
immediate appealability of an order denying a claim of Eleventh
Amendment immunity by adverting not only to the burdens of
litigation but to the need to ensure vindication of a State’s
dignitary interests.” Will, 546 U.S. at 352 (citing Metcalf, 506
U.S. at 146). “In each case, some particular value of a high
order was marshaled in support of the interest in avoiding trial:
honoring the separation of powers, preserving the efficiency of
government and the initiative of its officials, respecting a State’s
dignitary interests, and mitigating the government’s advantage
over the individual.” Id. at 352-53.
The Court has also applied the collateral order doctrine in
a narrow set of criminal cases. In Stack v. Boyle, 342 U.S. 1
(1951), the Court applied the doctrine to an order denying a
motion to reduce bail because the order “becomes moot if review
awaits conviction and sentence,” Flanagan, 465 U.S. at 266
(citing Stack, 342 U.S. 1). “Orders denying motions to dismiss
an indictment on double jeopardy or speech or debate grounds
are likewise immediately appealable” because “appellate review
must occur before trial to be fully effective.” Id. This is so
because “[t]he right guaranteed by the Double Jeopardy Clause
9
is more than the right not to be convicted in a second prosecution
for an offense: it is the right not to be ‘placed in jeopardy’ – that
is, not to be tried for the offense.” Id. (citing Abney v. United
States, 431 U.S. 651 (1977)). “Similarly, the right guaranteed by
the Speech or Debate Clause is more than the right not to be
convicted for certain legislative activities: it is the right not to
‘be questioned’ about them – that is, not to be tried for them.”
Id. (citing Helstoski v. Meanor, 442 U.S. 500 (1979)). These
cases generally present rights derived from the Constitution.
New Jersey’s interlocutory appeal presents none of these
considerations that have justified collateral order review. There
is no separation of powers issue, see Nixon, 457 U.S. at 748, nor
are there claims of qualified immunity or state sovereign
immunity, see Mitchell, 472 U.S. at 526; Metcalf, 506 U.S. at
146. Nor is this a criminal case in which appellate review after
final judgment will impinge upon a constitutional right or render
an issue moot. See Helstoski, 442 U.S. at 508; Abney, 431 U.S.
at 659. Rather, this is a civil case that involves a dispute over
money. In that regard New Jersey is no different from the other
investors whose securities lost value after the collapse of
Lehman, many of which, like New Jersey, are state and local
government investment funds.
If we lack collateral order jurisdiction to review the
pretrial disqualification of defense counsel in a criminal case,
which raises an issue of constitutional import, see Flanagan, 465
U.S. at 263, we fail to see how we have collateral order
jurisdiction to review the District Court’s order denying remand
in this civil case, see Caterpillar Inc. v. Lewis, 519 U.S. 61, 74
(1996) (“An order denying a motion to remand, standing alone,
is obviously not final and immediately appealable as of right.”)
(citation, quotations and alterations omitted); Chi., Rock Island
& Pac. R.R. v. Stude, 346 U.S. 574, 578 (1954) (“Obviously, . . .
an order [denying a motion to remand] is not final and
appealable if standing alone.”) (citation omitted); Spring Garden
Assocs., L.P. v. Resolution Trust Corp., 26 F.3d 412, 414 (3d
Cir. 1994) (“As for the district court’s denial of a remand,
neither 28 U.S.C. § 1291 nor 28 U.S.C. § 1292 expressly confers
jurisdiction on this court to review orders denying a remand to a
state court.”) (citations omitted).
10
We are not persuaded that the District Court’s order
denying remand falls within the “narrow class of decisions that
do not terminate the litigation, but must, in the interest of
achieving a healthy legal system, nonetheless be treated as
final.” Digital Equip., 511 U.S. at 867 (internal citations and
quotations omitted). If New Jersey’s arguments in favor of
remand are correct, a question that we do not decide today, an
appellate court can vacate the order denying remand with
instructions to remand the case to the New Jersey court.
New Jersey’s reliance on the cost and delay associated
with litigation in the consolidated proceedings does little to
advance its position. The Supreme Court has held that “the
possibility that a ruling may be erroneous and may impose
additional litigation expense is not sufficient to set aside the
finality requirement imposed by Congress [in § 1291].”
Richardson-Merrell, 472 U.S. at 436; see also Lauro Lines s.r.l.
v. Chasser, 490 U.S. 495, 499 (1989) (noting that the Court “has
declined to find the costs associated with unnecessary litigation
to be enough to warrant allowing the immediate appeal of a
pretrial order”). The Court held that “‘[i]f the expense of
litigation were a sufficient reason for granting an exception to
the final judgment rule, the exception might well swallow the
rule.’” Richardson-Merrell, 472 U.S. at 436 (quoting Lusardi v.
Xerox Corp., 747 F.2d 174, 178 (3d Cir. 1984)).
That reasoning applies here. Congress considered the
expense of litigation when it fashioned the final judgment rule of
§ 1291, and we cannot second-guess its policy choice by using
those same litigation expenses to justify departure from the rule.
See id. at 434 (“One purpose of the final judgment rule
embodied in § 1291 is to avoid the delay that inherently
accompanies time-consuming interlocutory appeals.”) (citing
Flanagan, 465 U.S. at 264); see also Transtech Indus., Inc. v. A
& Z Septic Clean, 5 F.3d 51, 56 (3d Cir. 1993) (“That an
erroneous ruling may result in additional litigation expense is not
sufficient to set aside the finality requirement imposed by
Congress in § 1291.”) (citations, alterations and internal
quotations omitted); Powers v. Southland Corp., 4 F.3d 223, 232
(3d Cir. 1993) (“The courts . . . have consistently rejected claims
that the time and expense of litigating a suit that will later be
11
reversed amounts to effective denial of review because those
costs can never be recovered.”). Moreover, litigation costs are
inherent in the denial of every motion to remand. Such costs
alone do not render the order “effectively unreviewable” because
to hold otherwise “would leave the final order requirement of §
1291 in tatters,” Will, 546 U.S. at 351, and would render hollow
§ 1291’s requirement of finality.
Apparently recognizing the dearth of authority supporting
its position, New Jersey relies on a non-precedential opinion of
this court for its statement that “an order denying remand is
reviewable under the collateral order doctrine.” Dieffenbach v.
CIGNA, Inc., 310 F. App’x 504, 506 (3d Cir. 2009) (per curiam)
(citing Pennsylvania v. Newcomer, 618 F.2d 246, 249 (3d Cir.
1980)). As a non-precedential opinion, Dieffenbach is only as
persuasive as its reasoning. Dieffenbach provides no reasoning
relevant to the collateral order doctrine except a lone citation to
Newcomer, which does not support collateral order review of an
order denying remand. 618 F.2d at 247. On the contrary, the
court in Newcomer noted that “[i]n the instant case no effort was
made to secure collateral order review of the denial of the
motion to remand,” and thus the court held that “we need not
decide whether direct appeal was available under [the collateral
order doctrine]. . . .”3 Id. at 249. Even if we found the statement
in Dieffenbach to be persuasive, we would not have cited it as
authority. See 3d Cir. Internal Operating P. 5.7 (“The court by
tradition does not cite to its not precedential opinions as
authority.”).
Finally, New Jersey emphasized at oral argument that it is
“not an ordinary litigant,” but rather “a state sovereign” that has
3
New Jersey also attempts to analogize its “interest in
protecting certain aspects of the administration of its judicial
system” to the state’s interest in Newcomer. N.J.’s Resp. to Mot.
at 18. The interests are distinguishable. In Newcomer, the court
considered a petition for a writ of mandamus to compel a district
court to remand to state court a state criminal prosecution. 618
F.2d at 247. We are not presented with a state criminal prosecution
or a petition for a writ of mandamus.
12
been placed into a “procedural morass” entailing “years of
litigation [and] years of expense and waste.” We are not
unsympathetic to New Jersey’s disinclination to litigate this case
in a federal forum, where it will likely be transferred.4 Indeed,
we cannot say that we would have denied a petition to hear the
appeal under 28 U.S.C. § 1292(b). The Second Circuit granted a
similar petition and considered the same statutory conflict as a
certified question in WorldCom, 368 F.3d at 94, but that is not
our case. We are bound by the motions panel’s denial of New
Jersey’s petition for review under § 1292(b) and its petition for
panel rehearing. In any event, if, after the trial level proceedings
are completed, it is determined that it was error to deny remand,
there is nothing to prevent New Jersey from effectuating its
purported interest in having its case heard in a New Jersey state
court on remand after a final judgment.
III.
Conclusion
For the foregoing reasons, we will grant the Directors’
motion to dismiss the appeal for lack of jurisdiction.
Accordingly, we express no view on the conflict between 28
U.S.C. § 1452(a) and the anti-removal provision of the Securities
Act, 15 U.S.C. § 77v(a).
4
We note, however, that the Bankruptcy Code ameliorates
any comity concerns by providing for abstention in an appropriate
case: “nothing in [28 U.S.C. § 1334] prevents a district court in the
interest of justice, or in the interest of comity with State courts or
respect for State law, from abstaining from hearing a particular
proceeding arising under title 11 or arising in or related to a case
under title 11.” 28 U.S.C. § 1334(c)(1); see also In re Mystic Tank
Lines Corp., 544 F.3d 524, 528 (3d Cir. 2008) (“No provision of
the Bankruptcy Code requires the Bankruptcy Court to hear all
‘related to’ claims.”).
13