UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
SCOTT A. CUNNINGHAM; P.
DAVID MANTOR; ERIC
LOUGHEAD; JOHN BONNEVILLE,
Plaintiffs-Appellants, No. 03-1356
v.
BHP PETROLEUM GREAT BRITAIN
PLC, a United Kingdom Corporation;
HAMILTON BROTHERS
PETROLEUM CORPORATION, a
Delaware corporation,
Defendants-Appellees.
ORDER
Filed October 25, 2005
Before HENRY, MURPHY , and TYMKOVICH , Circuit Judges.
This matter is before the court on defendants-appellees’ petition for
rehearing with suggestion for rehearing en banc. Defendants-appellees contend
that in its opinion issued July 5, 2005, the panel confused the concept of “real
party in interest” under Federal Rule of Civil Procedure 17 with the concept of
“real party to the controversy” discussed in Navarro Savings Association v. Lee ,
446 U.S. 458 (1980). Upon consideration, the panel concludes that it did not
confuse the two doctrines and it DENIES the petition for panel rehearing.
Nonetheless, the panel will clarify the rationale in its opinion by issuing an
amended opinion. Accordingly, the panel WITHDRAWS the opinion issued
July 5, 2005, and substitutes a modified opinion filed this date. A copy of the
amended opinion is attached to this order.
The suggestion for rehearing en banc was transmitted to all the judges of
the court in regular active service in accordance with Rule 35 (b) of the Federal
Rules of Appellate Procedure. No member of the hearing panel and no judge in
regular active service on the court requested that the court be polled on rehearing
en banc. Accordingly, the suggestion for rehearing en banc is DENIED.
Entered for the Court
CLERK, COURT OF APPEALS
By:
Deputy Clerk
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F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
October 25, 2005
UNITED STATES COURT OF APPEALS
Clerk of Court
TENTH CIRCUIT
SCOTT A. CUNNINGHAM;
P. DAVID MANTOR; ERIC
LOUGHEAD; JOHN BONNEVILLE,
Plaintiffs-Appellants,
No. 03-1356
v.
BHP PETROLEUM GREAT BRITAIN
PLC, a United Kingdom Corporation;
HAMILTON BROTHERS
PETROLEUM CORPORATION, a
Delaware corporation,
Defendants-Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. No. 99-RB-1245 (CBS))
Submitted on the briefs:
Charles F. Brega, Stuart N. Bennett, Eric B. Liebman, Brega & Winters P.C.,
Denver, Colorado, for Plaintiffs-Appellants.
Bruce A. Featherstone and Frank C. Porada, Denver, Colorado, for Defendants-
Appellees.
Before HENRY, MURPHY , and TYMKOVICH , Circuit Judges.
TYMKOVICH , Circuit Judge.
Plaintiffs appeal the district court’s judgment of July 31, 2003, which,
among other things, dismissed their second amended complaint for lack of subject
matter jurisdiction. Plaintiffs do not contest the district court’s judgment of
dismissal; rather they challenge additional substantive rulings made by the district
court. We conclude that once the district court determined it lacked jurisdiction,
it should have vacated its previous substantive rulings and remanded the case to
state court in accordance with 28 U.S.C. § 1447(c). *
The State Court Complaint
In June 1999, plaintiffs Scott Cunningham and David Mantor brought suit
in Colorado state court against BHP Petroleum Great Britain PLC (BHP) and
Hamilton Brothers Petroleum Corp. (HB PetCorp.). Both plaintiffs had been key
employees of Hamilton International Oil Company (HIOC), whose successor in
interest was BHP. They asserted a number of contract-based claims arising out
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination
of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument.
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of their employment with HIOC. The dispute centers on a key employee
incentive plan providing for key employees to be given net profit interests (NPIs)
in certain petroleum properties. Pursuant to that plan, HIOC and Hamilton
Brothers (U.K.) Petroleum Corp. assigned interests in a North Sea petroleum
license known as license P. 380 to a trust for the benefit of the key employees.
The assignments provided that plaintiffs would share in the NPIs once payout
was reached. The complaint alleged that HB PetCorp. a subsidiary of BHP, also
owned an interest in license P. 380.
Although the plan was adopted in 1981, payout on license P. 380 did not
occur until 1997, when plaintiffs began getting payments on their NPIs. In their
complaint, Cunningham and Mantor alleged that the payments they received were
not calculated properly. Further, they contended that another license, P. 686, was
an outgrowth of license P. 380 and that they were due payments on the NPIs from
license P. 686 in proportion to defendants’ interests in license P. 380. Plaintiffs
asserted claims for declaratory judgment, breach of contract, promissory estoppel,
and unjust enrichment.
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Proceedings in Federal Court
1.
Relying on diversity of citizenship as the basis of federal jurisdiction,
HB PetCorp. removed the state court action to federal court in July 1999, where
it became Civil Case No. 99-RB-1245. BHP consented to the removal. In
January 2000, Cunningham and Mantor moved to amend and supplement their
complaint, and though defendants objected to the request, plaintiffs were
permitted to file an amended complaint in February 2000. The amended
complaint added Eric Loughead and John Bonneville, also former key employees
of HIOC, as plaintiffs and it added claims by all plaintiffs arising from the recent
sale of defendants’ interests in license P. 380. The amended complaint averred
that the court had jurisdiction based on diversity of citizenship. Both defendants
answered the amended complaint and BHP filed two counterclaims, one against
Cunningham for breach of his duty of loyalty and one against all four plaintiffs
for reformation of the NPI assignments.
Thereafter, the parties filed numerous motions for partial summary
judgment. In one of their joint motions filed in March 2001, BHP and
HB PetCorp. argued that the case should be dismissed for failure to comply with
Rule 17(a) because the four plaintiffs were not the real parties in interest on any
of the claims asserted in their amended complaint. See Fed. R. Civ. P. 17(a)
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(“Every action shall be prosecuted in the name of the real party in interest.”)
Defendants alleged that immediately upon receiving the NPIs, plaintiffs assigned
all their interest in them to Hamilton Brothers International Associates (HBIA), a
partnership that plaintiffs and other key employees created for the purposes of
acquiring, holding, managing, conserving, and dealing with the NPIs. Therefore,
defendants argued, all the claims plaintiffs asserted were really claims of HBIA,
not of the individual plaintiffs, and plaintiffs were not entitled to pursue any of
those claims.
Plaintiffs contested defendants’ motion, arguing that they had not
relinquished all ownership rights in the NPIs to HBIA and, in any event, that they
had standing to sue on behalf of their partnership interests in HBIA. They argued
that they were “suing on their own interests in HBIA, and correspondingly in the
NPIs.” Suppl. App. at 178. In a report and recommendation issued in September
2002, the magistrate judge rejected plaintiffs’ arguments that they had not
relinquished all their rights in the NPIs to HBIA. The magistrate judge concluded
that all the claims asserted in the amended complaint belonged to the partnership,
which was a real party in interest under Rule 17(a). The magistrate judge further
concluded that plaintiffs also were real parties in interest under Rule 17(a) and
that Colorado law would permit plaintiffs to pursue the claims asserted in the
amended complaint without having to name HBIA itself or all the other partners
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as party-plaintiffs.
Nonetheless, the magistrate judge stated, plaintiffs would still have to
satisfy the demands of diversity jurisdiction under 28 U.S.C. § 1332. Because
HBIA actually owned the claims plaintiffs were asserting, the magistrate judge
ruled that plaintiffs would have to establish jurisdiction based on the citizenship
of HBIA. See Navarro Sav. Ass’n v. Lee , 446 U.S. 458, 461 (1980) (“[A] federal
court must . . . rest jurisdiction only upon the citizenship of real parties to the
controversy.”). Noting that a partnership is considered a citizen of every state in
which its partners are citizens, the magistrate judge determined that plaintiffs
would have to show that defendants were completely diverse from every person
who was a partner in HBIA at the time the action was commenced. See Depex
Reina 9 P’ship v. Tex. Int’l Petroleum Corp. , 897 F.2d 461, 463 (10th Cir. 1990).
The magistrate judge recommended that plaintiffs be given thirty days to file an
amended complaint that would identify and allege the citizenship of everyone who
was a partner at the outset of the case. If plaintiffs could not do so, then the
magistrate judge recommended that the action be dismissed for lack of subject
matter jurisdiction.
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2.
In the meantime, plaintiffs filed suit in federal court against BHP
Petroleum (UK) Corp., as the successor to Hamilton Brothers U.K. Petroleum
Corp. This suit, which became Civil Case No. 01-RB-777, alleged essentially the
same claims against BHP Petroleum (UK) Corp. as plaintiffs had alleged against
BHP and HB PetCorp. in the removed action. Plaintiffs moved to consolidate the
two cases, which the district court did in October 2002.
3.
On March 27, 2003, the district court entered an order adopting the
magistrate judge’s report and recommendation on the real party in interest issue. 1
Accordingly, the district court directed plaintiffs to file an amended complaint
within thirty days in which they should “plead specifically the state of citizenship
of every partner of Hamilton Brothers International Associates at the time of the
commencement of the action.” Suppl. App. at 267 (emphasis and capitalization
1
No party has appealed the determinations that HBIA was a real party in
interest under Rule 17(a), that it actually owned the claims prosecuted by
plaintiffs, or that its citizenship was determinative for purposes of subject matter
jurisdiction.
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omitted). The court warned plaintiffs that if they failed to comply, the action
would be subject to dismissal for lack of prosecution.
Meanwhile, during the two years that had passed since defendants filed the
motion raising the issue of who was the real party in interest, the parties had filed
numerous substantive motions on which the magistrate judge had issued reports
and recommendations. On March 21 and March 28, 2003, the district court
entered orders ruling on some of those motions. Among other things, the district
court granted summary judgment to BHP and HB PetCorp. on plaintiffs’ claim to
an interest in license P. 686, granted summary judgment to Cunningham on BHP’s
first counterclaim, granted summary judgment to HB PetCorp. on all claims on
the ground that it was not a proper party, and ordered HB PetCorp. stricken from
the caption of the case.
4.
On April 25, 2003, plaintiffs filed their second amended complaint, in
which they attempted to aver the identity and citizenship of all the HBIA
partners. 2
In addition to the four named plaintiffs, the complaint provided the
names of fifteen other people who, upon information and belief, were partners in
2
This second amended complaint included the case numbers of both of the
consolidated cases and listed as defendants BHP, HB PetCorp., and BHP
Petroleum (UK) Corp.
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HBIA at the time the suit was commenced. The complaint averred the citizenship
of some of these additional partners, upon information and belief, but stated that
the citizenship of the others was unknown. At least one of the newly identified
partners was averred to be a citizen of the United Kingdom. Defendant BHP was
averred to be a corporation registered in and having its principal place of business
in London, England.
Shortly thereafter, BHP filed a motion to dismiss the second amended
complaint with prejudice for failure to comply with the court’s order of March 28.
In the alternative, BHP renewed its request for summary judgment on the claims
contained in the first amended complaint on the ground that plaintiffs were not
the real parties in interest on those claims.
5.
In his subsequent report and recommendation, the magistrate judge treated
BHP’s motion as “an attack on the facial sufficiency of the Second Amended
Complaint,” and concluded that the “jurisdictional allegations” of that complaint
were “fatally deficient.” App. to Opening Br., Vol. III at 1125. He therefore
recommended that the district court dismiss the second amended complaint under
Rule 12(h)(3) for lack of subject matter jurisdiction. The magistrate judge
rejected BHP’s contention that the complaint should be dismissed with prejudice
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under Rule 41(b) for failure to comply with the district court’s order of March 23.
He reasoned that because the court lacked subject matter jurisdiction, any
dismissal had to be without prejudice and could not operate as an adjudication
upon the merits as provided in Rule 41(b). The magistrate judge recommended
that the district court deny plaintiffs any further leave to amend, and he
recommended that BHP’s alternative request for summary judgment on the first
amended complaint be denied as moot in light of the court’s lack of subject matter
jurisdiction.
Plaintiffs and BHP both filed objections to the magistrate judge’s report
and recommendation. Plaintiffs objected to the report and recommendation only
to the extent that it recommended dismissing the action without prejudice rather
than remanding the matter to state court. Plaintiffs argued that because
defendants had removed the case to federal court and then shown that federal
jurisdiction was lacking, the only appropriate remedy was to remand the action to
state court in accordance with the dictates of 28 U.S.C. § 1447(c): “If at any time
before final judgment it appears that the district court lacks subject matter
jurisdiction, the case shall be remanded.”
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6.
On July 17, 2003, the district court entered an order adopting the magistrate
judge’s report and recommendation. 3
The court declined to remand the case to
state court, agreeing with BHP that the case as originally pled by plaintiffs was
properly removed to federal court and plaintiffs had not sought a timely remand.
The court characterized the claims plaintiffs asserted prior to the second amended
complaint as “individual claims” and contrasted them with the “claims on behalf
of the partnership” that plaintiffs asserted in the second amended complaint.
App. to Opening Br., Vol. III at 1089. Although the court acknowledged that
defendants had contended and the court itself had agreed that the so-called
“individual claims” actually belonged to the HBIA partnership, the court
nonetheless treated the claims asserted in the first and second amended
complaints as distinctly different.
Accordingly, the district court held that “the individual claims asserted in
the [first amended] Complaint which were not previously resolved by summary
judgment or otherwise were abandoned upon plaintiffs’ filing of their Second
Amended Complaint. Therefore, plaintiffs’ claims asserted in their individual
3
The district court’s order concerned only the claims involving BHP and HB
PetCorp. and did not address the claims involving BHP Petroleum (UK) Corp.
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capacities have essentially evanesced.” Id. at 1090. The court also reaffirmed its
previous grants of summary judgment on the first amended complaint by ordering
that judgment be entered in favor of HB PetCorp. on all plaintiffs’ claims in the
first amended complaint, that judgment be entered in favor of BHP and HB
PetCorp. on plaintiffs’ claim to an interest in license P. 686, and that judgment be
entered in favor of Cunningham on BHP’s first counterclaim. The court ruled
that the second amended complaint should be dismissed without prejudice for lack
of jurisdiction or, in the alternative, for failure to prosecute. The court entered
judgment on its order on July 31, 2003, and plaintiffs appealed. 4
4
We determined as a preliminary matter that the July 31, 2003 judgment was
not final and appealable because it did not dispose of all the claims before the
court. In particular, it did not dispose of BHP’s second counterclaim and it did
not dispose of the claims against BHP Petroleum (UK) Corp. in Civil Case
No. 01-RB-777. We therefore ordered plaintiffs to obtain and present to us either
the determination and direction required by Fed. R. Civ. P. 54(b) or an order and
judgment finally adjudicating all the remaining claims. On November 9, 2004,
the district court entered an order disposing of the outstanding claims in both
Civil Case. No. 99-RB-1245 and Civil Case No. 01-RB-777. We therefore have
jurisdiction over this appeal.
On November 15, 2004, the district court issued a supplemental judgment
in Civil Case No. 99-RB-1245 in accordance with the November 9 order. The
supplemental judgment, however, omitted one of the grounds for dismissal recited
in both the original July 31 judgment and the November 9 order. The
supplemental judgment recited that the second amended complaint was dismissed
without prejudice only for failure to prosecute; it did not mention the lack of
subject matter jurisdiction. It appears that this omission in the supplemental
judgment was the result of a clerical error and does not reflect any intent by the
district court to alter its ruling on subject matter jurisdiction. The district court
(continued...)
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The following time line summarizes the key events described above that
are relevant to our analysis:
• July 1999 Removal to federal court
(No. 99-RB-1245)
• February 2000 First amended complaint filed
• March 2001 Summary judgment motion
filed questioning real party in
interest
• April 2001 Second federal complaint filed
(No. 01-RB-777)
• October 2002 Both federal cases consolidated
• March 2003 Orders re summary judgment
entered
• April 2003 Second amended complaint
filed
• July 2003 Dismissal for lack of subject
matter jurisdiction
The Appeal
On appeal, plaintiffs do not challenge the district court’s determination that
it lacked subject matter jurisdiction. Rather, they argue only that because the
court concluded it lacked subject matter jurisdiction, it had no authority to enter
4
(...continued)
should correct this omission on remand.
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judgment in favor of either BHP or HB PetCorp. on any of plaintiffs’ claims or to
dismiss the action on the alternative ground of failure to prosecute.
Defendants argue that it was proper for the district court to enter judgment
in favor of HB PetCorp. on all the claims in the first amended complaint and to
enter judgment in favor of BHP and HB PetCorp. on plaintiffs’ claim involving
license P. 686 because the court had subject matter jurisdiction over the original
and first amended complaints. Defendants base this argument on their contention
that the original and first amended complaints asserted personal claims on behalf
of two or four individuals, each of whom was diverse from the named defendants.
Defendants’ reasoning ignores one fundamental fact: the purportedly personal
claims asserted by the individual plaintiffs in the original and first amended
complaints actually belonged to the HBIA partnership. Defendants themselves
argued this very fact in the district court. And because the claims asserted in the
original and first amended complaints actually belonged to the HBIA partnership,
the court lacked subject matter jurisdiction over those claims absent a proper
showing of diversity based on the citizenship of HBIA. See Navarro Sav. Ass’n ,
446 U.S. at 460 (“[T]he ‘citizens’ upon whose diversity a plaintiff grounds
jurisdiction must be real and substantial parties to the controversy.”); Becker v.
Angle , 165 F.2d 140, 142 (10th Cir. 1947) (“[I]n determining the question of
diversity we look to the citizenship of the real parties in interest . . . .”).
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In the September 2002 report and recommendation adopted by the district
court, the magistrate judge determined that in order to proceed on the claims
alleged in the first amended complaint, plaintiffs needed to provide additional
jurisdictional facts. It was for the purpose of providing these necessary
jurisdictional facts that plaintiffs were directed to file a second amended
complaint. When plaintiffs were unable to provide those facts, the magistrate
judge properly concluded that the court lacked jurisdiction over the action.
Thus, although it may have appeared that the court had diversity
jurisdiction over the action when it was first removed to federal court and when
plaintiffs filed the first amended complaint, the truth of the matter was that the
court lacked diversity jurisdiction from the beginning because HBIA was always
the real party in interest on the claims asserted in those complaints and its
citizenship was determinative for purposes of jurisdiction. 5
Defendants’
contention that the court had jurisdiction over the original and first amended
complaints and lacked jurisdiction over only the second amended complaint is
simply wrong.
5
As the owner of the NPIs and of the claims plaintiffs were asserting in
connection with those NPIs, HBIA was a real party in interest both in the sense
that under Rule 17(a) the action could have been brought in its name and in the
sense that under Navarro , 446 U.S. at 461, it was a “real and substantial party to
the controversy” whose citizenship should be considered for purposes of
determining diversity jurisdiction.
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Because the district court never had diversity jurisdiction over the action
against BHP and HB PetCorp., removal of that action was improper. Removal
under 28 U.S.C. § 1441 “is proper only if the federal district court would have
had original jurisdiction if the case was filed in federal court. This jurisdictional
prerequisite to removal is an absolute, non-waivable requirement.” Brown v.
Francis , 75 F.3d 860, 864 (3d Cir. 1996). Once the district court determined that
it lacked diversity jurisdiction, it should have remanded the case back to state
court. “The plain language of § 1447(c) gives no discretion to dismiss rather than
remand an action removed from state court over which the court lacks
subject-matter jurisdiction.” Fent v. Okla. Water Res. Bd. , 235 F.3d 553, 557-58
(10th Cir. 2000) (quotation omitted); see also Smith v. Wis. Dep’t of Agric., Trade
& Consumer Prot. , 23 F.3d 1134, 1139 n.10 (7th Cir. 1994) (“[T]he point of
§ 1447(c) is that a federal court does not have the authority to dismiss a claim
over which it never had jurisdiction in the first instance.”).
Moreover, because the district court never had jurisdiction over the case, it
had no power to rule on any substantive motions or to enter judgment in the case.
“A court may not . . . exercise authority over a case for which it does not have
subject matter jurisdiction.” Brown , 75 F.3d at 866. “Simply put, once a federal
court determines that it is without subject matter jurisdiction, the court is
powerless to continue.” Univ. of S. Ala. v. Am. Tobacco Co. , 168 F.3d 405, 410
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(11th Cir. 1999). “[A] judgment is void if the court that enters it lacks
jurisdiction over either the subject matter of the action or the parties to the
action.” United States v. 51 Pieces of Real Prop. , 17 F.3d 1306, 1309 (10th Cir.
1994).
We, therefore, must vacate all the district court’s post-removal orders, as
other circuits have done in similar circumstances. In Brown , for instance, after
determining that the district court had improvidently allowed a case to be
removed from state court which was then consolidated with a pending case over
which the court did have jurisdiction, the Third Circuit held that “any
post-removal actions taken by the court in this case were . . . ineffectual.” 75
F.3d at 867. The circuit court determined it was necessary to “vacate any orders
entered by the district court that were entered after the . . . case was removed to
the district court and in which the district court purported to exercise jurisdiction
over both [of the consolidated cases].” Id. at 866. The appellate court directed
the district court on remand to separate the consolidated cases and then remand
the removed case to the state court. Id. at 867.
Similarly, after concluding that a case had been improvidently removed
because the district court lacked subject matter jurisdiction, the Fifth Circuit in
Laughlin v. Prudential Insurance Co., 882 F.2d 187, 192 (5th Cir. 1989), vacated
“all actions taken by the district court, including the granting of summary
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judgment dismissing the claims against [one defendant],” and directed the district
court to remand the case to the state court. See also, ARCO Envtl. Remediation,
L.L.C. v. Dep’t of Health & Envtl. Quality of Mont. , 213 F.3d 1108, 1117 (9th
Cir. 2000) (holding that because district court lacked jurisdiction over
improvidently removed case, it did not have power to join a party-defendant, and
remanding with instructions to vacate joinder order and remand case to state
court); Avitts v. Amoco Prod. Co. , 53 F.3d 690, 694 (5th Cir. 1995) (per curiam)
(holding that district court was “without authority to enter its orders” in
improvidently removed case, and vacating all district court orders and directing
district court to remand case to state court).
Accordingly, we AFFIRM the district court’s holding that no subject matter
jurisdiction exists because of a lack of diversity. We VACATE all post-removal
orders entered by the district court, including those granting full or partial
summary judgment in favor of Hamilton Brothers Petroleum Corp.,
BHP Petroleum Great Britain PLC, or Scott Cunningham, and including the order
consolidating the removed case against Hamilton Brothers Petroleum Corp. and
BHP Petroleum Great Britain PLC with the federal case against BHP Petroleum
(UK) Corp. We REVERSE the district court’s dismissal of the removed case and
we REMAND the matter to the district court with directions to remand the
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removed case to state court. 6
On remand, the district court is DIRECTED to
remedy the clerical error contained in its supplemental judgment of November 15,
2004.
6
In Bradgate Associates, Inc. v. Fellows, Read & Associates, Inc. , 999 F.2d
745 (3d Cir. 1993), the circuit court considered a situation similar to that here,
where a removed state court case was consolidated with a case filed in federal
court and the district court later determined that it lacked subject matter
jurisdiction over both the state and federal parts of the consolidated case. The
court held that the district court should not have remanded both parts to the state
court, but should have “appl[ied] the rules pertaining to dismissal and remand[ed]
as if the cases had retained their separate identities and had never been
consolidated. . . . [T]he district court should have remanded the removed case to
state court and dismissed the case . . . originally filed in federal court.” Id. at
751.
Here, the district court determined in its November 9, 2004 order that it
lacked subject matter jurisdiction over the claims against BHP Petroleum (UK)
Corp. in Civil Case No. 01-RB-777, which were initiated in federal court. The
district court ordered the claims dismissed without prejudice, and no party has
appealed that ruling. The remand to state court we contemplate here will not
affect that ruling.
The supplemental judgment of November 15, 2004 referred to the dismissal
of the claims against BHP Petroleum (UK) Corp. and, as we mentioned in
footnote 3 above, mistakenly omitted the lack of subject matter jurisdiction as a
ground for dismissal. This omission needs to be remedied with respect to the
dismissal of Civil Case No. 01-RB-777 as well. We also note that the
November 15 supplemental judgment contemplated the entry of a separate
judgment in Civil Case No. 01-RB-777, but the district court’s docket sheet does
not reflect that a separate judgment has ever been entered in that case.
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