Hudson United Bank v. LiTenda Mortgage Corp.

Opinions of the United
1998 Decisions States Court of Appeals
for the Third Circuit

4-15-1998

Hudson United Bank v. Litenda Mtg Corp
Precedential or Non-Precedential:

Docket 97-5074

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Filed April 15, 1998

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 97-5074

HUDSON UNITED BANK, banking corporation of the State
of New Jersey,
Appellant

v.

LITENDA MORTGAGE CORP.;
THEODORE H. HOWARD;
LINDA M. HOWARD, his wife;
FEDERAL HOME LOAN MORTGAGE CORPORATION,
doing business as Freddie Mac;
GARY S. YOUNG;
YOUNG, DIMIERO & SAYOVITZ;
RICHARD G. NORWALK AND NORWALK ASSOCIATES

On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 96-cv-02204)

Argued Thursday, December 11, 1997

BEFORE: GREENBERG, ROTH, and GARTH,
Circuit Judges

(Opinion filed April 15, 1998)
Richard W. Mackiewicz, Jr. (Argued)
Burke & Mackiewicz
625 Washington Street
Hoboken, New Jersey 07430

Attorneys for Appellant

Lance J. Wolf (Argued)
Federal Home Loan Mortgage
Corporation
Legal Department
8200 Jones Branch Drive
McLean, VA 22102

Gerald T. Ford
Landman, Corsi, Ballaine &
Ford
One Gateway Center
Suite 500
Newark, NJ 07102

Attorneys for Appellees
Litenda Mortgage Corp.,
Theodore H. Howard,
Linda M. Howard, his wife,
Federal Home Loan Mortgage
Corporation d/b/a Freddie Mac

Brian Corrigan
Law Office of Brian Corrigan
150 Morris Avenue
P.O. Box 476
Springfield, NJ 07081

Attorney for Appellees
Richard G. Norwalk and
Norwalk Associates

2
OPINION OF THE COURT

GARTH, Circuit Judge:

This is an appeal of a district court order denying a
motion for reconsideration filed by Hudson United Bank
("Hudson"). The district court had dismissed Hudson's
federal claims, and remanded the state claims to state
court pursuant to 28 U.S.C. S 1367(c). When Hudson
moved for reconsideration of the dismissal and attempted to
amend its complaint, the district court held that it had lost
jurisdiction to hear the case when the remand order was
sent to state court. Accordingly, Hudson's motion was
denied.

We hold that the district court had jurisdiction to
entertain Hudson's motions. Thus, we reverse.

I.

On March 20, 1995, Theodore H. Howard, Linda M.
Howard, and their company, LiTenda Mortgage Corp.,
(collectively, "LiTenda") borrowed almost two million dollars
from the Hudson United Bank ("Hudson") tofinance
LiTenda's mortgage selling and servicing business. At the
time, LiTenda was a mortgage seller/servicer approved by
the Federal Home Loan Mortgage Corporation ("Freddie
Mac").1 As collateral for the loan, Hudson accepted
LiTenda's contractual rights to income derived from
servicing a portfolio of mortgages for Freddie Mac.

On May 2, 1996, Freddie Mac terminated LiTenda's
eligibility as a seller/servicer. In a letter faxed to LiTenda,
Freddie Mac stated that LiTenda's eligibility was revoked
_________________________________________________________________

1. Freddie Mac is a federally chartered, sponsored, and regulated
corporation that purchases home mortgages from lenders and sells
securities to the public to fund the purchases. Mortgages are only
purchased from, and serviced by, approved seller/servicers under the
terms of contracts authored by Freddie Mac. See 12 U.S.C. S 1454 (1989
& West Supp. 1997); American Bankers Mortgage Corp. v. Federal Home
Loan Mortgage Corp., 75 F.3d 1401, 1404 (9th Cir. 1996).

3
because LiTenda had violated their contractual agreement
in at least nine different ways--among them, by pledging
LiTenda's contractual rights as collateral to secure the loan
with Hudson.2 The termination letter directed LiTenda to
return all files and mortgage documents to Freddie Mac,
who in turn transferred its portfolio to another servicer.

Left without Freddie Mac's business, LiTenda's financial
condition deteriorated, and the loan with Hudson went into
default.3 When Hudson sought the contract rights it
believed it was owed under the loan agreement with
LiTenda, Freddie Mac rejected Hudson's claim.

Hudson responded by filing a complaint in state court
containing claims against both LiTenda and Freddie Mac.4
Hudson's claims against Freddie Mac alleged that Freddie
Mac was illegally withholding from Hudson the benefits it
was due as collateral under the terms of its loan agreement
with LiTenda. Freddie Mac then removed the case to federal
court pursuant to 12 U.S.C. S 1452(f), which confers federal
subject matter jurisdiction over any civil action to which
Freddie Mac is a party.

Once in federal court, Freddie Mac filed a motion to
dismiss for failure to state a claim pursuant to Fed. R. Civ.
_________________________________________________________________

2. The contractual relationship between Freddie Mac and LiTenda was
governed by a Seller/Servicer Guidebook authored by Freddie Mac. The
Guidebook set out the rights and duties to which LiTenda was subject as
a seller/servicer of Freddie Mac's mortgages. The nine violations of the
Guidebook that Freddie Mac alleged included: failure to account properly
for the disposition of funds; failure to fund and safeguard funds
properly; failure to comply with financial responsibilities; and failure
to
maintain qualified facilities and staff.

LiTenda subsequently petitioned Freddie Mac for review of the
termination decision. On August 1, 1996, Freddie Mac affirmed its
decision to terminate LiTenda's eligibility, calling LiTenda's violations
of
the contract "especially egregious," and stating that LiTenda's "record at
Freddie Mac was marginal at best."

3. LiTenda filed a petition in the United States Bankruptcy Court for the
District of New Jersey on November 21, 1996.

4. Hudson also named several other parties as defendants. For the sake
of clarity, however, we will focus our analysis here on the claims against
LiTenda and Freddie Mac.

4
P. 12(b)(6). Freddie Mac argued that Hudson had failed to
state a claim against Freddie Mac because Hudson's claim
under the loan agreement derived solely from LiTenda's
rights, and LiTenda's contract rights had been extinguished
when Freddie Mac revoked LiTenda's privileges as a
seller/servicer. Because LiTenda had no rights against
Freddie Mac, Hudson could not use its claim to LiTenda's
rights to state a cause of action against Freddie Mac.

On November 26, 1996, the district court granted Freddie
Mac's motion to dismiss for failure to state a claim.
Agreeing with Freddie Mac that Hudson had no claim
against Freddie Mac because LiTenda had no such claim,
the district court dismissed all of the counts against
Freddie Mac under Fed. R. Civ. P. 12(b)(6).5 Left without an
original basis for federal subject matter jurisdiction, the
district court exercised its discretion under 28 U.S.C.
S 1367(c), and remanded the remaining portions of the case
against LiTenda. A certified copy of the remand order was
mailed to the state court the next day, on November 27,
1996.

On December 6, 1996, Hudson filed several post-
dismissal motions in the district court. First, Hudson
moved for the district court to reconsider its dismissal
pursuant to Fed. R. Civ. P. 59(e) and Fed. R. Civ. P. 60(b).
According to Hudson, the district court had wrongly
concluded that LiTenda's rights were extinguished when
Freddie Mac revoked LiTenda's status as a seller/servicer.
Pointing to the contract between Freddie Mac and LiTenda,
Hudson noted that this was true only if LiTenda's status
had been revoked "with cause." If the termination was
"without cause," Hudson continued, then the contract
entitled LiTenda (and thus Hudson) to a termination fee
equal to the market value of LiTenda's servicing portfolio.
Although Hudson had not raised this issue previously,
_________________________________________________________________

5. Properly relying on Pension Benefits Guar. Corp. v. White Consol.
Indus., 998 F.2d 1192, 1196 (3d Cir. 1993), the district court considered
the portions of the Guidebook attached by the defendant and relied on
by both parties. Those portions of the Guidebook made clear that
LiTenda had no continuing rights in the servicing contract that Hudson
could rely on, such that it was clear as a matter of law that Hudson was
not entitled to relief.

5
Hudson now argued that the termination was "without
cause."

Hudson also moved to amend its complaint. The
amended complaint contained what Hudson modestly
termed "prophylactic" changes in its cause of action; in
particular, the proposed amended complaint alleged for the
first time that Freddie Mac had terminated LiTenda's
portfolio "without cause."6

The district court denied Hudson's motion in an order
dated January 13, 1997. The district court quoted Trans
Penn Wax Corp. v. McCandless, 50 F.3d 217, 225 (3d Cir.
1995) for the proposition that "a district court loses
jurisdiction over a case once it has completed the remand
by sending a certified copy of the remand order to the state
court." Id. Because a certified copy of the remand order had
been sent to the state court on November 27, 1996, the
district court concluded that its jurisdiction to hear
Hudson's motion for reconsideration had been divested on
that date. The district court denied Hudson's motion
without reaching the merits.

Hudson filed a timely appeal.

II.

Although neither party contests our appellate
jurisdiction, we have an independent duty to ensure that
we have jurisdiction over a case or controversy before we
attempt to resolve it. See PAS v. Travelers Ins. Co., 7 F.3d
349, 352 (3d Cir. 1993). In this case, the inquiry is
complicated by the fact that there are three distinct orders
that Hudson has attempted to appeal.

The first is the November 26, 1996 order dismissing
Hudson's claims against Freddie Mac under Fed. R. Civ. P.
12(b)(6), which we will refer to as "the dismissal order." The
second is the November 26, 1996 order remanding the
remaining claims against LiTenda to state court pursuant
_________________________________________________________________

6. Hudson also moved for a stay of the remand order. As the remand
order had already been sent to state court, however, this motion was
moot.

6
to 28 U.S.C. S 1367(c), which we will refer to as "the
remand order." The third is the January 13, 1997 order
denying Hudson's motion for reconsideration, which we will
refer to as "the reconsideration order."

Our cases establish that we have appellate jurisdiction
over the dismissal order pursuant to 28 U.S.C. S 1291. See
Carr v. American Red Cross, 17 F.3d 671, 674-77 (3d Cir.
1994) (holding that a dismissal order preceding aS 1367(c)
remand order is reviewable by direct appeal pursuant to 28
U.S.C. S 1291). The reasoning of Carr also makes clear that
we have appellate jurisdiction over the reconsideration
order pursuant to 28 U.S.C. S 1291. See id.

Although we will resolve this case without reviewing the
remand order, we note that we are authorized to exercise
jurisdiction over the remand order as well. It is clear that
28 U.S.C. S 1447(d) does not bar appellate review of the
remand order, because it was issued not under S 1447(d),
but rather pursuant to 28 U.S.C. S 1367(c). See, e.g.,
Pennsylvania Nurses Ass'n v. Pennsylvania State Educ.
Ass'n, 90 F.3d 797, 801 (3d Cir. 1996) (holding that
S 1447(d) is inapplicable to a remand order made pursuant
to S 1367(c)), cert. denied, 117 S. Ct. 947 (1997). Second,
although we would be able to review the remand order only
through a petition for mandamus, see PAS, 7 F.3d at 353,
we may treat Hudson's notice of appeal as a mandamus
petition. See Korea Exch. Bank v. Trackwise Sales Corp., 66
F.3d 46, 51 (3d Cir. 1995).7
_________________________________________________________________

7. Judge Greenberg is of the view that when, as here, a district court
dismisses the federal claims from a case removed from state court and
remands the state claims to state court pursuant to 28 U.S.C.
S 1367(c)(3), instead of exercising supplemental jurisdiction over them,
that, upon reversal of the dismissal of the federal claims, the court of
appeals may order that the state claims be reinstated without exercising
mandamus jurisdiction. He believes that an appeal by the plaintiff in
such a case is, in reality, from the dismissal order and not from the
remand order, because the plaintiff may be content to litigate the state
claims in state court where the plaintiff started the action. Therefore,
the
order from the court of appeals reinstating the state claims in federal
court is merely incidental to the reversal of the dismissal and is
authorized by 28 U.S.C. S 2106 which provides that after a reversal of a
ruling by a district court, a court of appeals "may remand the cause and
direct the entry of such appropriate judgment, decree or order, or require
such further proceedings to be had as may be just under the
circumstances."

7
III.

The question posed by this case is whether the district
court had jurisdiction to adjudicate Hudson's motion for
reconsideration. Our answer is yes.

A.

Congress has designed our federal court system so that
it affords civil litigants ample opportunity to seek review of
adverse decisions in the inferior courts. First, litigants may
request reconsideration of an unfavorable result in the
district court. See Fed. R. Civ. P. 59(e), 60(b). Second,
losing parties are entitled to seek review of "all final orders"
in the court of appeals. See 28 U.S.C. S 1291. Third,
litigants may request rehearing by a full court of appeals.
See Fed. R. App. P. 35. The animating concept behind this
forgiving structure is that justice is best served by the
checks and balances afforded by regular opportunities for
judicial review.

Despite this general design, the need to deter vexatious
litigation has led Congress to carve out exceptions in which
review is curtailed or even eliminated. One such exception
is the rule against review of remand orders following
improper removal to federal court, currently codified at 28
U.S.C. S 1447(c) and (d).8 This longstanding rule divests the
_________________________________________________________________

8. The text of 28 U.S.C. S 1447(c) and (d) reads as follows:

(c) A motion to remand the case on the basis of any defect other
than lack of subject matter jurisdiction must be made within 30
days after the filing of the notice of removal under section
1446(a).
If at any time before final judgment it appears that the district
court
lacks subject matter jurisdiction, the case shall be remanded. An
order remanding the case may require payment of just costs and
any actual expenses, including attorney fees, incurred as a result
of
the removal. A certified copy of the order of remand shall be
mailed
by the clerk to the clerk of the State court. The State court may
thereupon proceed with such case.
(d) An order remanding a case to the State court from which it was
removed is not reviewable on appeal or otherwise, except that an
order remanding a case to the State court from which it was
removed pursuant to section 1443 of this title shall be reviewable
by
appeal or otherwise.
8
federal courts of jurisdiction to review a district court's
remand order when the order is based on a defect in
removal procedure or lack of subject matter jurisdiction.
See Thermtron Products, Inc. v. Hermansdorfer, 423 U.S.
336, 346, 96 S. Ct. 584, 590 (1976); Quackenbush v.
Allstate Ins. Co., ___ U.S. ___, ___, 116 S. Ct. 1712, 1718
_________________________________________________________________

28 U.S.C. S 1447 (West Supp. 1997).

Those attempting to divine the meaning of S 1447 from its text would
do well to recall that sometimes "a page of history is worth a volume of
logic." New York Trust Co. v. Eisner, 256 U.S. 345, 349, 41 S. Ct. 506,
507 (1921) (Holmes, J.). In Thermtron Products, Inc. v. Hermansdorfer,
423 U.S. 336, 96 S. Ct. 584 (1976), the Supreme Court examined the
century-old history of Congress's bar to review of remand orders and
concluded that the bar to review contained in S 1447(d) covered only
remands issued because a case was removed improperly or the district
court was without subject matter jurisdiction. See id. at 346-50; 96 S.
Ct. at 590-93. At the time of Thermtron, the text of S 1447(c) provided
the
textual hook for this interpretation. It then read:"If at any time before
final judgment it appears that the case was removed improvidently and
without jurisdiction, the district court shall remand the case, and may
order the payment of just costs." Thermtron , 423 U.S. at 342, 96 S. Ct.
at 589. Thus, the Court concluded that the bar to review contained in
S 1447(d) applied only when the remand was based on the grounds
specified in S 1447(c). See id. at 346; 96 S. Ct. at 590.

Congress has since amended S 1447(c) several times, most recently in
1996. The amendments have focused on creating and clarifying time
limits concerning when a plaintiff can seek a remand following removal
from state court. These amendments have slightly altered the grounds
for remand "specified" in the text of S 1447(c): the statute now speaks of
remands for lack of subject matter jurisdiction, and remands for "any
defect other than lack of subject matter jurisdiction." 28 U.S.C. S
1447(c)
(West Supp. 1997). Rather than take this change in language as a
wholesale rejection of Thermtron and a dramatic expansion of S 1447(d),
we will assume that Congress did not mean to upset the Thermtron limits
on S 1447(d), and that they remain in effect unchanged by the
intervening textual modifications to S 1447(c). This conclusion is
supported by the legislative history of the 1996 amendment. See H.R.
REP. NO. 104-799 at 2-3 (1996), reprinted in 1996 U.S.C.C.A.N. 3417,
3418-19 (suggesting that the textual changes were designed only to
clarify Congressional intent on the timing of remands made for reasons
other than lack of subject matter jurisdiction).

9
(1996). The purpose of the rule is to prevent a party to a
state lawsuit from using federal removal provisions and
appeals as tool to introduce substantial delay into a state
action. See Thermtron, 423 U.S. at 354-55, 96 S. Ct. at
594-95 (Rehnquist, J., dissenting). Without S 1447(d), a
party to a state action could remove the action to federal
court, await remand, request reconsideration of the
remand, appeal, request rehearing, and then file a petition
for a writ of certiorari, all before being forced to return to
state court several years later. See Greenwood v. Peacock,
384 U.S. 808, 832-33, 86 S. Ct. 1800, 1815 (1966)
(contemplating the delay that would result if state criminal
defendants could regularly seek removal under 28 U.S.C.
S 1443, and then seek review of subsequent remand
orders). To avoid this delay, Congress has fashioned an
exception to the general rule of review, and made a district
court's initial determination that removal was
inappropriate, a nonreviewable one.

B.

In the present case, the district court issued a remand
pursuant to 28 U.S.C. S 1367(c),9 rather than 28 U.S.C.
S 1447(c). Section 1367(c) grants district courts the
discretion to refuse to exercise supplemental jurisdiction
when "values of judicial economy, convenience, fairness,
and comity" counsel that the district court remand state
claims to a state forum. See City of Chicago v. International
College of Surgeons, ___ U.S. ___, ___, 118 S. Ct. 523, 534
(1997) (quoting Carnegie Mellon Univ. v. Cohill , 484 U.S.
343, 350, 108 S. Ct. 614, 619 (1988)). Because the original
_________________________________________________________________

9. 28 U.S.C. S 1367(c) (1993) states:

(c) The district courts may decline to exercise supplemental
jurisdiction over a claim under [28 U.S.C. S 1367](a) if--

(1) the claim raises a novel or complex issue of State law,
(2) the claim substantially predominates over the claim or claims
over which the district court has original jurisdiction,
(3) the district court has dismissed all claims over which it has
original jurisdiction, or
(4) in exceptional circumstances, there are other compelling
reasons for declining jurisdiction.

10
basis of federal jurisdiction in this case was the presence of
Freddie Mac as a party, see 12 U.S.C. S 1452(f), the district
court exercised its discretion and declined to exercise
supplemental jurisdiction over the state claims against
LiTenda following the dismissal of the claims against
Freddie Mac. See 28 U.S.C. S 1367(c)(3).

The first question posed by this case is whether the bar
to review provided by S 1447(d) is even implicated when a
district court enters a remand order pursuant toS 1367(c).
The decisions of the Supreme Court, this court, and our
sister circuits make clear that S 1367(c) remands, such as
the one entered by the district court here, do not invoke the
bar to review prescribed by S 1447(d). See, e.g., Cohill, 484
U.S. at 355 n.11, 108 S. Ct. at 621 n.11 ("Section[ ] 1447(c)
. . . do[es] not apply to cases over which a federal court has
pendent jurisdiction. Thus, the remand authority conferred
by the removal statute and the remand authority conferred
by the doctrine of pendent jurisdiction overlap not at all.");
Pennsylvania Nurses Ass'n v. Pennsylvania State Educ.
Ass'n, 90 F.3d 797, 801 (3d Cir. 1996) (holding that
S 1447(d) is inapplicable to a remand order made pursuant
to S 1367(c)); Trans Penn Wax Corp. v. McCandless, 50 F.3d
217, 224 (3d Cir. 1995) (same); PAS v. Travelers Ins. Co., 7
F.3d 349, 352 (3d Cir. 1993) (same). See also Things
Remembered, Inc. v. Petrarca, 516 U.S. 124, 130, 116 S. Ct.
494, 498 (1995) (Kennedy, J., concurring) (noting that
several other circuits have agreed that remands pursuant
to S 1367(c) do not implicate the bar to review provided by
S 1447(d)) (citing cases); Trans Penn, 50 F.3d at 224 (same)
(citing cases from eight circuits).

Although the sharp distinction between remands
authorized by S 1367(c) and remands authorized by
S 1447(c) is often misunderstood, the reason behind their
different treatment is clear. Review of S 1447(c) remands is
barred to keep parties to state actions from making
dubious allegations of federal jurisdiction in order to
forestall the prompt resolution of state cases. Thus,
S 1447(c) remands are warranted only when a federal court
has no rightful authority to adjudicate a state case that has
been removed from state court. In such cases, the statute
provides a quick, permanent, and mandatory remedy to

11
return a state case to state court. See International Primate
Protection League v. Administrators of Tulane Educ. Fund,
500 U.S. 72, 89, 111 S. Ct. 1700, 1710 (1991).

By contrast, S 1367(c) serves no such corrective purpose.
Remands authorized by S 1367(c) may be entered only when
federal subject matter jurisdiction has been affirmatively
established, via 28 U.S.C. S 1367(a), and are entered
independently of whether the case originated in state or
federal court. See International College of Surgeons, 118 S.
Ct. at 530. Thus, a district court's decision to remand
pursuant to S 1367(c) does not imply that the case was
improperly filed in federal court. Rather, it reflects the
court's judgment, reviewable on appeal for abuse of
discretion, see Sparks v. Hershey, 661 F.2d 30, 33 (3d Cir.
1981), that at the present stage of litigation it would be best
for supplemental jurisdiction to be declined so that state
issues may be adjudicated by a state court. See United Mine
Workers v. Gibbs, 383 U.S. 715, 726-27, 86 S. Ct. 1130,
1139-40 (1966). In such circumstances, there is no
pressing need to block the mechanisms of review that are
generally afforded civil litigants.

Thus, the bar to review codified at S 1447(d) is entirely
inapplicable when the basis of the remand was the district
court's discretion pursuant to S 1367(c).

C.

Freddie Mac contends that we should construe the cases
holding that the S 1447 bar to review is inapplicable when
a remand is issued under S 1367(c) as establishing that
only appellate jurisdiction is available. Conceding our
appellate jurisdiction, Freddie Mac argues that the bar to
review should nonetheless apply to post-remand motions
filed before the district court. In other words, Freddie Mac
argues that the district court lacked jurisdiction to
adjudicate the post-remand motions, but that we have
appellate jurisdiction to review the merits of the district
court's orders.

We cannot agree. It is difficult to understand how we can
exercise appellate jurisdiction over the merits of a case if
the district court in which the notice of appeal wasfiled did

12
not itself have jurisdiction when the notice of appeal was
filed. Federal jurisdiction cannot be "lost" by the district
court one day and then "found" by the court of appeals
later on. Rather, jurisdiction that is originally and properly
vested in the district court becomes vested in the court of
appeals when a notice of appeal is filed. See Venen v.
Sweet, 758 F.2d 117, 120 (3d Cir. 1985) ("As a general rule,
the timely filing of a notice of appeal is an event of
jurisdictional significance, immediately conferring
jurisdiction on a Court of Appeals and divesting a district
court of its control over those aspects of the case involved
in the appeal.") Thus, if S 1447(d) does not deny an
appellate court jurisdiction to review a remand order, it
cannot deny the district court jurisdiction to entertain a
motion for reconsideration before the notice of appeal is
filed. See, e.g., J.O. v. Alton Community Unit Sch. Dist. 11,
909 F.2d 267, 273-274 (7th Cir. 1990) (holding that a
district court has the power to reconsider its order following
a S 1367(c) remand during the time allowed forfiling a
notice of appeal).

D.

We next address whether the mailing of the S 1367(c)
remand order to state court divested the district court of
jurisdiction. The primary support for this view derives from
language in Trans Penn Wax Corp. v. McCandless, 50 F.3d
217, 224 (3d Cir. 1995), which could be read (and was
read, by the district court) to suggest that the answer to
that question is "yes." However, such a reading of the dicta
in Trans Penn would ignore the sharp distinction between
S 1447(c) remands and those remands authorized by
S 1367(c). Accordingly, we conclude that the mailing of a
remand order does not divest a district court of jurisdiction
to entertain a motion for reconsideration following a
remand order issued under S 1367(c).

Trans Penn was a labor action brought by employees in
state court against their employer. Following the employer's
removal to federal court, the employees withdrew their
federal claims and asked the district court to remand the
remaining state claims to state court. The district court did
so, exercising its discretion according to S 1367(c).

13
Subsequently, the employer filed a motion for
reconsideration, which was denied on the merits. The
employer then petitioned our court for a writ of mandamus,
arguing that the remand was inappropriate because federal
issues remained lurking within the remaining state claims.

Before reaching the merits, we addressed at length
whether the district court had jurisdiction to reconsider its
remand order on the merits. We began by noting correctly
that the S 1447(d) bar to review was inapplicable because
the remand order was issued pursuant to S 1367(c). See id.
at 224. Nonetheless, the court suggested, there was a
question as to whether the district court had jurisdiction to
reconsider its own remand order. Our own precedent, the
court intimated, was "inconclusive." Id. at 226. First, there
was a "general rule . . . that a district court loses
jurisdiction over a case once it has completed the remand
by sending a certified copy of the remand order to the state
court." Id. at 225. Second, remands authorized by S 1367(c)
were generally reviewable. Finding no evidence that a
remand order had been sent to the state court, and noting
that the S 1367(c) remand did not implicateS 1447(d), we
held that the district court retained jurisdiction to
reconsider its order of remand. See id. at 227.

The conclusion we have reached in this case is in accord
with the holding of Trans Penn. In both cases, the district
court retained jurisdiction to reconsider its remand order.
To the extent that dicta in Trans Penn could be read as
suggesting a different result would be warranted if the
remand order had been sent to state court before the
motion for reconsideration was filed, we disavow that
notion. Indeed, the law in our circuit is clear. The mailing
of a remand order divests the district court of jurisdiction
when the remand is authorized by S 1447(c). See Hunt v.
Acromed Corp., 961 F.2d 1079, 1082 (3d Cir. 1992). When
the remand is authorized by S 1367(c), the bar to review is
inapplicable and the district court may reconsider its
remand order just as it would any other order. See Trans
Penn, 50 F.3d at 227; Thomas v. LTV Corp., 39 F.3d 611,
616 (5th Cir. 1994); Alton Community Unit Sch. Dist. 11,
909 F.2d at 273-274.

14
Because the remand in this case was authorized by
S 1367(c), the mailing of the remand order to state court did
not divest the district court of jurisdiction to entertain
Hudson's motion for reconsideration.

IV.

Having determined that the district court retained
jurisdiction to adjudicate Hudson's motion for
reconsideration, we must next decide whether to proceed to
the merits of the case or reverse and remand to the district
court. Hudson argues that we should reverse the
reconsideration order of the district court, and remand this
case to the district court so it may entertain Hudson's
motion on the merits. Freddie Mac contends that in the
name of judicial economy we should address the merits of
the motion for reconsideration in this appeal.

When a district court has failed to reach a question below
that becomes critical when reviewed on appeal, an appellate
court may sometimes resolve the issue on appeal rather
than remand to the district court. See, e.g., Chase
Manhattan Bank, N.A. v. American Nat'l Bank and Trust
Co., 93 F.3d 1064, 1072 (2d Cir. 1996) (summary
judgment). This procedure is generally appropriate when
the factual record is developed and the issues provide
purely legal questions, upon which an appellate court
exercises plenary review. In such a case, an appellate
tribunal can act just as a trial court would, so nothing is
lost by having the reviewing court address the disputed
issue in the first instance. See Otto v. Variable Annuity Life
Ins. Co., 814 F.2d 1127, 1138 & n.11 (7th Cir. 1986).

Such a procedure may be inappropriate, however, when
the issue to be addressed is not a purely legal question.
When the resolution of an issue requires the exercise of
discretion or fact finding, for example, it is inappropriate
and unwise for an appellate court to step in. As the
Supreme Court has stated, "the proper role of the court of
appeals is not to reweigh the equities or reassess the facts
but to make sure that the conclusions derived from those
weighings and assessments are juridically sound and
supported by the record." Curtiss-Wright Corp. v. General
Elec. Co., 446 U.S. 1, 10, 100 S. Ct. 1460, 1466 (1980).

15
The merits of Hudson's motion for reconsideration and to
amend its pleadings fall within the zone of discretion and
judgment that is best addressed initially by the district
court. A district court's decision to deny a motion for
reconsideration is placed within the sound discretion of the
district court; factual determinations supporting its
decision are reviewed by us under a clearly erroneous
standard. See North River Ins. Co. v. CIGNA Reinsurance
Co., 52 F.3d 1194, 1203 (3d Cir. 1995). Similarly, a district
court's decision to grant or deny leave to amend pleadings
is reviewed for abuse of discretion. See Heyl & Patterson
Int'l, Inc. v. F.D. Rich Housing, 663 F.2d 419, 425 (3d Cir.
1981). It is not our place to exercise the discretion normally
afforded the district court.

Accordingly, we will not reach the merits of Hudson's
motion, and instead will remand to the district court so
that the district court can take whatever steps are
necessary to entertain Hudson's post-dismissal motions. If
Hudson's reconsideration motion is granted, and if it is
permitted to amend its complaint, the district court will
need to vacate the remand order and give appropriate
notification to the state court. If Hudson's motions are
denied, however, no such steps will be necessary: it would
be a waste of judicial effort (indeed, a needless spinning of
wheels) to reclaim the state action from state court, only to
have to order a remand again immediately thereafter. Of
course, we do not express any opinion as to the merits of
Hudson's motions, leaving it to the sound discretion of the
district court as to how it regards allegations in Hudson's
original and amended complaint, as well as the timeliness
of Hudson's "without cause" theory.

The January 13, 1997 order of the district court will be
reversed, and remanded to the district court for further
proceedings consistent with this opinion.

A True Copy:
Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

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