In re Allstate Ins. Co.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT
_______________

No. 93-1179
_______________

IN RE ALLSTATE INSURANCE COMPANY,

Petitioner,

_________________________

Petition for Writ of Mandamus
to the United States District Court
for the Northern District of Texas
_________________________
(November 16, 1993)

Before HIGGINBOTHAM, SMITH, and DeMOSS, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

This petition for writ of mandamus presents an issue of first

impression in the circuit courts, and one we expressly reserved in

FDIC v. Loyd, 955 F.2d 316, 321 n.4 (5th Cir. 1992), to wit:

whether the federal removal statute, 28 U.S.C. § 1441 et seq.,

permits a district court to remand a case sua sponte for a "defect

in removal procedure" where the remand occurs within the thirty-day

period allowed by § 1447(c) for motions to remand. We conclude

that the 1988 amendments to § 1447(c) divested the district courts

of any such discretion.

I.

Oran Washburn filed suit in Texas state court on October 5,

1992, against Allstate Insurance Company ("Allstate") for breach of

contract arising from his uninsured/underinsured motorist insurance
policy. Although the original petition did not allege more than

$50,000 in damages, Washburn's amended petition, which added

several statutory causes of action, alleged a breach of the duty of

good faith and fair dealing, and sought punitive damages, would, if

he were successful, entitle him to recover greater than the $50,000

jurisdictional minimum needed to support diversity jurisdiction.

On December 30, 1992, Allstate filed its notice of removal in

the United States District Court for the Northern District of

Texas. The same day, the district court entered its order of

remand, citing as its reason Allstate's failure adequately to

allege Washburn's residence at the time the state petition was

filed.1 Allstate now seeks a writ of mandamus to vacate the order

of remand.

II.

We first address whether we have jurisdiction to review the

district court's order. Our authority to review a remand order is

severely circumscribed by 28 U.S.C. § 1447(d), which provides, in

pertinent part, that "[a]n order remanding a case to the State

court from which it was removed is not reviewable on appeal or

otherwise . . . ."2 Despite the broad sweep of the statute, the

1
Because the district court mistakenly ordered the cause remanded to
the 18th Judicial District Court of Dallas County, Texas, an amended order was
entered on January 8, 1993, remanding to the point of origin, the 18th
Judicial District Court of Johnson County.
2
Section 1447(d) allows an exception to its general rule of
unreviewability for certain civil rights actions. Obviously, that exception
is inapplicable here.

2
Court in Thermtron Prods. v. Hermansdorfer, 423 U.S. 336, 345-46

(1976), limited its purview by holding that "only remand orders

issued under § 1447(c) and invoking the grounds specified

therein . . . are immune from review under § 1447(d)." The Court

concluded that mandamus is an appropriate remedy "where the

district court has refused to adjudicate a case, and has remanded

it on grounds not authorized by the removal statutes." Id. at 353.

We may review a remand order on petition for writ of mandamus,

therefore, provided that it was entered on grounds not authorized

by § 1447(c). As we explain in greater detail below, the district

court acted without statutory authority when it sua sponte remanded

the case on procedural grounds. Consequently, § 1447(d) poses no

bar to our review.

III.

As amended by the Judicial Improvements and Access to Justice

Act of 1988, Pub. L. No. 100-702, 102 Stat. 4644, 4670, § 1447(c)

states, in pertinent part,

A motion to remand the case on the basis of any
defect in removal procedure 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.

28 U.S.C. § 1447(d) (Supp. 1993). In the recent cases of In re

Shell Oil Co., 932 F.2d 1518, 1519 (5th Cir. 1991), cert. denied,

112 S. Ct. 914 (1992), and Loyd, we granted the petitions for writs

of mandamus and directed the district courts to vacate their remand

orders, respectively, where the court had granted a motion to

3
remand for a defect in removal procedure made outside § 1447(c)'s

thirty-day limit, and where the court sua sponte had entered an

untimely order on the same ground.3

Here, the district court remanded on the same day Allstate

filed its notice of removal, explaining that "[Allstate] has failed

to adequately plead Plaintiff's residence at the time of filing of

the original petition. Thus, [Allstate] has failed to properly

remove this case, and this case must be remanded." Plainly, the

district court's order was nothing if not timely; the question that

concerns us is whether it was made in response to a defect in

removal procedure, and, if so, whether § 1447(c) authorizes a

court's sua sponte remand on such grounds.

Although it is "well settled that a removing party must allege

diversity both at the time of the filing of the suit in state court

and at the time of removal," Schwinn Bicycle Co. v. Brown, 535 F.

Supp. 486, 487 (W.D. Ark. 1982); Hubbard v. Tripp, 611 F. Supp.

895, 896 (E.D. Va. 1985), a "procedural defect" within the meaning

of § 1447(c) refers to "any defect that does not go to the question

of whether the case originally could have been brought in federal

district court . . . ." Baris v. Sulpicio Lines, 932 F.2d 1540,

1544 (5th Cir.), cert. denied, 112 S. Ct. 430 (1991); see also

Shell, 932 F.2d at 1522 ("`[A]ny defect in removal procedure'

includes all non-jurisdictional defects existing at the time of

removal."). By this standard, Allstate's failure to allege, in its

3
Cf. In re Medscope Marine Ltd., 972 F.2d 107, 110 (5th Cir. 1992)
(timely remand motions premised on a defect in removal procedure are
unreviewable under § 1447(d)).

4
notice of removal, the plaintiff's citizenship at the time the

original petition was filed constitutes a procedural, rather than

jurisdictional, defect; although Allstate failed conclusively to

demonstrate diversity, the record discloses no dispute that it in

fact existed.4

Thus, we are faced squarely with the question left undecided

in Loyd: whether § 1447(c)'s use of the word "motion" refers

exclusively to motions made by parties or includes sua sponte

remands. In Loyd, the district court concluded that the state

court defendants had removed untimely, and it remanded sua sponte

after twenty-one months had elapsed since the date of removal. On

petition for writ of mandamus, we rejected the district court's

contention (i) that § 1447(c)'s thirty-day limit for filing remand

motions did not constrain the district court, and (ii) that the

court possessed inherent authority to remand sua sponte for

procedural defects even after the time limit had passed. See Loyd,

955 F.2d at 318.

4
Because we base our decision on other grounds, we merely note that
plaintiff Washburn's original petition, enclosed by Allstate with its notice
of removal, averred that Washburn was then a resident of Tarrant County,
Texas. Not only the plaintiff's complaint but also the record as a whole may
be considered in determining the propriety of removal. Villarreal v. Brown
Express, 529 F.2d 1219, 1221 (5th Cir. 1976); Kerbow v. Kerbow, 421 F. Supp.
1253, 1258 (N.D. Tex. 1976). While such an averment as to residency, of
course, is not conclusive proof of citizenship, see, e.g., Nadler v. American
Motors Sales Corp., 764 F.2d 409, 412-13 (5th Cir. 1985), any qualms the
district court may have had concerning the distinction between the two are
best addressed by allowing Allstate to amend the removal petition to cure the
defect under 28 U.S.C. § 1653. See D.J. McDuffie, Inc. v. Old Reliable Fire
Ins. Co., 608 F.2d 145, 146-47 (5th Cir. 1979) (missing allegation of
citizenship in notice of removal not fatal but may be cured by amendment),
cert. denied, 449 U.S. 830 (1980); 14A CHARLES A. WRIGHT, ET AL., FEDERAL PRACTICE AND PROCEDURE
§ 3739, at 575-76 (2d ed. 1985) ("Irregularities or defects in the removal
procedure . . . ordinarily do not provide grounds for remand. They may be
cured by amendment in the federal court.").

5
 Finding use of the word "motion" inconclusive as to whether it

includes sua sponte actions, the Loyd panel reasoned, from the

caselaw and the legislative history of the 1988 amendments, that

the district court had no authority to remand on its own motion

after the expiration of the thirty-day limit. The court expressly

reserved the question whether § 1447(c) authorizes a court to

remand sua sponte within the thirty-day limit. See Loyd, 955 F.2d

at 321 n.4.5

Prior to the 1988 amendments to § 1447(c), a court undoubtedly

possessed the power to remand sua sponte "[i]f at any time before

final judgment it appear[ed] that the case was removed

improvidently and without jurisdiction . . . ." 28 U.S.C.

§ 1447(c) (1973) (repealed 1988). Respondent Washburn points to

our statement in Medscope Marine, 972 F.2d at 109-10, that the

amended statute "is a mere reconstitution of the existing statute

and jurisprudence, with the addition of a strict time limitation on

the privilege of filing remand motions," to advance his argument

that the court still may remand sua sponte.6 While we acknowledge

5
Two other circuit courts have addressed the issue resolved in Loyd and
have reached similar conclusions. It bears noting, too, that each case
reserved the same question as did Loyd. See Maniar v. FDIC, 979 F.2d 782,
785-86 (9th Cir. 1992); Air-Shields, Inc. v. Fullam, 891 F.2d 63, 65 (3d Cir.
1989). See also Notations, Inc. v. Tongkook Am., No. 92 Civ. 4850 (JSM), 1992
U.S. Dist. LEXIS 19240, at *6 (S.D.N.Y. Dec. 15, 1992) (same). But cf.
Averdick v. Republic Fin. Servs., 803 F. Supp. 37, 41-43 (E.D. Ky. 1992)
(rejecting holdings in Fullam and Loyd and adopting instead the reasoning of
the vacated district court opinion in FDIC v. Loyd, 744 F. Supp. 126 (N.D.
Tex. 1990)).
6
While respondent Washburn's point )) that the prior statute permitted
sua sponte remands for procedural defects and the 1988 amendment intended no
change in this regard )) is well taken, we cannot agree that the caselaw was
well settled that a court possessed such power under former § 1447(c). The
statute was phrased in the conjunctive; the court could remand provided that
(continued...)

6
the thrust of Medscope's reading, we find it more than balanced in

this regard by the dictum in Ziegler v. Champion Mortgage Co., 913

F.2d 228, 230 (5th Cir. 1990), which states that

considering a motion to remand is both procedurally and
substantively different from inquiring into the existence
of subject matter jurisdiction. Procedurally, a court
may consider remand only if the parties raise the issue;
conversely, a court must consider the existence of
subject matter jurisdiction on its own motion.

(Emphasis added.) See also Loyd, 955 F.2d at 323 (incorporating

Ziegler's dictum into its holding).

Beginning, as we must, with the language of the statute, we

note that the phrase, "[a] motion to remand the case . . . must be

made," implies that only a party to the case may initiate it.7

6
(...continued)
the case was removed both improvidently and without jurisdiction. See also
14A WRIGHT ET AL., supra note 4, § 3739, at 575-76 ("Irregularities or defects in
the removal procedure . . . ordinarily do not provide grounds for remand.").

Moreover, two cases cited by Washburn are distinguishable. Although
Smith v. City of Picayune, 795 F.2d 482, 484 (5th Cir. 1986), states that a
court "may, on its own motion, consider the correctness of the grounds for
removal," that case merely restated the pre-amendment standard and upheld the
retention of the case by the district court, despite the non-existence of
removal jurisdiction, where the court had subject matter jurisdiction at the
time of judgment. Id. at 485. In Schwinn Bicycle Co. v. Brown, 535 F. Supp.
486, 487 (W.D. Ark. 1982), the court noted that the removal petition was
defective, but the basis for remand was the lack of removal jurisdiction owing
to the defendant's alleged status as a citizen of the forum state.
Also, the Loyd court cited, in addition to Smith, London v. United
States Fire Ins. Co., 531 F.2d 257, 260 (5th Cir. 1976), as authority for the
proposition that a court may sua sponte remand on procedural grounds. But
London simply let stand a district court's ruling, apparently in response to a
motion by the parties, remanding following an untimely petition for removal,
despite the conceded existence of subject matter jurisdiction. The primary
basis for the affirmance was in fact the improper avenue of review pursued by
the defendant, who challenged the district court's ruling by direct appeal
pursuant to 28 U.S.C. § 1291, and not, as Thermtron directs, by petition for
writ of mandamus. Id. at 259.
7
Interestingly, the district court's parsing of the statute in the
vacated Loyd opinion resulted in the same conclusion: "Given the predominant
use of the phrase `own initiative' in the federal civil procedural rules, the
term `motion' in § 1447(c) likely means only a request presented by a party."
(continued...)

7
Respondent's argument that "[t]he court's power to monitor its

cases for defects is inherent in its authority" fails to recognize

that Loyd implicitly rejected the district court's related argument

that its inherent authority to remand sua sponte (even outside the

thirty-day limit) had survived the 1988 amendments. Loyd, 955 F.2d

at 318. Our reading of Loyd leaves no room for inherent authority;

either the statute confers upon the court power to remand on its

own initiative, or the court has no such power.

Given Thermtron and Loyd, moreover, we are persuaded that the

better reading precludes the existence of discretion in the

district court to remand for procedural defects on its own motion.

Section 1447(c)'s second sentence assigns to the court concern for

its jurisdictional prerequisites; the first consigns procedural

formalities to the care of the parties. We believe this to be a

wise and warranted distribution.

Where a removed plaintiff, by its inaction, has acquiesced in

federal jurisdiction, for example, it hardly will do for the court

sua sponte to interfere with the parties' apparent choice of forum.

In such circumstances, where subject matter jurisdiction exists and

any procedural shortcomings may be cured by resort to § 1653, we

can surmise no valid reason for the court to decline the exercise

7
(...continued)
Loyd, 744 F. Supp. at 131. See also Notations, Inc., 1992 U.S. Dist. LEXIS
19240, at *6 ("Certainly the wording of § 1447(c) does not appear to permit
the exercise of discretion in remanding for defects in removal procedure, and
courts in this Circuit have so considered it in passing."). But cf. Loyd, 955
F.2d at 321 ("[W]e find that the word `motion' is not dispositive of whether
sua sponte remands are subject to the thirty-day limit.").

8
of jurisdiction.8 Congressional intent seems to sanction such a

result, for as the legislative history of the 1988 amendments

states,

[s]o long as the defect in removal procedure does not
involve a lack of federal subject matter jurisdiction,
there is no reason why either State or Federal courts, or
the parties, should be subject to the burdens of
shuffling a case between two courts that each have
subject matter jurisdiction.

H.R. REP. NO. 889, 100th Cong., 2d Sess. 72 (1988), reprinted in

1988 U.S.C.C.A.N. 5982, 6033. See also Loyd, 955 F.2d at 323

("Because there was subject matter jurisdiction, the district court

had no valid interest in remanding the case under § 1447(c).").

As we can discern no basis, in either the language of the

amended statute or in policy, for conferring upon the district

courts discretion sua sponte to remand for purely procedural

defects, we conclude that we have jurisdiction to review the

court's remand order and, accordingly, the petition for writ of

mandamus is GRANTED.

HIGGINBOTHAM, Circuit Judge, dissenting:

The majority opinion expands our power to review remand

orders, contrary to the will of Congress in section 1447(c) and of

8
In Thermtron, for example, the district court remanded on the ground
that the crowded state of its docket would deprive the plaintiffs of a speedy
resolution of their claim. The Court refused to accept this pragmatic
consideration as a legitimate basis for declining jurisdiction, stating, "But
we are not convinced that Congress ever intended to extend carte blanche
authority to the district courts to revise the federal statutes governing
removal by remanding cases on grounds that seem justifiable to them but which
are not recognized by the controlling statute." Thermtron, 423 U.S. at 351.

9
the Supreme Court in Thermtron Products. In so doing it fails to

abide by controlling precedent of this circuit and creates a split

with another circuit. I must respectfully dissent.

I

This circuit reviews remand orders only if the district court

"affirmatively states a non-1447(c) ground for remand." Soley v.

First Nat'l Bank of Commerce, 923 F.2d 406, 408 (5th Cir. 1991); In

re Weaver, 610 F.2d 335, 337 (5th Cir. 1980); In re Merrimack Mut.

Fire Ins. Co., 587 F.2d 642, 647 (5th Cir. 1978). It does so

because Thermtron limits review to the "extreme situation" where a

judge has "clearly not relied upon § 1447(c)." Weaver, 610 F.2d at

337. This order simply does not create an extreme situation.

Correct or not, the district judge decided subject matter

jurisdiction. Section 1446, like Federal Rule of Civil Procedure

8(a), requires a "short and plain statement" of the grounds for

jurisdiction. See H.R. Rep. No. 100-889, 100th Cong., 2d Sess.,

reprinted in 1988 U.S.C.C.A.N. 5982, 6032; Charles A. Wright et

al., 14A Federal Practice and Procedure § 3733 (Supp. 1993).

Pleading residency instead of citizenship fails to meet that

requirement. Nadler v. American Motors Sales Corp., 764 F.2d 409,

413 (5th Cir. 1985). The judge recognized that failure and

remanded, basing his decision solely on the inadequacy of the

jurisdictional pleadings. No matter how faulty we consider his

reasoning or how inaccurate we consider his result, we cannot

review such a remand order. Thermtron Prods., Inc. v.

Hermansdorfer, 423 U.S. 336, 343 (1976) (section 1447(d) prohibits
review of remand orders issued under 1447(c) "whether erroneous or

not").

II

Two arguments can be made that such a remand is not

"jurisdictional" but rather is "procedural." The first is that

jurisdiction "exists" independently of the allegations in the

notice of removal, and a jurisdictional remand is present only when

the trial judge undertakes a review of the entire record to

determine that "existence."

This argument is not persuasive because the jurisdictional

nature of a remand order should not hinge on the depth of the

judge's inquiry into jurisdiction. A remand order based on

jurisdiction is nonreviewable even if the trial court appears to

have reasoned superficially or reached the wrong result. Thermtron

Products, 423 U.S. at 343. The trial judge in this case made a

quick decision based solely on the pleadings, but those actions are

within his discretion. See Schwinn Bicycle Co. v. Brown, 535

F.Supp. 486, 487 (W.D. Ark. 1982) (remanding sua sponte because the

removal petition alleged residence rather than citizenship). See

also Nadler, 764 F.2d at 413 (trial court could allow cure by

amendment or remand as district courts "do not sit to receive new

evidence"); D.J. McDuffie, Inc. v. Old Reliable Fire Ins. Co., 608

F.2d 145, 146-47 (5th Cir. 1979), cert. denied, 449 U.S. 830 (1980)

(noting that defective allegations of jurisdiction in removal

petitions "can" and "may" be amended). When this court reviews the

entire record to decide if remand is proper, it reviews the judge's

11
reasoning in the guise of reviewing his thoroughness. Such review

makes an end run around Thermtron.

This argument also subverts the purpose of the statute, which

is to prevent "delay through protracted litigation of

jurisdictional issues." Soley, 923 F.2d at 408. If we must

evaluate the thoroughness of a trial judge's inquiry into

jurisdiction to decide if the trial judge's inquiry was in fact

"jurisdictional," section 1447(d) will not prevent much delay.

The second argument that the order is not jurisdictional is

that the judge did not state with sufficient clarity that he was

remanding on jurisdictional grounds. The order is comparable,

however, to other orders this court has found unreviewable. In

Merrimack the judge stated that:

This case was removed from state court to this Court due
to the existence of diversity of citizenship between the
original parties. Subsequent to removal, two additional
persons were included as defendants. It is apparent that
no diversity exists between the plaintiff and the new
defendant, Rex N. Smutts and K.W. McDowell. Accordingly,
this Court no longer has jurisdiction over this matter,
and the entire case should be, and is hereby, REMANDED
back to state court for appropriate disposition.

587 F.2d at 644. The defendant complained that the two new parties

were not indispensable but had been added by the court in its

discretion. The court agreed that remanding on the basis of

joinder of dispensable parties would be "clearly improper" but

added that it "simply [could not] tell from the face of the remand

order what grounds the district judge relied on" and upheld the

order.

12
 Judge Maloney's order in this case has a stronger claim to

nonreviewability than did the one in Merrimack. The Merrimack

judge did say the word "jurisdiction," but the court did not

consider the presence or absence of that word. It instead focused

on the absence of a proper reason for remanding. Judge Maloney's

order has a reason for remanding--the inadequate pleading of

jurisdictional facts--that is a proper and potentially dispositive

concern in evaluating jurisdiction.

This order also has as strong a claim to nonreviewability as

the claim in In re Weaver. That order read "in pertinent part: `If

the case was removable at all, it was removable prior to the

appearance of the Defendants in the Superior Court action.'" 610

F.2d at 336 n.4. The court concluded that it "seems apparent" that

the judge "believed the case was not removable," producing a

"logical inference that he felt jurisdiction was lacking." Id. at

337. Judge Maloney's order produces an inference at least that

strong.

This interpretation of a "procedural" remand does not collapse

its definition into that of a "jurisdictional" remand.

"Procedural" defects involve the parts of the removal process

separate from the invocation of jurisdiction. See, e.g., Maniar

v. FDIC, 979 F.2d 782, 784 (9th Cir. 1992) (untimely removal). See

generally Wright et al., supra, § 3739 at 575 & n.9 (listing

various "procedural irregularities").

III

13
 The majority's decision forgets the Supreme Court's statement

to this court in Gravitt v. Southwestern Bell Telephone, 430 U.S.

723 (1977) (per curiam). This court granted a writ of mandamus

vacating a remand order, reasoning that the district court

incorrectly applied the Texas doctrine of judicial estoppel in

determining the existence of diversity. In re Southwestern Bell

Tel., 535 F.2d 859 (5th Cir. 1976) (per curiam), aff'd, 542 F.2d

197 (5th Cir. 1976) (en banc) (per curiam). The Supreme Court

reversed, stating that "[t]he District Court's remand order was

plainly within the bounds of § 1447(c) and hence was unreviewable

by the Court of Appeals, by mandamus or otherwise." Gravitt, 430

U.S. at 723. Our sister circuit recognizes that Gravitt bars

review when a district judge bases a remand order on the inadequacy

of the jurisdictional pleadings. Bregman v. Alderman, 955 F.2d

660, 664 (11th Cir. 1992) (per curiam). On this issue the majority

stands alone.

In sum, the only issue addressed in the remand order is the

adequacy of the jurisdictional pleadings. Calling this issue

"procedural" undermines judicial discretion and circumvents

1447(c)'s ban on review of jurisdictional remands by requiring

appellate courts to test the depth of the inquiry into

jurisdiction.

14