Kircher v. Putnam Funds Trust

PETITIONER: Carl Kircher et al.
RESPONDENT: Putnam Funds Trust et al.
LOCATION: Board of Immigration Appeals

DOCKET NO.: 05-409
DECIDED BY: Roberts Court (2006-2009)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 547 US 633 (2006)
GRANTED: Jan 06, 2006
ARGUED: Apr 24, 2006
DECIDED: Jun 15, 2006

David C. Frederick - argued the cause for Petitioners
Mark A. Perry - argued the cause for Respondents

Facts of the case

The Security Litigation Uniform Standards Act (SLUSA) states that class action lawsuits involving more than 50 plaintiffs alleging untruth or manipulation "in connection with the purchase or sale" of certain securities may be moved from state court to federal district court. In this case, several class action suits, each involving more than 50 investors in covered securities, were brought in various state courts over the devaluation of the plaintiffs' investments by Putnam Funds Trust and other mutual funds. The mutual funds asked to have the cases heard in federal court, and the state courts agreed. The federal district court sent the cases back to the state courts, however, finding that SLUSA does not cover suits over devaluation, only those related to purchases or sales. When the mutual funds appealed the decision to the Seventh Circuit Court of Appeals, the plaintiffs objected to the appeal because 28 U.S.C. 1447(d) prohibits appeals court review of federal district court decisions to remand cases to state court for lack of jurisdiction. The appeals court, however, found that the district court's decision had been substantive, not jurisdictional, and was therefore not covered by 1447(d). The appeals court then ruled that the plaintiff's claims could not be brought under SLUSA.


Can a federal district court's decision to send a case back to state court because its removal to federal court was not required by the Security Litigation Uniform Standards Act be reviewed by a circuit court of appeals under 28 U.S.C. 1447(d)?

Media for Kircher v. Putnam Funds Trust

Audio Transcription for Oral Argument - April 24, 2006 in Kircher v. Putnam Funds Trust

Audio Transcription for Opinion Announcement - June 15, 2006 in Kircher v. Putnam Funds Trust

John G. Roberts, Jr.:

Justice Souter has the opinion of the Court in 05-409, Kircher versus Putnam Funds Trust.

David H. Souter:

This is another gripping decision.

This case comes to us on writ of certiorari to the United States Court of Appeals for the 7th Circuit.

The Securities Litigation Uniform Standards Act precludes certain private state law securities class actions, so-called "covered" class actions, from being brought in either state or federal court.

Besides the preclusion provision, the Act has a removal provision, which allows a defendant to remove to federal court any covered class action brought in any state court involving a covered security, as set forth in the Act's preclusion provision.

The petitioners are mutual-fund investors who filed actions in state court raising state-law claims.

Each sought to represent a class of investors allegedly injured by devaluation of their holdings by respondents' mutual funds.

The funds filed notices of removal for federal district court, but the district court decided that it lacked subject-matter jurisdiction on removal, because the investors' claims were not precluded by the Act, and for that reason it remanded each case to state court.

The funds then filed notices of appeal, and the 7th Circuit issued an opinion addressing whether it had appellate jurisdiction in light of a statutory provision, 28 U.S. Code 1447(d), that bars appellate review of a remand order if the order's basis is a lack of subject- matter jurisdiction.

The 7th Circuit decided it did have appellate jurisdiction to review the remand order notwithstanding §1447(d), because the district court's remand was not, in fact, based on a lack of subject-matter jurisdiction.

In the view of the Court of Appeals, all covered class actions involving covered securities are removal under the act, and the district court's preclusion determination in substantive and separate from the jurisdictional determination whether the case was properly removed at all.

In an opinion filed today with the Clerk of Court, we vacate the judgment of the Court of Appeals for want of jurisdiction on its part.

Section 1447(d) bars review of remand orders based on a lack of subject-matter jurisdiction, no matter how plainly the remanding court was mistaken in its jurisdictional ruling.

In this case, the remand orders were based on the District Court's conclusion that it lacked jurisdiction under the Act's removal provision, and we think the District Court was correct in understanding that the reason for its remand order was a provision governing removal jurisdiction.

Unlike the Court of Appeals, we think that to remove a case under the Act, the case must not only be a covered class action involving a covered security, it must also be a case precluded by the Act.

The removal provision describes removable cases as covered class actions, and I quote, "as set forth in Subsection (d)", end of quote, the preclusion provision; and that language has no apparent function unless it limits removal to actions involving claims that are actually precluded.

Because removal jurisdiction under the act is restricted to precluded actions, a motion to remand claiming the action is not precluded poses a jurisdictional issue.

A district court's decision of that issue is simply the exercise of its authority to determine its own jurisdiction to deal further with the case, and when a district court remands because it has decided a claim is not precluded by the Act, 1447(d) forbids appellate review of the order implementing that decision.

We add that the Act does not give federal courts exclusive jurisdiction over preclusion decisions.

A state court may decide a preclusion issue in the first instance if a case is not removed, and it may decide the preclusion issue now, when these cases return to state court.

Collateral estoppel should not bar revisitation of the preclusion issue, precisely because of the Fund's inability to appeal the district court's decision here.

The state court is free to reject the remanding court's reasoning, and we have no doubt that the state court will duly apply our recent holding in the case of Merrill Lynch, Pierce, Fenner & Smith against Dabit, where we disallowed the interpretation, giving the Act's preclusion provision, by the district court in this case.

Justice Scalia has filed an opinion concurring in part and concurring in the judgment.