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Despite a federal statute stating that “an order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise,” the 7th U.S. Circuit Court of Appeals ruled on June 30 that it has the authority to review some remand orders made pursuant to the Securities Litigation Uniform Standards Act of 1998 (SLUSA). Judge Frank H. Easterbrook’s opinion in Kircher v. Putnam Funds Trust, No. 04-1495, puts the 7th Circuit at odds with a 2003 decision by the 2d Circuit and 2002 and 2004 decisions by the 9th Circuit. Although the statute quoted above, 14 U.S.C. 1447(d), is worded very broadly, there is general agreement that it denies appellate jurisdiction only when a district judge remands a case because of irregularities in the removal process or because the federal court lacks subject- matter jurisdiction. The crux of the disagreement between the 7th Circuit and its two sister circuits is how to characterize a remand made pursuant to a specific provision of SLUSA, 15 U.S.C. 77p(b). According to Easterbrook, the broad purpose of SLUSA was to close off an avenue by which securities litigants had eluded the Private Securities Litigation Reform Act of 1995. Litigants responded to the heightened pleading requirements of the 1995 act by framing their claims in terms of state law and thus bypassing federal courts altogether. That maneuver couldn’t keep plaintiffs from a reckoning with federal law indefinitely, since the companies being sued could always raise the affirmative defense that the state-law claims are pre-empted by federal securities law. With SLUSA, Congress gave defendants the option of removing a state case to a federal court for an immediate determination of the pre-emption issue. Section 77p(b) commands district judges to dismiss (on the ground of pre-emption) any state-law suit alleging “an untrue statement or omission of a material fact” or the use of a “manipulative or deceptive device” in connection with the purchase or sale of a security. Carl Kircher and his co-plaintiffs neither bought nor sold Putnam shares during the period in which they alleged misconduct by the mutual fund. Their complaint was that the alleged misconduct reduced the value of shares they still held. For that reason, District Judge David R. Herndon of the Southern District of Illinois declined to dismiss the suit under � 77p(b) and instead remanded it to the Madison County, Ill., trial court from which it arose, stating that the he “lacks subject matter jurisdiction.” Under similar facts, the 2d and 9th circuits have agreed that federal courts lack subject-matter jurisdiction over suits that fall outside � 77p(b). Such a finding carries the consequence that the circuit courts lack appellate jurisdiction over the remand order under 14 U.S.C. 1447(d). Easterbrook countered that Herndon and the 2d and 9th circuits had mischaracterized � 77p(b) as an exercise in fixing the limits of subject-matter jurisdiction. Instead, he argued that SLUSA gave federal courts solid, but task-limited, jurisdiction to rule on the pre-emption defense. A remand at the end of a � 77p(b) analysis is not a confession of a lack of jurisdiction, but simply a recognition that the federal court has completed the task at hand, he said. Because such a remand does not implicate 14 U.S.C. 1447(d), the 7th Circuit felt free to review Herndon’s remand order, which it approved, albeit on different grounds. Young’s e-mail address is [email protected].

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