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Washington-The Supreme Court last week narrowed the ability of corporate defendants to keep securities and other types of cases against them in their often-preferred forum, the federal courts. In Kircher v. Putnam Funds Trust, No. 05-409, a unanimous high court held that a federal district court order remanding a case removed from state court under the Securities Litigation Uniform Standards Act of 1998 (SLUSA) is not appealable. The Kircher ruling is of “great significance” in securities cases and, at the same time, reinforces the general rule prohibiting appellate review of remand orders in nonsecurities cases removed to federal court from state court, said David C. Frederick, partner in Washington’s Kellogg, Huber, Hansen, Todd, Evans & Figel and the winning counsel to Carl Kircher and other members of a class of mutual fund investors. “Securities defendants will no longer be able to tie up a case on appeal for years litigating the propriety of a remand when the district court finds that the plaintiff’s case does not implicate SLUSA,” Frederick said. He added that more generally, “The court’s holding greatly assists plaintiffs who file their claims in state court because it enables cases to be remanded and to proceed to the merits without lengthy, collateral appellate litigation on whether the district court properly remanded the case.” The mutual fund investors in Kircher filed separate state court actions asserting state law claims on behalf of a class of investors allegedly injured by devaluation of their holdings in Putnam Funds and other mutual funds. The funds removed each case to federal court, claiming, among other things, that the actions were removable under, and precluded by, SLUSA. The federal district court remanded each case back to state court on the ground that it lacked subject-matter jurisdiction on removal because SLUSA did not preclude the claims. The 7th U.S. Circuit Court of Appeals disagreed, consolidated the funds’ appeals and decided the merits, holding that SLUSA precluded the investors’ claims. In vacating the 7th Circuit decision, the high court, in an opinion by Justice David H. Souter, said: “The policy of Congress opposes ‘interruption of the litigation of the merits of a removed cause by prolonged litigation of questions of jurisdiction of the district court to which the cause is removed,’ and nearly three years of jurisdictional advocacy in the cases before us confirm the congressional wisdom.” Souter said that 28 U.S.C. 1447(d) provides that an order remanding a case to the state court from which it is removed is not reviewable on appeal or otherwise. The force of the bar, wrote Souter, is “not subject to any statutory exception that might cover this case.” ‘Not a favorable’ ruling Rebecca Jackson, partner in Bryan Cave’s St. Louis office and lower court counsel to Putnam Funds, agreed the ruling could have an impact beyond securities cases. “My focus is in trying to get my clients into federal court,” she said. “This is not a favorable development because it’s a tightening of the principles involved in removal and remand,” Jackson said. The Kircher decision will have an effect on the so-called removal wars, said Brian Wolfman of Public Citizen Litigation Group, who filed an amicus on behalf of a group of civil procedure scholars. “We see it all the time, particularly in the tort area where removal is usually the first round of battle,” he explained. “If you think of these cases and significant tort litigation, those cases take longer to process in the courts of appeals [than the average time of 11.4 months]. What you have here is the ability of the plaintiffs to rid themselves of a year or two of delay. “Delay is generally the defendant’s best friend and the plaintiff’s worst enemy,” Wolfman added. Back in state court, the Kircher plaintiffs will have to show that their claims are not the kind of “holder” claims that the Supreme Court also held this term are precluded by SLUSA in Merrill Lynch v. Dabit, No. 04-1371.

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