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Supreme Court justices continue to resolve important forum-selection issues this term. The last three Forum Selection columns discussed Supreme Court cases resolving procedural questions ranging from the appropriate standard for awarding fees under the removal statute, Martin v. Franklin Capital Corp., 126 S. Ct. 704 (2005), to whether a defendant has the burden of identifying nonjoined parties whose joinder would defeat complete diversity, Lincoln Property Co. v. Roche, 126 S. Ct. 606 (2005). Another column covered two more Supreme Court cases that raise important issues that bear on the forum-selection problem. The court ruled in Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 126 S. Ct. 1503 (2006), that the Securities Litigation Uniform Standards Act (SLUSA) pre-empts state law class action claims brought by holders of securities who allege fraudulent manipulation of stock prices. Dabit means that any plaintiff seeking to keep a class action in state court that alleges anything like fraud involving anything like a covered security under SLUSA will have a very tough row to hoe. That column also explained the significance of the court’s opinion in Arbaugh v. Y & H Corp., 126 S. Ct. 1235 (2006). The court noted that courts often erroneously conflate subject-matter jurisdiction with merits-related determinations. This is important to the forum-selection battle especially because if the federal court determines that there is no subject-matter jurisdiction, then the whole case must be dismissed. On the other hand, if the issue is merits-related, the federal claim must be dismissed, but any remaining state law claims remain within the court’s jurisdiction under the supplemental jurisdiction statute. Cases explore contours of federal jurisdiction Similarly, the two cases discussed in this column explore the contours of federal jurisdiction. One case, Kircher v. Putnam Funds Trust, 126 S. Ct. 2145 (2006), returns us to SLUSA and the Private Securities Litigation Reform Act; the other, Marshall v. Marshall, 126 S. Ct. 1735 (2006), involves a notorious battle between the ex-wife (and former Playboy bunny) of a deceased elderly billionaire and the billionaire’s son. Kircher is important because it resolves a split in the circuits on a question pertaining to the appellate review of remand decisions. It is also significant because it undercuts Arbaugh, discussed in the last Forum Selection column, to some extent. In Kircher, the defendants removed the plaintiff mutual fund investors’ class action alleging state law claims to federal court. The district court remanded, holding that SLUSA does not pre-empt state law claims involving the holders of securities. This rationale for remand was addressed later in the Supreme Court’s decision in Dabit, briefly discussed above. The 7th U.S. Circuit Court of Appeals reversed, notwithstanding 28 U.S.C. 1447(d), which purports to bar appellate review of remand decisions, because it held that the district court’s finding of no pre-emptive effect was substantive, and not jurisdictional. Such a ruling would appear to be consonant with the Supreme Court’s approach in Arbaugh. The Supreme Court in Kircher, however, reversed again, finding that � 1447(d) bars appellate review of SLUSA remand decisions. The court began by noting the policy underlying � 1447(d) of avoiding the interruption of litigation on the merits, and pointedly noted that Congress’ wisdom on this score was supported by the three years of jurisdictional wrangling in the cases before it. Indeed, the court has repeatedly ruled that any remand order issued specifically on the grounds specified in � 1447(d), either a defect in the removal procedure or a jurisdictional defect, is immune from appellate review. Additionally, the court makes clear that the � 1447(d) bar applies equally to cases removed under the general removal statute, 28 U.S.C. 1441, and to specialized provisions. Thus, the court resolved the split over whether � 1447(d) applies to cases remanded where the defendant sought to remove under SLUSA in favor of barring review of such remands. Although the district court was incorrect, after Dabit, that holders’ claims are not preempted, its remand order was predicated on a lack of jurisdiction and therefore was unreviewable. Unless Congress has expressly made � 1447(d) inapplicable, it applies, even when the district court is plainly wrong on the jurisdictional issue. The Supreme Court understood the 7th Circuit’s point that some rulings are too loosely labeled as jurisdictional, thereby opening the door to review. However, looking at the statutory structure, the Supreme Court concluded that the district court was correct to find a lack of subject-matter jurisdiction upon finding that the claims were not covered by SLUSA. District court jurisdiction depends on whether the claims are covered by SLUSA. Whether the court was correct or not in deciding that the claims were not covered was irrelevant. Section 1447(d) simply bars review of any remand order based on a lack of subject-matter jurisdiction. The court then turned to another ground for the 7th Circuit’s opinion-its assumption that SLUSA provides exclusive federal jurisdiction over the SLUSA preclusion provision that provides that a state court action is precluded if SLUSA pre-empts the state law claims. If the 7th Circuit were correct, a remand order based on a finding that an action is not precluded would arguably be immune from review. The Supreme Court, however, disagreed with the 7th Circuit’s exclusive-jurisdiction argument. It found that there was nothing in SLUSA giving federal courts exclusive jurisdiction and that state courts were competent to decide the scope of preclusion, and if it is wrong, the U.S. Supreme Court can have the last word. The court, of course, is correct that it could reverse an erroneous state court ruling, and Chief Justice John G. Roberts Jr. has indicated that he hopes to enlarge the court’s docket. But surely this is a small crumb being tossed to defendants seeking to avoid litigation in state courts? The three-year battle being waged in these cases will go on and on. There will be finality in the lower federal courts, but the jurisdictional battle will go on, with the battleground shifting to complex rules of preclusion. Justice Antonin Scalia’s concurring opinion picks up on the Arbaugh point discussed in this and the last column. Although none of the justices in Kircher points to Arbaugh, they are in essence still battling over whether a ruling is substantive or jurisdictional; and the extent to which an appellate court can look behind the text of a district court ruling to determine whether a purportedly jurisdiction opinion is in fact a substantive one. Scalia is rightly concerned that the majority opinion sends mixed messages on that score. Stay tuned on this issue! Marshall v. Marshall, the case involving Anna Nicole Smith’s claims against the estate of her former husband, involves sexy facts and the relatively obscure probate exception to federal jurisdiction. The Supreme Court had crafted two narrow exceptions to diversity jurisdiction-the probate exception and the domestic-relations exception. With respect to the domestic-relations exception, the court had held that the scope of diversity jurisdiction was not intended to extend to suits for alimony and divorce because of the historical understanding of the uniqueness of such actions. Similarly, with respect to the probate exception, the court had held that probate proceedings were outside the scope of federal jurisdiction. High court takes steps to narrow reach of exceptions Recently, the Supreme Court has taken steps to narrow the reach of these exceptions. In Ankenbrandt v. Richards, 112 S. Ct. 2206 (1992), the court held that the domestic-relations exception did not apply to claims by a plaintiff against her former husband for sexual and physical abuse of their children. And in Marshall, the court further narrows the probate exception. The decedent had established an inter vivos trust of which his son was the ultimate beneficiary. His widow claimed that although she was not provided for in the decedent’s estate plan, her late husband had intended to provide for her financial security through a catch-all trust. While probate proceedings were pending, the widow filed for bankruptcy. The son filed a proof of claim, alleging that he had been defamed by the widow’s lawyers, in the widow’s bankruptcy. In her answer to the claim, the widow counterclaimed, alleging that the son had tortiously interfered with the gift her late husband had promised her. This claim turned the son’s claim into an adversary proceeding in which the bankruptcy court ruled in favor of the widow, for approximately half a million dollars. The district court held that it had jurisdiction, but lowered the award. The 9th Circuit reversed, holding that the probate exception applied. The Supreme Court reversed again, holding that the probate exception did not apply to the widow’s tortious interference claim. The son had argued that earlier Supreme Court probate exception cases precluded federal jurisdiction over claims that interfered with probate jurisdiction. The court in Marshall found that the only sort of interference that could preclude federal jurisdiction is when the federal claim interfered with a res under control of the probate court. Here there was no attack or claim to specific property. Rather, the widow simply made a claim for an in personam judgment against the decedent’s son. It is difficult to characterize the Supreme Court’s 2005-06 term philosophy about federal jurisdiction. Although most of the cases open the door to federal jurisdiction, there are important limitations to the exercise of federal jurisdiction. Thus, it is difficult to predicate how the court will rule. The good news for appellants is that the court appears to have an open mind on forum-selection issues. Georgene M. Vairo is a professor of law and William M. Rains fellow at Loyola Law School, Los Angeles. She can be reached at [email protected].

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