Kircher v. Putnam Funds Trust

2006-06-15

Headline: Ruling prevents defendants in certain securities class actions from appealing federal remand orders, blocking immediate appeals and sending claims back to state court so state judges decide if the removal law applies.

Holding: The Court held that when a district court remands a securities class action removed under the 1998 removal law, that remand cannot be appealed and appellate courts must dismiss such appeals for lack of jurisdiction.

Real World Impact:

Stops immediate appeals of remand orders in many securities class-action removals.
Returns cases to state courts for decisions on whether federal removal law applies.
Defendants may still seek dismissal in state court; Supreme Court review remains possible later.

Topics: securities class actions, removal to federal court, appeals of remand orders, state court decision-making

Summary

Background

Groups of mutual fund investors sued several funds in Illinois state courts, accusing them of harming long-term holders by allowing “market timing.” The funds removed those state-law class actions to federal court under a 1998 federal law that bars some state-law securities class suits and allows removal when claims fall under that law. Federal district courts remanded the cases to state court, finding no federal removal power because the investors were “holders,” not purchasers or sellers.

Reasoning

The key question was whether a district court’s remand in these cases could be appealed. The Court explained that federal law (28 U.S.C. §1447(d)) bars appellate review of remand orders based on the grounds listed in the statute—including lack of removal jurisdiction. Because the district courts remanded for lack of removal jurisdiction under the 1998 law, the Supreme Court held those remands are not reviewable and appellate courts must dismiss such appeals for lack of jurisdiction.

Real world impact

The decision means defendants who remove state securities class actions under the 1998 law generally cannot immediately appeal a district court’s remand; they must return to state court where the same preclusion issues can be raised and decided. The Court emphasized that state courts may revisit the preclusion question and that any final state-court ruling can be reviewed later by higher courts, including this Court.

Dissents or concurrances

Justice Scalia agreed with the judgment but not all of the reasoning: he joined the result that the appeals must be dismissed, and he stressed that appellate courts may not recharacterize a district court’s stated basis for remand.