Mt. Hawley Ins. – Remand or Remain?

The Ninth Circuit issued its opinion in Atlantic National Trust v. Mt. Hawley Ins. The court held that it lacked appellate jurisdiction to review a federal district court order remanding a case to state court based on a ground colorably characterized as a “defect” for purposes of 28 U.S.C. § 1447(c).

In October 2008 a fire caused $10million in damage to buildings owned by Lebanon Hardboard LLC. Atlantic National Trust and Tritalent Funding Group loaned Lebanon money and retained a security interest in the buildings. The secured parties required that Lebanon maintain fire insurance on the property and assign all insurance proceeds to the respective secured parties. At the time of the fire Lebanon had submitted an application for fire insurance to agents of Mt. Hawley Insurance, which had issued an insurance binder but not the actual policy before the fire. The binder failed to assign or mention Atlantic and Tritalent as payees.

In the suit that followed Atlantic filed a complaint against Mt. Hawley, its agents, Lebanon and Tritalent in Oregon state court. Atlantic gave Mt. Hawley and Lebanon courtesy copies of the complaint but didn’t serve them. Mt. Hawley filed a motion to remove to federal court, which Lebanon and Tritalent along with Atlantic later moved to remand back to state court.

In deciding whether the court could exercise appellate review the court used a two part test. The first part asks whether the remand order is based on grounds enumerated in § 1447(c). Next the court, under Supreme Court precedent in Powerex v. Reliant Energy Servs., Inc., 551 U.S. 224
(2007), determines whether the grounds that form the basis of the remand order are “colorable.” Only if a trial judge “exceeded his statutorily defined power” by remanding “a properly removed case on grounds that he had no authority to consider” can an appellate court exercise jurisdiction over the appeal (Slip Opinion pg. 7, citing Thermtron Prods. Inc. v. Hermansdorfer, 423 U.S. 336, 351 (1976)). The court found the district court based its order on a violation of the unanimity rule and this ground was both enumerated under § 1447(c) and colorable (i.e. wasn’t based on as docket congestion or abstention) (pg. 13,14).

The court’s opinion doesn’t create any new law. In fact it goes out of its way in the final pargarphs to make clear that some of Mt. Hawley’s arguments present unsettled law that the court doesn’t need to reach to decide whether it had jurisdiction (pg. 16). The opinion does serve as a great model for the framework to analyze a remand order under § 1447(c).