AIA Did Not Alter Reviewability Bar of District Court Remand Decisions Under §1447(d)

Preston v. Nagel, (Fed. Cir. June 1, 2017) (Before Dyk, Taranto, and Hughes, J.) (Opinion for the court, Hughes, J.)

Plaintiffs (collectively, Preston) filed a complaint against Defendants (collectively, Nagel) in a state court alleging state-law claims.  Nagel pursued counterclaims seeking declarations of non-infringement of Preston’s patent under the Declaratory Judgment Act. Nagel removed the case to federal district court under 28 U.S.C. § 1441, the general removal statute, and under 28 U.S.C. § 1454, the patent removal statue.  Preston moved to remand to state court.

The district court determined that it lacked subject matter jurisdiction because Preston’s state-law claims did not arise under federal law and Nagel’s patent counterclaims did not present a justiciable case or controversy under Article III because the patent dispute was not imminent. Therefore, the district court remanded the case and Nagel timely appealed.

Nagel sought review of the district court’s decision to remand this case.  However, under 28 U.S.C. § 1447(d), “[a]n order remanding the case to the State court from which it was removed is not reviewable on appeal or otherwise.”  The reviewability bar applies to cases removed under the general removal statute and under other provisions.  Kircher v. Putnam Funds Tr., 547 U.S. 633, 641 (2006).  The district court remanded the case because it found that it lacked subject-matter jurisdiction over Preston’s state-law claims and Nagel’s patent counterclaims did not present an Article III case or controversy because they failed to satisfy the immediacy requirement of MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 126-27 (2007).  Therefore, §1447(d) controls, and precludes the Court “from second-guessing the district court’s jurisdiction determination regarding subject matter.”  Vermont v. MPHJ Tech. Invs., LLC, 763 F.3d 1350, 1353 (Fed. Cir. 2014).

Nagel argued that the America Invents Act (AIA) overrides §1447(d)’s bar, to create an exception “where, as here, Defendants invoked §1454 to remove patent claims over which federal courts have exclusive jurisdiction.”  Appellants’ Br. at 17.

The Federal Circuit, in dismissing Nagel’s alleged legal precedential, stated that the AIA does not operate like the exception in the Supreme Court’s Westfall Act case, addressed in Osborn v. Haley, 549 U.S. 225 (2007).  In Osborn, the Attorney General certified that an employee acted within the scope of his or her employment, thereby, substituting the United States as the defendant.  The Attorney General’s certification avoided the “threshold determination” of jurisdiction that is undertaken in an ordinary case.

Congress included several provisions in the AIA to strengthen federal courts’ jurisdiction over patent claims in response to the Supreme Court’s decision in Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc. 535 U.S. 826, 827, 831-32 (2002).  Nagel argued that the “Holmes Group fix” created a vehicle for defendant’s patent counterclaims to be heard in federal court alongside a plaintiff’s state-law claims.  However, the Federal Court held, “nothing in the AIA operates like the Attorney General’s certification under the Westfall Act, which was “[o]f prime importance to [the Supreme Court’s] decision” because it “foreclose[d] any jurisdictional inquiry.”  Osborn, 549 U.S. at 241, 243.  Instead, the district court is still required to “undertake a threshold inquiry” or “whether complete diversity exists or whether the complaint raises a federal question.”  See id. at 243.  Since the district court is still tasked with the threshold jurisdictional inquiry, the narrow exception of Osborn does not permit appellate review of the district court’s remand decision.

Nagel further argued that the Federal Circuit must be able to review the district court’s remand to avoid a problem the Supreme Court identified as potentially “serious”: the death knell of a claim subject to exclusive federal jurisdiction without federal review. See Kircher, 547 U.S. at 645– 46.  However, Nagel’s concern “rings hollow here” because Nagel has an alternative way to present its patent claims on the merits in federal court: a separate federal declaratory judgment action.

Finally, the Court held that because §1447(d) prohibits its review of the district court’s remand order, the appeal was dismissed for lack of subject-matter jurisdiction.

The AIA and its strengthening of federal court jurisdiction over patent claims did nothing to override the rule that a district court decision to remand a case to state court is not appealable under §1447(d).

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