University of Chicago Law Review Publishes Student Comment on Circuit Split re Reviewability of Post-SLUSA Removal Remand Orders

The University of Chicago Law Review has just published a student comment by Stephen J. Cowen entitled Appellate Review of SLUSA Remands After CAFA, 73 U Chicago L. Rev. 321 (2006), which discusses the circuit split regarding the reviewability of SLUSA-removed remand orders in reference to CAFA. Here’s an excerpt from the Introduction:

This Term, the Supreme Court will resolve a circuit split that has emerged over the reviewability of a SLUSA remand order. The stakes for litigants are high. Allowing review gives defendants further protection from discovery and another chance that a court will dismiss the claims as preempted. Denying review means the case will proceed in state court and that discovery will commence.

Of the circuits to consider the question, two have read the statute restricting appeal of most remands to prevent appellate review of SLUSA-removed remand orders. However, relying on Supreme Court case law decided after those circuit decisions, the Seventh Circuit has held that, for a remand order that is issued after the district court determined that removal was appropriate, the district court has subject matter jurisdiction over whether the claim is preempted by SLUSA. The Seventh Circuit reasoned that, because the district courts have jurisdiction over the preemption decision, the determination itself and a subsequent remand order are "unaffected by § 1447(d)" and so are reviewable by an appellate court.

This Comment attempts to resolve the circuit split over whether district court determinations of SLUSA preemption are reviewable at the appellate level. The Comment considers the impact of an analogous body of law-- the Class Action Fairness Act of 2005 (CAFA)--on the split. The Comment argues that CAFA reflects clear congressional intent favoring review for statutory schemes that, like SLUSA, grant federal courts jurisdiction in class action cases. Moreover, CAFA's treatment of remands suggests that these kinds of remands are what the Supreme Court has termed "claim-processing" rules rather than "jurisdictional" rules, and so review is not barred. The Comment further argues that allowing review of SLUSA remands is consistent with Supreme Court precedent, the statutes governing federal jurisdiction, and the purpose of SLUSA itself.

Part I briefly reviews the history of SLUSA, as well as the relevant rules governing removal, remands, appeals, and federal question jurisdiction. Part II explores the circuit split that has emerged over the appealability of SLUSA remands, evaluates the arguments on each side of the split, and concludes that the Supreme Court's decisions in Kontrick v Ryan and Scarborough v Principi are not dispositive on the issue. Part III argues that CAFA provides additional support in favor of review. The Comment concludes that allowing federal appellate review will better serve SLUSA's goal of creating uniform standards in securities class actions and that review will not create a burdensome increase in federal courts' caseloads nor cause undue delays in state court litigation.