In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 03-3703

ILLINOIS MUNICIPAL RETIREMENT FUND,

Plaintiff-Appellee,

v.

CITIGROUP, INC., J.P. MORGAN SECURITIES, INC.,

BANC OF AMERICA SECURITIES, LLC, et al.,

Defendants-Appellants.

____________

Appeal from the United States District Court

for the Southern District of Illinois.

No. 03 C 465—G. Patrick Murphy, Chief Judge.

____________

ARGUED NOVEMBER 9, 2004—DECIDED DECEMBER 2, 2004

Before FLAUM, Chief Judge, and CUDAHY and POSNER,

Circuit Judges.

FLAUM, Chief Judge. Plaintiff-appellee filed suit in Illinois

state court. Following removal by defendants-appellants,

the district court remanded the action to state court.

Defendants-appellants appeal, arguing that the district

court exceeded its authority, and seeking vacatur of the remand order. For the reasons stated herein, we affirm.
2 No. 03-3703

1 The facts in this section are taken principally from the Second

Circuit’s recent decisions in the WorldCom multidistrict litigation.

See Ret. Sys. of Ala. v. J.P. Morgan Chase & Co., 386 F.3d 419 (2d

Cir. 2004); Cal. Pub. Employees’ Ret. Sys. v. WorldCom, Inc., 368

F.3d 86 (2d Cir. 2004).

I. Background1

Between 1998 and 2001, WorldCom, once the second largest telecommunications company in the world, issued debt

securities worth billions of dollars in connection with which

defendants-appellants served as underwriters. WorldCom

agreed to indemnify appellants for liability arising out of

untrue statements or omissions in prospectuses issued in

connection with the offerings.

On June 25, 2002, WorldCom announced that it had improperly treated $3.8 billion in ordinary costs as capital

expenditures and that it would have to restate its financial

statements. This led to the filing of numerous individual

and class actions in state and federal courts across the country. On October 8, 2002, the Judicial Panel on Multidistrict

Litigation (“JPML”) ordered that actions pending in federal

courts be centralized in the Southern District of New York

before Judge Cote, pursuant to 28 U.S.C. § 1407, the multidistrict litigation statute.

Many of the individual actions brought in state courts

following WorldCom’s announcement were filed by state

and private pension funds that had purchased WorldCom

bonds (“bondholders”). Rather than joining a class action

against WorldCom and the other defendants, the bondholders, represented by Milberg Weiss Bershad Hynes &

Lerach, brought individual actions in state courts across the

country. Between July 5, 2002 and October 3, 2003, Milberg

Weiss filed at least 47 of these individual actions on behalf

of over 120 plaintiffs.
No. 03-3703 3

2 Section 1334(b) provides, in relevant part: “[T]he district courts

shall have original but not exclusive jurisdiction of all civil

proceedings arising under title 11, or arising in or related to cases

under title 11.” Section 1452(a), titled “Removal of Claims Related

to Bankruptcy Cases,” provides, in relevant part: “A party may

remove any claim or cause of action in a civil action . . . to the

district court for the district where such civil action is pending, if

such district court has jurisdiction of such claim or cause of action

under section 1334 of this title.”

3 JPML Rule 1.1 defines a “tag-along action” as “a civil action

pending in a district court and involving common questions of fact

with actions previously transferred under Section 1407.”

The bondholders’ actions filed in state courts, unlike the

class actions filed in federal courts, do not assert claims

under the Securities Exchange Act of 1934 (“1934 Act”), 15

U.S.C. § 78a, et seq.; instead, they allege claims only under

the Securities Act of 1933 (“1933 Act”), 15 U.S.C. § 77a, et seq.

Unlike the 1934 Act which provides for exclusive federal

jurisdiction, see 15 U.S.C. § 78aa, the 1933 Act allows for

concurrent federal and state jurisdiction and has an antiremoval provision. See 15 U.S.C. § 77v(a) (“[N]o case arising

under this subchapter and brought in any State court of

competent jurisdiction shall be removed to any court of the

United States.”). Drafting the complaints in this way would

seem to ensure a state forum and prevent removal. If this

was the bondholders’ intention, however, their efforts have

been frustrated by WorldCom’s July 2002 bankruptcy filing.

After that date, state-court defendants began removing the

actions to federal court on the ground that they are related

to WorldCom’s bankruptcy. See 28 U.S.C. §§ 1334(b),

1452(a).2

 Many of these removed bondholder actions have

been identified as “tag-along actions”3

 and transferred to

Judge Cote.

On March 3, 2003, Judge Cote denied a motion to remand

filed by the New York City Employees’ Retirement System
4 No. 03-3703

4 Plaintiffs in numerous individual bondholder actions, represented

by Milberg Weiss, were permitted to intervene in NYCERS’s

motion so that their arguments concerning removal could be heard

on an expedited basis. Id. at 315.

5 On May 1, 2004, the west coast partners of Milberg Weiss

Bershad Hynes & Lerach LLP formed a new law partnership,

Lerach Coughlin Stoia Geller Rudman & Robbins LLP. Plaintiffappellee is represented by the new partnership.

(“NYCERS”), holding that subject matter and removal

jurisdiction were proper and that abstention was not

appropriate. See In re WorldCom, Inc. Sec. Litig., 293 B.R.

308 (S.D.N.Y. 2003).4

 This ruling applied to the actions

transferred to Judge Cote pursuant to the JPML’s October

8, 2002 order, as well as to the tag-along actions. On May

11, 2004, the Second Circuit affirmed Judge Cote’s denial of

the motion to remand, holding that the 1933 Act’s antiremoval provision does not bar removal of actions under

§ 1452(a). See Cal. Pub. Employees’ Ret. Sys. v. WorldCom,

Inc., 368 F.3d 86 (2d Cir. 2004).

On June 18, 2003, plaintiff-appellee Illinois Municipal

Retirement Fund (“IMRF”) filed suit in Illinois state court,

alleging claims arising out of IMRF’s purchase of WorldCom

debt securities and alleging false and misleading statements

in registration statements and prospectuses issued in connection with the bond offerings, of which the underwriter

appellants allegedly were aware or should have been aware.

Consistent with the litigation strategy of other individual

pension funds, and represented by the same attorneys,5

IMRF alleged claims only under the 1933 Act. On July 16,

2003, appellants removed the case to the United States

District Court for the Southern District of Illinois, premising removal on § 1452(a). On the same day, appellants filed

a notice with the clerk of the JPML, requesting that the

action be transferred as a tag-along action to Judge Cote.

On July 25, 2003, appellants filed a motion to stay the
No. 03-3703 5

action pending a determination by the JPML on the issue

of transfer. The JPML issued a conditional transfer order

on September 3, 2003, notice of which appellants filed with

the district court on September 5, 2003.

On the same day that appellants filed their motion to

stay, June 25, 2003, IMRF filed a motion to remand or abstain, raising three arguments: (1) the 1933 Act absolutely

prohibits removal, even by way of § 1452(a); (2) IMRF’s

action does not fall within federal bankruptcy jurisdiction;

and (3) even if there is subject matter and removal jurisdiction, the district court should abstain from exercising

jurisdiction and should remand pursuant to § 1334(c)(1),

which permits abstention in cases related to a bankruptcy

case “in the interest of justice, or in the interest of comity

with State courts or respect for State law,” or § 1452(b), which

permits remand of claims related to a bankruptcy case “on

any equitable ground.” These were the same arguments

IMRF’s attorneys already had made to Judge Cote without

success, and would later make to the Second Circuit with

the same result.

On September 9, 2003, although acknowledging Judge

Cote’s contrary decision and the JPML’s conditional transfer order, the district court remanded this action to Illinois

state court. (Sept. 9, 2003 Order at 3.) The court found that

the 1933 Act bars removal but that its language conflicts

with § 1452(a). (Id.) It resolved this conflict by concluding

that “the rules of statutory construction require [the 1933

Act] to control over the more general provisions of 28 U.S.C.

§§ 1334(b) and 1452” and that “the only way to give effect

to the legislative intent behind its enactment is to construe

it as a bar to removal even under these circumstances.” (Id.

at 3-4.) The district court further held that even if the 1933

Act did not bar removal, the claims were “not ‘related to’ the

WorldCom bankruptcy and cannot be removed under

Section 1452,” and also that “remand is appropriate pursuant to the doctrines of permissive abstention and equitable
6 No. 03-3703

6 In unpublished opinions, the Sixth and Eleventh Circuits

dismissed similar appeals on this ground. See Tenn. Consol. Ret.

Sys. v. Citigroup, Nos. 03-5785, 03-5786 (6th Cir. Nov. 4, 2003)

(unpublished); Ret. Sys. of Ala. v. J.P. Morgan Chase & Co., No.

02-15385 (11th Cir. June 18, 2003) (unpublished).

remand” under §§ 1334(c)(1) and 1452(b). (Id. at 4.) The

court denied appellants’ motion to stay proceedings pending

the final transfer decision of the JPML and granted the

IMRF’s motion to remand or abstain. (Id. at 5.) On October

9, 2003, appellants filed a notice of appeal.

II. Discussion

A. Appellate Jurisdiction

We first must determine whether we have jurisdiction to

hear this appeal. The general grant of our appellate jurisdiction is found in 28 U.S.C. § 1291, which provides that

courts of appeals “shall have jurisdiction of appeals from all

final decisions of the district courts of the United States.”

The breadth of our jurisdiction, however, is limited by

several statutes which specifically bar appellate review of

certain types of “final decisions.” Each of the following statutes limit our jurisdiction in this case, given the district

court’s alternative grounds for remand: 28 U.S.C. § 1447(d)

provides that “[a]n order remanding a case to the State

court from which it was removed is not reviewable on appeal or otherwise”; § 1334(d) bars appellate review of “[a]ny

decision to abstain” made in a bankruptcy case or proceeding; and § 1452(b) bars review of equitable remands of

claims related to a bankruptcy case.

The parties agree that these three statutes bar appellate

review of the district court’s reasons for remand in this

case.6

 Appellants argue, however, that “antecedent questions of power are properly presented to courts of appeals.”

In other words, appellants contend that the district court
No. 03-3703 7

lacked statutory authority to issue the remand order and

that we may vacate the order even though we may not

review its reasoning.

In Thermtron Products, Inc. v. Hermansdorfer, where the

Supreme Court first decided that § 1447(d) is not a complete bar to appellate review of remand orders, the Court

held that it had appellate jurisdiction to review a remand

order premised on the district court’s overcrowded docket.

423 U.S. 336 (1976), abrogated on different grounds by

Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (1996).

“Because the District Judge remanded a properly removed

case on grounds that he had no authority to consider, he

exceeded his statutorily defined power.” Id. at 351. We have

explained that “Thermtron permits us to decide whether a

district court has the power to do what it did, although we

cannot examine whether a particular exercise of power was

proper.” In re Cont’l Cas. Co., 29 F.3d 292, 294 (7th Cir.

1994).

In Continental Casualty, we issued a writ of mandamus

ordering a district court to “recall its remand and reinstate

the case on its docket” because it had remanded sua sponte

for a procedural removal defect. Id. at 295. We held that the

district court lacked statutory authority to remand a case

based on a procedural defect in removal absent a motion by

a party. Id. at 294-95. In so holding, we did not consider the

substance of the district court’s order, but merely explained

that the “lack of a motion deprives a district court of power

to return a case to state court.” Id. at 294 (emphasis in

original).

In Thermtron, the Supreme Court permitted appellate

review of a statutorily invalid reason for remand. In

Continental Casualty, we recognized that appellate review

also may be had where a district court has articulated statutorily valid reasons for remand yet has exceeded its authority in some other way. This principle has been applied
8 No. 03-3703

7 See 28 U.S.C. § 455(b)(5) (Any judge of the United States shall

disqualify himself where “[h]e or his spouse, or a person within

the third degree of relationship to either of them, or the spouse of

such a person . . . [i]s a party to the proceeding.”).

in various contexts. For example, in Tramonte v. Chrysler

Corp., 136 F.3d 1025 (5th Cir. 1998), the defendant asked

the judge to recuse herself because a member of the judge’s

family was a potential class member. The judge denied the

recusal motion and remanded the case for lack of subject

matter jurisdiction. The defendant appealed, arguing that

the judge lacked authority to enter the remand order because she was disqualified from handling the case under

the federal recusal statute.7

 The Fifth Circuit agreed,

explaining that, if the judge should have recused herself,

any subsequent order must be vacated:

Our vacatur of the remand order would therefore not

constitute a review of the merits of that order, prohibited by 28 U.S.C. § 1447(d). Rather, we would be performing an essentially ministerial task of vacating an

order that the district court had no authority to enter

for reasons unrelated to the order of remand itself.

Tramonte, 136 F.3d at 1028. Similar reasoning has been

relied upon in vacating remand orders entered by magistrate judges acting without the parties’ consent. See, e.g.,

Vogel v. U.S. Office Prods. Co., 258 F.3d 509, 517-19 (6th Cir.

2001) (holding that a remand order entered by a magistrate

judge was beyond his statutory authority and concluding

that review was proper because the court of appeals was not

reviewing the merits of the remand order itself); In re U.S.

Healthcare, 159 F.3d 142, 146-47 (3d Cir. 1998) (same). Thus,

although §§ 1447(d), 1334(d), and 1452(b) preclude appellate review of the reasoning contained in many remand

orders, they do not deprive appellate courts of jurisdiction

to vacate a remand order issued in excess of a district

court’s statutory authority.
No. 03-3703 9

In an earlier case we suggested that it would be within

our appellate jurisdiction to vacate a remand order issued

by a transferor court after the case has been transferred by

the JPML. See Gen. Elec. Co. v. Byrne, 611 F.2d 670, 673

(7th Cir. 1979) (“[T]he entry of the transfer order deprives

the transferor court of jurisdiction until the case is returned

to it, so that any action taken by the transferor court after

transfer would be ineffective.”). Today we make the principle underlying this observation explicit: When a district

court exceeds its statutory authority by the very issuance of

a remand order—as opposed to merely issuing a flawed

remand order—it is within our appellate jurisdiction to

review that court’s exercise of authority and vacate the

ineffective order, provided we can do so without reference

to the contents of the remand order. In this case, we can

review the contested exercise of authority without considering the reasoning in the district court’s remand order.

Accordingly, we do so here.

B. Authority to Remand

We review de novo whether 28 U.S.C. § 1407, the multidistrict litigation statute, prohibits a district court from

issuing a remand order in contravention of a potential

transferee court’s earlier jurisdictional ruling. See Resolution

Trust Corp. v. Gallagher, 10 F.3d 416, 418 (7th Cir. 1993)

(questions of statutory construction are subject to de novo

review).

Section 1407 provides, in part:

(a) When civil actions involving one or more common

questions of fact are pending in different districts, such

actions may be transferred to any district for coordinated or consolidated pretrial proceedings. Such transfers shall be made by the judicial panel on multidistrict

litigation authorized by this section upon its determination that transfers for such proceedings will be for the
10 No. 03-3703

convenience of parties and witnesses and will promote

the just and efficient conduct of such actions. . . .

(b) Such coordinated or consolidated pretrial proceedings shall be conducted by a judge or judges to whom

such actions are assigned by the judicial panel on multidistrict litigation. . . .

28 U.S.C. § 1407. Under the rules of procedure adopted by

the JPML, see 199 F.R.D. 425 (2001), upon learning of a

potential tag-along action, an order “may be entered by the

Clerk of the [JPML] transferring the action to the previously designated transferee district court.” JPML Rule 7.4(a).

“The Clerk of the [JPML] shall serve this order on each

party to the litigation but, in order to afford all parties the

opportunity to oppose transfer, shall not send the order to

the clerk of the transferee district court for fifteen days

from the entry thereof.” Id. If there is no opposition to the

transfer in response to the conditional transfer order, the

clerk of the JPML will transmit a final transfer order to the

transferee court. See JPML Rule 7.4(d). “Conditional transfer orders do not become effective unless and until they are

filed with the clerk of the transferee district court.” JPML

Rule 7.4(e). The pendency of a conditional transfer order

“does not affect or suspend orders and pretrial proceedings

in the district court in which the action is pending and does

not in any way limit the pretrial jurisdiction of that court.”

JPML Rule 1.5.

In this case, the district court remanded after the JPML

issued a conditional transfer order but before transmittal of

a final transfer order to the previously designated transferee, Judge Cote in the Southern District of New York.

Therefore, the transfer had not become effective and the

conditional order did not “in any way limit the pretrial jurisdiction” of the district court. JPML Rules 1.5, 7.4(e).

Under the JPML rules of procedure, the district court did

not exceed its authority in issuing the remand order. At oral
No. 03-3703 11

argument, appellants acknowledged that they cannot

prevail in this appeal without showing that JPML Rule 1.5

is invalid. They have attempted to do so by arguing that the

rule conflicts with the text, structure, and purpose of

§ 1407.

Appellants’ textual argument for invalidating Rule 1.5 is

based on the language in the statute providing that “consolidated pretrial proceedings shall be conducted” by the

transferee judge. 28 U.S.C. § 1407(b). Appellants contend

that the word “shall” signals an obligation of the transferee

court and deprives other courts of the authority to interfere

with the transferee court’s actions: “given the scope of the

transferee court’s authority over pretrial proceedings, it

follows inevitably that once a transferee court has been

designated, potential transferor courts—such as the district

court below—do not enjoy the latitude to issue decisions

contrary to the rulings of the transferee court.” We disagree.

Subsection (b) provides that the transferee judge shall

conduct “consolidated pretrial proceedings,” but subsection

(a) states that actions must be “transferred,” not merely

designated, for “consolidated pretrial proceedings” to be conducted. Thus, though the statute identifies a duty of the

transferee court after an action has been transferred, it does

not suggest, even implicitly, that the authority of either

court is affected before transfer by the mere designation of

a transferee court. Consistent with this, Rule 1.5 states that

the authority of the potential transferor court is not limited

“in any way” prior to actual transfer. There is no textual

conflict between § 1407 and Rule 1.5 that would support

striking the latter or finding that the district court exceeded

its authority in this case.

Appellants’ structural argument for invalidating Rule 1.5

flows from their observation that § 1407, implicitly, and the

rules, explicitly, contemplate tag-along actions that are

brought to the JPML’s attention for transfer after a multi-
12 No. 03-3703

district litigation has already been assigned to a transferee

court. From this, appellants conclude that “the command

that pretrial proceedings ‘shall’ be before the designated

transferee court affects not only cases transferred, but also

those waiting to be transferred.” Appellants contend that

the “contrary interpretation leads to absurd results because

it would allow potential transferor courts to issue rulings

discordant with those of the transferee court, which clearly

undermines the stated purposes of the multidistrict litigation statute.”

We find nothing absurd in district courts individually

evaluating their own jurisdiction. Furthermore, Congress

has indicated a preference for remands based on such individualized jurisdictional evaluations and a tolerance for

inconsistency. As we have explained, 28 U.S.C. § 1447(d)

bars appellate review of a remand order based on a district

court’s determination that it lacks subject matter jurisdiction. See Baker v. Kingsley, 387 F.3d 649, 653-54 (7th Cir.

2004). This creates a “one-bite- at-the-apple scheme,” under

which inconsistent jurisdictional decisions by district courts

cannot be brought in line through the appellate process.

Adkins v. Ill. Cent. R.R. Co., 326 F.3d 828, 832 (7th Cir.

2003). Even clear errors in a district court’s jurisdictional

analysis may not be corrected by the courts of appeals if the

district court thought that it lacked subject matter jurisdiction. See Baker, 387 F.3d at 655. Section 1447(d) makes

clear that errors in favor of remand which yield inconsistent

holdings on subject matter jurisdiction must be tolerated.

See id. If the courts of appeals have no power to bring consistency to these remand orders, there is no reason why a

sister district court, in a different circuit, should have this

power. After a transfer takes place under § 1407, the

transferee court has authority to issue consistent jurisdictional rulings in all of the transferred cases before it. Before

the transfer is effective, however, the potential transferee

court wields no such power over individual, unconsolidated

cases.
No. 03-3703 13

Finally, appellants’ statutory purpose argument for invalidating Rule 1.5 relies on § 1407’s goal of centralizing civil

litigation “involving one or more common questions of fact”

that are “pending in different districts.” 28 U.S.C. § 1407(a).

The JPML is empowered to effectuate this goal by transferring pending actions upon determining that such transfers

will be to the “convenience of parties and witnesses and will

promote the just and efficient conduct of such actions.” Id.

Appellants argue that the district court’s order issued

during the pendency of the transfer process undermines the

purposes of the statute, namely, promotion of efficient

litigation and avoidance of inconsistent contemporaneous

rulings in like cases.

Undoubtably, efficiency and consistency are goals of

§ 1407. It does not follow from this premise, however, that

any rule that limits efficiency or allows inconsistency

conflicts with the statute and may not stand. As appellants

acknowledge, among the statute’s stated goals are the “convenience of parties and witnesses” and the “just . . . conduct

of such actions.” § 1407(a). To this end, the JPML rules

provide for a conditional transfer period “in order to afford

all parties the opportunity to oppose transfer.” JPML Rule

7.4(a). Appellants do not, and cannot, suggest that the

existence of this pre-transfer interim conflicts with the

purposes of § 1407.

We need not decide if a district court ever exceeds its

authority in acting during this period. We are satisfied,

however, that it does not do so when it rules on its own

jurisdiction. This, after all, is a fundamental obligation of

all courts of limited jurisdiction. See Hay v. Ind. State Bd.

of Tax Comm’rs, 312 F.3d 876, 878 (7th Cir. 2002). Though

some district courts stay proceedings during the interim following a conditional transfer order, see, e.g., Bd. of Trs. of

the Teachers’ Ret. Sys. of the State of Ill. v. WorldCom, Inc.,

244 F. Supp. 2d 900 (N.D. Ill. 2002), this is not required

where the court concludes that it lacks subject matter
14 No. 03-3703

jurisdiction. We will not require a district court that

believes that it lacks subject matter jurisdiction over a case

to facilitate a transfer under § 1407, a statute that does not

itself confer jurisdiction. Rule 1.5, as applied in this case,

does not conflict with the text, structure, or purpose of

§ 1407, and the district court did not exceed its authority in

issuing a remand order.

III. Conclusion

The order of the district court is AFFIRMED.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—12-2-04