## 1997 D e c i sion s O p inion s of the U nit e d
S t a t e s C our t of Appe al s for the Thir d C ir c uit

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D ock e t 96-3181

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. e du/thir dc ir c uit_1997/121Filed June 6, 1997

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

NO. 96-3181

WILLIAM DAVID BROMWELL, Personal Representative of the Estate of ELIZABETH NAOMI BROMWELL, Deceased; JOHN DARROW, SR., Personal Representative of the Estate of JOHN DARROW, JR., Deceased; and ORMAND KEITH ADAMS and MITCHELL J. CORNWELL, Personal Representatives of the Estate of BRIAN KENT ADAMS, Deceased; and PETE L. WURM,

Appellants

v.

MICHIGAN MUTUAL INSURANCE COMPANY and
MICHIGAN AUTOMOBILE INSURANCE PLACEMENT COMPANY,

Appeal from a Memorandum Order of the
United States District Court for the Western District of Pennsylvania
Civil Action No. 94-1696

Argued January 10, 1997

Before: COWEN, ALITO, and ROSENN, Circuit Judges

Filed June 6, 1997William A. Loftus, Esq. (Argued)

Shrager, McDaid, Loftus, Flum & Spivey
2001 Market Street 32nd Floor, Two Commerce Square Philadelphia, PA 19103

Daniel M. Berger, Esq. Berger Law Firm Frick Building
Suite 912 Pittsburgh, PA 15219 Counsel for Appellants

L. John Argento, Esq. Michael F. Nerone, Esq. Stephen R. Mlinac, Esq. (Argued) Dickie, McCamey & Chilcote
Two PPG Place
Suite 400 Pittsburgh, PA 15222-5402 Counsel for Appellees

OPINION OF THE COURT

ROSENN, Circuit Judge

.

This appeal, having wended a tortured procedural pa th to arrive finally at this court, raises an interesting issue concerning the extent of a federal court's jurisdic tion: whether a federal district court, having previously dismissed an action for lack of subject-matter juri sdiction, could properly exert jurisdiction over an identical state court action removed to that federal court by the defendants on diversity grounds. Having considered the jurisdictional limitations imposed on a federal cou rt by statutory law and the doctrine of res judicata, we hold that the district court is precluded from exercising fur ther jurisdiction over that claim and must remand the ca se to
the state court from which it was removed.

2I.

The current litigation arose out of a tragic accide nt that occurred at the Breezewood Interchange of the Pennsylvania Turnpike on June 17, 1990. A tractor-t railer owned by Ralph Meyers Trucking, Inc. ("Meyers Truck ing") and operated by David A. Stacey "rear-ended" a moto rcycle operated by Brian Kent Adams, on which Elizabeth Na omi Bromwell was a passenger, and then "rear-ended" a s econd motorcycle operated by John Darrow, Jr. Stacey's tr uck pushed the two motorcycles into the rear of another tractor-trailer, driven by Pete L. Wurm. The three motorcyclists, Adams, Bromwell, and Darrow, were ki lled in the collision and Wurm suffered serious physical an d psychological injuries.

Representatives of the estates of the three decease d motorcyclists individually brought actions against Meyers Trucking and Stacey for wrongful death and negligen ce; Wurm brought an action against Meyers Trucking and Stacey for negligence. These actions were filed in the United
States District Court for the Western District of Pennsylvania and were consolidated into a single ca se, with jurisdiction premised on diversity grounds pursuant to 28 U.S.C. § 1332. Both Meyers Trucking and Stacey are citizens of Michigan, Wurm is a citizen of Missouri , and the three decedents were citizens of Maryland.

On January 27, 1992, the district court granted a m otion for partial summary judgment filed by the estate representatives and Wurm (hereinafter collectively referred to as "Appellants") on the issue of liability. The Appellants subsequently entered into a settlement agreement an d release with Meyers Trucking's insurers, Michigan M utual Insurance Company and Michigan Automobile Insurance Placement Facility (hereinafter referred to collect ively as "Appellees"). The terms of the settlement agreement are, in pertinent part:

For and in consideration of the sum of Seven Hundred and Fifty Thousand Dollars ($750,000.00) plus whatever other liability insurance coverage th at may be declared available by judgment of any Court as the result of any Declaratory Judgment action now

3pending or to be filed . . . hereby fully and forev er

release, acquit and discharge Ralph Meyers Trucking

, Inc. and David Stacey to the full extent of their personal and/or corporate liability (while at the s ame time preserving our rights to pursue to the full ex tent possible the limits of insurance coverage available to either David Stacey and/or Ralph Meyers Tucking, In c. pursuant to policies of insurance issued by Michiga n Mutual and Michigan Automobile Insurance Placement Facility, the extent of said coverage having been p laced
at issue in the U.S. District Court for the Western District of Pennsylvania at Civil Actions Nos. 92-0 183 and 92-1172 and/or which may be placed in issue in another court of competent jurisdiction) from any a nd all actions . . . by John Darrow, Jr., Elizabeth Na omi Bromwell, Pete L. Wurm, and Brian Kent Adams or our property sustained or received on or about the 17th day of June, 1990 when a vehicular accident occurre d in the vicinity of the Breezewood Interchange of th e Pennsylvania Turnpike for which injuries, losses an d damages we claim Ralph Meyers Trucking, Inc. and David Stacey to be legally liable and on account of which suit was brought in the United States Distric t Court for the Western District of Pennsylvania at C ivil Actions Nos. 90-1120, 90-1608, and 91-1154, it bein g understood and agreed that the acceptance of said s um is in full accord and satisfaction of a disputed cl aim and that the payment of said sum is not an admissio n of liability by Ralph Meyers Trucking, Inc. and Dav id Stacey.

The agreement further addressed the pending declara tory judgment action brought by the Appellants against t he Appellees, stating:

It is further agreed and understood that this rele ase and settlement agreement is not intended to compromise, reduce or in any way affect the continu ed prosecution or outcome of the Declaratory Judgment Actions filed by us and Michigan Mutual Insurance Company/Michigan Automobile Insurance Placement Facility at Nos. 92-0183 and 92-1172 in the United
States District Court for the Western District of

4Pennsylvania or of any other Declaratory Judgment

action that may be filed or of any appeals that may be taken therefrom. It is further agreed and understoo d by the parties hereto that the within Settlement Agreement and Release will not be raised as a defen se in any Declaratory Judgment action. It is also acknowledged that all parties hereto retain their r ight to appeal any judgment reached in any Declaratory
Action.

The district court entered an order on August 13, 1 993, approving this settlement agreement and dismissing the action "without prejudice to any claims which may a rise under the settlement agreement." No order was issue d with regard to the district court's previous grant of su mmary judgment in favor of the Appellants on the issue of liability.

At the time the district court dismissed this matte r, two additional actions were pending in federal court. T he Appellants had filed a complaint in the United Stat es District Court against Meyers Trucking and Stacey, seeking a declaratory judgment pursuant to the Federal Decl aratory Judgment Act, 28 U.S.C. § 2201. In this action, the Appellants sought a declaration that the incident w hich occurred on June 17, 1990, constituted three separa te accidents, and therefore the available liability in surance coverage would be $2,250,000 and not the $750,000 available for a single accident. The district court dismissed this action against Meyers Trucking and Stacey for lack of subject-matter jurisdiction. The action concerned o nly the scope of the available insurance coverage and thus realigned Meyers Trucking and Stacey with the Appel lants against the Appellees. Since Meyers Trucking, Stace y, and the Appellees are all Michigan residents, the reali gnment destroyed diversity of citizenship. No other basis for federal court jurisdiction existed in that action.

The Appellees brought the second action against the Appellants, Meyers Trucking, and Stacey. This compl aint purported to raise a federal question but the grava men of the declaratory judgment action was the interpretat ion of the term "accident" in the insurance policy. The di strict court dismissed this action for lack of subject-mat ter jurisdiction, concluding that the Appellees were pr ecluded

5from bringing this action because there was no unde rlying

judgment of liability, a prerequisite to the only p ossible
claim under federal law.

Following the dismissal of their action, the Appell ants filed a Motion to Reconsider, which the district co urt denied. The court concluded that the error in plead ings
that led to the initial dismissal had not been corr ected. Additionally, the court stated that "[i]f this Cour t has subject matter jurisdiction over the parties' dispu te, one or more of the parties must

have an action for coercive relief-- damages in this case--against the others." Darrow v . Ralph Meyers Trucking, Inc. , C.A. No. 92-183, mem. order at 3 (W.D. Pa. Sept. 3, 1993). The court then granted th e Appellants leave to amend the complaint. The Appell ants chose, however, to file a second declaratory judgme nt
action in the federal district court.

The Appellants filed this second declaratory judgme nt action against only the Appellees; Meyers Trucking and Stacey were not parties to the action. The Appellan ts premised jurisdiction on diversity grounds, and div ersity was not defeated due to a realignment of the partie s, as had occurred in the previous action. The district c ourt again dismissed the action without prejudice, howev er, this time for failure to allege a "case or controversy" sufficient to invoke the federal court's subject-matter jurisdict ion under the Federal Declaratory Judgment Act. The court con cluded that both "the claim and counterclaim in the presen t action do not contain within them a justiciable controvers y." Bromwell et al. v. Michigan Mutual Insur. Co. et al

. , C.A. No. 93-1602, mem. op. at 16 (W.D. Pa. Mar. 28, 1994). A gain,
the district court focused on the absence of an und erlying judgment as the main bar to prosecution of this com plaint and the accompanying counterclaims. Thus, the court dismissed the Appellants' complaint and the Appelle es' counterclaims without prejudice.

Rather than appeal the district court's decision to dismiss their complaint without prejudice, the Appe llants
filed an action in the Court of Common Pleas of Bed ford County, Pennsylvania. This complaint repled the sam e request for declaratory relief concerning the defin ition of the term "accident" in the insurance policy as was rais ed in the

6federal district court. Additionally, this state la w action

sought a declaration that there was separate liabil ity coverage on both the tractor and on the trailer. Th e Appellants later dropped their first contention tha t there were three separate accidents under the terms of th e insurance policy. They proceeded only on their clai m that the tractor and the trailer were separate vehicles under both the insurance policy and federal law and that therefore each was covered for $750,000 under the t erms of the policy, and each injured party was entitled to a total of $1,500,000.00.

The Appellees removed this case to the United State s District Court for the Western District of Pennsylv ania and
moved to dismiss the action for failure to state a claim on which relief could be granted pursuant to Rule 12(b )(6) of the Federal Rules of Civil Procedure. The Appellant sfiled a
motion to remand the matter back to state court. Magistrate Judge Francis X. Caiazza issued a Report and Recommendation advising the district court to deny the motion to remand and to determine the justiciabilit y of the claim under the Federal Declaratory Judgment Act. D istrict Court Judge Robert J. Cindrich adopted the Report a nd Recommendation as the opinion of the district court

.

Judge Caiazza issued a second report and recommendation on the matter, recommending that the Appellees' motion to dismiss should be granted for lack of subject-matter jurisdiction. The court adopted this report and recommendation as the opinion of the court and ordered that the Appellants' complaint be dismissed . The court also held there was no subject matter jurisdi ction for a Pennsylvania court under the Pennsylvania Declara tory Judgments Act. The Appellants brought this timely a ppeal, arguing that the district court lacked jurisdiction over this case as a matter of res judicata and that the court therefore had no power to dismiss the Appellants' complaint.

II.

This court exercises plenary review over jurisdicti onal issues. Anthuis v. Colt Indus. Operating Corp. , 971 F.2d 999, 1002 (3d Cir. 1992). In the present matter, th e

7Appellants assert that the district court erred in exercising

jurisdiction over the removed complaint, originally filed in state court, because the federal court had previous ly determined that it lacked subject-matter jurisdicti on over an identical claim brought by the Appellants in the federal court. Additionally, the Appellants assert that the district court erred when, upon concluding that it lacked su bjectmatter jurisdiction over the removed state court ac tion, it
dismissed the action rather than remand it to the s tate court. The Appellants first propose that the distri ct court erred in its March 28, 1994, order dismissing their complaint for failing to raise a justiciable claim. The correctness of the district court's order is not pr operly before this court at the present time. The Appellan ts failed to file a timely appeal of this decision, choosing instead to bring a new, albeit identical, claim in state court . Therefore,
the district court's decision is final and the matt er cannot now be challenged as part of this appeal.

The gravamen of the Appellants' reviewable argument is that the district court improperly exercised jurisd iction over their state law claim when the Appellees removed th e matter to the federal court, and that the district court further erred by not remanding the matter to the st ate court once it concluded that it lacked subject-matt er jurisdiction over the dispute. The existence of subjectmatter jurisdiction over an action is a prerequisit e to its removal to federal court. 28 U.S.C. § 1441; Brown v

. Francis , 75 F.3d 860, 864-65 (3d Cir. 1996). Section 1441 states that "any civil action brought in a State co urt of
which the district courts of the United States have original jurisdiction, may be removed . . . to the district court of the
United States for the district and division embraci ng the place where such action is pending." In its March 2 8, 1994 order, the district court dismissed the Appellants' action after concluding that the Appellants had not presen ted a justiciable claim under the Federal Declaratory Jud gment
Act.

Once the court determined that it lacked jurisdicti on over the matter in its March 28, 1994 order, that determ ination had a preclusive effect. "A dismissal for lack of s ubjectmatter jurisdiction, while `not binding as to all m atters

8which could have been raised,' is, however, conclus ive as to

matters actually adjudged." Equitable Trust Co. v. Commodity Futures Comm'n , 669 F.2d 269, 272 (5th Cir. 1982) (quoting Acree v. Airline Pilot Ass'n , 390 F.2d 199, 203 (5th Cir.), cert. denied , 393 U.S. 852, 89 S. Ct. 88, 21 L.Ed.2d 122 (1968)). In the present matter, the iss ue of whether a justiciable claim was presented under the Federal Declaratory Judgment Act had previously bee n adjudicated in the March 28, 1994 order. The facts underlying the state law claim are identical to tho se underlying the previously dismissed federal court a ction. The Appellants had not obtained any judgment of lia bility in the interim, the lack of which presented the bas is for the district court's original determination that there was no subject-matter jurisdiction to hear the case. Once the matter was removed to the federal district court by the Appellees, the Federal Declaratory Judgment Act aga in governed the justiciability of the Appellants' clai m. The district court, having previously determined that i t lacked subject-matter jurisdiction over the Appellants' ca se, was precluded by the principles of res judicata from ex ercising jurisdiction over this matter once it was removed b y the Appellees. Thus, the district court simply could no t exercise jurisdiction over the matter.

Upon a determination that a federal court lacks subjectmatter jurisdiction over a particular action, the p lain language of 28 U.S.C. § 1447(c) mandates that the m atter
be remanded to the state court from which it was re moved. Section 1447(c) states: "If at any time beforefinal judgment it appears that the district court lacks subject ma tter jurisdiction, the case shall be remanded." The lang uage of this section is mandatory -- once the federal court determines that it lacks jurisdiction, it must rema nd the case back to the appropriate state court. Internati onal Primate Protection League v. Administrators of Tula ne Educ.
Fund , 500 U.S. 72, 87 (1991); Maine Assoc. of Interdependent Neighborhoods v. Commissioner, Maine Dep't
of Human Svcs. , 876 F.2d 1051, 1054 (1st Cir. 1989). Therefore, the district court erred when it dismiss ed the
matter rather than remand it to the state court.

The Appellees contend that the district court did n ot err in dismissing the matter under the "futility except ion" to

9§ 1447(c), which allows a district court to dismiss an action

rather than remand it to the state court when reman d
would be futile because the state court also would lack jurisdiction over the matter. This court has never recognized the futility exception, and the Supreme Court has, in dicta, expressed a reluctance to recognize such
discretion under the removal statute. See Internati onal
Primate , 500 U.S. at 89 (noting that literal words of § 1447(c) grant district court no discretion to dismiss matter). Thus, we turn to the case law of other cir cuits to consider the merits of this proposed exception.

This proposed "futility exception," a relatively ne w concept, has been recognized only by the Fifth and Ninth Circuits. See Bell v. City of Kellog , 922 F.2d 1418, 1425 (9th Cir. 1991) (ruling that dismissal was appropri ate where remand was futile); Arasco, Inc. v. Glenara, Ltd. , 912 F.2d 784, 787 (5th Cir. 1990) (permitting dismissal wher e remand would be futile because federal court's determination that state court lacked jurisdiction bound state court). However, the Fourth and Seventh Circu its have both expressly rejected the existence of this futility exception. See Roach v. West Virginia Reg'l Jail & Correctional Facility Auth. , 74 F.3d 46, 49 (4th Cir. 1996) (noting that "the futility of a remand to the West Virginia state court does not provide an exception to the pl ain meaning of § 1447(c)"); Smith v. Wisconsin Dep't of Agriculture , 23 F.3d 1134, 1139 (7th Cir. 1994) (citing
International Primate and stating that Supreme Court has "squarely rejected" any futility exception to§ 1447 (c)). The Tenth Circuit has also expressly rejected this prop osed exception in an unpublished opinion. Jepsen v. Texa co, Inc. , 68 F.3d 483, 1995 WL 607630, at *3 (10th Cir. 199 5) (noting that Supreme Court has expressly rejected f utility exception in International Primate ). Additionally, the First Circuit, while not expressly refusing to adopt the futility exception, stated that "the fact that we believe a certain legal result unlikely , as a matter of state law, is not sufficient grounds for reading an exception into th e absolute statutory words "shall be remanded." Maine Ass'n

, 876 F.2d at 1055 (emphasis in original). Even the S econd Circuit, which once indicated that it might conside r the futility exception, Mignogna v. Sair Aviation, Inc. , 937 F.2d

1037, 41 (2d Cir. 1991), has recently recognized that such an exception probably does not exist in light of the S upreme Court's opinion in International Primate . Barbara v. New York Stock Exchange , 99 F.3d 49, 56 n.4 (2d Cir. 1996).

In light of the express language of § 1447(c) and t he Supreme Court's reasoning in International Primate , we hold that when a federal court has no jurisdiction of a case removed from a state court, it must remand and not dismiss on the ground of futility. Having concluded that no such exception exists, it is unnecessary for us to address the Appellees' argument that remand would be futile because the Appellants have also failed to raise a justiciable
claim under state law. Once the district court dete rmined that it lacked subject-matter jurisdiction over the Appellants' claim, the district court was obligated to remand the matter to the state court under the expr ess language of § 1447(c). Whether the matter is justic iable
under state law is a matter for the state court to decide.

III.

The order of the district court dismissing the Appe llants' complaint is vacated and the matter is remanded to the
district court with instructions to remand the case to the Court of Common Pleas of Bedford County, Pennsylvan ia.

Each side to bear its own costs.

A True Copy:

Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

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