1998 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

10-27-1998

In Re: US Healthcare

Precedential or Non-Precedential:

Docket 97-5812

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Recommended Citation

"In Re: US Healthcare" (1998). 1998 Decisions. Paper 253.

http://digitalcommons.law.villanova.edu/thirdcircuit_1998/253
Filed October 27, 1998 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 97-5812 

IN RE: U.S. HEALTHCARE, 

 Petitioner 

On Petition for a Writ of Mandamus 

to the United States District Court 

for the District of New Jersey 

(Related to D.C. Civ. No. 97-02787) 

Argued October 5, 1998 

BEFORE: SLOVITER, GREENBERG, and COWEN, 

Circuit Judges 

(Filed: October 27, 1998) 

 Carl D. Buchholz (argued) 

 Angela M. Heim 

 Rawle & Henderson 

 Ten Lake Center Executive Park 

 401 Route 73 North 

 Marlton, New Jersey 08053 

 Attorneys for Petitioner 
 Keith G. Von Glahn (argued) 

 Adam J. Adrignolo 

 Wilson, Elser, Moskowitz 

 Edelman & Dicker LLP 

 2 Gateway Center 12th floor 

 Newark, New Jersey 07102 

 Attorneys for Respondents 

 Samuel Kasoff, M.D., New York 

 Medical College, Westchester 

 County (improperly pled as 

 Westchester County Medical 

 Center), M. Valsamis, M.D., 

 Deborah L. Benzil, M.D. and 

 University Pathology, P.C., 

 erroneously designated as 

 Pathology Faculty Practice, P.C. at 

 W.C.M.C. 

 William F. Sutton 

 Post & Schell 

 1800 JFK Boulevard 

 19th Floor 

 Philadelphia, PA 19103 

 Attorneys for Respondents 

 Paul F. Engstrom 

 Fox Chase Center 

 Center of the American 

 Onicologic Hospital 

 and Arthur S. Palchafsky, M.D. 

OPINION OF THE COURT 

GREENBERG, Circuit Judge. 

I. INTRODUCTION 

This matter is before the court on a petition for a writ of 

mandamus filed by U.S. Healthcare. The plaintiff in the 

underlying action, Donald Eric Hoyt, filed a complaint in 

the Superior Court of New Jersey, which he characterized 

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as an action for "medical malpractice," against U.S. 

Healthcare and various physicians and entities. Prior to any 

of the other defendants being served with a summons and 

complaint in accordance with New Jersey practice, U.S. 

Healthcare removed the matter to the district court

pursuant to 28 U.S.C. S 1441(b) and (c) on the ground that 

Hoyt's claims against it arose under the Employee 

Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 

S 1101 et seq., so that they were within the district court's 

original jurisdiction. See 28 U.S.C. S 1331. The notice of 

removal asserted that even though Hoyt framed the case as 

a negligence action, it was "removable pursuant to the 

complete preemption exception to the well-pleaded 

complaint rule," citing 29 U.S.C. S 1132(a)(1)(B) and 

Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 

1542 (1987). In addition, the notice of removal asserted 

that Hoyt's claims "relate to" an employee benefit plan 

under 29 U.S.C. S 1144, and thus ERISA preempts them. 

After U.S. Healthcare removed the action, it filed cross 

claims against the other defendants and a counterclaim 

against Hoyt advancing subrogation rights under Hoyt's 

employer's ERISA plan which covered Hoyt for medical 

benefits. 

Following the removal, the case was assigned to a district 

judge but, in accordance with procedure in the District of 

New Jersey, was assigned further to a magistrate judge for 

pretrial proceedings. The parties, however, did not consent 

to the magistrate judge exercising the jurisdiction of a 

district judge as provided in 28 U.S.C. S 636(c). Neither 

Hoyt nor any other party made a motion to remand the 

case to the state court. Nevertheless, the magistrate judge 

on his own motion on October 17, 1997, remanded the case 

to the Superior Court of New Jersey on the ground that the 

district court lacked subject matter jurisdiction. See 28 

U.S.C. S 1447(c). In remanding the action, the magistrate 

judge clearly regarded the remand order as nondispositive 

pursuant to 28 U.S.C. S 636(b)(1)(A), Fed. R. Civ. P. 72(a), 

and District of New Jersey Local Rule 72.1. As far as we 

can ascertain from the district court docket, the district 

court treated the remand as effective immediately because 

the court closed the case on October 17, 1997, 

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notwithstanding Local Rule 72.1(c)(1)(C) which provides 

that: 

 The Clerk shall take no action with respect to a 

 Magistrate Judge's order of remand or for transfer of 

 venue until 15 days from the filing of such an order. In 

 the event that a notice of appeal from such an order is 

 filed within such 15-day period, the Clerk shall take no 

 action until the appeal is decided by the Judge.1 

Subsequently, without seeking relief in the district court, 

U.S. Healthcare filed a petition for a writ of mandamus 

requesting that we vacate the order of remand. The 

petition's thrust was that the action could not be remanded 

because no party had made a motion to remand within 30 

days after the filing of the notice of removal as required by 

28 U.S.C. S 1447(c) in the case of a defect in the removal 

procedure. Moreover, U.S. Healthcare claimed that the 

district court had subject matter jurisdiction. Upon 

receiving the petition we ordered the filing of answers and 

subsequently we ordered the parties to submit briefs. 

U.S. Healthcare has filed a brief asserting that the 

magistrate judge "did not have the authority to remand this 

case to state court" and that "the district court had subject 

matter jurisdiction over the case at the time it was 

remanded through [its] counterclaim and, as such, the 

magistrate judge's failure to consider this fact was an abuse 

of discretion." Hoyt has not filed a brief in these

proceedings but certain of the defendants in the underlying 

action have filed a brief asserting that (1) a magistrate 

judge does have the authority to remand a case to a state 

court; (2) 28 U.S.C. S 1447(d) precludes this court from 

_________________________________________________________________ 

1. It appears that the district court adopted Local Rule 72.1(c)(1)(C) at 

least in part in response to DeCastro v. Awacs, 940 F. Supp. 692 (D.N.J. 

1996), which held that a magistrate judge could remand a case as a 

nondispositive order and that, notwithstanding 28 U.S.C. S 1447(d), a 

district court may hear an appeal from a remand order under 28 U.S.C. 

S 636(b)(1)(A), but that under Hunt v. Acromed Corp., 961 F.2d 1079 (3d 

Cir. 1992), once the court sends a certified copy of the remand order to 

the state court the district court could not review the remand decision. 

See also Campbell v. International Bus. Machs., 912 F. Supp. 116 (D.N.J. 

1996). 

 4 
reviewing the order of remand on the merits; and (3) 28 

U.S.C. S 636(b)(1)(A) afforded U.S. Healthcare a mechanism 

to appeal the remand order to the district court so that U.S. 

Healthcare cannot obtain mandamus relief.2 

II. DISCUSSION 

Initially we consider whether we should characterize the 

order of remand as dispositive or nondispositive inasmuch 

as 28 U.S.C. SS 636(b)(1)(A) and (B) draw a sharp 

distinction between dispositive and nondispositive matters 

in determining a magistrate judge's powers.3 28 U.S.C. 

S 636(b)(1)(A) provides that a magistrate judge may "hear 

and determine any pretrial matter pending before the court, 

except a motion for injunctive relief, for judgment on the 

pleadings, for summary judgment, . . . to dismiss or to 

permit maintenance of a class action, to dismiss for failure 

to state a claim upon which relief can be granted, and to 

involuntarily dismiss an action." Thus, in general, a 

magistrate judge, without the consent of the parties, has 

the power to enter orders which do not dispose of the case. 

The district court may reconsider any pretrial matter 

"where it has been shown that the magistrate judge's order 

is clearly erroneous or contrary to law." A magistrate judge, 

without the consent of the parties, may "conduct hearings, 

including evidentiary hearings and . . . submit to a judge of 

the court proposed findings of fact and recommendations 

for the disposition, by a judge of the court, of any" of the 

dispositive motions we described above. 

It is clear that 28 U.S.C. S 636(b)(1)(A) does not in terms 

preclude a magistrate judge from hearing and determining 

a motion to remand a case to a state court. Nevertheless, 

because a remand order is dispositive insofar as 

proceedings in the federal court are concerned, the order is 

the functional equivalent of an order of dismissal for 

purposes of that section. While we recognize that after a 

remand a case may go forward in the state court, still the 

_________________________________________________________________ 

2. Hoyt filed a letter joining in the opposition of the participating 

respondents to the granting of the petition. 

3. Of course, we deal with a situation in which the magistrate judge 

cannot exercise consent jurisdiction under 28 U.S.C. S 636(c). 

 5 
order for remand conclusively terminates the matter in the 

federal court against the will of the party who removed the 

case. 

In considering this issue we point out that we must take 

into account "the potential for Art. III constraints in 

permitting a magistrate to make decisions on dispositive 

motions." United States v. Raddatz, 447 U.S. 667, 676, 100 

S.Ct. 2406, 2412 (1980). Thus, in NLRB v. Frazier, 966 

F.3d 812, 816 (3d Cir. 1992), in discussing 28 U.S.C. 

S 636(b)(1)(A) and (B) we indicated that the statute: 

 distinguishes between regular pretrial matters, which a 

 magistrate judge may decide, and those dispositive 

 matters which have a preclusive effect on the parties, 

 about which the magistrate judge may only make a 

 recommendation to the court. Congress crafted this 

 distinction to assure that Article III judges retain the 

 ultimate adjudicatory power over dispositive motions. 

An order of remand simply cannot be characterized as 

nondispositive as it preclusively determines the important 

point that there will not be a federal forum available to 

entertain a particular dispute. In our view, a magistrate 

judge may not, without the consent of the parties, decide 

this critical issue at the core of the exercise of federal 

judicial power. 

In determining this case it is helpful to consider a 

situation in which a plaintiff files parallel federal and state 

actions seeking relief for the same alleged loss. We do not 

think that anyone would argue seriously that a magistrate 

judge, without consent of the parties, could hear and 

determine a motion to dismiss the federal action, predicated 

on an absence of subject matter jurisdiction, on the theory 

that the motion is nondispositive because a parallel action 

is pending in the state court.4 Yet in a practical sense an 

order of remand predicated on a lack of subject matter 

jurisdiction is no less dispositive than an order of dismissal 

_________________________________________________________________ 

4. The situation we describe is not fanciful for experience shows that 

sometimes plaintiffs do initiate parallel federal and state actions. See, 

e.g., Mints v. Educational Testing Serv., 99 F.3d 1253, 1255 (3d Cir. 

1996). 

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in the circumstances we describe as both orders have the 

exact same effect by permitting the case to proceed in the 

state rather than the federal court. In sum, we believe that 

even if it could do so, Congress never intended to vest the 

power in a non-Article III judge to determine the 

fundamental question of whether a case could proceed in a 

federal court. 

In reaching our result we recognize that while neither the 

Supreme Court nor any court of appeals of which we are 

aware has addressed the issue before us, the district court 

in DeCastro v. Awacs, Inc., 940 F. Supp. 692, 695 (D.N.J. 

1996) (citations omitted), surveyed district court cases and 

concluded that "the vast majority of the district courts, 

within [the District of New Jersey] and elsewhere, that have 

confronted this issue, have held that a motion to remand is 

`non-dispositive,' and therefore, can be determined by a 

magistrate judge by final order in accordance with 28 

U.S.C. S 636(b)(1)(A)." The DeCastro court in joining that 

majority pointed out that remand orders "are not among 

those [pretrial] orders specifically enumerated in 28 U.S.C. 

S 636(b)(1)(A) that a magistrate judge is without the 

authority to issue." DeCastro, 940 F. Supp. at 695. The 

court also noted that Fed. R. Civ. P. 72(a) indicates that a 

nondispositive matter is "not dispositive of a claim or 

defense of a party." The DeCastro court indicated that a 

remand order does not dispose of a claim or defense as it 

merely transfers the case. 

We certainly do not suggest that the district court cases 

DeCastro cited had no basis for their conclusion. 

Nevertheless we reject their conclusion because it is clear 

that as far as the federal courts are concerned, a remand 

order is dispositive of all the claims and defenses in the 

case as it banishes the entire case from the federal court. 

Moreover, a federal court is not concerned with the

proceedings that follow a remand. Furthermore, as we 

observed above, an order of remand is no less dispositive 

than a dismissal order of a federal action for lack of subject 

matter jurisdiction where a parallel proceeding is pending 

in the state court. 

Our conclusion that a remand order is dispositive for 

purposes of 28 U.S.C. S 636(b)(1) brings us to the two other 

 7 
issues implicated in these proceedings: (1) whether 28 

U.S.C. S 1447(d) precludes us from granting relief; and (2) 

whether U.S. Healthcare had an adequate remedy by a

procedure other than through mandamus. See In re 

Chambers Dev. Co., 148 F.3d 214, 226 (3d Cir. 1998). If we 

answer either question affirmatively we must deny the 

petition. 

With an exception not applicable here, 28 U.S.C. 

S 1447(d) provides that an "order remanding a case to the 

State court from which it was removed is not reviewable on 

appeal or otherwise." We observed recently that while "this 

bar to the reviewability of remand orders appears broad 

and unyielding, the courts have carved various exceptions 

from it and therefore will review certain remand orders." 

Feidt v. Owens Corning Fiberglass Corp., ___ F.3d ___, 1998 

WL 525440, at *2 (3d Cir. Aug. 24, 1998). In the leading 

case of Thermtron Prods. Inc. v. Hermansdorfer, 423 U.S. 

336, 346, 96 S.Ct. 584, 590 (1976), the Supreme Court 

made it clear that only "remand orders issued under [28 

U.S.C. S 1447(c)] and invoking the grounds specified therein 

. . . are immune from review under S 1447(d)." It seems 

evident that if an order of a district judge remanding a case 

is not insulated from review unless issued for a reason set 

forth in section 1447(c), i.e., a defect in removal procedure 

or a lack of subject matter jurisdiction, then an order of a 

magistrate judge that could not be issued pursuant to 

section 1447(c) because of the magistrate judge's lack of 

authority to issue it, is not insulated from review by section 

1447(d). In the circumstances, we see no need to discuss 

this point further as it is clear that section 1447(d) is not 

a bar to U.S. Healthcare's petition. 

Finally, we conclude that U.S. Healthcare has no realistic 

remedy other than to seek a writ of mandamus in this 

court under 28 U.S.C. S 1651. See Hahnemann Univ. Hosp. 

v. Edgar, 74 F.3d 456, 461 (3d Cir. 1996). We recognize 

that 28 U.S.C. S 636(b)(1)(A) provides that a "judge of the 

[district] court may reconsider any pretrial matter under 

this subparagraph (A) where it has been shown that the 

magistrate's order is clearly erroneous or contrary to law." 

The inadequacy of this provision in the context here is clear 

in view of Local Rule 72.1(c)(1)(C) for it seems unlikely that 

 8 
the district court would have granted relief on the ground 

that the magistrate judge did not have jurisdiction to issue 

an order of remand. After all, to do so it would have had to 

recognize, as we plainly do, that Local Rule 72.1(c)(1)(C) is 

invalid insofar as it deals with orders of remand. Thus, in 

this case it cannot be said that mandamus is being used as 

a substitute for appeal. In the circumstances, we conclude 

that we should issue the writ of mandamus.5 

III. CONCLUSION 

For the foregoing reasons we will order that a writ of 

mandamus be issued to the magistrate judge, directing him 

to vacate the order of October 17, 1997, remanding the 

case to the Superior Court of New Jersey. Of course, we 

express no view on whether the district court has subject 

matter jurisdiction in this case and thus our opinion does 

not preclude the district court from remanding the case if 

it should find that it lacks subject matter jurisdiction. The 

parties will bear their own costs in these proceedings. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

_________________________________________________________________ 

5. The district court docket sheets in the underlying case show that the 

file was closed on October 17, 1997, but they do not indicate that the 

clerk of the court sent a certified copy of the order of remand to the 

state 

court. Thus, we are not concerned with the jurisdictional rule of Hunt v. 

Acromed Corp., 961 F.2d 1079 (3d Cir. 1992), that once the district court 

sends a certified copy of the remand order to the state court it loses 

jurisdiction. See also Trans Penn Wax Corp. v. McCandless, 50 F.3d 217, 

225 (3d Cir. 1995). Of course, we would not in any event hold that the 

sending a certified copy of a remand order executed by a judicial officer 

without power to issue the order would place the order beyond judicial 

review. 

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