In the

United States Court of Appeals

For the Seventh Circuit ____________

Nos. 04-1495, 04-1496, 04-1608, 04-1628, 04-1650, 04-1651,

04-1660, 04-1661, 04-2162, 04-2687, 05-2895, 05-2896,

05-2911, 05-2912, 05-2981, 05-3011, 05-3389, 05-3390,

05-3548, 05-3558, 05-3559, 05-3585 & 05-3586

IN THE MATTER OF:

MUTUAL FUND MARKET-TIMING LITIGATION

____________

Appeals from the United States District Court

for the Southern District of Illinois.

____________

SUBMITTED JULY 25, 2006—DECIDED OCTOBER 16, 2006

____________

Before EASTERBROOK, RIPPLE, and WOOD, Circuit Judges.

EASTERBROOK, Circuit Judge. Our opinion in Kircher

v. Putnam Funds Trust, 403 F.3d 478 (7th Cir. 2005)

(Kircher II), explains the nature of these suits against

mutual funds. Plaintiffs maintain that the funds are liable

because they were vulnerable to arbitrageurs who exploited

the fact that, when the mutual funds’ shares were priced (at

4 P.M. New York time every business day), the funds valued

securities of foreign issuers at their closing prices in the

issuers’ home markets rather than the latest trading price

in any liquid market. If prices move after the issuers’ homemarket close, but before 4 P.M. in New York, the difference

creates arbitrage opportunities at the expense of investors

who follow a buy-and-hold strategy. Plaintiffs contend that
2 Nos. 04-1495 et al.

the funds should have made arbitrage unprofitable by

changing the rules for valuing the securities in the funds’

portfolios or imposing fees on short-swing trades.

Kircher II held that claims of this kind arise under federal

securities law because disclosure of the funds’ practices and

vulnerabilities would preclude recovery, and that, because

plaintiffs have not taken advantage of the exception for

derivative litigation, the state-law claims are preempted by

the Securities Litigation Uniform Standards Act of 1998

(SLUSA) even though at least some of the investors held

their shares throughout the class periods. Although the

Supreme Court has agreed with that substantive approach,

see Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit,

126 S. Ct. 1503 (2006), it has also concluded that we lacked

appellate jurisdiction and vacated our judgment accordingly. Kircher v. Putnam Funds Trust, 126 S. Ct. 2145

(2006) (Kircher III). (Kircher I, in which we had asserted

appellate jurisdiction, appears at 373 F.3d 847 (7th Cir.

2004). That makes the current opinion Kircher IV, though

we have used a generic caption to reflect the presence of

many related appeals.)

Ten of the appeals listed in the caption (Nos. 04-1495, 04-

1496, 04-1608, 04-1628, 04-1650, 04-1651, 04-1660, 04-1661,

04-2162 & 04-2687) are before us on remand from Kircher

III. Their disposition is straightforward: all ten appeals are

dismissed for lack of jurisdiction. This means that the suits

will return to Illinois courts under orders that the district

court entered in 2004. They stayed in federal court only as

a result of our now-vacated decisions in Kircher I and

Kircher II. Appellants in two of these appeals (Voegler v.

Columbia Wanger Asset Management, L.P., Nos. 04-1660 &

04-1661) have asked us to keep the proceedings on our

docket pending a settlement. Because we lack appellate

jurisdiction, however, we must dismiss the appeals outright.

There is neither authority to retain them longer nor any

point in doing so. Whether the settlement is completed or
Nos. 04-1495 et al. 3

not, the only act we can take is to dismiss the appeals; we

could not approve a settlement or do anything in response

to it. Any settlement that the parties reach can be implemented and the litigation brought to a close in state court.

The remaining 13 appeals listed in the caption were not

before the Supreme Court in Kircher III. Instead proceedings in this court were stayed after the petition for certiorari was granted. This set of appeals comprises two groups.

The first we call the Potter group after the lead case Potter

v. Janus Investment Fund, No. 05-2895. (The other ten

appeals in this group are Nos. 05-2896, 05-2911, 05-2912,

05-2981, 05-3011, 05-3389, 05-3390, 05-3558, 05-3559 & 05-

3586.) The second is Parthasarathy v. T. Rowe Price

International Funds, Inc., Nos. 05-3548 & 05-3585. What

distinguishes the Potter and Parthasarathy appeals from

the Kircher appeals is that these 13 appeals have been filed

by plaintiffs from final orders of the district court dismissing the suits on the merits, so the holding in Kircher III

that we lack jurisdiction to consider appeals filed by

defendants from remand orders is not controlling.

The 11 appeals in the Potter group arise from the same

suits that were before this court and the Supreme Court.

After we held in Kircher II that SLUSA preempts the plaintiffs’ claims, they not only sought certiorari but also proposed to amend their complaints in the district court to

eliminate any theory that depends on fraud or nondisclosure. Our mandates had issued, so plaintiffs were

entitled to do this. The district court deemed the proposed

amendments unavailing, however, and dismissed the

suits on the authority of Kircher II. Plaintiffs then appealed. Meanwhile the Supreme Court had granted

certiorari—though limited to the jurisdictional question; the

petition was denied to the extent it sought review of the

merits. 126 S. Ct. 979 (2006). Thus the cases were before

two appellate tribunals simultaneously. Seemingly we had

to decide whether the amended complaints avoided preemp-
4 Nos. 04-1495 et al.

tion under SLUSA at the same time as the Supreme Court

passed on appellate jurisdiction at an earlier stage of the

litigation. To avoid getting the cart before the horse, we

stayed proceedings pending the Supreme Court’s decision.

Defendants maintain that, because the Potter appeals

have been filed by plaintiffs from indisputably final decisions and hence are within our jurisdiction, we

should proceed to decide them on the merits. In response to

the plaintiffs’ observation that the Supreme Court’s decision

requires us to rewind the litigation to the date in 2004

when Kircher I erroneously asserted appellate jurisdiction—a step that would return each case to state

court—defendants maintain that, by attempting to amend

their complaints after the district court received our

mandates, plaintiffs have “effectively” commenced new

federal suits, which the district court was obliged to decide

without regard to any influence of the jurisdictional decision in Kircher III.

Defendants’ position is inventive but unpersuasive. The

Potter appeals are just steps in the Kircher litigation. Each

plaintiff filed only one suit, in state court. Proceedings held

in federal court after removal do not create new

suits. Amendments that delete some legal theories, while

leaving the parties’ identities untouched, relate back to

the original complaint and hence do not commence new

litigation. See Phillips v. Ford Motor Co., 435 F.3d 785 (7th

Cir. 2006); Schorsch v. Hewlett-Packard Co., 417 F.3d 748

(7th Cir. 2005). Each of these cases therefore must return

to the state court in which it was filed, just as Kircher III

concluded.

According to the mutual funds, this would be a pointless step, because they can remove the cases again, the

district court will exercise jurisdiction (for Dabit shows that

removal is proper) and resolve the cases on the merits yet

again, and we will see a new set of appeals in short order.
Nos. 04-1495 et al. 5

Defendants invite us to short-circuit this process and

resolve the issues now. Yet if defendants follow the strategy

they have outlined, plaintiffs will reply that federal law

allows only one removal. The mutual funds will argue that

a second removal is authorized either by 28 U.S.C. §1446(b)

(a new 30-day period for removal opens once an order first

demonstrates that the case is removable) or by SLUSA.

Plaintiffs tell us that they will respond that Dabit is not

such an “order” (because in their view “order” means “order

in a case to which the removing litigant was a party”) and

that SLUSA does not allow removal after the period specified

by §1446(b). There will be time enough to address these

arguments if they become important; their resolution ought

not be anticipated before the steps that make them relevant

have been taken.

If the 11 Potter appeals handled were not complex

enough, the Parthasarathy appeals are tied in additional

knots. Parthasarathy and three other plaintiffs (seeking

to represent a class) filed suit in state court against six

defendants: T. Rowe Price International Funds, Inc., and T.

Rowe Price International, Inc. (the Price defendants); AIM

International Funds, Inc., and AIM Advisers, Inc. (the AIM

defendants); and Artisan Funds, Inc., and Artisan Partners

Limited Partnership (the Artisan defendants). Defendants

removed this suit in 2003, and it was docketed in the

district court as No. 03-673 before being remanded. Although the Artisan defendants appealed from the remand,

the Price and AIM defendants did not. The Artisan defendants’ appeal was consolidated with the Kircher cases in

this court; meanwhile the litigation proceeded in state court

against the Price and AIM defendants. After Kircher II, the

Price and AIM defendants filed a second notice of removal,

which was assigned a new docket number (No. 05-302) even

though the same suit was still on the district court’s docket

as No. 03-673. When the district court received our mandate

after Kircher II, it ruled on the merits in favor of all six
6 Nos. 04-1495 et al.

defendants in No. 03-673 and dismissed No. 05-302 on the

ground that the disposition in No. 03-673 was preclusive

against plaintiffs. Plaintiffs filed two notices of appeal, one

from each docket number under which the district court

carried the litigation.

The first of these appeals (No. 05-3548), from the originally removed suit, is part of the Kircher family and must

receive the same treatment as the 11 Potter appeals. The

Price and AIM defendants ask us to affirm on the merits in

the second appeal (No. 05-3585, from the docket spawned by

the second removal in 2005) because it was not before the

Supreme Court in Kircher III, and the fact that the appeal

is from a final decision avoids all questions about appellate

jurisdiction. That is the path we took in a group of four

appeals in cases that had been removed after Kircher II,

dismissed by the district court on the merits, and were

affirmed by unpublished order relying on Dabit. See

Bradfisch v. Templeton Funds, Inc., 2006 U.S. App. LEXIS

12394 (7th Cir. May 19, 2006), rehearing denied (with

additional explanation) (June 15, 2006).

But Parthasarathy was removed in 2003 and remanded as

outside federal jurisdiction in 2004. The Artisan defendants

appealed; the Price and AIM defendants did not. That left

in force the district court’s decision against the non-appealing defendants. When they removed again in 2005, the

district court should have remanded without regard to the

conclusion of Kircher II—for the Price and AIM defendants

are bound by the district court’s adverse decision, notwithstanding the fact that both this court (in Kircher II) and the

Supreme Court (in Dabit) have held that the district judge’s

2004 decision was mistaken. Litigants who do not appeal

from an adverse decision are stuck with it, even if some

other party to the same case appeals and wins. See Federated Department Stores, Inc. v. Moitie, 452 U.S. 394 (1981);

Morley Construction Co. v. Maryland Casualty Co., 300 U.S.

185, 191 (1937).
Nos. 04-1495 et al. 7

Plaintiffs might have been able to say much the same

thing in the Bradfisch suits, for the defendants in those

four cases also had removed in 2003 and failed to appeal

from the remand orders. What led us to resolve Bradfisch

on the merits is that no such argument had been raised (nor

did plaintiffs adequately address the propriety of a second

removal under SLUSA, as our order denying rehearing in

Bradfisch observed). The preclusive effect of a judgment,

such as the 2003 remand, is an affirmative defense. Plaintiffs in Bradfisch failed to mount that defense; plaintiffs in

Parthasarathy have done so and are entitled to its benefits.

Although preclusion does not block a successive removal if

facts or law change after the initial remand, see Midlock v.

Apple Vacations West, Inc., 406 F.3d 453 (7th Cir. 2005), the

“change” worked by Kircher II is not one that the Price and

AIM defendants may invoke (and that change has evaporated anyway).

Dabit supplies an intervening change of law and may

or may not justify a successive removal; we reserved

that question above. But a pre-Dabit successive removal

cannot be justified by that later development, and certainly

not by the Price and AIM defendants. Cases are removed,

or not, as units; either all defendants agree to removal or

none does. Hanrick v. Hanrick, 153 U.S. 192 (1894);

Torrence v. Shedd, 144 U.S. 527 (1892). After removal, the

case either stays in federal court or returns to state court as

a unit (subject to the district court’s option under 28 U.S.C.

§1441(c) to remand “a separate and independent

[nonremovable] claim”). What happened to Parthasarathy,

however, is that a single case was broken into two by

defendants’ strategic choices. The district court should not

have allowed that to happen. Because the Price and AIM

defendants re-removed, however, the case came back

together as No. 03-673 on the district court’s docket. As a

result of Kircher III, that entire case must be

remanded—and No. 05-302 should be dismissed as an
8 Nos. 04-1495 et al.

unauthorized attempt to engineer a partial removal of a

single case. That ground is independent of any preclusive

effect of the original remand order.

On remand from the Supreme Court, the ten Kircher

appeals are dismissed for want of appellate jurisdiction. The

other 13 appeals are within our appellate jurisdiction, and

we vacate the district court’s judgments. All of these cases

(except the one discussed immediately above) must be

remanded to state court.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—10-16-06