Opinion ID: 7016474
Heading Depth: 2
Heading Rank: 2

Heading: Jurisdiction To Entertain the Preliminary Settlement Motions

Text: We disagree, however, with the district court’s view that its holding of implied repeal deprived it of jurisdiction to consider the parties’ pending motions for judicial approval of their proposed settlements of this consolidated class action. Although the doctrine of implied repeal is sometimes described in terms of the district court’s “antitrust jurisdiction,” e.g., Strobl, 768 F.2d at 27, we think it is more properly viewed as conferring an immunity that is an affirmative defense that does not affect the court’s subject matter jurisdiction over the action. As a general matter, where a complaint “is so drawn as to seek recovery directly under the Constitution or laws of the United States,” Bell v. Hood, 327 U.S. 678, 681, 66 S.Ct. 773, 90 L.Ed. 939 (1946), the district court has subject matter jurisdiction unless the federal claim “clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or where such a claim is wholly insubstantial and frivolous,” id. at 682-83, 66 S.Ct. 773. Thus, the district court has jurisdiction where “the right of the petitioners to recover under their complaint will be sustained if the Constitution and laws of the United States are given one construction and will be defeated if they are given another.” Id. at 685, 66 S.Ct. 773. The “inadequacy” of a federal claim is ground for “[d]ismissal for lack of subject-matter jurisdiction ... only when the claim is ‘so insubstantial, implausible, foreclosed by prior decisions of this Court, or otherwise completely devoid of merit as not to involve a federal controversy.’ ” Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 89, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) (quoting Oneida Indian Nation v. County of Oneida, 414 U.S. 661, 666, 94 S.Ct. 772, 39 L.Ed.2d 73 (1974)). Once a federal court has determined that a plaintiffs jurisdiction-conferring claims are not insubstantial on their face, “no further consideration of the merits of the claim is relevant to a determination of the court’s jurisdiction of the subject matter.” Baker v. Carr, 369 U.S. 186, 199, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962). Thus, the district court’s subject matter jurisdiction to entertain a suit based on a federal claim that is not wholly insubstantial, frivolous, or foreclosed by prior decisions of the Supreme Court, is not defeated by the defendant’s assertion of a position that is properly characterized as an affirmative defense. Most immunities are affirmative defenses. See, e.g., Gomez v. Toledo, 446 U.S. 635, 640, 100 S.Ct. 1920, 64 L.Ed.2d 572 (1980) (qualified immunity for a public official); Murphy v. Waterfront Commission of New York Harbor, 378 U.S. 52, 104, 84 S.Ct. 1594, 12 L.Ed.2d 678 (1964) (White, J., concurring) (absolute immunity); Troxler v. Owens-Illinois, Inc., 717 F.2d 530, 532-33 (11th Cir.1983) (statutory immunity); 2 Moore’s Federal Practice § 8.07[5] (3d ed. 1999) (“In addition to the 19 affirmative defenses set forth[ in Fed. R.Civ.P.] 8(c)[, that Rule] requires ‘any other matter constituting an avoidance or an affirmative defense’ to be pleaded. Affirmative defenses and avoidances other than those specifically referenced [in Rule 8(c) ] have been found to include common law immunity, statutory immunity, [and] exemption under a statute or regulation ....”) (footnotes omitted). Affirmative defenses can be waived, see, e.g., McCardle v. Haddad, 131 F.3d 43, 51 (2d Cir.1997); Satchell v. Dilworth, 745 F.2d 781, 784 (2d Cir.1984); lack of subject matter jurisdiction cannot be waived, see, e.g., Bender v. Williamsport Area School District, 475 U.S. 534, 541, 106 S.Ct. 1326, 89 L.Ed.2d 501 (1986); Louisville & Nashville R.R. Co. v. Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 53 L.Ed. 126 (1908); Fed.R.Civ.P. 12(h)(3). In discussing whether a given federal securities statute impliedly repeals an antitrust law, the Supreme Court has not suggested that the implied repeal deprives the district court of subject matter jurisdiction. It has instead referred to the implied repeal as giving the defendant “immunity” from liability under the antitrust laws. Thus, in Silver, the Court never referred to federal courts’ “antitrust jurisdiction” or used the phrase “subject matter jurisdiction.” The Silver Court used the term “jurisdiction” only in connection with the power of the SEC to regulate the challenged conduct. See, e.g., 373 U.S. at 357, 83 S.Ct. 1246 (“Commission jurisdiction”); id. at 358, 83 S.Ct.. 1246 (“Commission’s lack of jurisdiction”). Silver was described in Gordon as dealing with conduct that would be a per se violation of the Sherman Act “absent any immunity derived from the regulatory laws.” Gordon, 422 U.S. at 683, 95 S.Ct. 2598 (emphasis added). In the earlier stages of the Gordon litigation, the opinions of the lower courts, whose rulings of implied repeal were eventually upheld, had spoken not only in terms of antitrust immunity or exemption from the antitrust laws, but also in terms of a “denial of antitrust jurisdiction,” Gordon v. New York Stock Exchange, Inc., 498 F.2d 1303, 1305 (2d Cir.1974), or the “withdrawal of antitrust jurisdiction,” id. at 1309 n. 8, or the “court[’s] lack[ of] jurisdiction to entertain an anti-trust attack on the commission structure of the Exchanges,” Gordon v. New York Stock Exchange, Inc., 366 F.Supp. 1261, 1264 (S.D.N.Y.1973). However, no issue in that litigation hinged on whether the implied repeal impacted the court’s subject matter jurisdiction, and the Supreme Court in Gordon described the lower-court rulings as “utilizing] the framework for analysis of antitrust immunity in the regulated securities area that was established a decade ago in Silver,” 422 U.S. at 662, 95 S.Ct. 2598 (describing the district court opinion), and “devot[ing] its opinion to the problem of antitrust immunity,” id. (describing the court of appeals opinion). The Supreme Court itself in Gordon, except for an analogy drawn to the jurisdiction of the Interstate Commerce Commission, referred to jurisdiction only in connection with the regulatory power of the SEC. Never using the phrases antitrust jurisdiction or subject matter jurisdiction, the Supreme Court in Gordon at the outset described its task as “[rjesolution of the issue of antitrust immunity for fixed commission rates,” id. at 663, 95 S.Ct. 2598, and it thereafter repeatedly referred to the question as whether there was “antitrust immunity” or simply “immunity,” see, e.g., id. at 686, 95 S.Ct. 2598 (“the immunity issue”); id. at 688, 95 S.Ct. 2598 (“[W]e are concerned with whether antitrust immunity, as a matter of law, must be implied in order to permit the Exchange Act to function as envisioned by the Congress. The issue of the wisdom of fixed rates becomes relevant only when it is determined that there is no antitrust immunity.”); id. at 689, 95 S.Ct. 2598 (“We agree with the District Court and the Court of Appeals, and with respondents, that to deny antitrust immunity with respect to commission rates would be to subject the exchanges and their members to conflicting standards.”). Similarly, in NASD, the Supreme Court generally spoke of the implied repeal doctrine in terms of antitrust immunity rather than a lack of federal-court jurisdiction. See, e.g., 422 U.S. at 705, 95 S.Ct. 2427 (“The questions presented require us to determine whether § 22(d) obligates ap-pellees to engage in the practices challenged in Counts II-VIII and thus necessarily confers antitrust immunity on them.”); id. at 719, 95 S.Ct. 2427 (“[i]m-plied antitrust immunity is not favored”); id. at 726, 95 S.Ct. 2427 (discussing government’s “contention that the SEC’s exercise of regulatory authority has been insufficient to give rise to an implied immunity for agreements conforming with § 22(f)”); id. at 730, 95 S.Ct. 2427 (“the question presented is whether the SEC’s exercise of regulatory authority ... is sufficiently pervasive to confer an implied immunity”). Although an implied antitrust immunity prevents a court from “exercising jurisdiction under the antitrust laws,” id. at 734, 95 S.Ct. 2427 (emphasis added), in none of these cases did the Supreme Court suggest that that immunity was anything more than an affirmative defense. There is, of course, one type of immunity not discussed above — a government’s sovereign immunity — that has frequently been referred to as imposing constraints that are jurisdictional. See, e.g., United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 85 L.Ed. 1058 (1941) (“the terms of [the] consent [of the United States, as sovereign] to be sued in any court define that court’s jurisdiction to entertain the suit”); but see Wisconsin Department of Corrections v. Schacht, 524 U.S. 381, 389, 118 S.Ct. 2047, 141 L.Ed.2d 364 (1998) (a state’s immunity under the “Eleventh Amendment ... does not automatically destroy original jurisdiction”); Calderon v. Ashmus, 523 U.S. 740, 745 n. 2, 118 S.Ct. 1694, 140 L.Ed.2d 970 (1998) (“[w]hile the Eleventh Amendment is jurisdictional in the sense that it is a limitation on the federal court’s judicial power ... we have recognized that it is not coextensive with the limitations on judicial power in Article III”). Whether or not sovereign immunity poses a jurisdictional obstacle is of no moment here, for there can be no suggestion that the immunity conferred on a private entity on the basis that it is subject to one set of laws that takes precedence over another law is on a par with the immunity enjoyed by a government. The immunity conferred by an implied repeal of the antitrust laws simply prevents the court from imposing liability under those laws. In the present case, plaintiffs’ claims under the Sherman Act were neither frivolous nor contrived merely to create federal jurisdiction. Nor were their claims foreclosed by prior decisions of the Supreme Court, since a determination of whether there is an implied repeal requires a thorough analysis of the precise practice that has been challenged and the regulatory scheme with respect to that practice. See generally Gordon, 422 U.S. at 663, 95 S.Ct. 2598. Thus, the district court, as it indicated in its April Order, had jurisdiction at the outset to decide whether defendants were entitled to immunity from liability under the antitrust laws. Since the parties sought approval of their settlement agreements before the court had adjudicated the immunity defense, and since such a defense may be waived, the court had jurisdiction to entertain and rule on the motions for approval of the proposed settlements. Having entered a final judgment without dealing with those pending motions, the court should have entertained them in conjunction with the subsequent motion to alter or amend the final judgment, and it should have granted the latter motion if it approved the proposed settlements. Finally, we note that defendant LETCO, which was a party to the September settlement agreement, has argued that plaintiffs’ appeal from the district court’s April Order is moot as to the parties to that agreement because the agreement was, by its terms, automatically rescinded as a result of the district court’s denial of the approval motions. We reject LET-CO’s mootness contention because the rescission terms of the settlement agreement have no bearing on the question presented for review, namely, the correctness of the April Order’s ruling that the district court lacked subject matter jurisdiction to entertain the approval motions after finding implied repeal of the antitrust laws. We express no view as to the correctness of LETCO’s contention that the September settlement agreement became void because of the occurrence of an event specified in that agreement. That question may be considered by the district court on remand.