Court Opinion

ID: 2967356
Source: CourtListenerOpinion
Date Created: 2015-09-22 02:25:48.252215+00
Date Added: 2024-06-11T11:43:13.445711
License: Public Domain

PUBLISHED

UNITED STATES COURT OF APPEALS
                 FOR THE FOURTH CIRCUIT

CHRISTOPHER J. HINSON, on behalf of       
himself and all others similarly
situated; SUSAN HINSON, on behalf of
herself and all others similarly
situated; GREGORY W. MOON;
DEBORAH MOON; BEATRICE WOODEN
WASHINGTON; JOHN THOMPSON, JR.;
MARSHA THOMPSON; JOE W. COLLINS;
LINDA COLLINS, on behalf of                       No. 99-1087
themselves and all others similarly
situated,
                  Plaintiffs-Appellees,
                  v.
NORWEST FINANCIAL SOUTH
CAROLINA, INCORPORATED,
              Defendant-Appellant.
                                          
           Appeal from the United States District Court
          for the District of South Carolina, at Rock Hill.
           Joseph F. Anderson, Jr., Chief District Judge.
                         (CA-95-2346-0-17)

                       Argued: November 2, 2000

                       Decided: February 6, 2001

  Before NIEMEYER, LUTTIG, and TRAXLER, Circuit Judges.

Affirmed by published opinion. Judge Niemeyer wrote the opinion,
in which Judge Traxler joined and Judge Luttig joined in part. Judge
Luttig wrote a concurring opinion.
2           HINSON v. NORWEST FINANCIAL SOUTH CAROLINA
                             COUNSEL

ARGUED: Benjamin Rush Smith, III, NELSON, MULLINS, RILEY
& SCARBOROUGH, L.L.P., Columbia, South Carolina, for Appel-
lant. Steven Walker Hamm, RICHARDSON, PLOWDEN, CARPEN-
TER & ROBINSON, Columbia, South Carolina, for Appellees. ON
BRIEF: William C. Hubbard, John T. Moore, NELSON, MULLINS,
RILEY & SCARBOROUGH, L.L.P., Columbia, South Carolina, for
Appellant. Bradford P. Simpson, B. Randall Dong, D. Michael Kelly,
SUGGS & KELLY LAWYERS, P.A., Columbia, South Carolina, for
Appellees.

                             OPINION

NIEMEYER, Circuit Judge:

   After all the federal claims were settled in this truth-in-lending
case, the district court remanded the State law claims to the State
court from which the case had previously been removed. We are pre-
sented with the question of whether the district court abused its dis-
cretion in doing so. In affirming, we reject the defendant’s argument
that the remaining State law claims could not be remanded to State
court on the ground that the parties asserting them joined the case
only after it had been removed to federal court.

                                   I

   Christopher and Susan Hinson commenced this class action in June
1995 in South Carolina State court against Norwest Financial South
Carolina, Inc. ("Norwest"), alleging that when they borrowed money
from Norwest on the security of a mortgage on their home, Norwest
failed to inform them "of their right to be represented by counsel of
their choice at the closing." They also alleged that misrepresentations
were made with respect to the stated rate of interest and the pay-off
amount and that Norwest otherwise failed to comply with South Caro-
lina’s truth-in-lending act. Their complaint alleged that this conduct
violated South Carolina statutory and common law.
            HINSON v. NORWEST FINANCIAL SOUTH CAROLINA                3
   Norwest removed this action to the federal court based on its asser-
tion that one count stated a cause of action under the federal Truth in
Lending Act, 15 U.S.C. § 1601, et seq.

   After Norwest filed its answer in federal court, the Hinsons moved
to amend their complaint under Federal Rule of Civil Procedure 15(a)
to join seven additional parties plaintiff who were also borrowers of
Norwest, alleging that despite the fact that they did receive some
attorney preference information from Norwest, the notice, and other
actions taken by Norwest, did not comply with State law. Over Nor-
west’s objection, which was based on the futility of the new plaintiffs’
claims, the district court granted the motion to amend. In so ruling,
the court stated:

    From my experience most of the time when I [have] denied
    a motion to amend on futility, it has been a situation where
    the statute of limitations has clearly expired or the statute
    clearly does not provide right of action or something where
    it is a slam dunk. It is not going anywhere.

    Here it is pretty involved. You may well be right. You may
    convince me this form is acceptable even though it is not in
    the format drafted by the Department of Consumer Affairs.

In the context of that doubt, the court granted the motion to amend.

   Norwest and the Hinsons, as well as the class members whom they
purported to represent, then reached a settlement of their claims,
including the federal claim on which removal was based, leaving in
the case only the seven added plaintiffs, whose claims derived solely
from State law. After the settlement was approved, these seven plain-
tiffs filed a motion under 28 U.S.C. §§ 1367(c) and 1441(c) to remand
the case to State court, arguing

    that the case was initially removed on the basis of federal
    question jurisdiction; that the federal question and other
    claims of Christopher and Susan Hinson have since been
    compromised, settled and released with prejudice; and that
    State law predominates in the remaining causes of action of
    the above-named Plaintiffs.
4           HINSON v. NORWEST FINANCIAL SOUTH CAROLINA
The district court granted the motion and entered an order remanding
the case to the State court from which it was removed. In doing so,
the court concluded that the State law claims predominated, and it
rejected Norwest’s argument that the court lacked the power to
remand under 28 U.S.C. § 1447(c) because the motion to remand was
made more than 30 days after the filing of the notice of removal. The
court said that the 30-day limitation applied only to "motions to
remand on the basis of procedural irregularities in the process of
removal."

   Norwest appeals this ruling, contending that the district court
lacked the power to remand in the circumstances of this case. It also
challenges the district court’s related ruling that permitted the seven
new plaintiffs to join the federal action.

                                  II

   We begin with the question of whether we have jurisdiction to
review the district court’s remand order. Section 1447(d) of Title 28
provides, "An order remanding a case to the State court from which
it was removed is not reviewable on appeal or otherwise . . . ." But
this seemingly broad restriction on the appellate review of remand
orders is limited to remands based on the grounds specified in
§ 1447(c), authorizing remands based on a defect in the removal or
on a lack of subject matter jurisdiction. See Quackenbush v. Allstate
Ins. Co., 517 U.S. 706, 711-12 (1996). Remand orders that are not
subsumed under the § 1447(d) prohibition may be appealed pursuant
to 28 U.S.C. § 1291, which provides for appeals of final judgments.
See Quackenbush, 517 U.S. at 715 (permitting appeal of an
abstention-based remand order under § 1291 and disavowing a previ-
ous decision’s broad statement that "an order remanding or removed
action does not represent a final judgment reviewable on appeal"
(quoting Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S. 336,
352-53 (1976)).

   Forecasting our holding below that the remand authority in this
case is not derived from § 1447(c), but is inherent in the authority of
a district court to decline to exercise jurisdiction under 28 U.S.C.
§ 1367(c), we conclude that we have jurisdiction to review the
remand order under 28 U.S.C. § 1291. And if the scope of this review
            HINSON v. NORWEST FINANCIAL SOUTH CAROLINA                   5
does not include the review of all orders entered before the remand
order, we would have pendent appellate jurisdiction to review the dis-
trict court’s earlier joinder order because that order is inextricably
linked to the outcome of the remand issue. See Roberson v. Mullins,
29 F.3d 132, 136 (4th Cir. 1994); see also Clinton v. Jones, 520 U.S.
681, 707 n.41 (1997) (citing Swint v. Chambers County Comm’n, 514
U.S. 35, 51 (1995)).

                                    III

   On the principal question of whether the district court had authority
to remand this case to State court, Norwest contends that the district
court lacked such power because the only parties remaining in the
case joined the action while the case was pending in federal court,
rather than State court, and when a plaintiff first files its claim in fed-
eral court, remand is not an option. See Carnegie-Mellon Univ. v.
Cohill, 484 U.S. 343, 351 (1988). Norwest also contends, again rely-
ing on Carnegie-Mellon, see id. at 357, that the district court abused
its discretion in failing to consider "the values of economy, conve-
nience, fairness, comity, and whether plaintiffs attempted to manipu-
late the forum" when it decided to remand the case. We address these
two points in order.

                                    A

   The Hinsons’ complaint, which was originally filed in South Caro-
lina State court, stated both a federal cause of action and State causes
of action arising out of the Hinsons’ loans from Norwest. Norwest,
relying on the federal claim, removed the case to federal court on the
basis of 28 U.S.C. § 1441(a), which provides for removal of civil
actions "of which the district courts of the United States have original
jurisdiction." The district court had jurisdiction over the Hinsons’
State law claims under 28 U.S.C. § 1367, which confers supplemental
jurisdiction over State law claims that "are so related to claims in the
action within such original jurisdiction that they form part of the same
case or controversy under Article III of the United States Constitu-
tion." And whether the federal-law claims and State-law claims are
part of the same case is determined by whether they "‘derive from a
common nucleus of operative fact’ and are ‘such that [a plaintiff]
would ordinarily be expected to try them all in one judicial proceed-
6           HINSON v. NORWEST FINANCIAL SOUTH CAROLINA
ing.’" Carnegie-Mellon, 484 U.S. at 349 (quoting United Mine Work-
ers v. Gibbs, 383 U.S. 715, 725 (1966)) (alteration in original).

   When, after the case had been removed to federal court, the district
court granted the Hinsons’ motion to amend to join seven additional
parties plaintiff, it must have relied on 28 U.S.C. § 1367(a) for its
jurisdiction over the newly joined plaintiffs’ claims because these
plaintiffs only alleged State law claims. See 28 U.S.C. § 1367(a) (pro-
viding, in part, that "supplemental jurisdiction shall include claims
that involve the joinder or intervention of additional parties"). Of
necessity, therefore, the Hinsons’ claims (originally filed in State
court) and the seven new plaintiffs’ State-law claims (added after the
case was removed to federal court) became part of one constitutional
case, at least if we assume that the district court properly joined the
seven new plaintiffs — an issue that we address below.

   The initial question we must resolve is whether the district court
had the judicial power to remand a removed case to State court after
the federal claims that formed the basis for removal had been adjudi-
cated or had dropped out of the case.

   The removal statute authorizes remand to State courts under sev-
eral specified circumstances. See 28 U.S.C. §§ 1441(c), 1447(c),
1447(e), 1452. But none appears to be applicable to this case. Section
1441(c) provides for remand of "matters in which State law predomi-
nates" when "a separate and independent claim or cause of action"
within federal question jurisdiction is joined with a non-removable
claim or cause of action and the entire case is removed. (Emphasis
added). That section does not, however, apply when pendent claims,
as distinct from "separate and independent claims," are involved,
because "pendent claims are not ‘separate and independent’ within the
meaning of the removal statute." Carnegie-Mellon, 484 U.S. at 354.
Section 1447(c) is also not applicable because it authorizes the grant
of remand motions filed within 30 days after removal for any defect
in the removal process other than subject matter jurisdiction and
motions filed at any time for lack of subject matter jurisdiction. In this
case, the parties do not assert any defect in the removal process, nor
do they claim that the district court lacked subject matter jurisdiction
over the case. Supplemental jurisdiction authorized the district court
to adjudicate the State pendent claims of the newly and properly
              HINSON v. NORWEST FINANCIAL SOUTH CAROLINA               7
joined plaintiffs even after the federal claim dropped out of the case.
See 28 U.S.C. § 1367(a) (extending supplemental jurisdiction to
joined parties). Similarly, § 1447(e), authorizing remand if the district
court permits joinder that would destroy subject matter jurisdiction is
not applicable to the circumstances before us. Finally, § 1452(b),
which applies only to specified bankruptcy matters, is not relevant
here.

   Indeed, the question of remand in this case relates more directly to
the district court’s exercise of supplemental jurisdiction over pendent
State claims. And on that issue, the Supreme Court has spoken
directly. In Carnegie-Mellon, the Court found federal courts to have
an inherent power to remand removed State claims when the federal
claims drop out of the case. The Court found that this power is "deriv-
[ed] from the doctrine of pendent jurisdiction." 484 U.S. at 355 n.11.
Rejecting as unduly restrictive the argument that when a federal court
determines that it will not decide pendent State claims it must dismiss
the case, the Supreme Court stated:

    Because in some circumstances a remand of a removed case
    involving pendent claims will better accommodate these
    values [of economy, convenience, fairness, and comity] than
    will dismissal of the case, the animating principle behind the
    pendent jurisdiction doctrine supports giving a district court
    discretion to remand when the exercise of pendent jurisdic-
    tion is inappropriate.

Id. at 351.

   Even though Carnegie-Mellon was decided before the doctrine of
pendent jurisdiction was codified in 28 U.S.C. § 1367, we neverthe-
less conclude that it continues to inform the proper interpretation of
§ 1367(c), which authorizes a district court in its discretion to "de-
cline to exercise supplemental jurisdiction" over a pendent State
claim. Because the statute is silent about how a district court declines
to exercise supplemental jurisdiction, the principles inherent in sup-
plemental jurisdiction, or pendent jurisdiction, as articulated by
Carnegie-Mellon, continue to apply. As the Court in Carnegie-Mellon
observed, a court may dismiss the claim or, if it was removed, remand
it to State court. See 484 U.S. at 357 ("We conclude that a district
8           HINSON v. NORWEST FINANCIAL SOUTH CAROLINA
court has discretion to remand to state court a removed case involving
pendent claims upon a proper determination that retaining jurisdiction
over the case would be inappropriate"). And the Court’s holding in
Carnegie-Mellon was not dependent upon any statutory grant of
authority, but upon the flexibility required in disposing of cases that
include pendent State claims.

   In reaching this interpretation of § 1367(c), we join the other courts
of appeals which unanimously have treated the remand power as
inherent in the statutory authorization to decline supplemental juris-
diction under § 1367(c). See, e.g., Hyde Park Co. v. Santa Fe City
Council, 226 F.3d 1207, 1209 n.1 (10th Cir. 2000); Hudson United
Bank v. Litenda Mortgage Corp., 142 F.3d 151, 157 (3d Cir. 1998);
St. John v. International Ass’n of Machinists & Aerospace Workers,
139 F.3d 1214, 1217 (8th Cir. 1998).

   Norwest argues that the claims of the seven individuals who joined
the case while it was pending in federal court may not be remanded
to State court because their claims had never been filed in State court.
They note that remands to State court are not available for cases filed
initially in federal court. See Carnegie-Mellon, 484 U.S. at 351. This
argument, however, improperly collapses the distinction between a
"case," on the one hand, and the claims of the parties to the case, on
the other. Even though parties to a "case" (or an "action") may change
during its prosecution in court through dismissal or joinder, the case
remains the same case that was opened when the complaint was filed.
And remand concepts apply to the "case" or "action," not to the par-
ties. See, e.g., 28 U.S.C. § 1447(c) ("A motion to remand the case . . .
must be made, etc.") in 28 U.S.C. § 1447(d) ("An order remanding the
case . . . is not reviewable, etc."). Indeed, § 1447(e) explicitly recog-
nizes the subject of remand as the "case" or "action" and not the par-
ties to it. Thus, the question is not whether these particular plaintiffs
were previously before the State court, but whether the case was pre-
viously before that court. Obviously, as Norwest recognizes, if the
case was not removed, it cannot be remanded. See Carnegie-Mellon,
484 U.S. at 351 (pointing out that a case originally filed in federal
court cannot be remanded to State court).

   In short, we conclude that under the authority of 28 U.S.C.
§ 1367(c), authorizing a federal court to decline to exercise supple-
            HINSON v. NORWEST FINANCIAL SOUTH CAROLINA                  9
mental jurisdiction, a district court has inherent power to dismiss the
case or, in cases removed from State court, to remand, provided the
conditions set forth in § 1367(c) for declining to exercise supplemen-
tal jurisdiction have been met.

                                    B

   Finding authority for the district court’s remand does not resolve
whether the district court abused its discretion in exercising its author-
ity. In the circumstances before us, however, we find no such abuse.

   The exercise of discretion in these circumstances involves two
overlapping decisions to be made by the district court — whether to
continue exercising federal jurisdiction over pendent claims and
whether to remand the case to State court. Section 1337(c) lists fac-
tors to inform the decision of whether to exercise federal jurisdiction
over pendent State claims, such as whether the State claims involve
novel or complex issues of State law; whether the State law claims
predominate; whether the federal claims justifying the court’s juris-
diction remains in the case; or other compelling reasons. And when
the exercise of this discretion involves the additional question of
whether to remand the case to State court, the federal court should
consider "principles of economy, convenience, fairness, and comity"
and whether the efforts of a party in seeking remand amount to a "ma-
nipulative tactic." Carnegie-Mellon, 484 U.S. at 357.

   Applying these factors to the case before us, it appears that several
support remand. The federal claim in this case had been disposed of
by settlement, and State claims predominated, as the district court
found. Moreover, the State claims involved interpretations of complex
South Carolina statutes on which there was no State precedent. These
facts also implicate the overriding issues of fairness and comity. In
these circumstances, we conclude that the district court did not abuse
its discretion in remanding the case to State court after the federal
claim had dropped from the case.

                                   IV

  As an alternative to its direct challenge of the remand order, Nor-
west also contends that the district court’s earlier ruling permitting
10          HINSON v. NORWEST FINANCIAL SOUTH CAROLINA
joinder of the seven new plaintiffs was an abuse of discretion and that
had the district court properly excluded the new plaintiffs, no case to
remand would have remained after settlement of the Hinsons’ claims.

   Norwest argues that even though the Hinsons’ motion to join seven
new plaintiffs in a proposed amended complaint was made under Fed-
eral Rule of Civil Procedure 15(a), in deciding whether to grant that
motion, the court was required to find the requirements of Federal
Rule of Civil Procedure 20 satisfied. Rule 20(a) permits the joinder
of parties if they claim relief "arising out of the same transaction,
occurrence, or series of transactions or occurrences, and if any ques-
tion of law or fact common to all these persons will arise in the
action." Norwest asserts that the district court did not consider Rule
20 and that if it had, it could not have found that the Rule’s require-
ments were satisfied.

   We agree with Norwest that a court determining whether to grant
a motion to amend to join additional plaintiffs must consider both the
general principles of amendment provided by Rule 15(a) and also the
more specific joinder provisions of Rule 20(a). See Desert Empire
Bank v. Insurance Co., 623 F.2d 1371, 1374 (9th Cir. 1980) (noting
that both Rule 15 and Rule 20 standards are implicated by a motion
to amend pleadings to add a new party). Indeed, satisfying the joinder
requirements is necessary to the court’s subject matter jurisdiction
under 28 U.S.C. § 1367(a).

   That does not mean, however, that the district court abused its dis-
cretion when it granted the Hinsons’ motion to amend. The joining
plaintiffs alleged that they participated in the same kind of transaction
in which the Hinsons had participated and that all the transactions
involved similar loans from Norwest. The joining plaintiffs also
alleged the same or similar types of violations committed by Norwest
in these transactions. Finally, it appears that similar principles of law
would have been applicable to both the original plaintiffs and the
joined plaintiffs. While it is true that the factual circumstances of each
transaction differed, we cannot say that it was an abuse of discretion
for the district court to have permitted the joinder.

  Norwest’s reliance on Saval v. BL Ltd., 710 F.2d 1027, 1031 (4th
Cir. 1983), is misplaced. First, the procedural posture of Saval was
            HINSON v. NORWEST FINANCIAL SOUTH CAROLINA               11
precisely opposite to that before us. Here we are reviewing a district
court’s decision permitting joinder. In Saval, the subject of review
was the district court’s decision denying joinder. The Saval court
went out of its way to disclaim any implication that a contrary deci-
sion would have been within the discretion of the trial court, even on
precisely the same facts. See id. at 1032 n.6.

   Second, even if it would have been an abuse of discretion to join
the Saval plaintiffs, the plaintiffs in this case have asserted claims
with a much higher degree of relatedness. In Saval, each plaintiff
brought a breach of warranty claim against the same defendant. How-
ever, the plaintiffs’ factual histories were so dissimilar from each
other that their claims might have required severance for trial. The
only similarity among the Saval plaintiffs was that each had relied on
the same advertisements before purchasing their allegedly defective
vehicles. By contrast, the plaintiffs in this case alleged that a series
of related transactions involving Norwest violate the same South Car-
olina statute in the same manner with respect to each plaintiff. The
joined plaintiffs all shared in common the allegation that they were
not advised properly of their attorney preference rights at the time
they borrowed money from Norwest. Most importantly, it is the pre-
cise commonality that allegedly constitutes a violation of the South
Carolina statute that provides a basis for their lawsuit.

  For the reasons given, we affirm the judgment of the district court.

                                                           AFFIRMED

LUTTIG, Circuit Judge, concurring:

   I am pleased to concur in all but Part IV of Judge Niemeyer’s opin-
ion. As to the question of whether the district court abused its discre-
tion in not considering Fed. R. Civ. P. 20(a) when it joined party-
plaintiffs, I would hold that it did not, because consideration of that
Rule was not required. In my view, a district court may allow an
amendment to join parties under Rule 15 (within the time periods per-
mitted thereunder) unconstrained by the limitations of Rule 20. See
generally 6 Charles Alan Wright et al., Federal Practice and Proce-
dure § 1479 (2d ed. 1990).