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Kircher v. Putnam Funds Trust

While the blogosphere was excited about the Court's shift on the exclusionary rule today, I was more interested in a case involving an esoteric interpretation of federal appellate jurisdiction. The unanimous Supreme Court opinion in Kircher v. Putnam Funds Trust is a good example of how federal liability reform often has a loophole that permits unfriendly judges to disregard it. I discussed SLUSA (and the now-reversed Seventh Circuit opinion in Kircher) when the Supreme Court decided Dabit earlier this year. SLUSA was passed to pre-empt plaintiffs' lawyers' use of state courts to evade the reforms of the PSLRA in securities litigation. If a plaintiff evaded federal jurisdiction by bringing a case in state court, the defendant could remove the case. (Larry Ribstein, Steve Bainbridge, and I also discussed the federalism implications of Dabit.)

The problem comes when a plaintiff-friendly district court simply ignores the federal law. In Kircher, the Southern District of Illinois improperly remanded a case back to state court. The Seventh Circuit reversed. Today, the Supreme Court interpreted 28 U.S.C. � 1447 to preclude appellate review of the erroneous remand order—even as it acknowledged the remand as erroneous and the state case as precluded by federal law. But, that's okay, the Supreme Court said: state courts are expected to follow Supreme Court precedent.

True, but the state court in this instance is in Madison County, Illinois, where courts have been quite able and willing to ignore federal law when it suits plaintiffs' interest. It will be fascinating to see whether the state court will have the chutzpah to refuse to dismiss this illegitimate case upon remand now that there is Supreme Court precedent directly on point. If the lower court refuses, it is a sound argument for Congress to take another look at the removal statutes, and fix the problem of unreviewable improper remands nullifying Congressional intent. And in any event, it's a reason why Congress needs to make the right of federal removal explicitly reviewable when it passes future reforms, as it did in the Class Action Fairness Act. Otherwise, a single federal district judge can act to assist plaintiffs' attorneys in evading federal reforms.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.