Defendant’s Third-Party Claims Remain Stayed in Federal Court While Plaintiff’s State Law Claims Remanded United States Court of Appeals, Fourth Circuit, October 24, 2017

MARYLAND — The plaintiff filed a complaint in the Circuit Court for Baltimore City, MD alleging state law claims arising from asbestos exposure against defendant/appellant Campbell-McCormick (CMC) and others. CMC subsequently filed a third-party complaint against GE and 12 other co-defendants for contribution. GE removed the case to the District of Maryland, asserting federal contractor defenses. The plaintiff filed a motion to sever and remand, and specifically requested the district court to decline to exercise supplemental jurisdiction of the plaintiff’s state law claims pursuant to 28 USC 1367(c).

The district court granted the plaintiff’s motion to sever and remand. However, they also retained jurisdiction over, and stayed CMC’s third-party claims. The court explained in their opinion that a declination is permitted only when the claim “substantially predominates over” the claim that accords original or removal jurisdiction. Thus, severance and remand is appropriate, because the plaintiff’s state law claims are superior to the federal contractor defense, which provided the original jurisdiction for this court, and which would only be relevant if defendants were found liable for the plaintiff’s state law causes of action. The court reasoned that no prejudice to the defendants arose out of their ruling, given that CMC and other defendants were not blocked from asserting contribution claims after a judgment was entered in the main action. CMC appealed, and the Appellate Court requested briefing on bases for appellate jurisdiction, specifically the collateral order doctrine.

CMC argued that a remand order based on the district court’s declination of supplemental jurisdiction is considered to be a final appealable decision because it either ends the federal matter on the merits, or it qualifies for review under the collateral order doctrine. Regarding the first contention, the Appellate Court found that the district court’s ruling was not a final decision, as the district court retained jurisdiction over, and stayed the third party claims. Then, they entertained CMC’s arguments on the collateral order doctrine, which argued that adjudication of the plaintiff’s claims in federal court would enhance fairness and judicial economy, and prevent inconsistent verdicts.

The collateral order doctrine encompasses a “small class of decisions which finally determine claims of right separable from, and collateral to, rights asserted in the action, too important to be denied review and too independent of the cause itself to require appellate consideration to be deferred until the whole case is adjudicated.” To qualify for collateral order review, an order must 1) conclusively determine a disputed question, 2) resolve an important issue completely separate from the merits of the action, and 3) be effectively unreviewable on appeal from final judgment. The Appellate Court keyed in on the “importance” requirement, and found that CMC was unable to demonstrate how the Appellate Court’s failure to review the district court’s order severing and remanding the plaintiff’s claims would “endanger ‘a substantial public interest’ or ‘some particular value of high order.’” The court stated that CMC’s right to keep the plaintiff’s state law claim in Federal Court “pales in comparison to those interests that have been deemed sufficiently important to give rise to collateral order jurisdiction,” and even to some interests (such as the attorney-client privilege) that have been ruled insufficiently important.” Appeal dismissed for lack of jurisdiction.

Read the full decision here.

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