Federal Circuit Holds that the America Invents Act (AIA) Does Not Override Section 1447(d)'s Bar on Review of Orders Remanding Patent Cases to State Court

? Preston et al. v. Nagel et al. (Fed. Cir., June 1, 2017) (before Dyk, Taranto, and Hughes, J.) (opinion for the Court, Hughes, J.)

When a law suit involving both state-law and patent-law causes of action is removed to federal court, allowing the federal court to simultaneously adjudicate all of the issues would promote judicial efficiency and potentially avoid inconsistent judgments.  However, because federal law places certain restrictions on the ability of federal appellate courts to review orders of lower courts, it is often necessary to file separate law suits in order to address state-law and patent-law causes of action.  In Preston v. Nagel, the Federal Circuit was asked to create an exception to a federal law that limits appellate review of a district court’s order to remand a case back to state court.

28 U.S.C. § 1447 governs civil procedure of a case removed from a State court to a federal district court.  Section 1447(a) states that “[i]n any case removed from a State court, the district court may issue all necessary orders and process to bring before it all proper parties whether served by process issued by the State court or otherwise.”  Section 1447(d) below addresses whether an order remanding a case back to the State court may be reviewed on appeal.

(d) An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise, except that an order remanding a case to the State court from which it was removed pursuant to section 1442 or 1443 of this shall be reviewable by appeal or otherwise.

Thus, under the plain language of Section 1447(d), orders remanding a case to a State court are not reviewable unless the case was removed to the federal court pursuant to either Section 1442 (actions brought against federal officers or agencies) or Section 1443 (civil rights cases).  Under existing precedent, Section 1447(d) precludes review only of remands for lack of subject matter jurisdiction and for defects in the removal procedure.[i]

In Preston v. Nagel the Federal Circuit held that the America Invents Act (AIA) does not override Section 1447(d)’s bar on review of an order to remand a patent case to State court.

Preston sued Nagel in Massachusetts Superior Court alleging state-law claims.  Nagel filed counterclaims under the Declaratory Judgement Act seeking declarations of non-infringement of several patents held by the plaintiff.  Nagel also removed the case to the U.S. District Court for the District of Massachusetts under Sections 1441 and 1454 (the patent removal statute).  After Preston moved to remand the case back to State court, the District Court determined that it lacked subject-matter jurisdiction and granted Preston’s motion.  Nagel appealed the District Court’s order to remand to the Federal Circuit.

In spite of Section 1447(d)’s bar against review of the District Court’s order to remand, Nagel argued that an exception exists “where, as here, defendants invoked § 1454 to remove patent claims over which federal courts have exclusive jurisdiction.”  In support of this argument, Nagel relied on Osborn v. Haley, 549 U.S. 225 (2007), to argue that the AIA overrides Section 1447(d)’s bar.

The Federal Circuit disagreed and held that the AIA did not create an exception to the Section 1447(d) bar for cases that were removed to federal court under Section 1454.

In rendering its decision, the Federal Circuit found that the exception to Section 1447(d) that was created by the Supreme Court in Osborn v. Haley was narrow and only applied to extraordinary circumstances in which Congress intended cases to be shuttled in just one direction—from state to federal court.  The Federal Circuit disagreed with Nagel’s contention that provisions[ii] included in the AIA to address the Supreme Court’s decision in Holmes Group, Inc. v Vornado Air Circulation Systems, Inc.[iii] should be read as to apply an exception to the Section 1447(d) bar for cases that were removed to federal court under Section 1454. 

Although Nagel argued that applying the Section 1447(d) bar to patent cases would deprive him of the opportunities to have his claims heard on the merits in any forum (given that a state court lacks jurisdiction to address patent claims), the Federal Court pointed out that Nagel could file a separate federal declaratory judgment action, any final decision of which would be reviewable on appeal.  As explained below by Court, the Federal Circuit refused to create an exception to the presumption of remand non-reviewability—even though doing so could promote important interests such as efficiency and avoiding inconsistent judgments.

To the extent the AIA prefers that closely related state-law claims and patent-law counterclaims be heard together, it does not follow that we have jurisdiction to review remand decisions that require such claims to be pursued in separate forums.  . . .  Though hearing the state-law and patent-law claims together may promote important interests such as efficiency and avoiding inconsistent judgments, we are not persuaded that the AIA commands us to favor these interests over § 1447(d) and the presumption of remand non-reviewability.  Had Congress sought to permit review of remands like the one at issue here, it certainly knew how to do so.  . . . Thus, we leave it to Congress to grant us reviewability here if it sees fit.