Cert in Kircher v. Funds Trust (05-409)

The Supreme Court on Friday agreed to hear Kircher v. Putnam Funds Trust (05-409). The question presented by the case is whether a party may appeal a district judge’s decision to remand a case to state court pursuant to the Securities Litigation Uniform Standards Act of 1998 (SLUSA).

SLUSA is designed to implement uniform federal standards for securities litigation by prohibiting any state or federal court from hearing certain “covered class actions” (class actions on behalf of more than fifty investors) under state statutory or common law. The statute accomplishes this goal by authorizing removal of state cases to federal court, where the district judge will decide whether SLUSA permits the action. If SLUSA permits the case to proceed, the judge remands the case to state court for further proceedings. If not, the judge dismisses the action.

The question presented here turns on the character of SLUSA’s remand provision. If the remand is for lack of subject matter jurisdiction, it is rendered unappealable by 28 U.S.C. § 1447. However, if the SLUSA remand provision is “not equivalent to” § 1447(d), the remand is reviewable by the Court of Appeals. The district judge here found that this case was a “covered class action” and then remanded the case because plaintiffs had not alleged a loss “in connection with the purchase or sale” of securities.

That remand, according to the Seventh Circuit, was substantive rather than jurisdictional. In addition, normal remands leave all substantive decisions to the state court, whereas SLUSA reserves one question to the federal judiciary. As such, the remand provision was “not equivalent to” § 1447(d) and the decision to remand was reviewable by the Court of Appeals.

By granting certiorari, the Supreme Court will address a significant split among the circuits over the appealability of remands under SLUSA. The case will be argued in April.