Monday, August 11, 2014

-- “review is unavailable no matter how plain the legal error in ordering the remand.” --

The underlying action in State of Vermont v. MPHJ Technology was an allegation by Vermont that MPHJ engaged in unfair and deceptive trade practices
under the Vermont Consumer Protection Act , stating that [patent demand] letters
contained threatening, false , and misleading statements.

StateAGMonitor had written about the district court decision by William K. Sessions (once Senator Leahy's campaign manager):

MPHJ removed the case to federal court (No. 2:13-cv-00170, D. Vt.), arguing that it involved issues of patent law implicating a federal question, as well as asserting that diversity existed between the State of Vermont and MPHJ.

Yesterday, Federal District Judge William K. Sessions III rejected those arguments and ordered the case back to Vermont state court. Judge Sessions rejected the diversity argument quickly, citing the well-established principle that a state is not a “citizen” for diversity purposes. He further held that the AG’s suit based on harm allegedly caused to individuals and businesses did not render those individuals and businesses “real parties-in-interest” for diversity purposes.

Next addressing the federal question argument, the Court held that the state’s complaint is based entirely on Vermont state law, not federal patent law.


While this decision stands as a victory for AG Sorrell, the case itself is far from over. As the Court noted, MPHJ has asserted constitutional and federal patent law defenses—as it also has in litigation against Nebraska AG Jon Bruning and the Federal Trade Commission seeking to invalidate enforcement actions similar to Vermont’s—that remain pending. The expected substantive decision on those issues will have a far-reaching impact not only on AG consumer protection authority, but on the broader national debate of striking the right balance to protect intellectual property, limit abuse of the judicial system, and encourage innovation and economic growth.

The issues before the CAFC:

Without deciding any other motions, the district court granted the State’s motion to remand. The district court stated that the complaint did not raise a substantial question of patent law, and that “the State is targeting bad faith conduct irrespective of whether the letter recipi- ents were patent infringers” or the patents were invalid. State of Vermont v. MPHJ Tech. Invs., LLC, No. 13-cv- 00170, slip op. at 14 (D. Vt. Apr. 14, 2014). The court pointed out that MPHJ’s preemption assertion was a defense to its allegedly unfair and deceptive practices, and that a defense cannot provide a basis for federal subject matter jurisdiction. See Metro. Life Ins. v. Taylor, 481 U.S. 58, 63 (1987).

MPHJ appeals the remand to state court, and has filed a petition for a writ of mandamus.

The analysis by the CAFC:

We start with the issue of appellate jurisdiction over this remand order. Section 1447(d) of Title 28 provides that:
An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise[.]
The Supreme Court has held that this provision ap- plies only to remands based on the grounds specified in § 1447(c)—namely, a defect in removal procedure or lack of subject matter jurisdiction. Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S. 336, 343–45 (1976). In Kircher v. Putnam Funds Trust, the Court stated that “we have relentlessly repeated that ‘any remand order issued on the grounds specified in § 1447(c) [is immunized from all forms of appellate review] . . . .’” Kircher, 547 U.S. 633, 640 (2006) (citing Thermtron, 423 U.S. at 351).

And the interesting point:

Section 1447(d) pre- cludes this court from second-guessing the district court’s jurisdiction determination regarding subject matter. If the § 1447(d) bar applies, “review is unavailable no mat- ter how plain the legal error in ordering the remand.” Briscoe v. Bell, 432 U.S. 404, 413 n.13 (1977) (citing Gravitt v. Sw. Bell Tel. Co., 430 U.S. 723 (1977)).

In the CAFC case, MPHJ appealed a remand to state court. The CAFC noted Section 1447(d) pre-
cludes this court from second-guessing the district court’s
jurisdiction determination regarding subject matter. The remand stands, even if the reasoning was faulty.


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