By Taylor Ey

Today, the Fourth Circuit issued its decision in a rehearing en banc in Barlow v. Colgate Palmolive Co.  Plaintiffs Barlow and Mosko brought separate actions in Maryland state court against Colgate Palmolive Company (“Colgate”) and other companies, asserting that defendants’ products had exposed them to asbestos.  Plaintiffs contended that Colgate’s “Cashmere Bouquet” line of powder makeup products contained harmful levels of asbestos which contributed to the Plaintiffs’ health issues.  Colgate sought to remove the actions to federal court, and the Plaintiffs moved to remand the cases back to state court.  The district court remanded the Plaintiffs’ cases back to state court.  Later, Colgate moved in district court for relief from Plaintiffs’ purported misrepresentations.  Colgate sought relief under Rule 11 of the Federal Rules of Civil Procedure, asking that the district court sanction Plaintiffs’ attorneys by imposing monetary penalties, referring them to the state bar, and awarding other appropriate penalties as the court saw fit.  Colgate subsequently moved for relief under Rule 60(b)(3), seeking vacatur of the remand orders.   The district court denied both motions, and Colgate appealed.  The Fourth Circuit affirmed the district court’s decision, and later granted Colgate’s petition for rehearing en banc.  The question before the Fourth Circuit was whether a district court retains jurisdiction to issue sanctions under Federal Rule of Civil Procedure 11 and to vacate a remand order under Rule 60(b)(3) following remand of the case to state court?

The Federal Removal Statute Is Not Implicated in This Case

To answer this question, the Court examined how these rules interplay with 28 U.S.C. § 1447(d).  Generally under this statute, courts are precluded from reviewing a remand order if the case was remanded for lack of subject-matter jurisdiction or for defects in the removal procedure.  However, the Fourth Circuit has recognized three exceptions to the statute.  First, when the remand was not based on a determination either that the court lacked subject-matter jurisdiction or that there was a defect in the removal procedure.  Second, when the review is of a “collateral decision that is [logically and factually] severable from the remand order” and that had a “conclusive effect upon the parties’ substantive rights.”  Third, when the district court exceeds the scope of its authority in issuing a remand order.  However, the Fourth Circuit determined that none of these exceptions applied in this case, and § 1447(d) was not implicated in this case.  Section 1447(d) does not prohibit vacating an order as prohibited by Rule 60(b)(3); it merely prohibits reviewing an order.

The District Court Retains Jurisdiction to Impose Sanctions After Remanding an Action to State Court

The Fourth Circuit cited case law from the Supreme Court, from sister circuits, and from the Fourth Circuit to support its conclusion that a district court has jurisdiction to impose sanctions once it has remanded an action to state court.  Federal courts may consider collateral issues after an action is no longer pending and Rule 11 sanctions are “collateral to the merits.”  The judicial system has an interest in having rules of procedure obeyed, and this exists even after a court is without subject-matter jurisdiction.

The Fourth Circuit Adopted the Eleventh Circuit’s Analysis When Deciding Whether Colgate Sought Vacatur Based Upon a Collateral Consideration

In Aquamar S.A. v. Del Monte Fresh Produce N.A., Inc., 179 F.3d 1279 (11th Cir. 1999), the Eleventh Circuit recognized that vacatur of a remand order does not necessarily constitute a proscribed review of a remand decision.  Vacatur may still be available even when “review, reconsideration, or examination” is precluded.  Therefore, if a court vacates a remand order for “reasons that do not involve a reconsideration or examination of its merits,” then there is no review of the order, and a court is still in compliance with § 1447(d)’s requirements.

Because Colgate sought vacatur and not reconsideration, the Fourth Circuit was not required to reassess the facts presented to the district court at the time of removal.  Colgate attacked the manner by which Plaintiffs sought remand orders because Colgate only argued that Plaintiffs’ counsel misrepresented the actual facts in the case.

The District Court Should Have Considered Colgate’s Motions on the Merits

The district court believed that it lacked jurisdiction to give full consideration on the merits of the Rule 60(b)(3) motions, and perhaps the Rule 11 motions.  However, on remand, the Fourth Circuit directed the district court to make findings, supported by reasoning, on whether the Plaintiffs engaged in misconduct while in federal court and whether Rule 11 sanctions should be applied.  The Fourth Circuit explained that the district court is in the best position to consider Plaintiffs’ counsel’s conduct and other pertinent facts to make the fact-specific legal determinations required under Rule 11.  The Fourth Circuit instructed that the district court should do the same for the Rule 60(b)(3) motions.

The District Court’s Orders Are Reversed and the Cases Are Remanded for the District Court to Rule on Colgate’s Rule 11 and Rule 60(b)(3) Motions on Their Merits

The dissent warned if the Supreme Court granted certiorari, it would reject the majority’s interpretation of 28 U.S.C. § 1447(d) because vacatur contravenes the mandate of the statute.