Executive Software North America, Inc. v. United States District Court For The Central District Of California

Executive Software North America, Inc., Craig Jensen, and Sally Jensen ("Petitioners") petition this court for a writ of mandamus to compel the United States District Court for the Central District of California to retain jurisdiction over certain pendent state law claims filed in an employment discrimination suit against them by the plaintiff-real-party-in-interest, Donna Page. Petitioners1 contend that, in remanding the plaintiff's pendent state law claims, the district court misapprehended the scope of the supplemental jurisdiction statute, 28 U.S.C.A. Sec. 1367 (West Supp.1992), and failed to undertake the case-specific analysis required by that statute. In addition, Petitioners contend that, on a proper application of section 1367, a remand of their state law claims cannot be justified. Finally, Petitioners assert that mandamus is their only means of remedying this asserted error. For the reasons stated below, we grant the writ, but on narrower grounds than urged by the parties.

On April 8, 1993, Donna Page filed a complaint in state court against the petitioners. She claimed to have experienced several acts of discrimination during her employment with Executive Software. Specifically, Page, a black female, alleged that the company required all of its employees to study the teachings of the Church of Scientology written by L. Ron Hubbard. Page contends that when she refused to comply, she was charged with having made a number of errors in her work, and that when she attempted to contest the charges she was denied an opportunity to do so and was terminated. Page further asserts that the charges and subsequent termination were a mere "subterfuge for illegal discrimination against non believers in the Church of Scientology, women and racial minorities."

In her complaint, Page alleged two federal causes of action, (1) a claim under Title VII, 42 U.S.C. Sec. 2000(e) et seq. (1988), and (2) a claim under 42 U.S.C. Sec. 1983 (1988), as well as three state-law causes of action, including (1) a claim for unlawful religious and racial discrimination under the California Fair Employment and Housing Act ("FEHA"), Cal.Gov't Code Sec. 12940 (Deering 1982 & Supp.1992), (2) a claim of wrongful termination in violation of the California Constitution, Art. I Sec. 7(a), and (3) a claim for negligent supervision.

Based on the two federal claims, the defendants removed the action to federal court. Subsequently, on May 20, 1993, the district court issued an order sua sponte to show cause why the three state-law claims should not be remanded to state court. The court stated that "jurisdiction over the state claims depends upon whether this Court exercises its discretion to retain [them]," and admonished the parties to consider that "the Supreme Court defined the parameters of a federal court's supplemental jurisdiction in United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966)." After noting the requirements set forth in Gibbs for exercising supplemental jurisdiction, the Court added:

Even if [the Gibbs test is] met, however, a federal court has discretion to decline jurisdiction over state law claims if, for instance, the state claims substantially predominate, the state claims involve novel or complex issues of state law, trial of the state and federal claims together is likely to result in jury confusion, or retention of the state claims requires the expenditure of substantial additional judicial time and effort. [Gibbs, 383 U.S.] at 726-27 [86 S.Ct. at 1139-40]; see also 28 U.S.C. Sec. 1367(c); Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343 [108 S.Ct. 614, 98 L.Ed.2d 720] (1988).

The Removing Party(ies) should also be aware that this Court does not interpret the 1990 enactment of Section 1367 as restricting the discretionary factors set forth in Gibbs. Rather, this Court interprets Section 1367 as merely allowing this Court, at its discretion, to exercise jurisdiction over supplemental parties, which was previously foreclosed by Finley v. United States, 490 U.S. 545 [109 S.Ct. 2003, 104 L.Ed.2d 593] (1989).

The district court thereafter remanded the three state law claims, but provided no reasons.

This petition presents several issues. First, we must determine whether we may review the district court's order in this case and if mandamus properly is invoked. Second, we must determine whether the district court clearly erred in its interpretation and application of the supplemental jurisdiction statute, 28 U.S.C.A. Sec. 1367 (West Supp.1992), and if other factors counsel in favor of issuing the writ.

On its face, section 1447(d) of the Judicial Code would appear to bar review of the remand order in this case. That provision provides, with one exception not relevant here, that "[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise." 28 U.S.C. Sec. 1447(d) (1988). In Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S. 336, 96 S.Ct. 584, 46 L.Ed.2d 542 (1976), however, the Supreme Court held that section 1447(d) barred review only of those remand orders "issued under Sec. 1447(c) and invoking the grounds specified therein--that removal was improvident and without jurisdiction," id. at 346, 96 S.Ct. at 590; see also Gravitt v. Southwestern Bell Tel. Co., 430 U.S. 723, 723-24, 97 S.Ct. 1439, 1439-40, 52 L.Ed.2d 1 (1977) (per curiam) (finding unreviewable a remand order that purported to rely on Sec. 1447(c)). In this circuit, a district court's order remanding pendent state law claims on discretionary grounds is not considered one made pursuant to section 1447(c). See Lee v. City of Beaumont, 12 F.3d 933, 935 (9th Cir.1993); Sever v. Alaska Pulp Corp., 978 F.2d 1529, 1539 (9th Cir.1992).

In this case, the district court did not provide reasons for remanding the plaintiff's state law claims. In instances of ambiguity, this circuit "look[s] to the substance of the order to determine whether it was issued pursuant to section 1447(c)." Schmitt v. Insurance Co. of N. Am., 845 F.2d 1546, 1549 (9th Cir.1988). Here, the court retained jurisdiction over the federal claims asserted by the plaintiff, and we have held that asserting "original jurisdiction over at least one of the claims" "removes the possibility that a remand order is issued pursuant to section 1447(c)." Kunzi v. Pan Am. World Airways, Inc., 833 F.2d 1291, 1295 (9th Cir.1987). Accordingly, the remand order in this case is reviewable.

"Even though the order is reviewable, we may review the order only pursuant to the proper type of review." Lee, 12 F.3d at 935. The Supreme Court in Thermtron held that remand orders, because they are not "final judgment[s] reviewable by appeal" are properly reviewed by " 'mandamus to compel action, and not by writ of error to review what has been done.' " Thermtron, 423 U.S. at 353, 96 S.Ct. at 594 (quoting Railroad Co. v. Wiswall, 90 U.S. (23 Wall.) 507, 508, 23 L.Ed. 103 (1875)). We have recognized a narrow exception to the availability of mandamus when the remand order can be appealed as a "collateral order" under the doctrine of Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 1225-26, 93 L.Ed. 1528 (1949), see, e.g., Lee, 12 F.3d at 935-36 (citing Whitman v. Raley's Inc., 886 F.2d 1177, 1180 (9th Cir.1989)). If the order properly is appealable as a collateral order, then mandamus is barred. See, e.g., Survival Sys. v. United States Dist. Court, 825 F.2d 1416, 1418 (9th Cir.1987), cert. denied, 484 U.S. 1042, 108 S.Ct. 774, 98 L.Ed.2d 861 (1988); Pelleport Investors, Inc. v. Budco Quality Theatres, Inc., 741 F.2d 273, 276-78 (9th Cir.1984); see also Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 8 n. 6, 103 S.Ct. 927, 933 n. 6, 74 L.Ed.2d 765 (1983) ("[F]undamentally, a court of appeals has no occasion to engage in extraordinary review by mandamus 'in aid of [its] jurisdictio[n],' 28 U.S.C. Sec. 1651, when it can exercise the same review by a contemporaneous ordinary appeal."); cf. Badham v. United States Dist. Court, 721 F.2d 1170, 1171 (9th Cir.1983) ("[W]e may not exercise mandamus jurisdiction over an action which is subject to direct appeal." (citing Moses H. Cone)), cert. denied, 470 U.S. 1084, 105 S.Ct. 1844, 85 L.Ed.2d 143 (1985).

Petitioners contend that the collateral order doctrine is inapplicable because the district court did not resolve an issue of substantive law, but merely declined supplemental jurisdiction as a matter of discretion. Although we note that other circuits construe the collateral order doctrine in this context more broadly, see, e.g., Travelers Ins. v. Keeling, 996 F.2d 1485, 1489 (2d Cir.1993) (finding an order collateral if it "determines whether the dispute will be ... litigated in state court"), and more narrowly, see, e.g., Doughty v. Underwriters at Lloyd's, 6 F.3d 856, 862-64 (1st Cir.1993); Garcia v. Island Program Designer, Inc., 4 F.3d 57, 60 (1st Cir.1993); see also PAS v. Travellers, 7 F.3d 349, 352-53 (3d Cir.1993) (rejecting the doctrine altogether), in this circuit, to qualify as "collateral" the order must "resolve[ ] the merits of a matter of substantive law apart from any jurisdictional decision," e.g., Survival Systems, 825 F.2d at 1418 (emphasis added); Whitman, 886 F.2d at 1180. While we do not know the precise reasons that compelled the district court to remand the plaintiff's state law claims, the basis of the remand was clearly a discretionary refusal to entertain those claims. See Show Cause Order at 1 ("[J]urisdiction over the state claims depends on whether this Court exercises its discretion to retain [them]."). This is not a decision on a matter of substantive law apart from a jurisdictional decision. See Lee, 12 F.3d at 936.

In addition, Petitioners did not attempt certification through the mechanism provided by 28 U.S.C. Sec. 1292(b) before seeking mandamus.2 However, we do not believe seeking certification is a prerequisite for invoking mandamus. Even if the remand order meets the section 1292(b) criteria, the district court must agree to certify the order (a decision that itself is unreviewable), and the court of appeals must exercise its discretion to entertain the action before a section 1292(b) appeal can proceed. Clearly, this is not a "contemporaneous ordinary appeal," Cone, 460 U.S. at 8 n. 6, 103 S.Ct. at 933 n. 6 (emphasis added), that would turn the writ into a "substitute for appeal," e.g., Schlagenhauf v. Holder, 379 U.S. 104, 110, 85 S.Ct. 234, 238, 13 L.Ed.2d 152 (1964). Moreover, requiring an attempt to obtain certification before seeking mandamus would be contrary to our practice of occasionally treating appeals that fail to meet the strict requirements of the "collateral order" doctrine as writs of mandamus. See, e.g., Lee, 12 F.3d at 936; National Org. for Reform of Marijuana Laws v. Mullen, 828 F.2d 536, 541 (9th Cir.1987) (citing Hartland v. Alaska Airlines, 544 F.2d 992, 1001 (9th Cir.1976)); Price v. PSA, Inc., 829 F.2d 871, 873-74 (9th Cir.1987) (finding only mandamus appropriate when both a petition for the writ and an appeal under the collateral order doctrine were attempted), cert. denied 486 U.S. 1006, 108 S.Ct. 1732, 100 L.Ed.2d 196 (1988); see also Corcoran v. Ardra Ins. Co., Ltd., 842 F.2d 31, 35 (2d Cir.1988) (treating an improvident appeal as a writ of mandamus). The instances in which we have required section 1292(b) certification clearly have been based on prudential considerations. See, e.g., Mohasco Indus., Inc. v. Lydick, 459 F.2d 959, 960 (9th Cir.1972).

Finding no bar to our review of the petition, we turn to its merits.

II. Should Mandamus Issue?

Mandamus is an extraordinary remedy that may be obtained "only 'to confine an inferior court to a lawful exercise of its prescribed jurisdiction or to compel it to exercise its authority when it is its duty to do so.' " Will v. United States, 389 U.S. 90, 95, 88 S.Ct. 269, 273, 19 L.Ed.2d 305 (1967) (quoting Roche v. Evaporated Milk Ass'n, 319 U.S. 21, 26, 63 S.Ct. 938, 941-42, 87 L.Ed. 1185 (1943)). To issue the writ, the court must be " 'firmly convinced that the district court has erred,' " Valenzuela-Gonzalez v. United States Dist. Court, 915 F.2d 1276, 1279 (9th Cir.1990) (quoting Seattle Times v. United States, 845 F.2d 1513, 1515 (9th Cir.1988)), and that "the petitioner's right to the writ is 'clear and indisputable,' " id. (quoting Kerr v. United States Dist. Court, 426 U.S. 394, 403, 96 S.Ct. 2119, 2124, 48 L.Ed.2d 725 (1976)). Consequently, we review for clear error and not abuse of discretion. See, e.g., Survival Systems, 825 F.2d at 1418-1419 nn. 1-2; Badham, 721 F.2d at 1171 ("[O]n direct appeal we review the district court's order under an 'abuse of discretion' standard while under mandamus jurisdiction we employ a more stringent standard of review." (citation omitted)); cf. Schlagenhauf, 379 U.S. at 110, 85 S.Ct. at 238 ("The writ is appropriately issued ... when there is 'usurpation of judicial power' or a clear abuse of discretion[.]" (quoting Bankers Life & Cas. Co. v. Holland, 346 U.S. 379, 383, 74 S.Ct. 145, 148, 98 L.Ed. 106 (1953))).

This circuit has adopted five "objective principles," United States v. Harper, 729 F.2d 1216, 1221-22 (9th Cir.1984), for guiding determinations concerning when mandamus should issue: "(1) The party seeking the writ has no other adequate means, such as a direct appeal, to attain the relief he or she desires"; "(2) The Petitioner will be damaged or prejudiced in a way not correctable on appeal"; "(3) The district court's order is clearly erroneous as a matter of law"; "(4) The district court's order is an oft-repeated error, or manifests a persistent disregard of the federal rules"; and "(5) The district court's order raises new and important problems, or issues of law of first impression." Valenzuela-Gonzalez, 915 F.2d at 1279 (quoting In re Allen, 896 F.2d 416, 419-20 (9th Cir.1990) (quoting Bauman v. United States, 557 F.2d 650, 654-55 (9th Cir.1977))).

Although we have written of these five factors that "no single [one] is determinative," id. at 1279 (citing Bauman, 557 F.2d at 654-55), and that "all five factors need not be satisfied at once," id. (citing In re Cement Antitrust Litig., 688 F.2d 1297, 1301 (9th Cir.1982), aff'd mem. sub nom. Arizona v. Ash Grove Cement Co., 459 U.S. 1191, 103 S.Ct. 1173, 75 L.Ed.2d 425 (1983)), it is clear that the third factor, the existence of clear error as a matter of law, is dispositive, see Survival Systems, 825 F.2d at 1418 & 1419 n. 2 (finding all other factors irrelevant after concluding the district court's conclusions were legally correct); cf. Harper, 729 F.2d at 1222 (pointing out that the guidelines " 'are not meant to supplant reasoned and independent analysis by appellate courts' " (quoting In re Cement, 688 F.2d at 1301)). Accordingly, we first examine whether the district court clearly erred. After this discussion, we examine whether the other factors in the mandamus calculus point in favor of granting the writ.

A. Did the District Court Commit Clear Error?

The district court provided no reasons for its remand. However, in its Show Cause Order, the court stated that it did not "interpret Section 1367 as restricting the discretionary factors set forth in Gibbs. Rather, this court interprets Section 1367 as merely allowing this Court, at its discretion, to exercise jurisdiction over supplemental parties, which was previously foreclosed by Finley v. United States, 490 U.S. 545 [109 S.Ct. 2003, 104 L.Ed.2d 593] (1989)." In addition, the district court listed a number of factors that it took as illustrative of permissible bases for remanding pendent state law claims under Gibbs and its progeny, including whether "retention of the state claims requires the expenditure of additional judicial time and effort."

We find this interpretation of section 1367 erroneous. It is clear that, once it is determined that the assertion of supplemental jurisdiction is permissible under sections 1367(a) and (b), section 1367(c) provides the only valid basis upon which the district court may decline jurisdiction and remand pendent claims. Moreover, we conclude that although subsections (c)(1)-(3) appear to codify most preexisting applications of the Gibbs doctrine, subsection (c)(4), which also permits a court to decline jurisdiction when, "in exceptional circumstances, there are other compelling reasons," channels the district court's discretion to identify new grounds for declining jurisdiction more particularly than did preexisting doctrine. Accordingly, we conclude the district court erred to the extent that it relied on a basis for remanding pendent claims not permitted under section 1367(c). Finally, we conclude that, because the district court failed to articulate reasons for its remand of the pendent claims, we cannot determine whether the district court relied on a statutory ground and exercised its discretion in a permissible manner. Consequently, we conclude that the district court clearly erred.

1. The Gibbs Test and the Origins of Section 1367

United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966), broadly authorized the federal courts to assert jurisdiction over state law claims when "[t]he state and federal claims ... derive from a common nucleus of operative fact," the claims are such that a plaintiff "would ordinarily be expected to try them all in one judicial proceeding," and the federal issues are "substantial[ ]." Id. at 725, 86 S.Ct. at 1138. These three factors conferred power on the federal courts under Article III to hear the entire "constitutional" case. See id. The Court added critically, however, that:

[Such] power need not be exercised in every case in which it is found to exist. It has consistently been recognized that pendent jurisdiction is a doctrine of discretion, not of plaintiff's right. Its justification lies in considerations of judicial economy, convenience and fairness to litigants; if these are not present a federal court should hesitate to exercise jurisdiction over state law claims.... Needless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer-footed reading of applicable law.

Id. at 726, 86 S.Ct. at 1139 (citation and footnote omitted). The Court then described several scenarios in which declining to exercise power to entertain pendent state-law claims would be appropriate: (1) when "the federal claims are dismissed before trial"; (2) when "it appears that the state issues substantially predominate, whether in terms of proof, of the scope of the issues raised, or of the comprehensiveness of the remedy sought"; and (3) when separation of the state and federal claims is justified by "reasons independent of jurisdictional considerations, such as the likelihood of jury confusion." Id. at 726-27, 86 S.Ct. at 1139.3

Although some courts referred to these scenarios as the Gibbs "factors," e.g., Financial Gen. Bankshares, Inc. v. Metzger, 680 F.2d 768, 722-73 & n. 6 (D.C.Cir.1982), it is clear that they constituted merely illustrative applications of Gibbs 's animating values and were not meant to be exhaustive, see, e.g., Notrica v. Board of Supervisors, 925 F.2d 1211, 1213 (9th Cir.1991) (characterizing the first scenario described above as an "example" of the "proper discretionary exercise of pendent jurisdiction"). As the Supreme Court emphasized in Carnegie-Mellon University v. Cohill, 484 U.S. 343, 108 S.Ct. 614, 98 L.Ed.2d 720 (1988):

Under Gibbs, a federal court should consider and weigh in each case, at every stage of the litigation, the values of judicial economy, convenience, fairness, and comity in order to decide whether to exercise jurisdiction over a case brought in that court involving pendent state law claims. When the balance of these factors indicates that a case properly belongs in state court, as when the federal claims have dropped out of the lawsuit in its early stages, the federal court should decline the exercise of jurisdiction.... As articulated in Gibbs, the doctrine of pendent jurisdiction thus is a doctrine of flexibility, designed to allow courts to deal with cases involving pendent claims in the manner that most sensibly accommodates a range of concerns and values.

Id. at 350, 108 S.Ct. at 619 (citation and footnote omitted) (emphasis added);4 see also Hagans v. Lavine, 415 U.S. 528, 545, 94 S.Ct. 1372, 1383, 39 L.Ed.2d 577 (1974) (describing Gibbs as requiring courts to consider the values of "judicial economy, convenience, and fairness to the litigants" as well as comity in determining whether an exercise of discretion would be appropriate). Indeed, the Court in Carnegie-Mellon noted that Gibbs did not "directly address" the issue it faced: whether a court has discretion to remand, instead of dismiss, state law claims when it has determined that retaining jurisdiction is inappropriate. Id. at 351, 108 S.Ct. at 619-20. The Court found such an extension of the pendent jurisdiction doctrine justified by Gibbs 's underlying values:

[Gibbs ] establishes that pendent jurisdiction doctrine is designed to enable courts to handle cases involving state law claims in the way that will best accommodate the values of economy, convenience, fairness, and comity, and Gibbs further establishes that the Judicial Branch is to shape and apply the doctrine in that light.

Id. at 351, 108 S.Ct. at 619 (emphasis added).

Similarly, the Supreme Court's directive to test the appropriateness of pendent jurisdiction against the values of "economy, convenience, fairness, and comity" and its emphasis that the doctrine is one of "flexibility" led a number courts to decline pendent jurisdiction in situations not mentioned specifically in Gibbs. For instance, building on the statement in Gibbs that "[n]eedless decisions of state law should be avoided both as a matter of comity" and to provide the parties with "a surer-footed reading of applicable law," Gibbs, 383 U.S. at 726, 86 S.Ct. at 1139, some courts found it appropriate to decline pendent jurisdiction when the comity concerns embodied in abstention doctrines were implicated. See, e.g., United States ex rel. Small Business Admin. v. Pena, 731 F.2d 8, 15 (D.C.Cir.1984) ("Moreover, even when Gibbs has no application, pendent jurisdiction should sometimes be declined when local law issues are unsettled, complex, or novel."); see also Jones v. Fitch, 665 F.2d 586, 593 (5th Cir. Unit A 1982) (approving a remand of pendent state law cla