TOWNSQUARE MEDIA v. BRILL (July 21, 2011)

In 2002, creditors of several of Alan Brill's media companies forced them into bankruptcy. The bankruptcy court ordered the companies' radio stations sold. Regent Communications, Inc. was the successful bidder at the sale, although Brill also bid. After several years passed, Brill filed a 111-page complaint in Indiana state court against Regent and a number of other defendants, alleging both tort and contract claims based on state law. The gist of Brill's claim against Regent is that Regent used information obtained from Brill but subject to a confidentiality agreement to outbid Brill for the radio stations. Several of the defendants, creditors in the original bankruptcy case, removed the case to the bankruptcy court in the Southern District of Indiana. Before the bankruptcy court ruled, Brill filed an amended complaint in which Regent was the only defendant and the confidentiality agreement violations were the only claims. The bankruptcy court concluded that the amended complaint was not related to the bankruptcy case. The court therefore concluded that it had no jurisdiction over the case and remanded it to the Indiana state court. Chief Judge Young (S.D. Ind.) affirmed the remand order. Regent appeals.

In their opinion, Seventh Circuit Judges Posner, Kanne, and Rovner dismissed the appeal. The first question for the Court was whether the order was appealable. Under the Supreme Court's reading of § 1447 (the Seventh Circuit has held that the bankruptcy removal section is identical to § 1447), a case remanded for lack of subject matter jurisdiction is not appealable. Although the district court said it lacked jurisdiction, the Court disagreed. When the case was removed, the original creditors were still defendants and the case was challenging the confirmation of the plan. The case was therefore related to the bankruptcy case and within the court's jurisdiction. The Court then assumed, without deciding, that the bankruptcy court also acquired supplemental jurisdiction over the state law claims. The resolution of the federal claim (here by the filing of an amended complaint) did not eliminate the court's jurisdiction over the state law claims. It did create a situation in which the court had the discretion, depending on the number of factors, to keep or remand the claims. Under Carlsbad Technology, the remand of such state law claims is not a remand for lack of jurisdiction but simply a decision to relinquish supplemental jurisdiction. That would normally mean that the order is reviewable under § 1447. But that is not what happened in the bankruptcy court. Regent tried to keep the case in federal court on the ground that even the amended complaint's claims were within the bankruptcy court's jurisdiction -- and that argument was properly rejected by the lower courts. The Court concluded that it could review the order only if it could properly characterize the lower courts' orders as declining to exercise supplemental jurisdiction, despite the words used. The bankruptcy court was very clear in its order that the dismissal was for want of jurisdiction. The Supreme Court concluded in Kircher that an order unmistakably premised on lack of subject matter jurisdiction, even if clearly wrong, is not reviewable. The Court concluded that that was the case here, particularly since neither the courts nor Regent ever argued supplemental jurisdiction.