In cases where the relief being sought is equitable in nature or otherwise discretionary, federal courts not only have the power to stay the action based on abstention principles, but can also, in otherwise appropriate circumstances, decline to exercise jurisdiction altogether by either dismissing the suit or remanding it to state court.
The state insurance commissioner and trustee over assets of bankrupt insurance company sought an action seeking contract and tort damages against an insurance company for alleged breach of certain reinsurance agreements. The court remanded the case to state court but on appeal, United States Court of Appeals for the Ninth Circuit reversed the order. The reversal was premised on a holding that a federal district court could abstain from hearing a case only when equitable relief was sought.
Is a remand order a final decision and; does abstention allow remand if claims are equitable or discretionary?
The Court held a remand order was appealable as a final decision under 28 U.S.C.S. § 1291 because it put the litigants effectively out of court, it surrendered jurisdiction of a federal suit to a state court, it presented an important issue separate from the merits, amounted to a refusal to adjudicate the case in federal court, and could not be reviewed on appeal from a final judgment. The Court also held federal courts could dismiss or remand cases based on abstention principles only where the relief sought was equitable or otherwise discretionary, and consequently the remand order of the district court was unwarranted because petitioner sought damages. Accordingly, judgment that reversed the remand order was affirmed.