                         RECOMMENDED FOR FULL-TEXT PUBLICATION
                              Pursuant to Sixth Circuit Rule 206
                                      File Name: 09a0288p.06

                 UNITED STATES COURT OF APPEALS
                                  FOR THE SIXTH CIRCUIT
                                    _________________


                                                   X
                                                    -
              Nos. 08-2068/2079
                                                    -
 SAGINAW HOUSING COMMISSION;
 DOES 1-300,                                        -
                           Plaintiffs-Appellees, -
                                                        Nos. 08-2068/2069/2079/2082

                                                    ,
                                                     >
                                                    -
                                                    -
           v.
                                                    -
                                                    -
 BANNUM, INCORPORATED,
                          Defendant-Appellant. -
                                                    -
                                                    -
                                                    -
                                                    -
              Nos. 08-2069/2082
 SAGINAW SCHOOL DISTRICT,                           -
                             Plaintiff-Appellee, -
                                                    -
                                                    -
                                                    -
           v.
                                                    -
                                                    -
                          Defendant-Appellant, -
 BANNUM, INCORPORATED,

                                                    -
                                                    -
 CITY OF SAGINAW,                                   -
                                     Defendant. -
                                                   N
                     Appeal from the United States District Court
                   for the Eastern District of Michigan at Bay City.
          Nos. 08-12148; 08-12154—Thomas L. Ludington, District Judge.
                                     Argued: April 23, 2009
                             Decided and Filed: August 17, 2009
                                                                                                     *
Before: MOORE and McKEAGUE, Circuit Judges; FORESTER, Senior District Judge.




        *
        The Honorable Karl S. Forester, Senior United States District Judge for the Eastern District of
Kentucky, sitting by designation.


                                                  1
Nos. 08-2068/2069/2079/2082          Saginaw Housing Comm’n et al.                Page 2
                                     v. Bannum, Inc.


                                 _________________

                                      COUNSEL
ARGUED: Russell C. Babcock, THE MASTROMARCO FIRM, Saginaw, Michigan,
for Appellant. Robert A. Jarema, SMITH BOVILL, P.C., Saginaw, Michigan, R.
Drummond Black, CURRIE KENDALL, PLC, Midland, Michigan, for Appellees.
ON BRIEF: Russell C. Babcock, Victor J. Mastromarco, Jr., THE MASTROMARCO
FIRM, Saginaw, Michigan, for Appellant. Robert A. Jarema, SMITH BOVILL, P.C.,
Saginaw, Michigan, R. Drummond Black, Peter A. Poznak, CURRIE KENDALL, PLC,
Midland, Michigan, for Appellees.
                                 _________________

                                      OPINION
                                 _________________

       McKEAGUE, Circuit Judge. Bannum, Inc. obtained a permit from the City of
Saginaw to build a halfway house in Saginaw. After Bannum received its permit, the
Saginaw Housing Commission and the School District of the City of Saginaw both filed
complaints in Saginaw circuit court seeking injunctions against Bannum’s construction
of the halfway house. Bannum removed both actions to the United States District Court
for the Eastern District of Michigan. The district court then remanded the School
District action back to state court because, as the City of Saginaw was also a defendant,
complete diversity was not satisfied. The district court also dismissed the Housing
Commission’s action based on Burford abstention. For the reasons set forth below, we
dismiss Bannum’s appeal with regard to the School District action (Nos. 08-2069, 08-
2082) and reverse and remand the action involving the Housing Commission (Nos. 08-
2068, 08-2079).

                                           I.

       Bannum, Inc. is a private corporation that regularly contracts with the Federal
Bureau of Prisons (“BOP”) to operate Residential Re-entry Centers (“RRCs”). Bannum
is incorporated in Kentucky and has its principal place of business in Florida. Bannum
Nos. 08-2068/2069/2079/2082                   Saginaw Housing Comm’n et al.                      Page 3
                                              v. Bannum, Inc.


runs RRCs in Alabama, Florida, Georgia, Mississippi, Nevada, North Carolina, and
Texas.

          RRCs are halfway houses to which the BOP transfers prisoners approaching their
release dates and probationers under supervised release. The BOP provides extensive
regulations for RRCs. The RRC allows those staying there to transition into the
community, finding places to live and work, while remaining subject to supervision by
the RRC. Bannum employees monitor and supervise those staying at the RRC, but
Bannum employees do not have weapons or uniforms. They also do not have the
authority to stop those staying at the RRC from leaving the facility. Unauthorized
excursions are instead reported to federal authorities.

          The BOP published notice that it would seek bids for a new RRC in Saginaw,
Michigan. Intending to submit a bid, Bannum contacted Saginaw city authorities to
determine how best to comply with local zoning ordinances. Bannum sent a letter to
John Stemple, the Zoning Development Coordinator for Saginaw. In the letter, Bannum
requested information on where in Saginaw it could locate an RRC. Stemple informed
Bannum that “[t]hese types of facilities are permitted as a special land use after approval
by the Planning commission in an M-1 Light Industrial Zoning District and they are
permitted by right in the M-2 General Industrial Zoning District.”

          Bannum purchased 2.2 acres of property at 2209 Norman Street in Saginaw in
order to construct the RRC. Bannum submitted a site plan review form to the Saginaw
Planning Commission on October 11, 2007. On October 23, 2007, the Planning
Commission held a public meeting and unanimously approved Bannum’s site plan.1
Bannum received its building permit on April 24, 2008. It then began construction on
its RRC in Saginaw. Id.

          On May 8, 2008, the Saginaw Housing Commission ( the “Commission”) and
three hundred unnamed plaintiffs filed a complaint against Bannum in the Saginaw

          1
              The approval order requested minor modifications to the order that are not relevant to this
appeal.
Nos. 08-2068/2069/2079/2082                 Saginaw Housing Comm’n et al.                         Page 4
                                            v. Bannum, Inc.


Circuit Court and sought a temporary restraining order and an injunction. SHC is a
Michigan non-profit municipal commission that “exists to develop and rehabilitate
affordable housing in Saginaw.” The complaint alleged that Bannum’s RRC violated
Saginaw zoning ordinances and that SHC would suffer irreparable harm if the RRC
operated at that location. The Saginaw Circuit Court granted the TRO on May 7, 2008.
On May 12, the circuit court held a hearing on the TRO. After the hearing, the circuit
court lifted the TRO.

         On May 15, 2008, the School District of the City of Saginaw (the “School
District”) filed a complaint in Saginaw Circuit Court. The complaint named Bannum
and the City of Saginaw (“City”) as defendants. It alleged that the RRC was a penal
institution and, as such, required a special use permit. The complaint alleged that
Bannum had not received a special use permit and that any construction or operation
without a special use permit was a nuisance per se. Based on these facts, the School
District alleged that the RRC would be a nuisance per se and a nuisance in fact. The
nearest school is about 750 feet away from Bannum’s property.2

         The School District also moved to consolidate its complaint against Bannum with
the Commission’s complaint against Bannum. Before the circuit court could act on the
motion to consolidate, Bannum filed a notice of removal in both the action brought by
the Commission and the action brought by the School District.

         Bannum’s notices of removal relied on diversity to establish the district court’s
subject matter jurisdiction. There was no issue regarding Bannum’s diversity from both
the Commission and the School District. However, in the School District complaint, the
School District had also named the City as a defendant. Bannum’s notice of removal
contended that the School District had fraudulently joined the City, and therefore the
City’s presence did not defeat diversity jurisdiction.



         2
          Bannum’s counsel asserts, on information and belief, that there are no residents near the Bannum
property and that several buildings and an elevated roadway separate the Bannum property from the
school.
Nos. 08-2068/2069/2079/2082           Saginaw Housing Comm’n et al.                 Page 5
                                      v. Bannum, Inc.


         Once the matter was before the district court, both the Commission and the
School District filed motions to return the matter to state court. The Commission’s
motion contended the district court should abstain, while the School District’s motion
sought a remand because the City’s presence in the action prevented the district court
from exercising subject matter jurisdiction. The Commission later sought to add the City
as a defendant in its complaint, alleging a due process violation. Bannum, meanwhile,
filed a motion to dismiss both claims.

       After a consolidated hearing, the district court found that the City was properly
joined in the School District’s complaint, defeating diversity jurisdiction, and that
abstention was appropriate with regard to the Commission’s action. Accordingly, the
district court remanded both cases to state court. In addition, it denied without prejudice
both the Commission’s motion to amend and Bannum’s motion to dismiss.

       Bannum filed a motion for reconsideration, which the district court denied.
Bannum then filed a notice of appeal.

                                            II.

       A district court lacks subject matter jurisdiction in a diversity action where the
parties are not completely diverse. Jerome-Duncan, Inc. v. Auto-By-Tel, L.L.C., 176
F.3d 904, 907 (6th Cir. 1999). However, “fraudulent joinder of non-diverse defendants
will not defeat removal on diversity grounds.” Coyne v. Am. Tobacco Co., 183 F.3d 488,
493 (6th Cir. 1999). Fraudulent joinder occurs when the non-removing party joins a
party against whom there is no colorable cause of action. Jerome-Duncan, 176 F.3d at
907. If the removing party does not demonstrate fraudulent joinder, the district court
must remand back to state court based on the lack of subject matter jurisdiction. Id.
Because a remand based on the absence of fraudulent joinder is based on a lack of
subject matter jurisdiction, such a remand is generally immune from appellate review.
Hernandez v. Seminole County, Fla., 334 F.3d 1233, 1237 (11th Cir. 2003); Garbie v.
DaimlerChrysler Corp., 211 F.3d 407, 409-10 (7th Cir. 2000); Am. Home Assurance Co.
v. Insular Underwriters Corp., 494 F.2d 317, 319 (1st Cir. 1974). Remands based on
Nos. 08-2068/2069/2079/2082            Saginaw Housing Comm’n et al.                Page 6
                                       v. Bannum, Inc.


a lack of subject matter jurisdiction are unreviewable even where the district court erred
in its assessment of its jurisdiction. Volvo Corp. of Am. v. Schwarzer, 429 U.S. 1331,
1333 (1976); Ohio v. Wright, 992 F.2d 616, 617 (6th Cir. 1993) (en banc).

          There are, however, several limited exceptions to the unreviewability of remands
to state court. See 28 U.S.C. § 1447(d). The only exception at issue in this appeal is
whether the district court made “a substantive decision on the merits of a collateral
issue.” See, e.g., Regis Assoc. v. Rank Hotels (Mgmt.) Ltd., 894 F.2d 193, 194 (6th Cir.
1990). Collateral issues under this exception include decisions such as abstention-based
remands and remands based on the interpretation of a forum selection clause. Dawalt
v. Purdue Pharma, L.P., 397 F.3d 392, 399 (6th Cir. 2005).

          Both the School District and the City are citizens of Michigan for purposes of
diversity. Bannum thus based its assertion of diversity on an allegation that the School
District had fraudulently joined the City as a defendant. The district court found that
there was no fraudulent joinder and remanded the School District’s claim to Saginaw
Circuit Court. As the remand order was based on the district court’s assessment of its
own jurisdiction, it is generally unreviewable regardless of whether it reached the correct
result.

          Bannum argues that one of the exceptions to the bar on reviewing remand orders
applies because the district court made substantive decisions on the merits of collateral
issues. Specifically, Bannum alleges “the District Court found that the School District
had a colorable case against the City of Saginaw” and that the Court addressed the issue
of standing. These arguments were part of the district court’s assessment of fraudulent
joinder. As such, they were part of a remand based on jurisdiction, not any sort of
collateral order. Compare Dawalt, 397 F.3d at 399. Therefore, the remand order is
unreviewable.
Nos. 08-2068/2069/2079/2082                 Saginaw Housing Comm’n et al.                        Page 7
                                            v. Bannum, Inc.


                                                  III.

         Abstention is “an extraordinary and narrow exception to the duty of a District
Court to adjudicate a controversy properly before it.” Answers in Genesis of Ky., Inc.
v. Creation Ministries Int’l, Ltd., 556 F.3d 459, 467 (6th Cir. 2009) (quoting Colorado
River Water Conservation Dist. v. United States, 424 U.S. 800, 813 (1976)). A district
court’s decision to abstain under Burford v. Sun Oil Co., 319 U.S. 315 (1943), is
reviewed de novo.3 Habich v. City of Dearborn, 331 F.3d 524, 530 (6th Cir. 2003).

         Burford abstention arose out of a conflict involving state oversight of oil fields
in Texas. The Supreme Court observed that, in certain cases, abstention “further[s] the
harmonious relation between state and federal authority” and that, when faced with an
equitable claim, federal courts “should exercise their discretionary power with proper
regard for the rightful independence of state governments in carrying out their domestic
policy.” 319 U.S. at 318, 332. In the case before it, an oil company challenged a state
administrative agency’s grant of a drilling permit to another oil company. 319 U.S. at
317. The Supreme Court found that the regulation of Texas oil fields was “as thorny a
problem as has challenged the ingenuity and wisdom of legislatures.” Id. at 318. The
nature of the oil fields required the fields to be regulated as units, and Texas vested
regulatory authority in the Texas Railroad Commission. Id. at 319-20. Texas required
all appeals from Texas Railroad Commission decisions be taken “to a state district court
in Travis County” and then, through appeals, to a state circuit court and the state
supreme court. Id. at 325. Given the complexity of oil field regulation, the unified
method Texas selected to regulate those fields, and the process provided for judicial
review, the Supreme Court held that district courts should abstain from hearing cases
challenging Commission decisions. Id. at 333-34.

         “[I]n Burford . . . dismissal was appropriate because the availability of an
alternative, federal forum threatened to frustrate the purpose of the complex

         3
          Though some previous opinions in this circuit apply an abuse of discretion standard, see, e.g.,
Caudill v. Eubanks Farms, Inc., 301 F.3d 658, 660 (6th Cir. 2002), de novo review is “the rule of the
circuit.” Habich, 331 F.3d at 530 n.2.
Nos. 08-2068/2069/2079/2082           Saginaw Housing Comm’n et al.                 Page 8
                                      v. Bannum, Inc.


administrative system that Texas had established.” Quackenbush v. Allstate Ins. Co.,
517 U.S. 706, 725 (1996). The Supreme Court has therefore summarized Burford
abstention as follows:

       Where timely and adequate state-court review is available, a federal court
       sitting in equity must decline to interfere with the proceedings or orders
       of state administrative agencies: (1) when there are “difficult questions
       of state law bearing on policy problems of substantial public import
       whose importance transcends the result in the case then at bar”; or
       (2) where the “exercise of federal review of the question in a case and in
       similar cases would be disruptive of state efforts to establish a coherent
       policy with respect to a matter of substantial public concern.”
New Orleans Pub. Serv., Inc. v. Council of City of New Orleans (“NOPSI”), 491 U.S.
350, 361 (1989).

       Burford abstention often protects “complex state administrative processes from
undue federal interference.” Id. That said, “it does not require abstention wherever
there exists such a process.” Id. “Because Burford abstention is concerned with
potential disruption of a state administrative scheme, rather than the mere existence of
such a scheme, looking behind the action to determine whether it implicates the concerns
of Burford is necessary.” AmSouth Bank v. Dale, 386 F.3d 763, 784 (6th Cir. 2004).
“The key question is whether an erroneous federal court decision could impair the state’s
effort to implement its policy.” Ada-Cascade Watch Co., Inc. v. Cascade Res. Recovery,
Inc., 720 F.2d 897, 903 (6th Cir. 1983).

                                           A.

       The question in this appeal is one of first impression in this circuit: whether a
federal court should abstain from a decision involving the interpretation of a local land
use ordinance. We find that it should not. Every case in which we have found Burford
abstention appropriate has involved evidence that federal involvement would disrupt a
coherent state policy. See Adrian Energy Assocs. v. Mich. Pub. Serv. Comm’n, 481 F.3d
414, 424 (6th Cir. 2007) (state utility regulation); Ellis v. Gallatin Steel Co., 390 F.3d
461, 480-81 (6th Cir. 2004) (state air pollution regulation); Caudill v. Eubanks Farms,
Nos. 08-2068/2069/2079/2082          Saginaw Housing Comm’n et al.                Page 9
                                     v. Bannum, Inc.


Inc., 301 F.3d 658, 665 (6th Cir. 2002) (state corporate dissolution procedures);
MacDonald v. Village of Northport, Mich., 164 F.3d 964, 968 (6th Cir. 1999) (state land
plat supervision); Coal. for Health Concern, 60 F.3d at 1194-95 (state hazardous waste
removal regulation); Ada-Cascade Watch Co., 720 F.2d at 904-05 (state hazardous waste
treatment regulation).

       This emphasis on state policy is in keeping with the Supreme Court’s emphasis
on the disruption of state regulatory processes. Burford repeatedly articulates the
purpose of abstention as facilitating the relationship between the federal government and
the states. It notes the importance of preserving “the rightful independence of state
governments in carrying out their domestic policy.”         Burford, 319 U.S. at 318.
Municipalities have no such independence. Municipalities, unlike states, “are not
themselves sovereign.” Town of Hallie v. City of Eau Claire, 471 U.S. 34, 39 (1985).
“[T]hey do not receive all the federal deference of the States that create them.” City of
Lafayette, La., v. La. Power & Light Co., 435 U.S. 389, 412 (1978) (plurality opinion).
The only authority they possess is derived from the state. See Cmty. Commc’ns Co., Inc.
v. City of Boulder, Colo., 455 U.S. 40, 53 (1982). Therefore, we find it appropriate to
look to state policy to determine if Burford abstention is warranted.

       While the presence of a state agency is not conclusive proof that Burford
abstention is appropriate, the Supreme Court has found that the presence of such a
process does indicate that a court should consider Burford abstention. NOPSI, 491 U.S.
at 361; County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 189 (1959) (“This
Court has also upheld an abstention on grounds of comity with the States when the
exercise of jurisdiction by the federal court would disrupt a state administrative
process.”); see also ERWIN CHEMERINSKY, FEDERAL JURISDICTION 805 (5th ed. 2007)
(“Burford abstention requires that the administrative system have a primary purpose of
achieving uniformity within a state and that there be the danger that judicial review
would disrupt the proceedings and undermine the desired uniformity.”).
Nos. 08-2068/2069/2079/2082                 Saginaw Housing Comm’n et al.                      Page 10
                                            v. Bannum, Inc.


         This emphasis on state administrative involvement is clear in our decisions on
Burford abstention. In most cases in which we have applied Burford, the creation of an
agency to promulgate and administer the state policy has served as evidence of the
state’s level of concern and of its desire for uniform application of the policy. See
Adrian Energy Assocs., 481 F.3d at 424; Ellis, 390 F.3d at 480-81; Coal. for Health
Concern, 60 F.3d at1194-95; Ada-Cascade Watch Co., 720 F.2d at 904-05.

         Where there is not an agency devoted to implementing the policy in question, we
have looked elsewhere for proof of state involvement. In Caudill, we found that the
extensiveness of the state statutory scheme governing corporations justified abstention
in cases seeking corporate dissolution. 301 F.3d at 665. In MacDonald, meanwhile, a
state statute provided that a party seeking to challenge a recorded plat must bring suit in
state circuit court and that the state treasurer, state director of the department of natural
resources, and the relevant township must all be joined. 164 F.3d at 968. The statute
provided for mandatory joinder of these parties to ensure that the state agencies and
townships would review both the plat and the challenge to it. See id. Further, if the suit
resulted in a change to a plat providing public access to a lake, the statute provided the
state an opportunity to take the property as an ingress or egress point. Id. These features
demonstrated that Burford abstention was appropriate. Id. Notably, while the statute at
issue provided for the joinder of the local township, our focus was on the state’s
interests–not those of the township.

                                                   B.

         Like MacDonald, there is both a state and local policy at interest here. And, like
MacDonald, we find it appropriate to focus on the state rather than the local policy. The
evidence of a coherent state policy here is minimal. The City of Saginaw drafted and
implemented the ordinances under the authority of the Township Zoning Act.4 See


         4
          Michigan has since replaced the Township Zoning Act with the Zoning Enabling Act. See
MICH. COMP. LAWS §§ 125.3101-125.3702. Like the Township Zoning Act, the Zoning Enabling Act
provides municipalities with the authority to create and implement zoning ordinances but does not provide
any substantive guidance in developing the ordinances. MICH. COMP. LAWS §125.3401.
Nos. 08-2068/2069/2079/2082                  Saginaw Housing Comm’n et al.                        Page 11
                                             v. Bannum, Inc.


MICH. COMP. LAWS §§ 125.271-125.310. The Township Zoning Act did not provide
substantive guidance for municipalities; instead, it provided localities the authority to
create zoning ordinances, subject to certain procedural protections not at issue here. See
MICH. COMP. LAWS § 125.271. The Township Zoning Act also did not create any state
administrative agency to implement the Township Zoning Act; instead, it left
administration of local zoning ordinances to the localities themselves.5 Id.

         The Township Zoning Act also does not display any other hallmarks of a
complex and uniform approach to land use issues. While the Township Zoning Act vests
appeals from zoning commissions in the local circuit courts, there is no provision for
mandatory joinder of any state official. Compare MacDonald, 164 F.3d at 968.
Similarly, state oversight of zoning is nowhere near as comprehensive as state corporate
law governing corporate dissolution. Compare Caudill, 301 F.3d at 665. Put simply,
while land use policy is undoubtedly of substantial public concern, there is no evidence
that the state’s interest in that policy has led to the type of coherent state policy that
would warrant Burford abstention.

                                                    C.

         Our decision in this case is consistent with the approach taken by the Third
Circuit in Heritage Farms, Inc. v. Solebury Twp., 671 F.2d 743, 747-48 (3d Cir.), cert.
denied, 456 U.S. 990 (1982). There, the court found Burford abstention inappropriate
for a claim based on a local land use ordinance when there was no indication that the
claim disrupted the policies in a state statute authorizing the development of local
ordinances and instead challenged “the application of those policies by a single
township.” Id. at 748. Like Michigan’s Township Zoning Act, the Pennsylvania statute
considered by the court in Heritage Farms embodied the state’s “policies and general
rules concerning municipal land development” but “delegat[ed] power to the


         5
          This feature also forecloses abstention under the first prong of Burford abstention as articulated
in NOPSI. See NOPSI, 491 U.S. at 361. As there is no question of state law at issue, there are no “difficult
questions of state law bearing on policy problems of substantial public import whose importance
transcends the result in the case then at bar.” Id.
Nos. 08-2068/2069/2079/2082            Saginaw Housing Comm’n et al.               Page 12
                                       v. Bannum, Inc.


municipalities” to enact and enforce local land use ordinances. Id. at 747. Noting that
“policies necessarily differ from municipality to municipality,” the court concluded that
“there is no uniform state policy for land use and development.” Id.

        We recognize that we previously have cited favorably the Fourth Circuit’s
decision in Pomponio v. Fauquier County Bd. of Supervisors, 21 F.3d 1319, 1327 (4th
Cir. 1994) (en banc), which held that “absent unusual circumstances, a district court
should abstain under the Burford doctrine from exercising its jurisdiction in cases arising
solely out of state or local zoning or land use law, despite attempts to disguise the issues
as federal claims.” See MacDonald, 164 F.3d at 969. However, our decision in
MacDonald cited Pomponio only in dicta. Furthermore, MacDonald did not involve a
local ordinance, and it cited Pomponio favorably for the importance of state land use
policy, not for Pomponio’s application of Burford abstention to local ordinances. Id.
We now find the Fourth Circuit’s approach unpersuasive as it applies to local zoning
ordinances.

        To summarize, we hold that Burford abstention applies only to statewide policies
and that the appropriate focus for Burford abstention is state policy, rather than local
policy. Additionally, we hold that the zoning dispute in this case does not implicate the
kind of coherent state policy that would warrant Burford abstention.

        Again, the Commission has not identified any evidence of a coherent state policy
or of how federal involvement would disrupt such a policy. Instead, the Commission’s
nuisance per se action only challenges the permit Bannum received from the City. The
dispute thus turns solely on the City’s interpretation of its own zoning ordinance–it does
not implicate any policies embodied in the Township Zoning Act or the Zoning Enabling
Act. See Heritage Farms, Inc., 671 F.2d at 747-48 (holding that Burford abstention was
inappropriate where suit implicated only a municipality’s zoning policies rather than any
policy embodied in the state zoning authorization statute). Therefore, we conclude that
the district court erred in abstaining in this case.
Nos. 08-2068/2069/2079/2082         Saginaw Housing Comm’n et al.               Page 13
                                    v. Bannum, Inc.


                                         IV.

       As the district court’s remand of the School District’s claim for lack of subject
matter jurisdiction is unreviewable by this court, we dismiss Bannum’s appeal in case
numbers 08-2069 and 08-2082. As Burford abstention was inappropriate for the
Commission’s claim, we REVERSE and REMAND for further proceedings in case
numbers 08-2068 and 08-2079.
