Late Pleading Amendment Prevents Federal Jurisdiction

• Date: 01 April 2024

Published i n Litigation New s Volume 49, Numbe r 3, Spring 2024 . © 2024 by the Ameri can Bar Asso ciation. Rep roduced with pe rmission. A ll rights rese rved. This inf ormation or any p ortion there of

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federal court declined to interfere with a state court’s

procedural ruling that prevented removal jurisdic-

tion. The state court’s ruling permitted the plaintiff

to amend his complaint in a manner that elimi-

nated diversity jurisdiction just days before the

defendant tried to remove the case. ABA Litigation Section

leaders agree with the federal court’s decision and caution

practitioners to promptly le notices of removal to avoid

pleading amendments that can terminate that right.

In Turner v. GoAuto Insurance Company, the plaintiff sued

his automobile insurance company in Louisiana’s 19th Judicial

District Court in East Baton Rouge Parish. He had totaled his

car in an accident and claimed that the defendant insurer paid

him less than his policy benet and less than what Louisiana

law required. After extensive pretrial activity, the plaintiff

amended his complaint to make it a class action. The class

consisted of all “residents of Louisiana” who were insured by

the defendant, had totaled their vehicles, and whose payments

were reduced by the specic adjustment at issue.

After several more months, the plaintiff again sought per-

mission to amend his complaint, this time to redene class

members as “citizens of Louisiana.” Two days after the plain-

tiff received permission to amend his complaint, the defen-

dant led a notice of removal to the U.S. District Court for

the Middle District of Louisiana alleging diversity jurisdiction

under the Class Action Fairness Act (CAFA).

CAFA grants subject matter jurisdiction for class actions to

federal courts when there is just minimal diversity. This occurs

when at least one class member is the citizen of a different

state than the defendant. This is a departure from the more

typical diversity jurisdiction where the state citizenship of all

plaintiffs must be diverse from all defendants.

As the defendant is a citizen of Louisiana, the plaintiff moved

to remand, arguing that the defendant could not show minimal

diversity when the class was limited to “citizens of Louisiana.”

By denition, no plaintiff could be a citizen of another state,

and therefore, all parties were citizens of Louisiana. The district

court agreed and denied the motion to remand. The defendant

appealed to the U.S. Court of Appeals for the Fifth Circuit.

The defendant argued that the amended complaint should

be disregarded because either it was not the operative com-

plaint or it should not have been. The defendant claimed the

Louisiana state court did not follow state law by allowing

the amended complaint. The Fifth Circuit was unpersuaded

because the state court had accepted the plaintiff’s amended

complaint before the defendant led the notice of removal.

More importantly, the circuit court noted that any action

on its part to review a state court’s procedural ruling made

before removal offends basic precepts of federalism, as well as

the jurisdictional parameters set forth in Article III, Section 2

of the U.S. Constitution. Federal courts ought not to interfere

with state court proceedings concerning matters of state law

except in extraordinary circumstances, the court reasoned.

In this ordinary case, the court of appeals would not guess at

how the state court should have ruled on a motion to amend

the complaint.

Litigation Section leaders are not surprised by the court of

appeals’ decision. “On the whole, I think the court got its role

right,” explains Jeffrey J. Greenbaum, Newark, NJ, cochair

of the Section’s Federal Practice Task Force. “A federal court

evaluating removal has no right to look into the proceedings

of the state court and second-guess its determination to allow

an amendment of the complaint,” he adds.

“Federal courts are courts of limited jurisdiction, and the

idea of removal is very much an exception to the concept

that a state court gets to decide issues of state law and oper-

ate free of interference from federal courts,” echoes Ian H.

Fisher, Chicago, IL, cochair of the Section’s Class Actions &

Derivative Suits Committee. “This case is interesting because

diversity jurisdiction, as it is laid out in the Constitution,

would not support removal at all. It is only with the act that

diversity jurisdiction was extended to allow minimal diversity

for class actions,” he elaborates.

Federal courts can review state court procedural rulings

in the instance of fraudulent joinder: the intentional joinder

of nondiverse defendants to frustrate diversity jurisdiction.

“Federal courts are permitted to look into the propriety of

adding a nondiverse defendant and have the power to look

beyond the actual pleading,” to the plaintiff’s intent, asserts

Fisher. “We don’t know if there was any manipulation in the

days before the second motion to amend was led,” remarks

Greenbaum. “If I got the sense that games were being played

to frustrate diversity, I would be arguing that in court.”

Finally, Section leaders urge diligence. “A defendant needs

to think about removal immediately upon being served with

the complaint,” cautions Fisher. “If additional information is

necessary to conrm that a case is removable, the defendant

should form a strategy for getting that information before any-

thing else.”

RESOURCES

28 U.S.C . § 1332

Wystan Ackerman, “Strategies for Removal un der the Class Action

Fairness Act,” Corp. Counsel (May 26, 2014).

Gregory C . Cook, ed., The Cla ss Action Fairness Act: La w and

Strategy (ABA 20 13).

Josh Jacobs on, “Who Qualif‌ie s as ‘Any Defendant’ und er the Class

Action Fairnes s Act?,” App. Prac . (Oct. 17, 2018).

Late Pleading Amendment Prevents

Federal Jurisdiction

By Frances Codd Slusar z, Litigation News Associat e Editor

SPRING 20 24 • VOL. 49 NO. 3

23 | ABA LITIGATION SECTIO N

CIVIL PROCEDURE UPDATE