Removing Diversity Cases: The Thrill Is Gone, 0515 ALBJ, 76 The Alabama Lawyer 166 (2015)
| Author | By Patrick H. Sims |
| Position | Vol. 76 3 Pg. 166 |
By Patrick H. Sims
Over the last seven years, thanks to two decisions of the Eleventh Circuit Court of Appeals,
one decision from the United States Supreme Court and some related statutory changes, formulating a notice of removal in a diversity case has gone from an often frantic process to a very simple one. These changes are significant, and every lawyer who has removed a diversity case in the past should note the new framework.
Basic Diversity Removal Principles
A defendant’s ability to remove a lawsuit from state court to federal court is not a matter of Constitutional right. It is a federal statutory grant, and the chief relevant statutes are 28 U. S. C. §§ 1441 and 1446. There are several others that affect those two. Federal diversity jurisdiction is conferred by 28 U. S. C. § 1332, which vests in federal district courts jurisdiction of civil actions where the amount in controversy exceeds $75,000 and the controversy is between citizens of different states. For purposes of original diversity jurisdiction and removal, an individual is a citizen of the state in which he is domiciled1 and a corporation is a citizen of both the state in which it was incorporated and the state where its principal place of business is located.[2] The phrase “principal place of business” was fairly recently explained by the Supreme Court to mean (usually) the corporation’s “nerve center,” that is, where corporate headquarters are located and its executives make significant corporate decisions. Hertz Corp. v. Friend, 559 US 77, 130 S. Ct. 1181 (2010).
Section 1441 (a) states that, in general, any civil action filed in a state court that could have been filed originally in federal court may be removed to the appropriate federal district court. Section 1441 (b) adds a significant limitation on diversity removals: Even though there is complete diversity jurisdiction, such that a state-court case could have been filed in federal court, it may not be removed if there is a “local defendant”–that is, if any defendant “properly joined and served” is a citizen of the forum state, the action is not removable. There are other types of cases that might otherwise be removable under diversity, notably workers’ compensation cases, that are declared non-removable by 28 U. S. C. § 1445 (c).
The procedure for removal is set out in 28 U. S. C. § 1446. That section requires the filing of a notice of removal in the federal district court within 30 days of service on the defendant, which notice must contain “a short and plain statement of the grounds for removal.” Normally all served defendants must join in the removal. The notice must attach all pleadings, process and orders served on the defendant in the state action. There are provisions in § 1446 for cases that were not originally removable that become removable through later developments in the case. There is a one-year time limit on diversity-based removals.3 Other details of the removal process are discussed as needed below.
The Good Old Days
When B.B. King told us that the thrill was gone, he was not singing about events in a lawyer’s office.4 A different kind of “thrill” was associated with diversity based removals until quite recently, though. To appreciate fully the effect that recent decisions have had on removing cases to federal court, it is illuminating to consider the process before the recent changes took place.
Consider a hypothetical damage lawsuit filed in an Alabama circuit court in June 2008, before the first of the appellate cases alluded to above. There is a single plaintiff and three defendants, one of them a corporation. The complaint is in the basic form prescribed by one of the Official Forms appended to the Alabama Rules of Civil Procedure. That is significant because the complaint is a basic state-court complaint that does not contain the additional party residency/citizenship descriptions often found in state court complaints. These are not required by the Alabama Rules of Civil Procedure. After the complaint is filed, a lawyer for one of the defendants typically receives the complaint from her client, or its insurance carrier. That’s when the stress begins for the lawyer seeking to remove the case to federal court.
Despite the conservative tenor of the decisions of the Alabama Supreme Court this century, most corporate defendants, their lawyers and their insurance companies seek to flee state counsel by removal to federal court despite the general perception that federal court litigation is more complicated, more expensive and beset by needless rigmarole. In accord with that premise, the removing lawyer’s first action would probably be to review the last page of the complaint to see if there was a quantified ad damnum prayer. Though Ala.R.Civ.P. 8 (a)(2) requires a complaint to contain “a demand for judgment for the relief the pleader seeks,” no dollar demand needs to be specified in a state court complaint. Accordingly, a lawyer preparing a complaint might try to avoid removal by not demanding a specific amount (at least not one exceeding $75,000). In that case, the defense lawyer would likely find only a prayer for “such compensatory and punitive damages as the jury may impose.”
Next, the removing lawyer would need to know, from her client or from the insurance company, and would confirm with the circuit clerk, when service occurred and, thus, how many of her 30 days were remaining. Critically, because there were two other defendants involved, she needed to know when those other two defendants were served, because in June 2008 there were numerous decisions from Alabama federal district courts holding that a single 30-day removal window applied to all defendants, which started running when the first defendant was served.5 So our defense lawyer’s removal opportunity might have vanished even before she received the complaint.
Then, assuming the removal was not time-barred, she still had to sort out, during her remaining time, the questions of jurisdictional amount and actual diversity of citizenship. The complaint probably told her essentially nothing about either subject. Her burdens as to both...
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