The Basics of Removal and Remand in South Carolina, 1114 SCBJ, SC Lawyer, November 2014, #25

• Author: Andrew R. de Holl.

The Basics of Removal and Remand in South Carolina

Vol. 26 Issue 3 Pg. 25

South Carolina BAR Journal

November, 2014

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0 Andrew R. de Holl.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0In 1995, this magazine published an excellent article outlining the basic requirements for removing a case to federal court and getting a case remanded to state court.^[1] But significant changes to removal and remand law over the past 19 years have made that article outdated. This article attempts to provide an updated, issue-based overview of removing cases from South Carolina state courts to the U.S. District Court in South Carolina, asking the federal court to remand the case to state court, and proceeding in those courts after removal and remand. Because this article is about the basics, it focuses only on the removal and remand of simple actions under 28 U.S.C. § 1441. It does not address the more specific removal statutes or the removal of class actions.²

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Removing the case

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Removing a case properly involves satisfying a number of factors, including standing, jurisdiction, timing, the involvement of other defendants, drafting, filing and service.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Who can remove—Only named defendants can remove a case.³ Plaintiffs and counterclaim defendants—parties brought into a case solely as defendants to a defendant's counterclaim—may not remove under § 1441(a).⁴ Most courts do not permit third-party defendants to remove, but district judges Henry Herlong and David Norton have noted there is minority position allowing a third-party defendant to remove "when the third party complaint asserts a separate and independent cause of action" against the third-party defendant.⁵

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Jurisdictional grounds—An action can be removed if it is one over which federal district courts have original jurisdiction.⁶ Generally, this means there must be federal question jurisdiction or diversity jurisdiction.⁷ The former exists when the complaint states a federal-law cause of action or a state-law cause of action that "necessarily raise[s] a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities."⁸

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The latter exists when the plaintiffs state of citizenship is different than that of every defendant and the amount in controversy in the case, excluding costs and interest, exceeds $75,000.⁹ In analyzing the diversity of the parties, the citizenship of defendants sued as "John Doe" or under other fictitious names must be ignored.¹⁰ Similarly, the citizenship of "sham" defendants—those joined just to frustrate diversity—may be disregarded; however, the burden of proving that a party is a sham defendant is very hard to meet.¹¹ "To show fraudulent joinder, the removing party must demonstrate 'either outright fraud in the plaintiffs pleading of jurisdictional facts' or that 'there is no possibility that the plaintiff would be able to establish a cause of action against the instate defendant in state court.'"¹² As to the amount in controversy, the general rule is that the sum demanded in the complaint, if any, controls.¹³ However, because South Carolina generally allows recovery of damages beyond the amount demanded in the complaint, a defendant may establish the amount in controversy, even if the plaintiff has demanded a different amount in the complaint.¹⁴

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0If diversity under § 1332(a) is the sole jurisdictional basis for removal, there is an additional hurdle to clear: if any "properly joined and served" defendant is a South Carolina citizen, the case cannot be removed.¹⁵ "[P]roperly joined" refers to fraudulent joinder.¹⁶ The "and served" language has created issues about whether, and when, defendants can remove cases involving forum defendants. For example, when a plaintiff sues a South Carolina defendant and an out-of-state defendant and serves the out-of-state defendant first, that served defendant can remove the case any time before the South Carolina defendant is served.¹⁷ Another issue is whether a South Carolina defendant who has not been served can remove a case.¹⁸

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0When to remove—A defendant must file the removal notice within 30 days after it is either served with the summons and complaint or waives service and receives the complaint.¹⁹ For the filing period to be triggered, either the defendant or its designated agent must be served. Service on a statutory agent does not start the 30-day removal period.²⁰

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The complaint may not always be the only document that triggers a removal period. If the complaint indicates that the case is not removable, but a later pleading, motion, order or other paper indicates that the case is or has become removable, the defendant must file the removal notice within 30 days after receiving that document.²¹ For example, if the case initially is not removable because the complaint indicates the amount in controversy does not exceed $75,000, information in the record and in discovery responses regarding the amount in controversy constitutes "other papers" that can start the 30-day period.²²

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0There is a caveat to this 30-day rule: a case cannot be removed on the basis of diversity jurisdiction more than one year after the summons and complaint are filed, "unless the district court finds that the plaintiff has acted in bad faith in order to prevent a defendant from removing the action."²³ A finding by the district court that the plaintiff deliberately failed to disclose the actual amount in controversy constitutes bad faith.²⁴ Other conduct can conceivably constitute bad faith. The Fourth Circuit has not addressed the bad faith exception, but district judges Joseph Anderson and Margaret Seymour have.²⁵

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The unanimity requirement—In cases with multiple defendants, "all defendants who have been properly joined and served must join in or consent to removal."²⁶ But there are several exceptions to this rule. First, nominal defendants— those who have no real interest in the outcome of the case—need not join or consent.²⁷ Second, and similarly, the consent or participation of fraudulently joined defendants is not required.²⁸ Third, defendants not served with process when the removal petition is filed do not have to join or consent.²⁹ And fourth, in cases involving both claims providing federal question jurisdiction and separate claims that either are outside the district court's original or supplemental jurisdiction or are otherwise nonremovable, defendants who are parties only to those separate claims providing no basis for removal do not have to join in or consent to removal.³⁰

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The unanimity requirement creates timing issues when defendants who must join are not served on the same date. Each defendant has 30 days after it is served to file a notice of removal.³¹ "If defendants are served at different times, and a later-served defendant files a notice of removal, any earlier-served defendant may consent to the removal even though that earlier-defendant did not previously initiate or consent to removal."³² Neither the Fourth Circuit nor the District of South Carolina has yet stated when, under this rule, an earlier-served defendant must consent to the removal. However, one district judge in Maryland has held consent must be given at the later of (1) when the notice of removal is filed or (2) 30 days after the defendant whose consent is required is served with process.³³

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Defendants can explicitly join in removal notices, or they can file separate documents expressing their consent to the removal. However, the process can be streamlined somewhat by having counsel for the removing defendant state unambiguously that he is s peaking for the other defendants and that they consent to removal.³⁴

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Drafting the removal notice—The notice must contain "a short and plain statement of the grounds for removal."³⁵ But because the removing party has the burden of establishing jurisdiction, and doubts about jurisdiction must be resolved in favor of remand, the grounds should not be stated in a conclusory fashion.³⁶ Perhaps because of that burden, the district court has developed some drafting rules. First, "[w]here a codefendant has not joined in a removal petition, the petitioning defendant must affirmatively explain the absence of his codefendant in the removal petition; otherwise, the removal petition is rendered defective."³⁷ Second, if diversity jurisdiction is a basis for removal, the notice must state the date on which the case was commenced.³⁸ And third, the caption must include all party names; do not use "et al."³⁹ Finally, if there are...