The One Year Limit on Removal: an Ace Up the Sleeve of the Unscrupulous Litigant?

• Publication year: 2010

Georgia State University Law Review

Volume 24 , ,

Article 4

Issue 4 Summer 2008

3-21-2012

The One Year Limit on Removal: An Ace Up the Sleeve of the Unscrupulous Litigant?

Katherine L. Floyd

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Recommended Citation

Floyd, Katherine L. (2007) "The One Year Limit on Removal: An Ace Up the Sleeve of the Unscrupulous Litigant?," Georgia State

University Law Review: Vol. 24: Iss. 4, Article 4.

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THE ONE-YEAR LIMIT ON REMOVAL: AN ACE UP THE SLEEVE OF THE UNSCRUPULOUS LITIGANT?

Introduction

Consider this scenario: Plaintiff, a resident of Georgia, sues two defendants.¹ One defendant is a resident of Georgia, and the other defendant is a resident of Florida. When the plaintiff files the lawsuit, the plaintiff knows the damages will exceed the $75,000 minimum amount in controversy required for removal to federal court.³ However, the plaintiff states in the initial state court petition that the amount in controversy will be less than $75,000 but, after the one year statutory limit for removal has passed, plaintiff increases the amount in controversy to over $75,000 and dismisses the non-diverse defendant.⁴ Defendant immediately attempts to remove to federal court, but the one-year time limit on removal already expired.⁵ Should the defendant be allowed to remove despite the one-year time limit?⁶

Alternatively, assume that the plaintiff has a valid claim against the Georgia resident, but unbeknownst to the defendant, the plaintiff has no intention of pursuing the claim.⁷ Should the defendant be allowed to remove after the one-year time limit has expired?

As indicated by the above examples, "[i]t is no secret that plaintiffs often deliberately structure their state court lawsuits to prevent removal by defendants to federal court."⁹ The reason plaintiffs try to prevent defendants from removing to federal court is because,

1. See generally Foster v. Landon, No. 04-2645, 2004 U.S. Dist. LEXIS 22440 (E.D. La. Nov. 3 2004).

2. Id.

3. Id.

4. Id.

5. Id.

6. See discussion infra Part IV.

7. See generally Ardoin v. Stine Lumber Co., 298 F. Supp. 422 (W.D. La. 2003).

8. See discussion infra Part IV.

9. Laura J. Hines & Steven S. Gensler, Driving Misjoinder: The Improper Party Problem in Removal Jurisdiction, 57 ala. L. rev. 779,781 (2006).

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statistically, plaintiffs are more likely to win the case if it is tried in state court.¹⁰

Several jurisdictions have considered whether plaintiffs should be allowed to prevent removal through the use of strategic joinder or fraudulent joinder.¹¹ Strategic joinder occurs when a plaintiff joins a party, but has no intention of pursuing his or her claim against the party.¹² In contrast, fraudulent joinder occurs when the plaintiff joins a party against whom he or she has no claim. Courts disagree about the ability of a plaintiff to successfully prevent a defendant from removing by strategically or fraudulently joining a party.¹⁴

More importantly, courts remain split on the issue of whether the one-year time limit on removal stated in 28 U.S.C. § 1446(b) is subject to an equitable exception or whether it is an absolute bar to removal after one year from commencement of the action.¹⁵ Courts allowing an equitable exception focus on the fairness of allowing a defendant to remove compared to the unfairness of allowing a plaintiff to manipulate the forum.¹⁶ In contrast, courts interpreting the one-year time limit as an absolute bar focus on the plain language of the statute, the legislative reasoning behind the limitation, and Congress's ability to amend the statute if it so desires.¹⁷

This Note advocates adopting an equitable exception to the one-year limit on removal when a plaintiff joins a party, but has no intention of pursuing his or her claim against the party.¹⁸ Conversely, this Note advocates an absolute bar on removal after one year from

10. Kevin M. Clermont & Theodore Eisenberg, Do Case Outcomes Really Reveal Anything About the Legal System? Win Rates & Removal Jurisdiction, 83 cornell L. rev. 581, 606-07 (1998) [hereinafter Win Rates & Removal] (finding that removal in diversity cases reduces the plaintiffs' odds of winning from approximately even to about 39%, concluding that "[t]he residual 11% reduction represents the impact of forum.")-

11. See discussion infra Part III.

12. See discussion infra Part III.D.

13. See discussion infra Part III.C.

14. See discussion infra Part IV.

15. See discussion infra Part HI.

16. E. Kyle McNew, Are Rules Meant To Be Broken? The One-Year Two-Step in Tedford v. Warner-Lambert Co., 62 Wash. & Lee l. Rev. 1315, 1344 (2005).

17. Id. at 1345.

18. See discussion infra Part V.

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commencement of the action when the plaintiff joins a party against whom he or she has no claim.¹⁹ Part I describes the ability of a defendant to remove to federal court on the basis of diversity

9ft

jurisdiction. Part II describes the history of the one-year limit on removal and interprets the relevant language included in the statute.²¹ Part III discusses joinder of parties, including permissive joinder,

99

compulsory joinder, fraudulent joinder, and strategic joinder. Part IV examines various interpretations of 28 U.S.C. § 1446(b), focusing on whether the one-year limitation on removal is absolute or whether an equitable exception to the time limit is possible in certain situations. Finally, Part V encourages the United States Supreme Court to allow an equitable exception to the one-year time limitation in cases of strategic joinder while discouraging an equitable exception in cases of fraudulent joinder.²⁴

I. Removal Based on Diversity Jurisdiction: 28 U.S.C. § 1332

Defendants are allowed to remove an action from state court to federal court when diversity exists and the amount in controversy requirement is met²⁵ 28 U.S.C. § 1332 gives federal courts the power to adjudicate diversity cases.²⁶ However, this statute is subject to strict construction so that the power of state courts to decide their own controversies is not intruded upon.²⁷ Strict construction requires that removal only be allowed in clearly defined circumstances²⁸

19. See discussion infra Part V.

20. See discussion infra Part I.

21. See discussion infra Part II.

22. See discussion infra Part III.

23. See discussion infra Part IV.

24. See discussion infra Part V.

25. See 16 James Wm. Moore et al., Moore's Federal Practice § 107.03 (3d ed. 2006); and 28 U.S.C. §1332(a) (2000 & Supp. 2005).

26. 28 U.S.C. § 1332 (2000 & Supp. 2005).

27. City of Indianapolis v. Chase Nat'l Bank, 314 U.S. 63,76 (1941).

28. See id. All.

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A. Defining Diversity

Two types of diversity exist.²⁹ The first type, complete diversity, exists when "all plaintiffs are from different states from all defendants."³⁰ The second type, minimal diversity, only requires that "one plaintiff be a citizen of a different state from that of at least one defendant."³¹ In most cases, complete diversity is required for a federal court to hear a case. However, under some circumstances, a federal court has jurisdiction to hear a case despite the fact that only minimal diversity is present.

B. Purpose of Allowing Removal in Diversity Cases

One main reason for allowing removal in diversity cases is to alleviate the danger of prejudice to out-of-state residents in a foreign state court that the out-of-state resident might not otherwise encounter in their own local courts.³⁴ State judges are elected and have closer ties to their community; this creates the potential to influence the judges to make decisions favoring their local community. Federal courts do not have the same tie to a local community, so they are more neutral when making decisions.³⁶ Overall, diversity jurisdiction provides a neutral forum for the parties and helps avoid dangers of prejudice to defendants in out-of-state courts.³⁷

29. See 15 James Wm. Moore et al., Moore's Federal Practice § 102.12 (3d ed. 2006).

30. Id. (emphasis in original).

31. Id.

32. Id.

33. See 28 U.S.C. § 1367 (2000); Class Action Fairness Act of 2005, Pub. L. No. 109-2, 119 Stat. 4 (2005).

34. Stifel v. Hopkins, 477 F.2d 1116, 1125-26 (6th Cir. 1973); Galva Foundry Co. v. Heiden, 924 F.2d 729, 730 (7th Cir. 1991); see also John P. Frank, For Maintaining Diversity Jurisdiction, 73 yale L.J. 7, 12 (1963). See generally John P. Frank, The Case for Diversity Jurisdiction, 16 harv. J. on legis. 403 (1979).

35. See Class Action Fairness Act of 2005, P.L. No. 109-2 § 2(a)(4)(B), 119 Stat 4, 5 (2005).

36. Id.

37. China Basin Props., Ltd. v. Allendale Mut. Ins. Co., 818 F. Supp. 1301, 1304 (N.D. Cal. 1992).

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II. The One-Year Limit on Removal: 28 U.S.C. § 1446

Despite courts allowing defendants to remove diversity cases to federal court, "a case may not be removed . . . more than 1 year after commencement of the action."

A. History of the Statute

A one-year limitation on removal did not always exist.³⁹ Before enacting the one-year time limit, defendants could remove to federal court at any time during the course of the proceedings.⁴⁰ However, in 1988, Congress amended 28 U.S.C. § 1446(b) to include a one-year time limitation on removal⁴¹ This limitation imposed barriers that prevent defendants from removing at any time during the case.⁴²

B. Purpose of Amendments to the Statute

There are many reasons for the amendment to 28 U.S.C. § 1446 ⁴³ As discussed by Congress, the amendment was enacted in order to...