For The Defense, November 2012 - DRI Today

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Product Liability A Waivable Defect By Sara Deskins and Kathryn Isted Current Application of the Forum Defendant Rule Until the Supreme Court weighs in, defense attorneys representing forum defendants must be mindful of the circuit split and pay particular attention to the law in the jurisdictions in which they practice. The forum defendant rule prohibits defendants from removing to the federal courts when any defendant joined to a case is a citizen of the state where the case was filed. However, the circuit courts have split on whether a plaintiff waives the right to object to a violation of the forum defendant rule if the plaintiff does not file a motion for remand within 30 days after the filing of the removal notice. Generally, if a case has been improperly removed to a federal court, the federal court can remand the case at any time in the proceeding, including on appeal, if the court lacks subject matter jurisdiction. However, if a removal defect relates to the removal procedure, then the plaintiff must file the motion to remand within 30 days after the notice of removal was filed or the plaintiff has waived the right to correct the defect. The following article discusses whether the forum defendant rule is procedural, and thus waivable, or jurisdictional, and thus nonwaivable, the current state of law in the 11 circuits, and practical considerations for defense counsel addressing this issue. The Forum Defendant Rule Part (b) of the removal statute, 28 U.S.C. §1441, provides for removing cases from a state court to a federal court based on diversity of citizenship: A civil action otherwise removable solely on the basis of the jurisdiction under section 1332(a) of this title [diversity jurisdiction] may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought. 28 U.S.C. §1441(b)(2). Courts have interpreted this statutory language as imposing a “forum defendant rule” on cases removed from a state court on the basis of diversity jurisdiction. Herd v. Scotty’s Contracting & Stone, L.L.C., CIV.A. 09-313-KSF, 2009 WL 4016004, at *1 (E.D. Ky. Nov. 19, 2009). The forum defendant rule permits a defendant to remove a case from a state court based on diversity of citizenship “only if none of the parties in interest properly joined and served 50 ■ For The Defense ■ November 2012 ■ Sara Deskins and Kathryn Isted are associates in Greenberg Traurig’s Product Liability & Mass Torts and Pharmaceutical, Medical Device & Health Care Litigation Groups in Atlanta. Ms. Deskins and Ms. Isted have experience representing and defending pharmaceutical and medical device clients in federal and state courts, including experience with multi- district litigation and consolidated state court litigation. Ms. Deskins and Ms. Isted also have experience with mass torts, consumer class actions, and medical malpractice claims. In addition, Ms. Deskins is an active member of the DRI Young Lawyers Committee Publications Subcommittee.
as defendants is a citizen of the State in which such action is brought.” Regions Bank v. Am. Justice Sch. of Law, Inc., CIV A 5:08CV-134-M, 2009 WL 909548 (W.D. Ky. Mar. 30, 2009). The forum defendant rule generally prohibits a defendant from removing a case to a federal district court when the concern that underpins diversity jurisdiction—prejudice to one or more out-of-state defendants—are not present because a plaintiff chose to file the lawsuit in the defendant’s own home state courts. Ethington v. Gen. Elec. Co., 575 F. Supp. 2d 855, 858 (N.D. Ohio 2008); NFC Acquisition, LLC v. Comerica Bank, 640 F. Supp. 2d 964, 969 (N.D. Ohio 2009). If a removal of a case involves a forum state defendant, the case was not properly removed based on federal diversity jurisdiction. If the removal of the action then was a procedural defect, a plaintiff will have waived the right to fix the defect by not moving to remand the case within 30 days following removal. 28 U.S.C. §1447(c) (providing that a motion to remand based on a procedural defect “must be made within 30 days after the filing of the notice of removal”); Page v. City of Southfield, 45 F.3d 128, 133 (6th Cir. 1995) (holding that “§1447(c) does not authorize sua sponte remands for purely procedural defects.”). However, if this deficiency is deemed jurisdictional, then a court is obligated to remand the matter back to the state court. Id. (“If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.”); Probus v. Charter Commc’ns, LLC, 234 F. App’x 404, 406 (6th Cir. 2007) (“[c]ourts must examine subject matter jurisdiction ‘on their own initiative’”). Whether courts in a circuit generally interpret a violation of the forum defendant rule as jurisdictional or procedural can significantly affect a case and a defense strategy. However, the U.S. Supreme Court has not decided the issue, and the U.S. circuit courts interpret the rule differently. The First, Second, Third, Fifth, Seventh, Ninth, Tenth, and Eleventh Circuits hold that a violation of the forum defendant rule is procedural and thus waivable; the Eighth Circuit holds that a violation of the forum defendant rule is jurisdictional and thus not waivable; and the Fourth and Sixth Circuits have not decided. Applicable Supreme Court Precedent: Grubbs v. General Electric Credit Corp. Although the U.S. Supreme Court has not decided whether a violation of the forum defendant rule is jurisdictional or procedural, the Grubbs v. General Electric Credit Corp., 405 U.S. 699 (1972), decision is instructive. Circuit and district courts cite Grubbs and use the reasoning of Grubbs to support their holdings regarding the jurisdictional versus procedural interpretation. In Grubbs, General Electric Credit Corp. (GECC) filed an action in a state court against Grubbs and, subsequently, Grubbs filed a “cross- action” seeking damages from General Electric Co. (GE). Grubbs, 405 U.S. at 700. Later, Grubbs filed cross- actions against additional parties, one of which was the United States, because it claimed that the United States and the other parties were its creditors, and it sought to have the court determine the priority of its debts. Id. at 700–01. The United States removed the entire action to a U.S. district court under 28 U.S.C. §1444, which allows removal of a foreclosure action against the United States. Id. at 701. The U.S. district court tried the case without a jury. Id. The court awarded damages to Grubbs and held that the other parties take nothing by their actions. Id. at 702. At no time after the United States removed the action did Grubbs object to the U.S. district court taking jurisdiction over the entire action. Id. at 701. GECC appealed to the court of appeals, which found that removal of the entire action under 28 U.S.C. §1444 was improper and, thus, the court of appeals remanded the case to the state court. Id. at 702. Grubbs appealed the court of appeals’ remand to the U.S. Supreme Court. Id. The U.S. Supreme Court reversed the court of appeals remand order, holding that the district U.S. court had subject matter jurisdiction through diversity jurisdiction regardless of whether the case had been improperly removed under 28 U.S.C. §1444. Id. at 704. The U.S. Supreme Court explained that where after removal a case is tried on the merits without objection and the federal court enters judgment, the issue in subsequent proceedings on appeal is not whether the case was properly removed, but whether the federal district court would have had original jurisdiction of the case had it been filed in that court. Id. In other words, as long as subject matter jurisdiction exists, defects in the procedural mechanism for removing a case to a federal district court are waived if the case was decided by the district court on the merits. Whether courts in a circuit generally interpret a violation of the forum defendant rule as jurisdictional or procedural can significantly affect a case and a defense strategy. Circuit and district courts following Grubbs have used its holding and reasoning to support their decisions regarding whether the forum defendant rule is jurisdictional, and violating it results in a nonwaivable defect, or procedural, and violating it results in a waivable defect. For example, the Third Circuit found that the U.S. Supreme Court in Grubbs “clearly suggested, even if it did not directly hold, that it does not view the removal statute as imposing independent jurisdictional restrictions on the federal courts.” Korea Exchange Bank v. Trackwise Sales Corp., 66 F.3d 46, 50 (3d Cir. 1995). Likewise, the Ninth Circuit relies on Grubbs to distinguish between elements of removal procedure, which can be waived, and restrictions on a U.S. district court’s subject matter jurisdiction, which cannot be waived. See Lively v. Oats Markets, Inc., 456 F.3d 933, 942 (9th Cir. 2006). The U.S. District Court, Central District of California interpreted Grubbs as allowing a federal court to remand a case at any time on the basis of a removal statute violation “unless the matter has proceeded to judgment on the merits, and the federal court would have had subject matter jurisdiction had the case For The Defense ■ November 2012 ■ 51
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