For The Defense, November 2012 - DRI Today

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
Ҥ1447(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
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