For The Defense, November 2012 - DRI Today
For The Defense, November 2012 - DRI Today
For The Defense, November 2012 - DRI Today
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as defendants is a citizen of the State in<br />
which such action is brought.” Regions<br />
Bank v. Am. Justice Sch. of Law, Inc., CIV<br />
A 5:08CV-134-M, 2009 WL 909548 (W.D.<br />
Ky. Mar. 30, 2009). <strong>The</strong> forum defendant<br />
rule generally prohibits a defendant from<br />
removing a case to a federal district court<br />
when the concern that underpins diversity<br />
jurisdiction—prejudice to one or more<br />
out-of-state defendants—are not present<br />
because a plaintiff chose to file the lawsuit<br />
in the defendant’s own home state courts.<br />
Ethington v. Gen. Elec. Co., 575 F. Supp. 2d<br />
855, 858 (N.D. Ohio 2008); NFC Acquisition,<br />
LLC v. Comerica Bank, 640 F. Supp.<br />
2d 964, 969 (N.D. Ohio 2009).<br />
If a removal of a case involves a forum<br />
state defendant, the case was not properly<br />
removed based on federal diversity jurisdiction.<br />
If the removal of the action then<br />
was a procedural defect, a plaintiff will<br />
have waived the right to fix the defect by<br />
not moving to remand the case within 30<br />
days following removal. 28 U.S.C. §1447(c)<br />
(providing that a motion to remand based<br />
on a procedural defect “must be made<br />
within 30 days after the filing of the notice<br />
of removal”); Page v. City of Southfield, 45<br />
F.3d 128, 133 (6th Cir. 1995) (holding that<br />
Ҥ1447(c) does not authorize sua sponte<br />
remands for purely procedural defects.”).<br />
However, if this deficiency is deemed<br />
jurisdictional, then a court is obligated to<br />
remand the matter back to the state court.<br />
Id. (“If at any time before final judgment it<br />
appears that the district court lacks subject<br />
matter jurisdiction, the case shall be<br />
remanded.”); Probus v. Charter Commc’ns,<br />
LLC, 234 F. App’x 404, 406 (6th Cir. 2007)<br />
(“[c]ourts must examine subject matter<br />
jurisdiction ‘on their own initiative’”).<br />
Whether courts in a circuit generally<br />
interpret a violation of the forum defendant<br />
rule as jurisdictional or procedural can significantly<br />
affect a case and a defense strategy.<br />
However, the U.S. Supreme Court has<br />
not decided the issue, and the U.S. circuit<br />
courts interpret the rule differently. <strong>The</strong><br />
First, Second, Third, Fifth, Seventh, Ninth,<br />
Tenth, and Eleventh Circuits hold that a<br />
violation of the forum defendant rule is<br />
procedural and thus waivable; the Eighth<br />
Circuit holds that a violation of the forum<br />
defendant rule is jurisdictional and thus<br />
not waivable; and the Fourth and Sixth Circuits<br />
have not decided.<br />
Applicable Supreme Court Precedent:<br />
Grubbs v. General Electric Credit Corp.<br />
Although the U.S. Supreme Court has not<br />
decided whether a violation of the forum<br />
defendant rule is jurisdictional or procedural,<br />
the Grubbs v. General Electric<br />
Credit Corp., 405 U.S. 699 (1972), decision<br />
is instructive. Circuit and district<br />
courts cite Grubbs and use the reasoning<br />
of Grubbs to support their holdings regarding<br />
the jurisdictional versus procedural<br />
interpretation. In Grubbs, General Electric<br />
Credit Corp. (GECC) filed an action<br />
in a state court against Grubbs and, subsequently,<br />
Grubbs filed a “cross- action”<br />
seeking damages from General Electric<br />
Co. (GE). Grubbs, 405 U.S. at 700. Later,<br />
Grubbs filed cross- actions against additional<br />
parties, one of which was the United<br />
States, because it claimed that the United<br />
States and the other parties were its creditors,<br />
and it sought to have the court determine<br />
the priority of its debts. Id. at 700–01.<br />
<strong>The</strong> United States removed the entire action<br />
to a U.S. district court under 28 U.S.C.<br />
§1444, which allows removal of a foreclosure<br />
action against the United States. Id. at<br />
701. <strong>The</strong> U.S. district court tried the case<br />
without a jury. Id. <strong>The</strong> court awarded damages<br />
to Grubbs and held that the other parties<br />
take nothing by their actions. Id. at 702.<br />
At no time after the United States removed<br />
the action did Grubbs object to the U.S.<br />
district court taking jurisdiction over the<br />
entire action. Id. at 701.<br />
GECC appealed to the court of appeals,<br />
which found that removal of the entire<br />
action under 28 U.S.C. §1444 was improper<br />
and, thus, the court of appeals remanded<br />
the case to the state court. Id. at 702.<br />
Grubbs appealed the court of appeals’<br />
remand to the U.S. Supreme Court. Id.<br />
<strong>The</strong> U.S. Supreme Court reversed the court<br />
of appeals remand order, holding that<br />
the district U.S. court had subject matter<br />
jurisdiction through diversity jurisdiction<br />
regardless of whether the case had<br />
been improperly removed under 28 U.S.C.<br />
§1444. Id. at 704. <strong>The</strong> U.S. Supreme Court<br />
explained that<br />
where after removal a case is tried on<br />
the merits without objection and the<br />
federal court enters judgment, the issue<br />
in subsequent proceedings on appeal<br />
is not whether the case was properly<br />
removed, but whether the federal district<br />
court would have had original jurisdiction<br />
of the case had it been filed in<br />
that court. Id.<br />
In other words, as long as subject matter<br />
jurisdiction exists, defects in the procedural<br />
mechanism for removing a case to<br />
a federal district court are waived if the<br />
case was decided by the district court on<br />
the merits.<br />
Whether courts in a circuit<br />
generally interpret a violation<br />
of the forum defendant<br />
rule as jurisdictional or<br />
procedural can significantly<br />
affect a case and a<br />
defense strategy.<br />
Circuit and district courts following<br />
Grubbs have used its holding and reasoning<br />
to support their decisions regarding<br />
whether the forum defendant rule is<br />
jurisdictional, and violating it results in<br />
a nonwaivable defect, or procedural, and<br />
violating it results in a waivable defect.<br />
<strong>For</strong> example, the Third Circuit found that<br />
the U.S. Supreme Court in Grubbs “clearly<br />
suggested, even if it did not directly hold,<br />
that it does not view the removal statute<br />
as imposing independent jurisdictional<br />
restrictions on the federal courts.” Korea<br />
Exchange Bank v. Trackwise Sales Corp.,<br />
66 F.3d 46, 50 (3d Cir. 1995). Likewise, the<br />
Ninth Circuit relies on Grubbs to distinguish<br />
between elements of removal procedure,<br />
which can be waived, and restrictions<br />
on a U.S. district court’s subject matter<br />
jurisdiction, which cannot be waived.<br />
See Lively v. Oats Markets, Inc., 456 F.3d<br />
933, 942 (9th Cir. 2006). <strong>The</strong> U.S. District<br />
Court, Central District of California interpreted<br />
Grubbs as allowing a federal court to<br />
remand a case at any time on the basis of a<br />
removal statute violation “unless the matter<br />
has proceeded to judgment on the merits,<br />
and the federal court would have had<br />
subject matter jurisdiction had the case<br />
<strong>For</strong> <strong>The</strong> <strong>Defense</strong> ■ <strong>November</strong> <strong>2012</strong> ■ 51