For The Defense, November 2012 - DRI Today

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Product Liability been filed in federal court.” WRS Motion Picture and Video Lab. v. Post Modern Edit, Inc., 33 F. Supp. 2d 876, 876 (C.D. Cal. 1999). Thus, the U.S. District Court, Central District of California determined the forum defendant rule to be jurisdictional consistent with Grubbs. Id. at 878. 52 ■ For The Defense ■ November 2012 The Majority Interpret Violating the Rule as Procedural Error Creating a Waivable Defect The majority of circuit courts, including the First, Second, Third, Fifth, Seventh, Ninth, Tenth, and Elevenths Circuits, hold that a violation of the forum defendant rule is procedural and, thus, waivable. See Farm Constr. Servs., Inc. v. Fudge, 831 F.2d 18, 22 (1st Cir. 1987) (holding that a violation of the forum defendant rule did not strip the district court of its jurisdiction because it was a “technical” defect that had been waived); Woddward v. D.H. Overmyer Co., 428 F.2d 880, 882–83 (2d Cir. 1970); Blackburn v. United Parcel Serv., Inc., 179 F.3d 81, 90 n.3 (3d Cir. 1999) (describing a §1441(b) violation as a waivable removal defect); Korea Exchange Bank v. Trackwise Sales Corp., 66 F.3d 46, 50 (3d Cir. 1995); In re Shell Oil Co., 932 F.2d 1518, 1523 (5th Cir. 1991); Hurley v. Motor Coach Indus. Inc., 222 F.3d 377, 380 (7th Cir. 2000) (holding that the forum defendant rule “is more a matter of removal procedure, and hence waivable, than a matter of jurisdiction”); Lively v. Wild Oats Markets, Inc., 456 F.3d 933, 940 (9th Cir. 2006) (describing removal by a forum defendant as a “technical” violation); Am. Oil Co. v. McMullin, 433 F.2d 1091, 1095 (10th Cir. 1970) (describing a §1441(b) violation as a waivable defect in removal proceedings); Pacheco de Perez v. AT & T Co., 139 F.3d 1368, 1372 n.4 (11th Cir. 1998); Borg- Warner Leasing v. Doyle Elec. Co., 733 F.2d 833, 835 n.2 (11th Cir. 1984). Although these circuits agree in interpreting the forum defendant rule as raising procedural issues, their procedural postures and rationales differ. For example, the First Circuit in Fudge relied on the plaintiff’s actions to determine “implicit consent” to federal jurisdiction. See Fudge, 831 F.2d at 22. In Fudge, the defendants removed the case to a federal court on the basis of diversity jurisdiction, and the federal district court rendered a final judgment dismissing the plaintiff’s complaint. See id. at 19. The removal was improper under the removal statute because the defendant was a citizen of the state where the action was filed. Id. at 22. The plaintiff appealed, arguing that the federal district court did not have jurisdiction to enter a judgment against it because “the parties acted upon a mutual mistake of law with respect to the propriety of removal to federal court.” Id. at 21. The First Circuit upheld the federal district court’s judgment, explaining that the plaintiff’s “prosecution of the case in federal court for approximately one year, and its failure to object to removal until after judgment had been rendered, constitute[d] implicit consent to federal court jurisdiction and waiver of its right to object to removal.” Id. at 22. The Third Circuit in Korea Exchange Bank, however, found that whether the case could have been filed initially in a federal court would determine the outcome. See Korea Exchange Bank v. Trackwise Sales Corp., 66 F.3d at 47. In Korea Exchange Bank, the plaintiff, a citizen of New York, filed a complaint in a New Jersey state court against three defendants, all citizens of New Jersey. See id. at 47. The first defendant that the plaintiff served, Trackwise Sales Corp., timely removed the action to a federal district court on diversity jurisdiction grounds. Id. Nothing happened in the case for over seven months after the federal district court sua sponte remanded the case due to violation of the forum defendant rule. Id. The defendants appealed the federal district court’s remand order. Id. The Third Circuit reversed, holding that “an irregularity in removal of a case to federal court is to be considered ‘jurisdictional’ only if the case could not initially have been filed in federal court.” Id. at 50 (emphasis added). The Third Circuit recognized in the holding that unlike in Grubbs, the federal district court in the Korea Exchange Bank case had not entered a final judgment. Id. Similar to Korea Exchange Bank, the Fifth Circuit in In re Shell Oil Co. based its holding on the language of the removal statute and the statute’s underlying policy. See In re Shell Oil Co., 932 F.2d at 1521–22. In In re Shell Oil Co., the plaintiffs moved for a remand 34 days after the filing of the defendants’ notice of removal, arguing that two of the defendants were citizens of the forum state. Id. at 1518. The federal district court granted the remand, and the defendants appealed. Id. The Fifth Circuit reversed the remand order, holding that “improper removal under §1441(b) is [] a waivable removal defect.” Id. at 1522. To support the holding the court relied on the text of 28 U.S.C. §1447(c), which states that “‘a motion to remand the case on basis of any defect in removal procedure must be made within 30 days after the filing of the notice of removal.’” Id. at 1521 (quoting 28 U.S.C. §1447(c)). The court explained that the “policy behind the rule is to prevent a party who is aware of a defect in removal procedure from using the defect as insurance against later unfavorable developments in federal court.” Id. at 1522. The Minority Interpret Violating the Rule as a Jurisdictional Issue Creating a Nonwaivable Defect The Eighth Circuit Court of Appeals is the only circuit court to hold expressly that failing to comply with the forum defendant rule is a jurisdictional issue thus creating a nonwaivable defect. See Hurt v. Dow Chem. Co., 963 F.2d 1142, 1146 (8th Cir. 1992). In Hurt, the plaintiff filed the lawsuit in a state court against the defendants for personal injuries allegedly resulting from exposure to pesticide manufactured and applied by the defendants. Id. at 1143. The defendants filed a petition to remove the case to the federal court on the basis of federal question removal jurisdiction. Id. The plaintiff moved to remand the case to the state court, arguing that the case was improperly removed on federal question grounds. Id. at 1143–44. The federal district court denied the plaintiff’s motion, holding that removal on federal question grounds was proper at the time of removal, and plaintiff “waived any non- jurisdictional objection to the impropriety of removal.” Id. at 1144 (quoting Hurt v. Dow Chem. Co., No. 90-0783-C (3), slip op. 3 (E.D. Mo. May 22, 1991)). The plaintiff appealed to the Eighth Circuit. Id. In the appeal, the sole question presented was whether removal was proper. Id. The defendants argued that removal was proper because a preemption defense arising under federal law gave the federal district court federal question jurisdiction and, in the alternative, the federal
district court had original diversity jurisdiction. Id. For the purposes of this article, only the court’s analysis regarding diversity jurisdiction is discussed. The parties agreed that when the plaintiff originally filed the action in the state court the parties were diverse. Id. at 1145. However, the defendants removed the case under 28 U.S.C. §1441, under which a defendant may not remove a case to a federal court on the basis of diversity jurisdiction if any of the defendants is a citizen of the state where the action was filed. Id. One of the defendants was a resident of the state from which the case was removed; thus, the federal district court did not have diversity jurisdiction when the case was removed. Id. The defendants argued that a violation of the forum defendant rule was merely a procedural defect and that the plaintiff, therefore, waived any right to object to the removal. Id. The Eighth Circuit examined Grubbs and found that it was factually distinguishable from the facts in Hurt. Id. The Eighth Circuit noted that in Grubbs neither party ever questioned the removal’s correctness until after the federal district decided the merits of the case; then the plaintiff appealed to the Fifth Circuit, without objecting to the removal in the federal district court, and Fifth Circuit then sua sponte questioned the federal district court’s jurisdiction and ultimately remanded the case. Id. at 1145–46. The Eighth Circuit found Grubbs inapplicable because the plaintiff in Hurt did object to the removal to the federal district court in that court, and “subjectmatter jurisdiction is not a mere procedural irregularity capable of being waived.” Id. at 1146. In a footnote, the Eighth Circuit reiterated that in the Hurt case “there is an absence of subjectmatter jurisdiction,” and “[a] jurisdictional defect, unlike a procedural defect, cannot be waived.” Id. at 1146 n.1. While the Eighth Circuit factually distinguished Grubbs from Hurt based on the Hurt plaintiff’s objection to the removal in the federal district court, it did not analyze thoroughly or explain why failing to comply with the forum defendant rule is a subjectmatter jurisdiction defect and not a procedural defect. Instead, the Eighth Circuit merely concluded that this type of violation was a subjectmatter jurisdictional defect. Undecided Circuits Answering whether violating the forum defendant rule creates a waivable defect while litigating a case in the Fourth or Sixth Circuit Courts of Appeal becomes a bit murkier. Neither circuit has definitely answered the question. District courts in each district have provided tentative but not definitive guidance. The federal district courts in the Fourth Circuit have found that the defect created by violating the forum defendant rule is procedural and waivable. See, e.g., Rehbein v. Biomet Orthopedics, LLC, Civil No. WDQ-12-1247, 2012 WL 2340000 (D. Md. June 15, 2012). On the other hand, federal district courts in the Sixth Circuit have found that violating the forum defendant rule creates a jurisdictional and nonwaivable defect. See, e.g., Regions Bank v. Am. Justice School of Law, No. 5:08CV- 134-M, 2009 WL 909548 (W.D. Ky. March 30, 2009). The Fourth Circuit District Courts—Procedural Defect The Fourth Circuit has not addressed whether violating the forum defendant rule results in a procedural or a jurisdictional defect. See Rehbein v. Biomet Orthopedics, LLC, Civil No. WDQ-12-1247, 2012 WL 2340000, at *2 n.11 (D. Md. June 15, 2012). However, several federal district courts in that circuit have weighed in on the issue and all have, thus far, concluded that violating the rule creates a procedural and waivable defect if a plaintiff does not raise an objection within 30 days. See, e.g., Ada Liss Group v. Sara Lee Branded Apparel, No. 1:06CV610, 2007 WL 634083, at *3–4 (M.D.N.C. Feb. 26, 2007); Councell v. HomerLaughlin China Co., 823 F. Supp. 2d 370, 379 (N.D. W.Va. 2011); Rehbein, 2012 WL 2340000, at *2. The most thorough analysis of the issue in the Fourth Circuit has come from the U.S. District Court, Northern District of West Virginia in the Councell case. 823 F. Supp. 2d 370 (N.D. W.Va. 2011). In Councell, the plaintiffs filed a lawsuit in a West Virginia state court for wrongful termination. Id. at 373. The parties were diverse, but the defendant had its principal place of business in West Virginia. Id. The defendant subsequently removed the case to the federal court on the basis of both federal question and diversity jurisdiction. Id. The plaintiffs filed a motion to remand, arguing that neither federal question nor diversity jurisdiction existed. Id. The plaintiffs specifically argued that diversity jurisdiction did not exist in the case because the defendant had its principal place of business in West Virginia, so the forum defendant rule precluded the lawsuit. Id. The defendant argued that the plaintiffs had The court explained that the “policy behind the rule is to prevent a party who is aware of a defect in removal procedure from using the defect as insurance against later unfavorable developments in federal court.” waived the forum defendant rule argument because they failed to file a motion to remand within 30 days of removal as required by 28 U.S.C. §1447(c). The federal district court evaluated “whether removal violative of the forum defendant rule is a procedural defect or amounts to a complete lack of subjectmatter jurisdiction.” Id. at 378. In evaluating this question, the court found that while the Fourth Circuit has not yet ruled on the issue, the majority of other federal circuit courts to address the issue “have found that removal by a forum defendant is a procedural defect, and thus waivable.” Id. The court also pointed to other district courts within the Fourth Circuit that had considered the issue and found a violation of the forum defendant rule to be procedural. Id. (citing Ada Liss Grp., 2007 WL 634083, at *3–4). In addition, the court found the rationale set forth by the Ninth Circuit in Lively v. Wild Oats Markets, Inc., 456 F.3d 933 (9th Cir. 2006), persuasive. Id. Specifically, the court agreed with the For The Defense ■ November 2012 ■ 53
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