For The Defense, November 2012 - DRI Today

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Product Liability If a forum defendant is considering removal to a federal district court in the Eighth Circuit based on diversity jurisdiction, counsel should advise the client against removal. Lively court that “if diversity jurisdiction exists and a defendant removes a case in violation of the forum defendant rule, neither party will be prejudiced if the case were to remain there, and the plaintiff may still exercise control over the case by moving for remand.” Id. at 379 (citing Lively, 456 F.3d at 940). The court distinguished Hurt, reasoning that “[w]hile this Court agrees with the Eighth Circuit that all statutory requirements of jurisdiction must be met for jurisdiction to exist… it cannot agree that §1441(b) is one of those requirements.” Id. (distinguishing Hurt, 963 F.2d 1142 (8th Cir. 1992)). The court concluded that “failure to comply with the forum defendant rule is a procedural defect and the ability to remand based upon violation of §1441 is waivable under §1447(c).” Id. The court also stressed that if a plaintiff objects to removal based on a violation of the forum defendant rule, a plain reading of §1447(c) requires the plaintiff to file a motion to remand within 30 days. Id. at 380. It is not enough for the plaintiff to merely put defendant on notice that it objects to the removal; it must actually file a motion to remand. Id. Failing to file a motion to remand within 30 days waives any objection that a plaintiff may have to removal by a forum defendant. Id. The Sixth Circuit District Courts— Jurisdictional Defect with an Exception The most recent district court decisions in the Sixth Circuit analyzing whether a violation of the forum defendant rule is procedural or jurisdictional determined that 54 ■ For The Defense ■ November 2012 the rule is jurisdictional, but they recognize an exception under Grubbs that would allow a court to retain jurisdiction when a case has proceeded to finality or near finality without objection by either party to the improper removal. Wooten v. Greenview Hosp., Inc., No. 1:10-CV-00034-TBR, 2010 WL 1742539, at *4 (W.D. Ky. April 28, 2010); see also Capital One Bank (USA), NA v. Ponte, No. 11-11072, 2011 WL 2433480, at *3 n.2 (E.D. Mich. May 26, 2011) (“Although there is also some lack of clarity surrounding whether a court may sua sponte raise the “forum defendant rule” as jurisdictional, on these facts, this Court concludes that it may do so.”). But see GE Comm’l Distrib. Finance Corp. v. W.W. Cycles, Inc., No. 4:10CV2673, 2011 WL 1831752, at *3 (N.D. Ohio May 12, 2011) (“[t]he forum defendant provision is a procedural removal requirement that is waived if it is not raised by a timely motion to remand”). The most thorough analysis of this issue was conducted in 2009 by the U.S. District Courts, Western District of Kentucky and Western District of Michigan. See Regions Bank v. Am. Justice School of Law, No. 5:08CV-134-M, 2009 WL 909548 (W.D. Ky. March 30, 2009); Balzer v. Bay Winds Fed. Credit Union, 622 F. Supp. 2d 628, 630 (W.D. Mich. 2009). In Regions Bank, the plaintiff filed the lawsuit in a Kentucky state court. The defendants removed the action to the U.S. District Court, Western District of Kentucky on the basis of diversity jurisdiction. Various defendants were citizens of Kentucky, the forum state. Thus, the action was improperly removed. Id. at *1. However, the plaintiff raised no objection to the removal. The U.S. District Court, Western District of Kentucky evaluated whether the forum defendant rule is procedural and waivable or jurisdictional and nonwaivable. Id. The court first found that “[m]any Circuits have addressed this issue and most have held that the forum defendant rule is procedural and is waived if not raised by the plaintiff within 30 days following removal.” Id. (citing 16 Moore’s Fed. Prac. 107.14[2][e] n.81). The court also found that these circuits have interpreted Sixth Circuit precedent as holding that the forum defendant rule is procedural. See Lively v. Wild Oats Markets, Inc., 456 F.3d 933, 940 (9th Cir. 2006) (citing Handley- Mack Co. v. Godchaux Sugar Co., 2 F.2d 435, 437 (6th Cir. 1924) (describing removal by a forum defendant as a “technical” violation) (describing a violation of the forum defendant rule as a waivable “procedural defect”)); Plastic Moldings Corp. v. Park Sherman Co., 606 F.2d 117, fn 1 (6th Cir. 1979). The Regions Bank court pointed out that most circuits finding a violation of the rule procedural cited Grubbs for support. The court in Regions Bank ultimately found the forum defendant rule jurisdictional and remanded the case to the state court. See also Johnston v. Panther II Transp., 2007 WL 2625262 (N.D. Ohio 2007) (finding the rule jurisdictional). However, the court found that Grubbs provided an exception to this rule in certain case- specific instances. Specifically, the Regions Bank district court found that Grubbs provided an exception to the rule that a §1441(b) defect is a jurisdictional defect: the defect becomes procedural “when a case is improperly removed but is tried to judgment on the merits without objection, a party waives his right to later raise the issue of lack of subject- matter jurisdiction at the time of removal.” Regions Bank, 2009 WL 909548, at *5. The district court went on to discuss the policy rationale underlying the Grubbs exception, finding that it “ensures that substantial judicial resources already expended in reaching a judgment will not be needlessly wasted if the case could have been brought in federal court in the first instance.” Fed. Nat’l Mortgage Ass’n v. LeCrone, 868 F.2d 190, 194 (6th Cir. 1989). See also Thompson v. Karr, 182 F.3d 918, 1999 WL 51297, at *3–4 (6th Cir. 1999). The Regions Bank federal district court expressed its frustration with the lack of clarity from the Sixth Circuit on this issue: If the Court does not remand this matter, there is no assurance that an appellate panel which raises the question of jurisdiction will apply the Grubbs exception. And if they do not, a great deal of time, effort and money will be wasted…. For the Court’s part, it would welcome an appeal. This is a question that needs resolution. Regions Bank, 2009 WL 909548, at *6. Subsequently, the U.S. District Court, Western District of Michigan also found the rule jurisdictional, but after conducting a similar analysis to Regions Bank, it com-
plained that “this Court does not believe the Sixth Circuit has issued a definitive and binding ruling on point….” Balzer v. Bay Winds Fed. Credit Union, 622 F. Supp. 2d 628, 630 (W.D. Mich. 2009). Balzer found that the analysis required “calls for a more nuanced consideration of both the nature of the procedural flaws, and the context of the case at the time the flaw is identified. This approach permits a court to balance the respective interests of judicial economy, finality of judgments, and the seriousness of the procedural flaw.” Id. at 631. Practical Considerations for Defense Counsel Attorneys representing clients that are forum defendants that have or plan to remove cases on the basis of diversity jurisdiction may find the following tips helpful to consider. First, know the law in the particular jurisdiction. As mentioned, the circuit courts disagree on whether removal by a forum defendant is a procedural or jurisdictional defect. Defense counsel need to be aware of the applicable law in their jurisdiction. Defense counsel practicing in jurisdictions following the majority rule and representing a forum defendant in a case removed on the basis of diversity jurisdiction should feel confident that as long as plaintiff did not file a motion to remand within 30 days of the notice of removal, the plaintiff has waived his or her right to later object. In jurisdictions such as the Fourth, Sixth, and Eighth Circuits, where the courts are less clear or follow the minority rule, defense counsel must be wary of removal when they represent forum defendants. Second, advise clients early. If a client has removed a case to a federal district court in the Fourth, Sixth, or Eighth Circuits based on diversity jurisdiction, advise the client as soon as possible of this issue. In these jurisdictions, a violation of the forum defendant rule may be interpreted as a subject matter jurisdiction defect. The plaintiff or the court itself may object to the subject matter jurisdiction of the court at any point. Thus, it is in a defense counsel’s best interest to know where the relevant issue falls in this circuit split and advise a client on the front end of the potential for a remand to the state court. Advise forum defendant clients with cases in the Eighth Circuit against removal based on diversity jurisdiction. If a forum defendant is considering removal to a federal district court in the Eighth Circuit based on diversity jurisdiction, counsel should advise the client against removal. Even if the plaintiff never objects to the removal, the court could, at any point, raise the issue on its own and remand the case for lack of subject matter jurisdiction. If the state court is extremely unfavorable to the defendant, consider evaluating the possibility of removal with the client for the purpose of appealing the issue eventually to the U.S. Supreme Court in the hopes that the Court would resolve the circuit split the client’s favor. Conclusion The majority of U.S. circuit courts find that a violation of the forum defendant rule is a procedural defect, and a plaintiff will waive objecting rights if the plaintiff Engineers, Architects, Scientists & Fire Investigators Admiralty / Maritime Architecture / Premises Safety Automotive Engineering Aviation Biomechanical Engineering Construction Claims / Injuries Dram Shop / Liquor Liability Education / Supervision Electrical Engineering Environmental / Toxic Torts does not properly object to the removal in a motion to remand within 30 days of the filing of the notice of removal. However, the U.S. Supreme Court has yet to weigh in on this issue, and at least one circuit court has found the defect to be jurisdictional and not subject to waiver. 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. Attorneys practicing in the Eighth Circuit need to advise their forum clients as early as possible of this issue, and they may want to advise against removal based on diversity jurisdiction unless a client is willing and able to litigate the case perhaps all the way to appealing to the U.S. Supreme Court. Attorneys practicing in the Fourth and Sixth Circuits will also want to advise their clients of the circuit split and unsettled authority in their jurisdiction as early as possible in a case. Fire / Explosion Human Factors HVAC / Plumbing Occupational Health / Safety Oil & Gas Drilling Product Liability Sports and Recreation Structural Engineering Toxicology Vehicle Collisions With 175 experts at one firm, Robson Forensic provides expertise in more than 75 unique disciplines. Visit us online for expert bios and CVs. www.robsonforensic.com | 800.813.6736 For The Defense ■ November 2012 ■ 55
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