Civil Procedure Question(s)

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Mikedunford
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Civil Procedure Question(s)

Postby Mikedunford » Tue Aug 28, 2012 12:24 am

Here's the situation:Plaintiff files in state court. Defendant removes to federal court based on diversity jurisdiction. After some discovery, and based in part on that discovery, plaintiffs move for permission to add a defendant and causes of action. The motion is opposed, but granted by the court. The joinder destroys diversity, resulting in a remand to state court. Here are the questions:a) Can the state court determine (presumably on motion of Defendants) that the joinder was improper and sever the cases? b) If so, can the non-state defendant re-remove their portion back to federal court? c) If so, is there anything to keep things from turning into a closed loop problem?I asked the professor after class, and she thought about it for a minute or two, then said she's going to have to think about it and get back to me. I'm going to try to do some research on my own, but I thought it might be interesting to get input from some of the folks here.

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Sterngard Friegen
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Civil Procedure Question(s)

Postby Sterngard Friegen » Tue Aug 28, 2012 1:54 am

[-X Read the applicable Federal statutes and the case law. And advise whether the temporal restrictions on removal affect, in part, the closed loop concerns.

A Legal Lohengrin
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Civil Procedure Question(s)

Postby A Legal Lohengrin » Tue Aug 28, 2012 4:32 am

Here's the situation:Plaintiff files in state court. Defendant removes to federal court based on diversity jurisdiction. After some discovery, and based in part on that discovery, plaintiffs move for permission to add a defendant and causes of action. The motion is opposed, but granted by the court. The joinder destroys diversity, resulting in a remand to state court. Here are the questions:a) Can the state court determine (presumably on motion of Defendants) that the joinder was improper and sever the cases? b) If so, can the non-state defendant re-remove their portion back to federal court? c) If so, is there anything to keep things from turning into a closed loop problem?

Not enough detail actually to answer this. First, echo Stern's concerns.Second, was the discovery necessary to add the defendant, or was this a pretext to thwart diversity? Apparently, the court doesn't believe so (or doesn't care), or it wouldn't have granted the motions.Also, as a practical matter, does the plaintiff really want to spend potentially tens of thousands of dollars in order to have a case heard in a court that obviously doesn't want to hear it? The successful plaintiff, in such a case has, well, spent potentially tens of thousands of dollars in order to have a case heard in a court that obviously doesn't want to hear it.If by "closed loop problem" you mean something like a computer language problem that results in an endless series of remands to state court followed by re-removals to federal court, that can't really happen in a system run by humans, at least not forever, because someone will eventually get sick of it and step in and stop it.In short, though, if a federal court remands something back to state court, it is generally going to stay that way unless a higher federal court says otherwise.

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Mikedunford
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Civil Procedure Question(s)

Postby Mikedunford » Tue Aug 28, 2012 4:46 am

[-X





Read the applicable Federal statutes and the case law. And advise whether the temporal restrictions on removal affect, in part, the closed loop concerns.

First, just to make sure we're all clear, this is not a homework assignment that I'm asking for help on.





Moving on to attempt Stern's assignment:





Under 28 U.S.C. §1446(c)(1), "[a] case may not be removed...on the basis of jurisdiction conferred by section 1332 more than 1 year after commencement of the action...". This statute would appear to make any jurisdictional closed loop very unlikely, as most litigation does not progress quickly enough to permit multiple trips around the loop in a single year. There is, however, some case law that would suggest that there are ways that the defendants in this case could achieve re-removal even if the initial 1 year period has expired.





1: There is currently disagreement about when 28 U.S.C. §1446(c)(1) is and is not applicable. 28 U.S.C. §1446(b)(3) provides that "Except as provided in subsection (c), if the case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant...of a copy of an amended pleading, motion, order, or other paper from which it may first be ascertained that the case is one which is or has become removable." There are some courts that read §1446(c)(1) as applying to all diversity cases, but other courts have interpreted §1446(b)(3) to mean that §1446(c)(1) applies only to those diversity cases that were not originally removable. (For discussion of this, see Anderson v. Ford Motor Co., 303 F. Supp. 2d 1253, 1255-56 (W.D. Okla. 2004). In this scenario, the case was originally removable, and was originally removed in a timely fashion. An argument can be made that §1446(c)(1) simply does not apply here, and the resolution of that argument would depend largely on how the court in question chooses to interpret the "except" clause.





In this case, a closed loop result would seem to be possible. If the one year time limit simply does not apply, it is theoretically possible to keep going around in circles provided the defendant continues to promptly remove the case on diversity grounds each time the cases are severed. In practice, I suspect that such an unseemly result would be prevented through other means, such as denying a subsequent request for permissive joinder.





2: While 28 U.S.C. §1446(b) requires that a notice of removal be filed within 30 days after the receipt of the complaint, courts "have read into the statute an exception for the case where the plaintiff files an amended complaint that so changes the nature of his action as to constitute substantially a new suit begun that day." Wilson v. Intercollegiate (Big Ten) Conference Athletic Ass'n, 668 F.2d 962, 965 (7th Cir. 1982)(Internal quotations omitted). An argument can be made that if the complaint has been changed enough to constitute a new suit such that the 30 day clock is reset, the 1 year clock would logically be reset as well. In this scenario, a new defendant and new causes of action have been added, and an argument can be made that this is now "substantially a new suit". This argument is weakened by the fact that re-removal would presumably occur after that new defendant and new causes of action have been severed, which would effectively restore the old suit.





Here, a closed loop is unlikely to be possible. The first joinder of the parties might be considered sufficient to create a "substantially" new suit; it's doubtful that a second joinder of the same parties and causes of action would have the same result. In this instance, the defendants might be able to get a second bite at the apple, but probably not a third.





3: The 5th Circuit concluded that the 1 year limit is subject to equitable exception. Tedford v. Warner-Lambert Co., 327 F.3d 423, 425-26 (5th Cir. 2003). That case is not directly on point, particularly since it addressed a situation where the 1 year limit was exceeded as a result of the plaintiffs actions. Here, it's less clear that the plaintiff is attempting to manipulate the situation to run out the clock. At the same time, the defendants did immediately remove, and did oppose the motion for joinder. They would also have had to promptly move to sever in state court, and promptly re-remove. it's possible that the court could be persuaded that an equitable exception is warranted, but unlikely unless the court wishes to rethink the initial decision to join the new (non-diverse) party.





In this case, as in the first, a closed loop would seem to be theoretically possible but unlikely. A court might be persuaded to grant an equitable exception once, but any further exceptions would create a situation where the plaintiffs are being effectively denied access to adjudication. That sort of situation is probably not the goal of equitable relief.

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Mikedunford
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Civil Procedure Question(s)

Postby Mikedunford » Tue Aug 28, 2012 4:53 am

Here's the situation:


Plaintiff files in state court. Defendant removes to federal court based on diversity jurisdiction. After some discovery, and based in part on that discovery, plaintiffs move for permission to add a defendant and causes of action. The motion is opposed, but granted by the court. The joinder destroys diversity, resulting in a remand to state court.





Here are the questions:


a) Can the state court determine (presumably on motion of Defendants) that the joinder was improper and sever the cases?


b) If so, can the non-state defendant re-remove their portion back to federal court?


c) If so, is there anything to keep things from turning into a closed loop problem?

Not enough detail actually to answer this. First, echo Stern's concerns.

I just put a bit of time into those - more than I planned, anyway. When reading my attempt, particularly at bringing in case law, please bear in mind that I'm just beginning to figure out Westlaw and Lexis, and have had all of 1 research class so far. Shephardizing isn't being officially introduced for another 3 weeks, but I did the best I could.





Second, was the discovery necessary to add the defendant, or was this a pretext to thwart diversity? Apparently, the court doesn't believe so (or doesn't care), or it wouldn't have granted the motions.

The case that provided the starting point for my questions is Larson v. American Family Mutual, 2007 U.S. Dist. LEXIS 41864 (D. Colo. 2007), from the Yeazell casebook. The court found that the discovery was necessary to add the defendant, and that it was not a pretext.





Also, as a practical matter, does the plaintiff really want to spend potentially tens of thousands of dollars in order to have a case heard in a court that obviously doesn't want to hear it? The successful plaintiff, in such a case has, well, spent potentially tens of thousands of dollars in order to have a case heard in a court that obviously doesn't want to hear it.





If by "closed loop problem" you mean something like a computer language problem that results in an endless series of remands to state court followed by re-removals to federal court, that can't really happen in a system run by humans, at least not forever, because someone will eventually get sick of it and step in and stop it.





In short, though, if a federal court remands something back to state court, it is generally going to stay that way unless a higher federal court says otherwise.

Understood. I wasn't thinking that this was remotely likely. I was just wondering if it was theoretically possible.

A Legal Lohengrin
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Civil Procedure Question(s)

Postby A Legal Lohengrin » Tue Aug 28, 2012 6:21 am

I wrote this back when the site was down for a bit for backups, so it doesn't respond to your more recent post.

it's possible that the court could be persuaded that an equitable exception is warranted, but unlikely unless the court wishes to rethink the initial decision to join the new (non-diverse) party.

You've clearly done a lot of thought about this, but I think that sentence may be the key to your question (which does not appear to have a conclusive answer). Since complete diversity between the parties is necessary, it is really up to the federal court whether it considers joinder proper. If the only basis for jurisdiction is diversity, the problems seem isomorphic. Is the additional defendant an indispensable party? What I am not understanding is why the court granted the joinder motion. Was this a mechanical decision and the remand solely an inevitable result of the joinder, or did the court present reasoning as to why joinder was proper and then conclude that remand was appropriate?I believe a decision based on thorough reasoning as to the issues is much less likely to be reconsidered than a procedural decision taken without much thought.The fact that you indicate the joinder motion was opposed seems to indicate a greater degree of thought than simply remanding because of an unopposed motion that made the complaint facially inadequate to support diversity jurisdiction. While this is not the "well pleaded complaint" rule that applies to federal question jurisdiction, it is still the operative complaint that governs who the parties are, and complete diversity will be necessary for diversity jurisdiction.In short, how much thinking did the court do about remanding? Did it consider and already reject the possible grounds for jurisdiction in a well reasoned opinion? Is the defendant going to draw another judge at random on another attempt at removal? Or will it be assigned to the same judge, who is likely to have the same opinion now as then?The standard of review of the federal court's decision would, in theory, be abuse of discretion. In practice, decisions are very few where a federal court declining to exercise diversity jurisdiction, after a proper joinder destroys diversity, is reversed. If there are any such cases, you may know them. I can't think of any, personally.

In this case, as in the first, a closed loop would seem to be theoretically possible but unlikely. A court might be persuaded to grant an equitable exception once, but any further exceptions would create a situation where the plaintiffs are being effectively denied access to adjudication. That sort of situation is probably not the goal of equitable relief.

I don't believe such a loop would last long enough to implicate due process. I'd be surprised if, at the latest, the court didn't decide by the third time it happened to make a definitive decision as to where the case would be heard. (I have been surprised in my lifetime more than once, however.)

chancery
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Civil Procedure Question(s)

Postby chancery » Tue Aug 28, 2012 5:59 pm

As I recall, an order remanding an action to state court is not appealable. Also, I think the 30 day time limit on filing a notice of removal would, as a practical matter, preclude an endless loop. Your defendant is out of luck, because he received the complaint (by service or otherwise) a long time ago. (You might be able to construct some pathological case based on a plaintiff who can't or won't complete service on multiple defendants, but it would be just that, pathological).





Also, the federal court's initial ruling that joinder was improper as a matter of federal procedural law is law of the case. No subsequent state court ruling could be a basis for setting it aside.





Edit: In fact, even if the state court had somehow ruled prior to removal that joinder was proper, that ruling would not be binding on the federal court.

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Piffle
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Civil Procedure Question(s)

Postby Piffle » Tue Aug 28, 2012 6:02 pm

As I recall, an order remanding an action to state court is not appealable. Also, I think the 30 day time limit on filing a notice of removal would, as a practical matter, preclude an endless loop. Your defendant is out of luck, because he received the complaint (by service or otherwise) a long time ago. ([highlight]You might be able to construct some pathological case based on a plaintiff who can't or won't complete service on multiple defendants, but it would be just that, pathological[/highlight]).

Ya mean like Orly's case in Mississippi?

chancery
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Civil Procedure Question(s)

Postby chancery » Tue Aug 28, 2012 6:03 pm

Shhh ....

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Sterngard Friegen
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Civil Procedure Question(s)

Postby Sterngard Friegen » Tue Aug 28, 2012 6:41 pm

:shock: :-$

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DaveMuckey
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Civil Procedure Question(s)

Postby DaveMuckey » Tue Aug 28, 2012 6:58 pm

IANALS, so I'd recommend Kirk's Kobayashi Maru solution.

A Legal Lohengrin
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Civil Procedure Question(s)

Postby A Legal Lohengrin » Tue Aug 28, 2012 7:03 pm

Also, the federal court's initial ruling that joinder was improper as a matter of federal procedural law is law of the case. No subsequent state court ruling could be a basis for setting it aside.

The federal court ruled that joinder was proper. The addition of the new defendant destroyed complete diversity and thus divested the federal court of jurisdiction.

chancery
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Civil Procedure Question(s)

Postby chancery » Tue Aug 28, 2012 8:31 pm

Also, the federal court's initial ruling that joinder was improper as a matter of federal procedural law is law of the case. No subsequent state court ruling could be a basis for setting it aside.

The federal court ruled that joinder was proper. The addition of the new defendant destroyed complete diversity and thus divested the federal court of jurisdiction.

Didn't I say that?





"The federal court's initial ruling that joinder was proper and that therefore removal had been improper ...."*





Er, sorry, I guess I didn't. Anyhow, the point is that the federal court's ruling that the action should be remanded is extremely unlikely to be called into question by any subsequent state trial court ruling.


________


* altered, i.e., fake, quote.

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Civil Procedure Question(s)

Postby anti-birfer » Thu Aug 30, 2012 12:47 pm

Similar things happen all the time. I had a case removed years ago and when the defendant filed their answer, they argued that a different party bore comparative fault. When I amended to add the new party, diversity was destroyed and the case was remanded to state court.The interesting law school question under the new removal statutes is - whether the settlement of the non-diverse defendant (or dismissal) results in complete diversity and allowable removal. I have never had that happen, but had a defendant threaten it a few years back during mediation (yes it was within 30 days of when that the case became fully diverse).G


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