January 6, 2012

New Changes in Federal Law Provide Some Relief for Defendants Sued in State Courts


Winter 2012

The Federal Courts Jurisdiction and Venue Clarification Act of 2011, H. R. 394, P.L 112-63 (the "Act"), takes effect January 6, 2012.

Review the full language of the Act.

The Act is Congress' attempt to address a number of areas of procedural confusion and disagreement amongst the various federal courts. Although the Act is not a cure for all that plagues the application of the civil rules of procedure to lawsuits across the country, the Act will bring some relief to defendants who have been sued in state courts. Specifically, the Act amends 28 U.S.C. § 1441, the statute governing the removal of state court actions to federal courts, expanding the rights of defendants and the circumstances under which removal is allowed. Highlights of the relief provided to defendants sued in state courts include the following:

  1. The 30-day deadline for the removal of a state court action to federal court is triggered by formal service, not mere receipt, of the initial pleading. In some cases, defendants have been provided with a courtesy copy of the complaint prior to actual service. Some federal circuits have ruled that the 30-day clock starts ticking when the defendant received the courtesy copy of the complaint. The Act clarifies that the clock does not begin running until formal service is complete.
  2. In multi-defendant cases, each defendant has 30 days to remove from the date it is served with the initial pleading and not from the date the first defendant is served. In addition, earlier served defendants who waived their right to removal may consent to removal by any subsequent defendant. The rule that all defendants must agree to removal still remains in effect.
  3. If an action is between citizens of different states and the amount in controversy exceeds the amount set forth in the diversity jurisdiction statute (presently $75,000), removal is permitted. Although the amount of damages sought in a complaint is generally deemed the amount in controversy for removal purposes, under the Act a defendant can still establish the requisite amount in controversy if the plaintiff's complaint seeks nonmonetary relief or "a money judgment, but the State practice either does not permit demand for a specific sum or permits recovery of damages in excess of the amount demanded." In addition, even if the complaint expressly seeks less than the requisite amount, a defendant can remove to federal court if it can establish, by a "preponderance of the evidence" that the amount in controversy is greater than the requisite amount. Prior to the enactment of the Act, some courts required defendants to prove the amount in controversy by a "legal certainty." Finally, if discovery or a later filed pleading indicates the amount in controversy is, in fact, greater than the requisite amount, a case can be removed.
  4. There is a one-year limit to diversity-based removals. The Act amends this provision to allow diversity-based removal where a plaintiff acted in "bad faith in order to prevent a defendant from removing the action."

Although not a benefit to defendants sued in state courts, the Act made one other change to removal procedures that is worth noting. If a case is removed to district court on the basis of federal question jurisdiction and the case involves "a claim not within the original or supplemental jurisdiction of the district court," the entire action may be removed to federal court. Previously, federal courts were permitted to hear any unrelated state court claims. Now, however, following removal the "district court shall sever from the action" the claims over which the federal district does not have original or supplemental jurisdiction, and "remand the severed claims to the State court from which the action was removed."

Review the House of Representatives Report of the Committee on the Judiciary, No. 112-10 and/or get more information on all of the Act's changes.

For more information on this topic, please contact marketing@jordanramis.com or call (888) 598-7070.

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