United States: Recent Amendments To Federal Removal Statutes Create New Possibilities And Potential Pitfalls For Litigators

Litigators should be aware of recent noteworthy amendments to the federal removal statutes. 28 U.S.C. §§ 1441, 1446. The removal amendments, brought about by the Federal Courts Jurisdiction and Venue Clarification Act of 2011, PL 112-63, December 7, 2011, 125 Stat 758, apply to all actions "commenced" in state court on or after January 6, 2012. The first change resolves a circuit split over the time for removal in a case involving multiple defendants, where each defendant is not served at the same time. The second change strips federal district courts of removal jurisdiction they previously possessed over state law claims not within the court's original or supplemental jurisdiction. These changes present litigators with significant tactical choices and opportunities.

Adopting the "Later-Served Defendant" Rule for Removal

Under the Act, when multiple defendants are sued in state court, each defendant now has 30 days to file a notice of removal to federal district court, starting from the date that the defendant itself was served, not from the date the first defendant was served. Before the Act, there was a deep circuit split between circuits adopting this so-called "later-served" rule and those adopting the "first-served" rule, which required any defendant seeking removal to file the notice of removal within 30 days of the date the first defendant is served. Compare Delalla v. Hanover Ins., 660 F.3d 180, 182 (3d Cir. 2011) (adopting "later-served" rule) with Barbour v. Int'l Union, 640 F.3d 599, 610 (4th Cir. 2011) (adopting "first-served" rule).

Defendants seeking removal to federal court under 28 U.S.C. § 1441 must do so according to the procedures in 28 U.S.C. § 1446. Prior to the amendment, Section 1446(a) required a "defendant or defendants desiring to remove" an action to file a notice of removal. Old Section 1446(b) provided that a notice of removal "shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading ... or within thirty days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter." Because Section 1446(a) referred to a "defendant or defendants," but Section 1446(b) referred only to "receipt by the defendant," the prior version raised the question of whose receipt of the complaint triggered the 30-day clock for removal, the first defendant or any defendant.

The new Section 1446 specifies that "[e]ach defendant shall have 30 days after receipt by or service on that defendant of the initial pleading or summons ... to file the notice of removal." 28 U.S.C. § 1446(b)(2)(B) (2012) (emphasis added). Thus, the new version resolves the circuit split over the time for removal in multiple defendant cases and clears up any ambiguity over the applicable rule: a new 30-day period begins when each defendant receives the complaint. It also eliminates the potentially "perverse incentive system" created by the first-served rule, which encouraged a "plaintiff who wishes to remain in state court [to serve] a defendant who is indifferent to removal, and then [to wait] to serve other defendants who are more likely to wish to remove." Delalla, 660 F.3d at 186.

Beyond these changes, the new Section 1446 also codifies the judicially created "rule of unanimity" by providing that "all defendants who have been properly joined and served must join in or consent to the removal of the action." 28 U.S.C. § 1446(b)(2)(A) (2012); see also City of Cleveland v. Ameriquest Mort. Securities, Inc., 615 F.3d 496, 501 (6th Cir. 2010) (describing the judicially created "rule of unanimity"). And, anticipating that later-served defendants may seek to remove even if an earlier-served defendant has chosen not to, the new Section 1446 states that if "defendants are served at different times, and a later-served defendant files a notice of removal, any earlier-served defendant may consent to the removal even though that earlier-served defendant did not previously initiate or consent to removal." 28 U.S.C. § 1446(b)(2)(C) (2012).

Stripping Federal Courts of Jurisdiction Over Unrelated State Law Claims

The Act implements another important change in the removal statutes: a federal district court no longer has discretion to hear state law claims in a removed action if they are not otherwise within the original or supplemental jurisdiction of the court. Section 1441(c) now provides that when a state court case includes a removable federal claim and "a claim not within the original or supplemental jurisdiction of the district court or a claim that has been made nonremovable by statute," a defendant can still remove "the entire action ... if the action would be removable without the inclusion of the [nonremovable] claim." However, after such a case is removed, the federal district court must sever the nonremovable claims from the action and "shall remand the severed claims to the State court from which the action was removed." 28 U.S.C. § 1441(c) (emphasis added).

The old Section 1441(c) likewise provided that when a removable "claim or cause of action ... is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed." But unlike the amended version, the old Section 1441(c) allowed district courts to decide all the claims or, "in its discretion, [to] remand all matters in which State law predominates." As a result, the old version permitted federal district courts to decide state law claims over which they lacked jurisdiction.

This generated criticism from courts and commentators who believed that by extending federal removal jurisdiction over state law claims not within the federal court's jurisdiction, the old Section 1441(c) exceeded the boundaries of Article III jurisdiction. Thomas v. Shelton, 740 F.2d 478, 483 (7th Cir. 1984) (Posner, C.J.) (noting the "constitutional questions" raised by the exercise of removal jurisdiction over state law claims "completely unrelated to any claim within the federal district courts' original jurisdiction" and, thus, outside of Article III jurisdiction); Douglas D. McFarland, The Unconstitutional Stub Of Section 1441(c), 54 Ohio St. L. J. 1059 (1993) (same). It was this criticism that prompted Congress to amend Section 1441(c) and preclude federal courts from adjudicating such "separate and independent" state law claims. H.R. Rep. No. 112-10, at 12 (2011) (stating that new Section 1441(c)'s "sever-and-remand approach is intended to cure any constitutional problems").

Therefore, under the new Section 1441(c), state court litigants contemplating removal of an action involving state law claims potentially outside of federal jurisdiction must consider the possibility that if they remove, the state law claims will be remanded and they will face litigation in both state and federal court.

Conclusion

The recently effective amendments to the removal statutes brought about by the Federal Courts Jurisdiction and Venue Clarification Act of 2011 resolve a circuit split, cure potential inequities, clarify various aspects of removal procedure and jurisdiction, and avoid a lurking constitutional problem. Litigants need to be aware of the changes because they can determine where a case will be heard and how and when a state court action can be removed to federal court. The Act also amended the procedures for establishing the amount in controversy for purposes of removal based on diversity jurisdiction, which will be the topic of a later article.

This article is presented for informational purposes only and is not intended to constitute legal advice.