As we reported previously here, there has been a long-standing split among the Circuits over when the time for removal runs in a multiple defendant case, with the Sixth Circuit adopting the “later-served” rule under which each defendant has a thirty day period to file a notice of removal that ends thirty days after that defendant is served. Other Circuits followed the “first-served” rule, holding that the thirty day period ends thirty days after the first defendant is served.
The Federal Courts Jurisdiction and Venue Clarification Act of 2011, H.R. 394, P.L. 112-63, resolves the split for all cases filed after January 6, 2012. Deeming the later-served rule to be more equitable, the Act provides that, “[e]ach defendant” shall have 30 days after receipt by or service on that defendant to file the notice of removal.” The Act also codifies the “rule of unanimity,” which requires all defendants to consent to removal of cases under 1441(a). As a result, earlier-served defendants can join in or consent to removal by a later-served defendant in such cases.
The Act also significantly amends other key aspects of the federal jurisdiction statutes, including the provisions governing diversity jurisdiction, venue, and removal.
Click below to learn more about these other important amendments.
The Act also adds a new code section 1446(c)(1), which adds to the current one-year limitation on removal a limited exception, authorizing a district court to permit removal after the one-year period if it finds that the plaintiff acted in bad faith to prevent removal. This section is meant to address the plaintiff who includes in diversity cases a non-diverse defendant only to dismiss that defendant after the one year had run in order to avoid federal jurisdiction.
The Act also eliminates the district courts’ previous discretion to hear unrelated state law claims in cases removed to federal court on the basis of federal question jurisdiction. Specifically, if a case involves a claim that raises a federal question and “a claim not within the original or supplemental jurisdiction of the district court,” the entire action may be removed to federal court. Upon removal of a case, however, the district court is to “sever” the claims over which it does not have original or supplemental jurisdiction and remand the severed claims to the State court.
With respect to establishing the amount in controversy in diversity actions, the Act also gives defendants a procedure to satisfy the amount in controversy requirement where 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.” If the defendant can establish by a preponderance of the evidence after discovery taken on the issue that the amount in controvery requirement has been met, then removal will be permitted. The Court must make findings of fact on the issue. Further, the Act provides that a defendant may remove within 30 days of receiving information from which it may first be ascertained that the amount in controversy is satisfied.
Section 102 of the Act clarifies that foreign contracts are relevant for diversity jurisdiction purposes and that both foreign and domestic corporations are citizens of both their place of incorporation and their principal place of business, resulting in a denial of diversity jurisidiction (1) where a foreign corporation with its principal place of business in a state sues or is sued by a citizen of that same state, and (2) where a citizen of a foreign country sues a U.S. corporation with its principal place of business abroad.
The Act also addresses venue and transfer, allowing an action to be transferred to any district — even if the action could not have been brought in that district originally — so long as all parties consent to the transfer.
For further discussion of the important changes of the Act, see the insightful article by Arthur Hellman of the University of Pittsburgh School of Law discussing the impact of the Jurisdiction and Venue Clarification Act of 2011 on federal and state court litigation or the House of Representatives’ Committee on the Judiciary’s Report 112-10.
