Removal of state-court actions to federal court has provided a seemingly never-ending source of procedural disputes. Fortunately many of those mind-numbing issues have been resolved in the last several years by Congress and the courts, with the Supreme Court of the United States addressing one key issue recently.
Effective in early 2012, the Federal Courts Jurisdiction and Venue Clarification Act of 2011 addressed and clarified a number of removal issues. After several years of operating under the statute, a refresher is in order.
Regarding timing of removal, each defendant has 30 days after “receipt by or service on that defendant of the initial pleading or summons” to remove to federal court. Under the prior statutory language and caselaw, the 30-day clock ran from the date service was first effected on any defendant. Under the new law, however, 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 the party did not previously initiate or consent to removal. Thus, in multiple-defendant cases, removal could be possible more than 30 days after the initial service.
Caselaw provides guidance on when the 30-day clock for removal is triggered. Specifically, in Walker v. Trailer Transit, 727 F.3d 819 (7th Cir. 2013), a class-action contract case was filed in Indiana state court, then later removed to the Southern District of Indiana. Plaintiff moved to remand, which was denied.
In affirming the denial of remand, the 7th Circuit noted, “We have never addressed the standard for determining when the 30-day time period for removal begins to run.” The court held, “The 30-day removal clock is triggered by the defendant’s receipt of a pleading or other paper that affirmatively and unambiguously reveals that the case is or has become removable.”
The court added, “Every circuit that has addressed the question of removal timing has applied § 1446(b) literally and adopted some form of a bright-line rule that limits the court’s inquiry to the clock-triggering pleading or other paper and, with respect to the jurisdictional amount in particular, requires a specific, unequivocal statement from the plaintiff regarding the damages sought.” The court continued, “We follow the lead of our sister circuits and now adopt the same approach. The 30-day removal clock does not begin to run until the defendant receives a pleading or other paper that affirmatively and unambiguously reveals that the predicates for removal are present. With respect to the amount in controversy in particular, the pleading or other paper must specifically disclose the amount of monetary damages sought.”
Finally, the court emphasized, “The timeliness inquiry is limited to the examining contents of the clock-triggering pleading or other litigation paper; the question is whether that document, on its face or in combination with earlier-filed pleadings, provides specific and unambiguous notice that the case satisfies federal jurisdictional requirements and therefore is removable. Assessing the timeliness of removal should not involve a fact-intensive inquiry about what the defendant subjectively knew or should have discovered through independent investigation.”
Amount in controversy. The Act addresses how to treat amount in controversy on removal, including for jurisdictions (like Indiana) where in some types of cases the amount of damages cannot be set forth in state court complaints. The 7th Circuit previously held that “the estimate of the disputes stakes advanced by the proponent of federal jurisdiction controls unless a recovery that large is legally impossible.” Back Doctors, Ltd., 637 F.3d 827 (7th Cir. 2011). The Act, however, establishes one standard for amount in controversy. The sum demanded in “good faith” in plaintiff’s complaint “shall be deemed the amount in controversy,” 28 U.S.C. 1446(c)(2). If the complaint is silent, defendant may prove amount in controversy by a preponderance of evidence. If removal isn’t available in diversity because of insufficient amount in controversy, the Act clarifies that information learned in discovery in state court can be the trigger for the 30-day clock to remove.
What’s required in the removal notice? In Dart Cherokee Basin Operating Co. v. Owens, 13-719, 2014 U.S. Lexis 8435 (Dec. 15, 2014), the Supreme Court addressed requirements for removal notices, holding that the basic and familiar “short and plain statement” standard governs removal notices.
In Owens, plaintiffs’ class action asserted underpayment in oil/gas leases and sought “fair and reasonable” damages. Defendant removed, asserting the amount in controversy was $8.2 million, exceeding the $5 million class-action removal threshold. The District Court remanded based on 10th Circuit precedent that required proof of the amount in controversy in the removal notice. The 10th Circuit denied review 2-1; an evenly divided 10th Circuit denied rehearing en banc. The Supreme Court granted certiorari to resolve a split in circuits (noting that the 7th Circuit had not required a higher pleading standard in removal notice).
The court ruled, “To assert the amount in controversy adequately in the removal notice, does it suffice to allege the requisite amount plausibly, or must the defendant incorporate into the notice of removal evidence supporting the allegation? The answer, we hold, is supplied by the removal statute itself. A statement ‘short and plain’ need not contain evidentiary submissions.”
The court explained, a “defendant seeking to remove a case to a federal court must file in the federal forum a notice of removal ‘containing a short and plain statement of the grounds for removal.’ §1446(a). By design, §1446(a) tracks the general pleading requirement stated in Rule 8(a). Congress, by borrowing the familiar ‘short and plain statement’ standard from Rule 8(a), intended to ‘simplify the “pleading” requirements for removal’ and to clarify that courts should ‘apply the same liberal rules [to removal allegations] that are applied to other matters of pleading.’”•
John Maley – [email protected] – is a partner with Barnes & Thornburg LLP, practicing federal and state litigation, employment matters and appeals. The opinions expressed are those of the author.