Thursday, December 8, 2011

New rules for removing cases to federal court will impact employers

If you are an employer, or an attorney representing employers (and if you’re reading this blog I’d bet dollars to donuts you fall into one of these categories), the Federal Courts Jurisdiction and Venue Clarification Act of 2011 [pdf] will significantly impact you. Congress passed this bill last week, and PrawfsBlog notes that President Obama expects to sign it into law.

Without getting overly technical (for those who are not familiar with how the removal of cases from state court to federal court works), with some limited exceptions, a defendant has the right to take a case originally filed in state court into federal court if the plaintiff could have filed the case in federal court in the first place. There are two types of cases a plaintiff is jurisdictionally permitted file in federal court: those based on the diversity of the parties (where no plaintiff is a citizen of the same state as any defendant, and the amount in controversy exceeds $75,000), and those based on a federal question (where a claim arises under the Constitution, laws, or treaties of the United States).

The JVCA will make some significant changes in how we remove cases to federal court:

For all removed cases:

  • In cases with multiple defendants, it will now be a statutory requirement that all defendants consent to the removal (codifying a long-standing judicial requirement).
  • Each defendant will have its own 30-day period after receipt by or service on that defendant of the initial pleading or summons (clearing up a conflict among the circuits, some of which had denied a later-served defendant the benefit of a full 30-day period to file a notice of removal).
  • If a later-served defendant is the first to file a notice of removal, earlier-served defendants may consent to the removal even though they had not previously initiated or consented to the removal (also clearing up a circuit conflict).

For removed cases based on a federal question:

  • In cases that combine a federal question with non-removable state law claims (workers’ comp claims, for example), the JVCA will require the federal district court to sever the non-removable state law claims and remand them back to state court. This provision presents a risk of bifurcated lawsuits (and duplicative litigation?) in certain instances.

For removed cases based on diversity of citizenship:

  • The JVCA adds a bad faith exception to the prohibition against the removal of cases after one year after the commencement of the action. A court can permit this late removal if it finds that the plaintiff acted in bad faith to prevent a timely removal (such as by deliberating hiding the real amount in controversy).
  • The JVCA cures the conflict among the circuits in the calculation of the amount in controversy. It permits a defendant to state in the notice of removal the amount in controversy when the complaint is silent, and permits late removal if one learns the amount in controversy via discovery responses. This provision is significant in states like Ohio, which permit boilerplate $25,000 prayers for relief in common pleas court complaints. This provision removes that risk that a defendant who waited to remove a case following discovery on the amount in controversy risked remand based on a late-filed removal. 

It is no secret that employers and their lawyers usually prefer to be in federal court, and removal is often the way we get there. Because the JVCA will affect how we get certain cases into federal court, it is a significant development that warrants our attention. It will go into effect 30 days after President Obama signs it into law.

[Hat tip: @overlawyered]