Thursday, April 7, 2011

Outside of My Jurisdiction: Sixth Circuit Reverses Prior Precedent, Finds 1 Year Deadline of Section 1446(b) to be Procedural

28 U.S.C. Section 1446(b) provides in relevant part that

If the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable, except that a case may not be removed on the basis of jurisdiction conferred by section 1332 of this title more than 1 year after commencement of the action.

Meanwhile, 28 U.S.C. Section 1447(c) provides in relevant part that

A motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal under section 1446(a). 

So, assume that (1) a defendant removes an action to federal court based upon diversity jurisdiction more 1 year after the commencement of an action; and (2) the plaintiff moves to remand more than 30 days after the filing of the notice of removal. Was the untimely removal by the defendant a procedural defect that was waived by the plaintiff when it failed to file a timely motion for remand? Or, was the untimely removal by the defendant a jurisdictional defect that could not be waived by the plaintiff, meaning that the court should grant the motion to remand? In other words, is the 1 year deadline in 28 U.S.C. Section 1446(b) jurisdictional or procedural? This was the question addressed by the Sixth Circuit in its recent opinion in Music v. Arrowood Indem. Co., 632 F.3d 284 (6th Cir. 2011), with the court reversing its prior (unpublished) opinion on the issue.

The facts in Arrowood Indem. Co. were somewhat complicated, but the basics are that Larry Carpenter brought a negligence action against Donald Music after a car accident, and Arrowood's alleged predecessors in interest provided no defense to Music, resulting in a default judgment being entered against him to the tune of $392,310.06. Music later filed an action against Arrowood in state court, claiming that its predecessors acted in bad faith in refusing to defend him. Thereafter, Arrowood removed the action to federal court on July 20, 2009, (possibly) more than 1 year after the commencement of the action. Subsequently, on October 27, 2009, more than 30 days after Arrowood filed its notice of removal, Music moved to remand the action to state court. The district court denied the motion, finding that it was untimely, and ultimately granted summary judgment in favor of Arrowood.

Music thereafter appealed to the Sixth Circuit, which had to decide whether the 1 year deadline is procedural, meaning that Music forfeited any objection to removal based upon its untimely motion to remand, or jurisdictional, meaning that it could be raised anytime prior to final judgment. According to the Sixth Circuit,

Every circuit court to address the issue has held that the one-year limitation on the removal of diversity cases is a procedural requirement. Ariel Land Owners, Inc. v. Dring, 351 F.3d 611, 616 (3d Cir. 2003) (holding that the "failure to remove within the one-year time limit established by § 1446(b) is not a jurisdictional defect"); In re Uniroyal Goodrich Tire Co., 104 F.3d 322, 324 (11th Cir. 1997) (addressing the one-year limitation and holding that "[t]he untimeliness of a removal is a procedural, instead of a jurisdictional, defect"); Barnes v. Westinghouse Elec. Corp., 962 F.2d 513, 516 (5th Cir. 1992) (holding that plaintiff forfeited his opportunity to challenge the failure to remove within the one-year limitation period).

What the Sixth Circuit failed to mention is that several federal district courts have reached the opposite conclusion. As Scott Dodson, a professor at the William and Mary Law School, noted in his article, In Search of Removal Jurisdiction, 102 Nw. U. L. Rev. 55, 65 n.64 (2008), several federal district court opinions have found the 1 year deadline is jurisdictional, including

-Rashid v. Schenck Constr. Co., 843 F. Supp. 1081, 1086-88 (S.D.W. Va. 1993);

-Brock v. Syntex Labs, Inc., 791 F.Supp. 721, 723 (E.D. Tenn. 1992); aff'd, 7 F.3d 232 (6th Cir. 1993);

-Perez v. Gen. Packer Inc., 790 F. Supp. 1464, 1470-71 (C.D. Cal. 1992);

-Smith v. MBL Life Assurance Corp., 727 F. Supp. 601, 602-04 (N.D. Ala. 1989);

-Foiles by Foiles v. Merrell Nat'l Labs., 730 F. Supp. 108, 110 (N.D. Ill. 1989); and 

-Gray v. Moore Forms, Inc., 711 F. Supp. 543, 544-45 (N.D. Cal. 1989)

Of course, the Sixth Circuit did acknowledge that it affirmed the Brock case listed above. The court concluded, though, that because this opinion was unpublished (and cited no authority for its conclusion), it was not bound to honor it. 

So, why did the Sixth Circuit find that the 1 year deadline is procedural? The court gave three reasons: First, it cited to Caterpillar, Inc. v. Lewis, 519 U.S. 61 (1996), in which a defendant moved to remove an action to federal court before a diversity-destroying defendant was properly dismissed from the action. While the Supreme Court found that the defendant could not have satisfied the 1 year deadline if it waited for this other defendant to be dismissed, it also noted that the respondent did not raise this issue on appeal and that "a nonjurisdictional argument not raised in a respondent's brief in opposition to a petition for writ of certiorari 'may be deemed waived.'" Therefore, according to the Sixth Circuit, "the Supreme Court has described the one-year limitation as 'nonjurisdictional' and waivable."

Second, the Sixth Circuit noted that it previously had found (1) "that the requirements of § 1446(b) are generally procedural; and (2) "that the thirty-day time requirement of § 1446(b) is procedural." The court then found that "[t]here is no reasoned basis to hold differently with regard to the one-year limitation."

So, why had the Sixth Circuit reached these conclusions, and why was it now reaching the same conclusion with regard to the 1 year deadline? According to the court, "We have previously held that where a statute limiting removal did not expressly restrict the jurisdiction of the federal courts, the requirements of the statute were procedural and thus waivable."

Is this argument entirely convincing? I think that Professor Dodson's answer would be "no" based upon his aforementioned article. In it, Professor Dodson noted that in Arbaugh v. Y & H Corp., 546 U.S. 500 (2006), the Supreme Court held that the employee-numerosity requirement of Title VII was part of the merits of the plaintiff's case and not jurisdictional because it did not speak in jurisdictional terms. According to the Court, "when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character." Professor Dodson, however, cautioned against applying such a "converse presumption" to removal because the Supreme Court in Bowles v. Russell, 551 U.S. 205 (2007), later found

that statutory time limits for filing a notice of appeal are jurisdictional despite the lack of specific jurisdictional words in the statute. The Court reasoned that the long historical treatment of appellate time limits as jurisdictional demanded a jurisdictional characterization despite the lack of a clear statement of jurisdictionality from Congress.

Professor Dodson also listed 5 other reasons for not applying this "converse presumption" to removal:

-First, jurisdiction and procedure are, in some respects, more closely aligned than jurisdiction and merits;

-Second, as Howard Wasserman has argued, because normal trial structure tends to cause jurisdictional issues to arise in separate contexts from and prior to merits questions, the two types of issues are more appropriately resolved at different times in the formal litigation;

-Third, as Wasserman also points out, the jurisdictional versus merits characterization problem implicates the identity of the proper decisionmaker;

-Fourth, also drawing upon Wasserman's arguments, the confusion between merits and jurisdiction is often grounded in a misconception of whose jurisdiction is at issue;

-Fifth, substantive statutes like Title VII implicate federalism values to a lesser degree than does removal.  

Yet, despite the seeming validity of these criticisms, the vast majority of cases that I have come across deeming the requirements of § 1446(b) to be procedural have focused on the same factor as the Sixth Circuit:  the absence of an express jurisdictional restriction in the language of § 1446(b). So, how do we solve this problem? According to Professor Dodson, we should replace this single-factor analysis with a four-factor analysis and consider:

(1) whether Congress has specifically designated a provision as jurisdictional; (2) whether the function of the particular provision supports a jurisdictional characterization; (3) whether the effects of a jurisdictional characterization are consistent with the purpose and function of the provision; and (4) whether a jurisdictional characterization is doctrinally consistent as a matter of historical treatment and cross-doctrinally consistent with the characterization of similar provisions.

In the end, I think that even if it applied Professor Dodson's analysis, the Sixth Circuit would have reached the same conclusion, but I think that its conclusion would have had a stronger foundation.

My final thought in summing up is that reading Arrowood Indem. Co. by itself might lead to the conclusion that construing the 1 year deadline of § 1446(b) as procedural is a windfall for (out-of-state) defendants, who get to keep cases in federal court if plaintiffs fail to move to remand within 30 days. But, the Sixth Circuit's prior opinion in Brock suggests how a construction of the 1 year deadline of § 1446(b) as jurisdictional can hurt (out-of-state) defendants.

In Brock, shortly more than a year after commencement of an action, the plaintiff amended its complaint, which initially sought $10,000 in damages (just below the then-existing amount in controversy requirement), so that it now sought $5 million in  damages. The defendants then moved to remove, but, as noted, the Eastern District of Tennessee and then the Sixth Circuit found that the 1 year deadline of § 1446(b) is jurisdictional. As a result, even though it appeared likely that the plaintiff acted in bad faith, these courts found that the defendants could not remove the action because of the jurisdictional nature of § 1446(b). Moreover, this conclusion seems consistent with other case law. See, e.g., Kinabrew v. Emco-Wheaton, Inc., 936 F.Supp. 351, 352 (M.D.La. 1996).

-Colin Miller

http://lawprofessors.typepad.com/civpro/2011/04/28-usc-section-1446bprovides-in-relevant-part-that-if-the-case-stated-by-the-initial-pleading-is-not-removable-a-not.html

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