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E-Alert Case Updates

Important Changes in Removal Rules

Federal Courts Jurisdiction and Venue Clarification Act of 2011
(March 2012)

by Colleen K. O’Brien, Associate
Semmes, Bowen & Semmes (

For more information, contact Paul N. Farquharson.

Federal practitioners need to be aware of important changes to the rules regarding removal brought about by the Federal Courts Jurisdiction and Venue Clarification Act of 2011, which went into effect on January 6, 2012.

The purpose of the Act was to bring more clarity to the operation of the Federal jurisdictional statutes and to avoid wasting Judges’ time determining jurisdictional issues at the expense of adjudicating underlying litigation. The Act also brought about changes in diversity of citizenship, specifically as to foreign corporations, as well as venue; this blog focuses only on the changes affecting removal.

In a nutshell, some of the key changes that may affect you are as follows:

• “Sever-and-Remand”: The old version of 28 U.S.C. 1441(c) authorized a defendant to remove the entire case whenever a “separate and independent” Federal question claim was joined with one or more non-removable claims. Following removal, the district court could either retain the whole case or remand all matters in which state law predominated. Some Federal district courts found the provision unconstitutional because on its face, it purported to give Federal courts authority to decide state law claims that they did not have original jurisdiction. They would remand the entire case to state court, and defendants were defeated from accessing Federal court. The amendment to subsection 1441(c) permits the removal of the case, but requires that a district court remand unrelated state law matters. This “sever-and-remand” approach is intended to cure constitutional problems, while preserving the defendant’s right to remove claims arising under Federal law.

Removal with Multiple Defendants: 28 U.S.C. 1446(b)(2)(A) codifies the well-established “rule of unanimity” for cases involving multiple defendants. Under that rule, all defendants who have been properly joined and served must join or consent to removal. Like the old law, the new provision is limited to cases removed solely under section 1441(a) (for cases where the federal court has original jurisdiction as opposed to diversity jurisdiction). The twist is that the old statute specified a 30-day period for “the defendant” to remove the action, but it did not address situations with multiple defendants, particularly where they were served over an extended period of time, during and after the expiration of the first-served defendant’s 30-day period of removal. In those situations, Federal courts differed over determining the date on which the 30-day period began to run. New subparagraph 1446(b)(2)(B) provides that each defendant will have 30 days after receipt by or service on that defendant of the initial pleading or summons to seek removal. In addition, Subparagraph (b)(2)(C) allows earlier-served defendants to join in or consent to removal by a later-served defendant, even if that earlier-served defendant did not previously initiate or consent to removal. The new paragraph clarifies the rule of timeliness and provides for equal treatment of all defendants in their ability to obtain Federal jurisdiction.

Removal after one year due to Plaintiff’s bad faith: Under the old rule, a case could not be removed on the basis of diversity of citizenship more than one (1) year after commencement of the action. New paragraph 1446(c)(1) allows removal after one year where the plaintiff acted in “bad faith” in order to prevent the defendant from removing, such as deliberately failing to disclose the amount in controversy.

Amount in controversy: 1446(c)(2) and (3) have been added to address issues relating to the uncertainty of the amount in controversy when removal is sought, such as when state practice does not require or permit the plaintiff to assert a sum claimed or allows the plaintiff to recover more than an amount asserted. New paragraph 1446(c)(2) allows the defendant to assert an amount in controversy in the notice of removal if the initial pleading seeks non-monetary relief or a money judgment. The removal will succeed if the district court finds by a “preponderance of the evidence” that the amount in controversy exceeds the amount specified in 28 U.S.C. 1332(a) (currently $75,000.00). If the defendant lacks information with which to remove within 30 days after the commencement of the action, the Act adds a new subparagraph 1446(c)(3)(A) to clarify that the defendant has the right to undertake discovery in the state court to determine the amount in controversy. The discovery is treated as “other paper” within the meaning of paragraph 1446(b)(3), and it triggers a new 30-day period in which to remove. In adopting the preponderance standard, the new paragraph follows the lead of recent cases which hold that the defendant does not need to prove to a “legal certainty” that the amount in controversy requirement has been met. Finally, under 1446(c)(3)(B), if the notice of removal is filed more than one year after the commencement of the suit, and a finding is made that the plaintiff deliberately failed to disclose the actual amount in controversy to prevent removal, that finding would be deemed bad faith under paragraph (1).