FCJVCA Presentation

Report
 The Act is designed to accomplish two things:
Facilitate the identification of the proper State or
Federal Court in which the action should be brought;
and
2) Promote judicial efficiency by allowing judges to focus
on the merits of the lawsuit rather than forcing them
to “waste time” in determining jurisdiction.
1)
 “Jurisdictional Improvements”
 Amendments to:
 § 1332, §1441, §1446, and §1453
 “Venue Improvements”
 Amendments to:
 §1390, §1391, §1392, and §1404
 Removal of Criminal Prosecutions:
 New Provision:
 28 U.S.C. §1454
 Diversity Jurisdiction requires:
 Complete diversity of citizenship
 and
 An amount in controversy that exceeds $75,000.
 28 U.S.C. § 1332 – Diversity of Citizenship:
 Former §1332(a): The district courts shall have original
jurisdiction of all civil actions where the matter in
controversy exceeds the sum or value of $75,000,
exclusive of interests and costs, and is between –
 (1) Citizens of different States;
 **(2) citizens of a State and citizens or subjects of a foreign
state**;
 (3) citizens of different States and in which citizens or
subjects of a foreign state are additional parties; and
 (4) a foreign state, defined in section 1603(a) of this title, as
plaintiff and citizens of a State or of different States.
 28 U.S.C. § 1332 – Diversity of Citizenship:
 Amended §1332(a): The district courts shall have
original jurisdiction of all civil actions where the matter
in controversy exceeds the sum or value of $75,000,
exclusive of interests and cots, and is between –
***
 (2) citizens of a State and citizens or subjects of a foreign
state, except that the district courts shall not have
original jurisdiction under this subsection of an action
between citizens of a State and citizens or subjects of a
foreign state who are lawfully admitted for permanent
residence in the United States and are domiciled in the
same State;
 Significance of Change to Section 1332(a)(2):
 Federal Courts had taken a fairly narrow view of Section
1332 (a)(2) – frequently declining to assert jurisdiction
over disputes in which resident aliens appeared on both
sides of the litigation.
 The Amendment aims to clarify:
 Federal courts do not have jurisdiction over a claim between a
citizen of a State and a resident alien domiciled in the same
State as his or her adversary.
 Significance of Change to Section 1332(a)(2):
 Amendment also confirms resident aliens may appear as
additional parties in a federal action without having to
establish that their residency preserves complete
diversity.
 Example, Illinois plaintiff sues Wisconsin defendant in
federal court for an amount in controversy that exceeds
$75,000.
 A resident alien domiciled in the State of Illinois may be
added as a party to that action without depriving the federal
court of jurisdiction pursuant to §1332.
 §1332 also amends (slightly) the citizenship of
corporations:
 Former §1332(c) provided:
 “A corporation shall be deemed to be a citizen of any State by
which it has been incorporated and of the State where it has
its principal place of business.”
 §1332 also amends (slightly) the citizenship of
corporations:
 Amended §1332(c) provides:
 “A corporation shall be deemed to be a citizen of every State
and foreign state by which it has been incorporated and of
the State or foreign state where it has its principal place of
business.”
 Purpose of this Amendment:
 Congress hoped to address the increasing prevalence of
foreign corporations gaining access to federal courts.
 This Amendment purports to eliminate diversity
jurisdiction in two situations:
 (1) Where a foreign corporation with its principal place of
business in a foreign state sues or is sued by a citizen of that
same state.
 (2) Where an alien sues a U.S. corporation with its principal
place of business in a foreign state.
 Significance of this amendment to §1332(c):
 Under the old rules, a corporation with its principal
place of business outside of the U.S. might choose to
incorporate in a State.
 Pursuant to the old language, the entity’s incorporation
would make it a citizen of that State only, and enable it
to claim access to a federal court in a dispute with
another foreign national.
 Significance of this amendment to §1332(c):
 Under the amended rules, that foreign corporation
would be deemed to be a citizen of its State of
incorporation AND of the foreign state.
 Accordingly, that corporation would not have access to
the federal courts because disputes between two aliens
does not satisfy the requirements for diversity
jurisdiction.
 Significance of this amendment to §1332(c):
 Congress DID NOT ALTER the citizenship of other
entities – namely, limited liability companies.
 For purposes of diversity jurisdiction, the citizenship of
an LLC depends on the citizenship of each member of
the LLC. See Belleville Catering Co. v. Champaign Mkt.
Place, LLC, 350 F.3d 691, 692 (7th Cir. 2003).
 Treatment of LLC’s for Diversity Purposes:
 Likely to destroy diversity.
 Members of an LLC may also be LLC’s, corporations,
partnerships, or individuals.
 Must know with certainty the citizenship of each and
every member.
 “Affidavits alleging citizenship based on ‘the best of my
knowledge and belief’ are, by themselves, insufficient to
show citizenship in a diversity case.” See America’s Best Inns,
Inc. v. Best Inns of Abilene, L.P., 980 F2d 1072, 1074 (7th Cir.
1992)
 Citizenship of Insurance Companies in “Direct
Actions”:
 In jurisdictions that allow direct actions against
insurers, an insurance company is now deemed to be the
citizen of:
 Every state and foreign state of which the insured is a citizen;
 Every state and foreign state by which the insurer has been
incorporated; and
 The State or foreign state where the insurer has its principal
place of business.
 This provision aims to prevent such “direct actions”
against insurance companies from qualifying for
diversity jurisdiction.
 The Act also amended 28 USC §1441 governing
Removal Procedures.
 Severed the criminal removal procedures from this
section of the Code.
 Congress found that this was necessary to assist litigants
in knowing which provisions were applicable to civil
cases as opposed to criminal cases.
 Changes to Removal Procedure in 28 USC §1446:
 Time to Remove Initially
 Consent Required
 Standard for Determining the “Amount in Controversy”
 Pre-Removal Discovery
 Deadlines to Remove
 Supplemental Jurisdiction
 TIME TO REMOVE:
 A removing defendant still has 30 days after receiving
the initial pleading to file its notice of removal.
 That 30 day period begins running when defendant
receives the initial pleading – whether through “service
or otherwise.”
 Multiple Defendants – Time to Remove:
 The Act is designed to clarify the deadline to remove
when there are multiple defendants, each of whom
receives the initial pleading at a different time.
 Split in the Circuits regarding the former language of
Section 1446 governing the deadline for removal when
multiple defendants were served at different times.
 Section 1446(a)(2)(B) now provides that: each defendant
shall have 30 days after receiving the initial pleading or
summons to file the notice of removal.
 As noted in the Act’s commentary: “Fairness to later-served
defendants, whether they are brought in by the initial complaint
or an amended complaint, necessitates that they be given their
own opportunity to remove, even if the earlier-served
defendants chose not to remove initially.”
 Multiple Defendants – Consent
 The Act also clarifies what happens when an earlier-
served defendant chooses not to remove but a laterserved defendant files a notice of removal:
 The earlier-served defendant has two options:
 Consent to the removal, thereby allowing federal jurisdiction
to vest; or
 Oppose the removal (actively or passively), thereby
destroying federal jurisdiction.
 Under the Act, all defendants who have been served
must consent to the removal for it to be valid.
 Satisfying the Requisite “Amount in Controversy”
 At what time period does the “amount in controversy”
matter for removal purposes?
 What elements of damages can be included as part of
the “amount in controversy” calculation?
 Evidentiary Standard for Identifying the “Amount in
Controversy” in the Notice of Removal
 Federal Circuits had adopted differing standards
governing the burden of showing that the requisite
amount in controversy is satisfied:
 “Sum claimed”
 “Legal certainty”
 “Competent proof”
 “Preponderance of the evidence”
 Congress believed that these “differing standards” led
to practical complications.
 Evidentiary Standard for Identifying the “Amount in
Controversy” in the Notice of Removal
 To rectify the conflict among the Circuits, the Court
adopted the “preponderance of the evidence” standard
for satisfying the amount in controversy.
 Adopted reasoning of the Seventh Circuit in Meridian
Security Insurance v. Sadowski, 441 F.3d 536 (7th Cir. 2006).
 How can a removing defendant meet this
preponderance standard?
 The Act helps clarify this – the “sum demanded in good
faith” in the initial pleading shall be deemed to be the
amount in controversy.
 But what happens when the plaintiff is:
 Seeking equitable relief?
 Prohibited from pleading the full extent of its damages?
 Attempting to avoid federal jurisdiction?
 Complaint for Equitable Relief:
 In this instance, the Act allows the Defendant’s Notice of
Removal to establish the “amount in controversy.” 28 USC
1446(c).
 In the Seventh Circuit, the amount in controversy in actions
seeking declaratory or injunctive relief is measured by “the
value of the object of the litigation.” America’s Money Line v.
Colemani, 360 F.3d 782 (7th Cir. 2004).
 This means that the amount in controversy is the pecuniary result
that would flow to the plaintiff (or from the defendant) if the
injunctive, declaratory, or other equitable relief is granted by the
Court.
 Complaint where plaintiff is unable to allege its total
amount of damages in the Complaint:
 Defendant may:
 Provide a good faith estimate of the amount in controversy in
the Notice of Removal; or
 **Issue discovery requests to the plaintiff in the state-court
action.**
 Pre-Removal Discovery:
 This represents a significant change in the Removal
Statute.
 Where a plaintiff cannot demand a specific sum in the
Complaint, the 30-day removal deadline is extended
until the plaintiff clarifies the amount in controversy
through state-court discovery.
 If the plaintiff’s response to discovery indicates that the
amount in controversy exceeds $75,000, the defendant is then
provided with 30 days to remove the action to federal court.
 At least one District Court has commented that
propounding “amount in controversy” discovery in
state court is now the preferred method for removing a
case:
 “Indeed, recent amendments to the removal statute
make it clear that the defendants should pursue
state-court discovery before removal. These
amendments give defendants a new thirty-day window
to remove a case if they receive discovery from the
plaintiff in state court showing that the jurisdictional
minimum is satisfied.” Ramsey v. Kearns, 2012 U.S. Dist.
LEXIS 22970 (E.D. Ky. 2012).
 Complaint where plaintiff is intentionally attempting
to avoid removal by pleading an indefinite “amount in
controversy.”
 What happens when:
 Defendant cannot provide a good faith estimate of the
amount in controversy based upon the Complaint; and
 State-court discovery failed to disclose an amount in
controversy that exceeded $75,000?
 The Act maintains a one-year deadline for removing
an action to federal court based upon diversity
jurisdiction:
 “A case may not be removed…on the basis of [diversity
jurisdiction] more than 1 year after commencement of
the action.” 28 USC § 1446(c)(1). See also Loellke v.
Moore, 2012 U.S. Dist. LEXIS 2709 (S.D. Ill. 2012).
 However, the Act allows a defendant to avoid the one-
year bar by demonstrating that the plaintiff acted in
bad faith to prevent a defendant from removing the
action.
 The Act specifically provides that a plaintiff’s deliberate
failure to disclose the actual amount in controversy
constitutes “bad faith.”
 Thus, where a plaintiff refuses to provide sufficient
information concerning the amount in controversy, the
one-year limitations on removal likely will not apply.
 Supplemental Jurisdiction - §1441(c):
 Where plaintiff’s cause of action combines federal-
question and state-law claims, the federal court may
exercise jurisdiction over the entire action so long as the
claims arise from a “common nucleus of operative fact.”
 Under the former language of the statute, the district
court was vested with discretion to:
 Determine all of the claims at issue (including state-court
claims); or
 Remand those matters on which state law “predominated”
 Supplemental Jurisdiction - §1441(c):
 As Amended, the district courts no longer have
discretion and must sever-and-remand “separate and
independent” state law claims.
 Consequently, the district court may still determine
state law claims that form part of the same “case or
controversy” as the federal claims pursuant to its
supplemental jurisdiction.
 However, where there is a pure issue of state law unrelated to
the federal question, the district court must sever that claim
from the federal question and remand it to state court.
 The Amendments to the federal venue statutes are
aimed to clarify rather than change existing law.
 The “Venue Improvements” purport to accomplish three
goals:
 Define “venue” under federal law;
 Distinguish venue from subject matter jurisdiction; and
 Provide a consistent method for defining a party’s “residency”
for venue purposes.
 Venue Defined - §1390:
 The Act includes a new section which defines venue:
 “The term venue refers to a geographic specification of
the proper court or courts for the litigation of a civil
action that is within the subject matter jurisdiction of
the district courts in general, and does not refer to any
grant or restriction of subject-matter jurisdiction
providing for a civil action to be adjudicated only by the
district court for a particular district or districts.”
 Proper Venue - §1391:
 A civil action may be brought in any one of the following
judicial districts:
 A judicial district in which any defendant resides, if all
defendants are resident of the State in which the district is
located.
 A judicial district in which a substantial part of the events or
omissions giving rise to plaintiff’s claim occurred, or a
substantial part of property that is the subject of the action is
situated; or
 If there is no district in which an action may otherwise
be brought as provided in this section, any judicial
district in which any defendant is subject to the court’s
personal jurisdiction with respect to such action.
 A district court lacks power to enter judgment against
a defendant as to whom venue is improper.
 If venue is improper, defendant must raise that defense
at the first available opportunity or it is deemed
waived. See Fed. R. Civ. P. 12 (b)(3) and 12(h)(1).
 Where does the party reside? §1391(c):
 Natural persons: only the district in which they are
domiciled.
 Entities (whether incorporated or not): any judicial
district in which the entity is subject to the court’s
personal jurisdiction.
 Foreign parties (natural persons or entities): every
judicial district and the joinder of such defendants does
not impact the propriety of a particular venue.
 Transferring Venue -- §1404:
 The Act does not alter traditional rules concerning
transfer of venue; however, §1404 now allows for transfer
to “any district or division to which all parties have
consented.”
 This allows the district courts to transfer a civil action to
a district chosen by the parties – even if that venue
would not otherwise be “proper” pursuant to §1391.
 For Defendants hoping to remove on diversity
jurisdiction:
 As 735 ILCS 5/2-604 prohibits plaintiffs from seeking
damages in excess of $75,000 in their personal injury
complaints, a removing defendant is now allowed to
proceed in two ways.
 First, assuming complete diversity is established, the
defendant may:
 Remove the case immediately within 30 days of service;
 Provide a good faith estimate of the amount in
controversy; and
 Hope that the district court agrees that the amount in
controversy exceeds the jurisdictional threshold.
 OR…
 Upon receiving the Complaint, the Defendant may
also:
 Issue discovery (interrogatories or request to admit) to
plaintiff;
 Establish conclusively that the amount in controversy
exceeds $75,000; and
 Remove within 30 days of receiving the discovery
confirming that plaintiff is seeking more than $75,000 in
damages.
 If you’re a personal injury plaintiff hoping to keep your
case in state court, there are a few things you can do:
 You can affirmatively disclaim damages in excess of
$75,000.
 However, this disclaimer cannot appear on the face of
the Complaint – federal courts do not limit plaintiffs to
the amount of damages requested or disclaimed in the
Complaint.
 Rather, the plaintiff must file a binding stipulation, with
the Complaint, demonstrating that the amount in
controversy will not exceed $75,000. Oshana v. CocaCola, 472 F.3d at 512.
 For plaintiffs hoping to remain in state court (while
pursuing damages in excess of $75,000), the better
practice may be to preemptively destroy diversity by
naming a non-diverse defendant.
 Assuming that the non-diverse defendant played some
role in the events at issue, that defendant will be a
proper party to the action.
 However, plaintiffs should be mindful of the
fraudulent joinder doctrine:
 This doctrine aims to prevent plaintiffs from arbitrarily
naming non-diverse defendants merely to destroy
diversity jurisdiction.
 If the district court determines that plaintiff’s purported
claim against the non-diverse defendant is “utterly
groundless,” the district court may disregard that
defendant’s citizenship, assume jurisdiction over the
matter, and dismiss the plaintiff’s claim against the nondiverse defendant.
 The Federal Courts Jurisdiction and Venue
Clarification Act of 2011 does not represent a drastic
change to the traditional rules of federal procedure.
 However, we can expect that federal judges – will
demand strict compliance with the Act’s nuances in
order to perfect jurisdiction and venue in federal court.
 At this point, the Act’s most significant amendments
likely will impact the procedures for removing a civil
action pursuant to a federal court’s diversity
jurisdiction.
 Attorneys specializing in personal injury and general
tort litigation should be mindful of the Act’s influence
when attempting to gain – or to prevent – access to the
federal court system.

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