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Class Action Defense Issues: One Year Limit On Removal to Federal Court – 28 U.S.C. § 1446

28 U.S.C. § 1446 – One Year Limit on Removal

Class action defendants often benefit if they can remove the case to federal court if possible. CAFA (Class Action Fairness Act of 2005) was enacted to greatly expand access to federal courts in class action cases. Removal of cases to federal court generally is governed by 28 U.S.C. §1446. CAFA is discussed in a separate article.

The procedure for removal is set forth in 28 U.S.C. § 1446. As a general rule the defendant must remove the case to federal court within 30 days of receipt of the complaint or “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,” 28 U.S.C. § 1446(b). However, if the basis of removal is diversity jurisdiction, then the matter may not be removed more than one year after the lawsuit was filed. Id. The 30-day limit is discussed in a separate article; this article discusses the one-year limitation.

Section 1446 provides in part:

(a) A defendant or defendants desiring to remove any civil action or criminal prosecution from a State court shall file in the district court of the United States for the district and division within which such action is pending a notice of removal signed pursuant to Rule 11 of the Federal Rules of Civil Procedure and containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders served upon such defendant or defendants in such action.

(b) The notice of removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or within thirty days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.

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. (Italics added.)

Congress amended the removal statute significantly when it added the phrase “except that a case may not be removed on the basis of [diversity of citizenship] jurisdiction conferred by section 1332 of this title more than 1 year after commencement of the action” to subdivision (b) of Section 1446. While the one-year limitation applies only to removal based on diversity jurisdiction, this represents a substantial percentage of cases removed to federal court.

From the author’s point of view, the limitation invites abuse by plaintiff’s counsel committed to defeating diversity jurisdiction. A complaint could name as a party-defendant a non-diverse citizen, wait a year, and then dismiss that party. For example, the complaint may name a corporate defendant’s employee as an individual, even though the plaintiff has no interest or intention of going to trial against the individual. Nonetheless, a colorable claim and a modicum of patience apparently permit a plaintiff to defeat diversity jurisdiction. In fact, this situation very nearly arose in Harris v. Bankers Life & Cas. Co., 425 F.3d 689 (9th Cir. 2005), discussed below, where the plaintiff sued Bankers Life and its agent in January 2003, took no steps to serve the agent, and learned only after defendant removed the case on November 3, 2003 as part of an effort to defeat diversity jurisdiction by serving the agent that the agent had been dead for almost 20 years.

This, then, gives rise to a logical question: In light of the fact that the 30-day removal period is not jurisdictional, and the 30-day remand period is not jurisdictional, is the one-year limitation jurisdictional? Surprisingly, the answer is unclear.

Courts have split as to whether the one-year rule imposes a jurisdictional limitation. Some courts have concluded that it does, and therefore must be strictly observed. See Whisenant v. Roach, 868 F. Supp. 177, 178 (S.D. W.Va. 1994); see also Brock v. Syntex Laboratories, 1993 WL 389946 (6th Cir.1993) (unpublished disposition). Others have concluded that the rule involves a procedural question which may be waived. Barnes v. Westinghouse Elec. Corp., 962 F.2d 513, 516 (5th Cir.), cert. denied, 506 U.S. 999, 113 S.Ct. 600, 121 L.Ed.2d 536 (1992).

Zumas v. Owens-Corning Fiberglas Corp., 907 F. Supp. 131, 134 (D. Md. 1995).

So long as the case law is undeveloped in this area, a defendant may wish to remove the action as soon as diversity jurisdiction exists, and then argue the one-year limitation to the district court. Whether to proceed in this manner will, of course, require a case-specific examination of the facts leading up to the newfound existence of diversity jurisdiction.