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Harris v. Bankers Life: Duty of Inquiry to Determine Removability to Federal Court

28 U.S.C. §1446 and Issues Related to Class Action Defense

Class action defendants often benefit if they can remove the case to federal court if possible. CAFA (Class Action Fairness Act of 2005), discussed in a separate article, 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.

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) (italics added). The 30-day time limit on removal is discussed in a separate article.

This issue here discussed is whether a defendant is under a duty to inquire into the existence of jurisdictional facts. The Circuit Courts are split on this issue. This article discusses the recent Ninth Circuit opinion on the topic, Harris v. Bankers Life & Cas. Co., 425 F.3d 689 (9th Cir. 2005). Harris is important because it rejects both Moore’s Federal Practice treatise and the Tenth Circuit’s interpretation of a prior Ninth Circuit opinion, Cantrell v. Great Republic Ins. Co., 873 F.2d 1249 (9th Cir. 1989). Both Moore’s Federal Practice 3d, 107.30[3][f] at n.100 (3d ed. 2005), and Akin v. Ashland Chem. Co., 156 F.3d 1030, 1035 n.2 (10th Cir. 1998), cite to Cantrell as imposing a duty upon a defendant to investigate potential reasons for removal within the first thirty days of receiving a complaint. In Harris, the Ninth Circuit recently rejected Moore’s and Akin’s interpretation of Cantrell and clarified its holding in Cantrell.

In Harris, the Ninth Circuit considered “for the first time . . . whether the jurisdictional facts supporting removal of an action from state court to federal court must be apparent from the face of the initial pleading or whether the mere spectre of removability triggers a duty of inquiry.” 425 F.3d at 690.

Specifically, is removability determined by the face of the initial pleading or by defendant’s knowledge, constructive or otherwise, of the requisite jurisdictional facts? Our interpretation of 28 U.S.C. § 1446 leads us to join our sister circuits in holding that the “thirty day time period [for removal] … starts to run from defendant’s receipt of the initial pleading only when that pleading affirmatively reveals on its face” the facts necessary for federal court jurisdiction. Chapman v. Powermatic, Inc., 969 F.2d 160, 163 (5th Cir.1992); see also Lovern v. General Motors Corp., 121 F.3d 160, 162 (4th Cir.1997) (“[W]e will allow the court to rely on the face of the initial pleading and on the documents exchanged in the case by the parties to determine when the defendant had notice of the grounds for removal, requiring that those grounds be apparent within the four corners of the initial pleading or subsequent paper.”). Consequently, we affirm the district court’s denial of the motion to remand this case to state court; the removal was both proper and timely.

Id., at 690-91.

Harris filed suit in state court against Bankers Life and its agent, Kenneth Brown, in January of 2003. The complaint alleged that Harris resided in Montana, that Bankers Life is an Illinois corporation, and that Brown resided in Montana “in May, 1972.” During discovery, Bankers Life produced documents showing that Brown lived in Kentucky in 1973, and that he was terminated by Bankers Life in 1973. Brown was never served. 425 F.3d at 691.

In October 2003, in preparation for a February 2004 trial, Bankers Life moved to continue to the trial date because Brown had not been served or dismissed. Harris opposed the motion, but refused to confirm whether he intended to serve Brown. Accordingly, Bankers Life removed the action to federal court because “Brown is not a party to this matter” as he had not been served. 425 F.3d at 691-92.

Harris then announced that he was “continuing to search for Brown” and filed a motion to remand the action to state court. Shortly thereafter, Harris disclosed that Brown had died in 1983. Nonetheless, Harris pressed forward on his motion to remand, arguing that Bankers Life had not timely removed the case to federal court. The district court denied the motion to remand, and Harris appealed. 425 F.3d at 692.

The Ninth Circuit affirmed. The crux of its analysis is as follows:

We now conclude that notice of removability under § 1446(b) is determined through examination of the four corners of the applicable pleadings, not through subjective knowledge or a duty to make further inquiry. Thus, the first thirty-day requirement is triggered by defendant’s receipt of an “initial pleading” that reveals a basis for removal. If no ground for removal is evident in that pleading, the case is “not removable” at that stage. In such case, the notice of removal may be filed within thirty days after the defendant receives “an amended pleading, motion, order or other paper” from which it can be ascertained from the face of the document that removal is proper. See 28 U.S.C. § 1446(b).

As noted above, Harris is important because it expressly rejects the interpretation by Moore’s Federal Practice and by the Tenth Circuit that Cantrell v. Great Republic Ins. Co., 873 F.2d 1249 (9th Cir. 1989), “impos[es] a duty upon a defendant to investigate [potential reasons for removal] within the first thirty days of receiving an indeterminate complaint.” 425 F.3d at 694 n.4.

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