Federal Courts Jurisdiction and Venue Clarification Act

Marty Dolan, principal at Dolan Law and his associate Karen Munoz represent victims of wrongful death and personal injury. His column “Law and Wellness,” appears in the Chicago Lawyer and her column appears regularly in the Law Bulletin. This week’s blog is written by Karen Munoz.

The Federal Courts Jurisdiction and Venue Clarification Act [H.R.394] came into effect this January. The Act has brought some significant changes to the existing rules regarding jurisdiction and removal. These changes will have an impact on a lot of litigation involving federal diversity jurisdictional issues which we should be mindful of.

30-Day Removal Period for Defendants

The new rule allows any defendant 30 days from the date that defendant is added to seek removal of a case to federal court. Previously, the period for seeking removal of a case expired 30 days after service of the suit. But the new rule means a 30-day period starts running again every time a new defendant is served in a case. The rule obviously makes sense for a defendant who is joined to a state action in a jurisdiction where that defendant does not reside.

However, it comes at a cost for plaintiffs. A plaintiff in a products liability case, for example, could find out during discovery a couple of years into the litigation that a separate entity which is not a party to the litigation manufactured a particular component of the allegedly defective product. After the plaintiff adds the manufacturer as a defendant to the case, the manufacturer may then seek to remove the case to federal court, even when this happens years into the litigation. Further, if the newly added manufacturer does move for removal, each previously served defendant has an opportunity to join the new defendants’ request.

This may lead to defendants taking advantage of the rule in cases where a defendant who is named when the complaint is initially filed knows that other defendants will most likely be added after discovery is complete. The first defendant can then simply wait until the new defendant is added and then join its removal request; although it is hard to imagine this will happen very often.

Removal After One-Year Removal Period

However, one rule has been changed to prevent the potential for taking advantage of the one-year removal period. If a district court finds that a plaintiff has acted in bad faith to preclude removal based on diversity, the court may permit removal, regardless of whether the statutory one-year removal period has expired. It would be possible to add a non-diverse defendant in order to keep the action in state court under the old rules and then voluntarily dismiss them after the one year removal period has expired.

This rule, I think, is sensible as the old jurisdictional rules did leave room to be circumvented and some cases that undoubtedly belonged in federal court were wrongfully being heard in state court.

These are just two of the important provisions of the Act. There are various other provisions, including changes to rules regarding removal based on “separate and independent state claims” and on the amount in controversy which we should also be attentive to, as they could seriously affect litigation in which we are involved.

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