 You're watching FJTN, the Federal Judicial Television Network. The Federal Judicial Center presents Subject Matter Jurisdiction, an overview for law clerks. This broadcast is a videotaped and edited version of a lecture presented to law clerks at the Federal Judicial Center in November 1999 by James M. Wagstaff, an attorney with the San Francisco-based law firm, Kerr & Wagstaff. Mr. Wagstaff is a frequent lecturer on jurisdiction and center orientation programs. Welcome. We are here today to discuss the always-sensitating subject of federal subject matter jurisdiction, that first topic that comes up in so many cases, analyzing whether the case is properly in federal court. Today we're here to talk about that growing burden of federal case loads and see if there are ways that law clerks in particular can assist their judges in evaluating jurisdictional issues and eliminating cases from the docket that shouldn't be there to begin with. We're going to talk about federal jurisdiction today. We're going to talk about ways to look at those cases. We'll go fast, as I want to do. One of my students said that my name is Jim for the acronym, Jaws in Motion. So perhaps we'll get a little of that pacing as well. You know, the most important thing that federal judges do is, as Brandeis said, not doing. They analyze jurisdiction first. Now, the United States Supreme Court this last year in the Rourgas case made it clear that the court can on rare occasions analyze personal jurisdiction first, leaving subject matter jurisdiction if it is a more complex subject for a different moment in analysis. But that's really the exception. Generally speaking, courts will analyze the existence of subject matter jurisdiction first. And as a law clerk, the last thing you want to do when you finish your clerkship is get a call from your judge and have the judge say, you know, the case was reversed, that case we tried, because the appellate court raised the absence of jurisdiction suesponte. Imagine the frustration the litigants must have felt when Judge Evans, in a concurring opinion recently in the Seventh Circuit said, the district judge nurtured the case for three years with 11 published decisions. And the parties came here looking for answers to questions on the merits of this complex litigation. We tell everyone they wasted their time. The district court we hold didn't have jurisdiction from the get-go. So close the hymnal because mass is over. Go home. Case dismissed. Three years of work in the district court, getting the case to this point, are washed down the drain. Now, you know, that tells us how we prioritize decision making. So today, as you watch this tape and as you're here with me in studio, I want to emphasize one thing. In fact, I'll deputize each and every one of you as radical members of that society jurisdiction first, because that's where it starts, because the Supreme Court in the Steel Company case reminds us you go to jurisdiction first, you don't go to the merits, even if the merits seem that they can be resolved easily. So what's the hardest and really the easiest less than a federal jurisdiction? Here it is. You've heard it before. Federal courts are courts of limited jurisdiction. But I want to give that to you in a different light. I want you to think of it this way, that in civil cases, federal courts are presumptively without jurisdiction. That is, the case comes into the courtroom. With the presumption there is no subject matter jurisdiction, and the litigants and occasionally the court must take a Missouri approach, which is a show me approach. Whoever invokes the jurisdiction of the court must demonstrate that it exists. So I'm pleased to be here with you today to talk about these jurisdictional issues. We should start off, since we're talking about jurisdiction, by doing some jurisdictional calisthenics. Watch with me as we look at this graphic, because what we've got here is we've got the four doorways to federal court. I want you to imagine that the room in which you're sitting is the federal courthouse jurisdictionally speaking. There are only four doorways in which to get into this particular room. Let's start with the front door of federal question jurisdiction. You know the rule, as we'll look at in a moment, it must arise under federal law. A federal defense is insufficient for subject matter jurisdiction to come in that front door of an arising under federal question case. That brings us of course then to the visitors door. Now the visitors door right over here is diversity jurisdiction. We have a national court system to allow citizens of different states, particularly a non-local, to use our system to avoid the possible prejudice of a local court, state court. They're allowed to go to court. You know the basic rule, there must be complete diversity of citizenship between all parties. And there might be some special citizenship rules that will assist us in analyzing this issue as we go forward. Well the next part of our, if you will, of our calisthenics is the back door right behind you. None of you came in that way, but it's the back door of removal jurisdiction. This action is commenced in state court and by really a remarkable piece of statutory language that allows this case to come to federal court even though there's no court order, there's no agreement between the parties, the unilateral decision of the defendant to remove the case to federal court. Well removal jurisdiction generally equates with original jurisdiction. If that state court case, as is pled, could have been filed as a federal question or is a diversity case, then it can come to federal court. Now this back door is a squeaky door because the procedures are, must be complied with in a strict manner. Even if there's jurisdiction, as we'll see, if there's no procedural propriety, then that's not going to be allowed. And lastly, we come to the side door of supplemental jurisdiction under 1367 of Title 28. Supplemental jurisdiction, as you know, means there's generally some claim or claims over which the court has original jurisdiction and there's something supplemental to it. That is, it's arising out of the same transaction or occurrence and then the whole case becomes one constitutional case. It also includes in many situations supplemental parties. Even though you have no federal claim against that party, they can be attached to the lawsuit. Now, I wrote a book for lawyers, a federal civil procedure before trial, a 2600 page turner. It'll keep you just mesmerized as you read it. One of my co-authors, Judge Schwerzer, William W. Schwerzer, he says, let's not call this a side door. Let's call it the pet door. You know, that door within a door because this door, like with a pet, swings freely both ways. This jurisdiction, as we'll see, is discretionary jurisdiction. So we start with the four doorways to federal court. Now, you are law clerks and as law clerks, you must realize that in many ways you are the first sentinel at that door. You are the ones who evaluate and assist the judge in evaluating the existence and presence of subject matter jurisdiction. Now, in that role, I want today our time together for me to give you a terrorist profile as sentinels at that door. Things to look for to evaluate whether this case should properly be here. And I have to say to you that this will often be done suesponte by the judges for whom you work. In other words, the lawyers will not understand or perhaps appreciate or desire to have a court dismiss it for lack of subject matter jurisdiction. But the absence of subject matter jurisdiction, as one court said, is a dead limb on the judicial tree. It is waiting to be locked off at any time. And therefore, it is properly and in fact, mandatory raised suesponte. And I assure you, your judges will feel wonderful when you give them what I call their Colombo moment. They're sitting in court, perhaps at a scheduling conference, and they say, oh, counsel, by the way, one more thing. Is there jurisdiction over this case? And they focus the litigants on that issue. And that's appropriate as it should be. So what you're going to do today is analyze whether there is jurisdiction in a particular case. And how are we going to do it? We're going to do it with little quizzes. You don't need to answer them. This is not a television quiz show where you earn a million dollars, although maybe I am like that jurisdictional version of that. You're going to get quizzes to assist us in figuring out what the right answer is. And I should tell you that the law changes from year to year. And this is the best and the most recent version of some of these questions. Well, I think it's not that way. Now, one other caveat for you all as we get started. I understand that although you'll make recommendations to your judges, you'll assist your judges in analyzing this. It's the judge who makes those decisions. And we all appreciate and understand that. So let's start with the front door of federal question jurisdiction. Simply put, an action is properly brought or removed to federal court on federal question grounds if it arises under federal law. It must arise under... that's the critical phrase. U.S. Constitution, treaties, federal statutes, administrative regulations creates... a federal law creates the right to sue. You know it is insufficient that there would be a defense. A federal defense doesn't give a right of federal jurisdiction. You know that, of course, from the great case of Louisville and National Railroad versus Motley. You read it in school, studied it for the bar exam. It was decided in 1908, which was the last time the Cubs won the World Series. It's old but venerable. It's still the law. You remember the Motley said they had a lifetime pass that they reached in an agreement with the railroad and they said, we know what that railroad is going to do. They're going to argue that federal law prevents this contract. Therefore, federal law is a big issue in the case. The Supreme Court said that's an anticipated defense. A defense does not mean a federal cause of action and therefore there's no federal jurisdiction. We start with that proposition. It is not enough that the cause of action refer to federal law. The Meryl Dow case, where federal law actually provided one of the elements as a matter of national law for all state misbranding cases for drugs. Supreme Court said that doesn't arise under federal law. Well, you know, was it Twain who said that thunder is good and thunder is great but it's lightning that gets the job done. Let's go to our first hypothetical. Lyssen-Sues Berg in federal district court alleging a federal securities act violation. The court grants summary judgment for Berg. A disgruntled Berg then sues Lyssen for malicious prosecution in federal court. Berg, who's not diverse from Lyssen, asserts that federal question jurisdiction exists because the claim raises a substantial federal question. That is, was there probable cause to bring the original underlying federal suit? So the question presented is should the court grant the motion to dismiss for lack of jurisdiction. Now pause for a minute and ask yourself this question. The answer is as the court properly held in Berg versus Lyssen, no. There's no federal jurisdiction here because the cause of action is a state law cause of action. Admittedly, that cause of action incorporates into it some federal law issues. Maybe the sole issue in the case but as the Ninth Circuit correctly ruled this is a case in which there is no federal question jurisdiction because the action does not arise under federal law. It is not even enough as a general matter if federal preemption precludes the cause of action. Most federal preemption simply displaces state law causes of action. That is, such as the cigarette labeling act, a classic example, the Lonnie case you'll recall. In which the federal law pushes out alternative state law failure to warrant cases as to cigarettes in appropriate circumstances. But there's no federal claim there. There's no there there, jurisdictionally speaking. And so that's a federal defense. And that's true for the vast majority of federal preemption statutes. The Airline Deregulation Act would be an example of that. The Federal Medical Devices Act, FIFRA, Federal Crop Insurance, these are preemptive federal statutes. But there's no federal claim there, so it displaces but does not replace the cause of action. So we start with that. And one other thing to consider is that there may be some circumstances where federal common law creates the right to sue as a source of the law. So we talked about statutes and treaties and civil rights cases and regulation, etc. But you can also sue if the action arises under federal common law. We've seen many cases in the last few years in which the courts have held that if a case involves Indian gaming regulations in appropriate circumstances, that will be deemed to arise under the federal common law. And hence the case will be an arising under case. Sometimes cases against air carriers for loss of property will be treated because of our need for federal common law as not only providing the source of law but also providing the basis for a cause of action. So as we end our first area together on this one we come up with a simple rule which is our first terrorist profile. Federal question jurisdiction does not arise simply because federal law is an issue in the case. Federal law must create the right to sue either expressly or impliedly either by statute or common law or otherwise. That brings us then happily to diversity jurisdiction. The visitor's door of diversity jurisdiction. Now in doing diversity we have to engage in a certain degree of visualization. Who are the plaintiffs and where are they citizens and who are the defendants? Well if you've been to first grade you can do a pretty good job on diversity jurisdiction. Because if you can take out a sheet of paper and put plaintiffs on one side defendants on the other side and draw a line down the sheet of paper you'll be able to do a very good job on diversity jurisdiction. Now this may sound so simple so easy you know but you know it's not because you should do it in every case where there's diversity as an issue. This is a matter of routine. What do I mean by this? On one side write down the states of citizenship of all plaintiffs in a diversity case. On the other side write down the states of citizenship of all defendants. The plaintiffs on this side and all the defendants on this side. That's a general matter. If the same state appears on both sides of the line we don't have complete diversity. Which is required in most cases by 1332 of Title 28. So simple. Wagstaff of California Seuss Jones of Nevada and Smith of California. We have minimal diversity but we have a California on both sides of the line. That gets us started. There's individuals. There's interesting issues involving students perhaps a law clerk who's temporarily in a physical location but you know the basic rule. When we're trying to figure out how to write the citizenship of the individual in this column we're asking ourselves where are they domiciled? As you know that is where are they intending to remain permanently? You take a snapshot of citizenship rules and not there after. So if someone moves after the lawsuits filed that's jurisdiction irrelevant. If we add a new party we've got to consider that but if it's the same party. So individuals you ask yourself where are they domiciled and the court in an appropriate case where this is an issue would ask themselves the circumstantial questions of where do they live on that occasion how long do they live there do they intend to remain permanently where are they registered to vote or circumstantial pieces of evidence to determine individuals? Now the part that raises the jurisdictional algebra so interestingly is how do you define the citizenship of a corporation? In what state is a corporation? Well you know let's get the basic rule and let's see it as it plays out on the screen. The basic rule is that under 1332 of title 28 a corporation is a citizen for diversity purposes of every state in which it's incorporated and these state in which it has its principal place of business. Now if a corporation is merely licensed to do business but is not formally incorporated there that doesn't count has to be incorporated and these state the one state where they have their principal place of business states of incorporation usually doesn't present much of a problem or a challenge but you know the principal place of business does. So let's take a look at this particular hypothetical and see what it does for us. I call it diversity algebra. Plain of ink what the heck I'm the I'm the person here Plain of ink manufactures basketball rooms for sale primarily in the state of California its manufacturing plant is in California. All right. Let's incorporate in the state of Delaware. Let's knock out that California to make it easier man. So just the state of Delaware however its officers and CEO reside and conduct all business affairs from their home in Palm Beach, Florida where the company was founded by James Naismith Shack O'Neill a California citizen is injured while dunking the basketball in a dunking the basketball in a game he's playing out in California against the Golden State Warriors. He brings a diversity suit in the northern district of California the question is does the court have subject matter jurisdiction? Well this depends on how you define principal place of business remember how we've changed the hypo we've got we've got this plaintiff on the one side from California and we've got a corporation which has its officers located in Florida but seems to be doing a fair chunk of business in California and that's where the injury took place now we know we've got Florida on one side Delaware on one side because that's where it's incorporated what else do we add to that side the answer here is going to depend on what you're in. The seventh circuit applies what they call the nerve center test when we're determining principal place of business we look to where they have their offices in this case that would be Florida we'd have Delaware in Florida on one side California in the planar side complete diversity if on the other hand we imply the rule of most other circuits the industrial tectonics case by way of example you'll see that they look to what's called the bulk of the activity where is this corporation conducting its activity where is it most present such that it shouldn't be able to go to federal court as a stranger if you will in this particular case since our facts seem to point us towards California for a lot of their activity that may well be the answer under that test if you have a state which has a predominance of the corporate activity it will become the state we write down as the principal place of business notwithstanding that its offices may be located elsewhere now what if on the other hand you have a corporation that's far flung it's doing a lot of little business everywhere but no one state has a predominance as compared to another state in that situation even these other second courts have said we'll go to the nerve center test as a backup and lastly what if you have a corporation in this day and age there are a lot of them a corporation which has only passive investments as its principal activity the courts in the last couple of years have held that if it's a passive investment corporation then you will look to the nerve center which makes sense, that's really where they're doing their activity under either test so you would keep that in mind now let's go to ask ourselves, let's change the facts a little bit of this hypothetical this time we've got Wagstaff Inc. is the wholly owned subsidiary of Smith Inc. a mega corporation incorporated in California with its principal place of business in Los Angeles so let's suppose that we were able to have our principal place of business be in Florida maybe it was a far-flung corporation so seems like we have it there's the fact that this defendant is owned by a parent that's California, change our analysis the answer is that it does not under the case law it does not under the case law because every corporate defendant is entitled to have its own citizenship counted without attribution even of entities with which they're connected unless the party can demonstrate that that larger entity or the smaller entity is a subsidiary is an alter ego if they can meet the stringent test for alter ego piercing the veil then we would have one whole corporation would analyze the business of each of them so we keep that in mind now that gets us through corporations but that's not the answer it's not the whole answer so I'm now about to tell you a rule that will assist you in your jobs as sentinels at the door a rule in which many times the lawyers and occasionally even the judges don't catch the absence of jurisdiction through the visitor's door here's the rule all artificial entities other than corporations take on the citizenship of each of their members it's worth repeating all artificial entities other than corporations take on the citizenship of each of their members now corporations we know are not they don't take on the citizenship of their shareholders but every other artificial entity takes on the citizenship of its owners or its members let's do some jurisdictional algebra to get us started on this particular thought process so you know jurisdiction here it is Jim Wagstaff living in California has a hot idea why not a self-lighting cigarette hmm he learned from a nation's leading expert on incendiary objects one William Hotpocket Schorzer one of my co-authors is a federal judge who lives in Arlington Virginia Wagstaff also found a major investor one Wally Deeppockets Tashima who also lived in California together they formed a partnership the WT Limited DBA ULITUM with Wagstaff I got 50% Tashima's got 49% who's also my co-author who are all partners and we begin to sell the product nationwide unfortunately the product didn't always work as planned and sure enough one Mary Kelly of Virginia tried the product and badly burned her hand she has sued in federal court located in Virginia predicated on the court's diversity jurisdiction so let's do our algebra together sheet down the line we've got a plaintiff from Virginia suing a partnership which is an artificial entity that's not a corporation so therefore it takes on the citizenship of each of its members one of the members the 1% owner, partner is a citizen of Virginia we have Virginia on both sides of the line we don't have complete diversity as a result of this rule and the Supreme Court told us that in the Cardin case it's been reiterated by many cases since that is if it's a partnership you look at the citizenship of each partner it doesn't matter if they're limited or silent or not so good if they're partners they get put down in the jurisdictional algebra you can have 100 partners from California if one of them is from the same state as the plaintiff or on the plaintiff side as the defendant then we don't have jurisdiction now that sounds pretty easy let's see if we can apply that rule in a different context here we go you know jurisdiction? at formation the founders of the entity decide they'd like a bit more protection from suits we have informed it as a limited liability company under the law of the state of California and designated its principal place of business at San Francisco, California Kelly brings the same lawsuit in federal court what's the answer? is there subject matter jurisdiction? well it is established under our rule this is an artificial entity a limited liability company that is not a corporation therefore it takes on the citizenship to change our previous conclusion there is no jurisdiction here because it is a virginian on both sides of the line would it make a difference if this was a sub chapter S corporation? no it would make a difference in our rule the rule is that all artificial entities other than corporations well a sub chapter S corporation a professional corporation is a corporation therefore we turn to the definition of corporate citizenship for a sub chapter S professional corporation let's change it let's try one more area which is quite common in this day how people own entities we'll see if this changes it this time Schwerzer the 1% owner you'll recall from Virginia of the LLC is dissatisfied with the management of the entity believing it is wasting his striking invention so he sues Wagstaff to Schema and the entity itself in a federal diversity suit well what do we got? California suing Wagstaff of California to Schema of California and sure enough the entity itself which includes him he's on both sides of the line not as a defendant but his citizenship is attributed to the partnership we don't have complete diversity you'll be surprised how often people don't answer the question of whether the partnership citizenship destroys it a simple order to show cause or a question from the judge a Colombo question is could you tell me the citizenship of all the partners that's appropriately asked in this kind of setting as we look at it now that brings us of course to one other issue on diversity you know what? in order to come in the visitor's door you have to have a ticket that ticket is that there must be more than $75,000 in controversy it's got to be more than $75,000 in controversy in this particular case so how do we judge that in an original action you know the rule the rule is that we ask ourselves if you can say to a legal certainty that the plaintiff won't recover that here's a simple rule of thumb you ask yourself and the judge asks himself or herself if this case were to go to verdict and the jury would award more than $75,000 would that be an award that would be so patently unreasonable that I'd be obliged to grant a judgment as a matter of law or to remit that no reasonable jury could ever award more than $75,000 that is in fact the issue that arises in these cases let's look at how it's arisen in an interesting setting this last year A1 term paper ink is a vendor of term papers and research it is in the business of selling term papers and research to college students it makes its primary sales on the internet university conducts an undercover investigation of A1 it's also doing business as prestigious papers here's my favorite the paper shack perfect the investigation confirms only one sale to university student who actually turned it into his own work and seven others which apparently didn't turn it in or they couldn't prove it and one of those seven was when they did the investigation themselves and the undercover person bought it the university of Massachusetts in Massachusetts actually a different college brings a diversity action against A1 term papers of New York alleging state law claims for torches interference university student relations and unfair business practices the complaint alleges that the misconduct has damaged the university and diminished the value of a degree good moral lesson to this case of course the question is there diversity jurisdiction well there is complete diversity presuming it's private university and it's not the state the question is is the amount of controversy satisfied and here the court concluded that it was not the court concluded it could say to illegal certainty there weren't more than there wasn't more than $75,000 in controversy why the court said because the court said it's inconceivable that one little sale of one term paper that was used and six or five other possible ones could ever rise to the level of diminishing the value of a degree to the point of $75,000 now this is not a case to to apply in every situation because it's going to be a very liberal interpretation of whether the plaintiff satisfies it unless essentially you can say as a matter of law illegal certainty but it is certainly something to keep an eye on I'll give an example let's suppose you have a contract that limits liability to a certain dollar figure and let's assume it's enforceable that would limit diversity jurisdiction you know you go to a hotel and there's a statute that limits how much you can recover if someone steals something that would limit diversity jurisdiction in the appropriate case alright now I'd like to do is have our one last question on diversity be almost a law school exam a case decided quite properly I might add by Judge Fern Smith who's now head of the Federal Judicial Center this is going to bring our way really in many ways to removal jurisdiction because the amount of controversy provides a segue to removal jurisdiction the case in state court between citizens of different states may not be entirely clear how much money is at stake they may not even allege into the complaint and the defendant on removal files a notice from removal and says they think it's worth more than $75,000 let's try this case out and see how it how it takes us to in many ways to the to where we need to go in this regard plaintiffs bring a products liability class action in state court against a manufacturer of head lice remedies seeking actual and punitive damage this case gives me kind of willies injunctive relief and attorneys fees they allege that the defendant continue to manufacture and sell their over the counter head lice remedies despite knowledge that the head lice will be able to sell their products and sell their products so we've got here one of these causes of action it's a class action the manufacturers removed the case to federal court stating that none of the defendants are citizens of the same state as the plaintiffs they also allege that the class action satisfies the amount of controversy requirement because they say compliance with injunctive relief will cost each defendant more than $75,000 class members have common and undivided interest in their claims for punitive damages and the value of the attorneys fees alone as authorized by statute will exceed $75,000 per the named plaintiff no one will disagree with that part of the fact the question is what does it mean so the plaintiffs file a motion to remand and the grounds set forth is there jurisdiction let's take it apart one step at a time on this amount of controversy first I should note that the allegation as to diversity the court held was insufficient to merely say that none of the defendants are the same state as the plaintiff is not specific enough the court is obliged to require of what those specific states are and when you read a notice of removal take a look for that because you as the sentinels at the removal backdoor can also identify areas where this case properly should be in state court and should not have been removed that's what you're that's really what you're looking at and I know it's not so easy I think I forget who it was that said that Wagner's music is better than it sounds well you know that's the way some people feel about jurisdiction in these matters so, but there's always your role as sentinels will play this so let's keep going on this one compliance with the injunctive relief now here there's a split of authority some circuits allow you to look at either the value of the injunction to the plaintiff or the detriment to the defendant other circuits such as the one in this particular case say you don't look at the two values you look only at how much it's worth to the plaintiffs in this case the facts are clear that buying this product was a $9 to $17 item there was no way the plaintiffs were going to be able to aggregate their claims in that regard you know the basic rule generally speaking multiple plaintiffs cannot aggregate their claims together to satisfy it they must each satisfy the amount of controversy so what do we have we have here an argument being made that the punitive damage allegation is common and undivided such that it's allowed to be aggregated like a beneficial trust case where they do allow it there's a lot of authority here as well in some circuits the 11th circuit most notably they hold that in a class action punitive damages can be aggregated they can be aggregated and therefore it's a unified right and therefore we have that and you'll see those cases cited in judge smith's case here in the cancer case you can find those citations by looking at that case or others the case in the 11th circuit is a case called tap scut you can in fact aggregate other circuits the majority of district courts say no the supreme court in the zon case said that you must have the amount and controversies for each plaintiff in a class action and punitive damages can be alleged in any individual lawsuit you don't need to bring that lawsuit together and therefore we will analyze punitive damages as prorated among all the various class members and since the supreme court said everybody even the unnamed members must satisfy the amount of controversy it's not satisfied here the judge smith held there was no basis to conclude the punitive damages even in our wildest imagination would equal 75,000 times the very large number of people in this class that leaves us with how to handle attorney's fees if attorney's fees are mandated by statute or authorized by statute I must say or by contract they will be treated as part of the damages if they're treated as costs they don't count as the amount of controversy the question is how do you handle in a class action and judge smith took the majority rule and concluding you prorate the amount you could possibly recover among all the class members you don't look at just the name class members therefore judge smith held this case was not properly removed well you know that really does bring us then to removal jurisdiction the back door we've started with this notion of how you remove a case with the amount of controversy on removal you ask yourself this question looking at the four corners of the plaintiff's complaint as filed in state court does it disclose diversity jurisdiction and the amount of controversy or and or federal question jurisdiction if it does the defendant is free to file a notice of removal attach a copy of that complaint and the summons and the answer if they filed one already or just the summons and complaint and file it in federal court notify the state court and we have a handout a handoff jurisdiction quarter back to the federal court question is what if the plaintiff pleads a case in state court in state court and chooses only state law causes of action that's how we get started what if they choose only state law causes of action that brings us to a pretty straight forward hypothetical here we go we have here a school teacher brings a federal civil rights action in federal court against the school district with demoted because of her vocal objections to school policies simultaneously she brings a state court action alleging her demotion was a breach of contract and a violation of the right of free speech under the state constitution she obviously feels she could have also sued under the federal constitution but she chose not to sue under the state constitution the district court removes the state court action to federal court asserting the state claims actually are the federal claim in disguise we should be consolidated into one forum hmm that brings us to the question should the court grant the motion to remand and we have here the carpenter case as you can see at 44f third 362 the court properly holds it's not removable let's look at the case it's a state law cause of action it's under the state civil rights statute that's not a federal cause of action the fact that it's related to a claim already in court the supreme court has held rest you to cut is not a ground to remove a case that's a defense so this is not a federal cause of action this is not completely preempted under the circumstances so what we have here is simply the plaintiff serving as the master of their claim let's try one out this is really one of my one of my favorite cases for bringing the principle clearly to light let's do this one together as you watch the screen here let's answer the question as you go plaintiff brings an action in state court alleging that defendants engaged in violations of the state's little rico statute you're allowed to have an alternative state little rico claim you could have had a federal claim perhaps but they don't the complaint expressly alleges that the predicate acts underlying the state rico claims were violations of the federal wire and mail fraud statutes defendants timely remove the action the federal court and you know what they state they state in their notice removal that the action arises under federal law that is the federal wire and mail fraud statutes plaintiff brings a motion to remand and says this doesn't arise under federal law at all let's see how the court dealt with that issue in the pederman case from the southern district of georgia what do we got let's just figure it out we've got a state law cause of action under the little rico statute without mentioning the federal statute as a cause of action and the predicate acts for that state law cause of action happening under federal statutes is there removal the court holds no correctly so this is a case in which federal law is an issue in the case but it's not the cause of action the federal wire tapping you know federal wire and mail fraud statutes do provide an element of the state law cause of action but remember we learned earlier an element does not equal a federal cause of action so there's no removal jurisdiction in this particular case you know so keep that in mind as we're going forward now with that in mind we've got to make a hard segue here that hard I think I forget who it was that said that gravity isn't easy but it's the law well you know we've got to make that same segue to a different issue the issue we need now to talk about is what do we do when there's a preemption statute involved and how does it affect removal jurisdiction and you'll find that we as sentinels of the door you can watch out for this let's look at this fact pattern employee of air repair station certified by the FAA was fired allegedly for testing positive on a drug test the plaintiff sued her employer in state court for wrongful termination and violation of public policy as set forth on the state's drug testing statute so we've got a state law cause of action so far so good aha defendant employer removes the action to federal court on federal question grounds alleging that the claim was completely preempted by the FAA regulations the argument is it wipes out or displaces the state law claims and they argue this gets me to federal court after removal the employer moved to dismiss because the plaintiff could not bring a private right of action under the regulations which is limited to enforcement claims by the FAA and the state law claim was may have been preemptive but it gets us back to state court so what do we got here you know what what we've got there in that last paragraph is we've got a married bachelor we've got the defendant saying I'm removing this to federal court because it arises under federal law as a federal claim and then on the motion dismiss saying there's no federal claim here it's not a private right of action well the right answer is there's no federal jurisdiction there's no federal jurisdiction in this case as the smelling court held this why is there no federal jurisdiction because yes federal law does preempt those alternative state law claims but there's no right to sue expressly or impliedly under the federal statute that's pretty straight forward so I've got you this far now how do we answer the question the question is are there any times in which a federal statute preempts state law and does allow removal well you're in for the ride of your life this is the disney land of jurisdiction because the courts have held that there's a doctor known as complete preemption where federal where state law federal law displaces state law and necessarily replaces it with a federal cause of action displacement plus replacement think of it like DNA splicing you place that federal cause of action was always there it's placed in there now here I want you to think about it if we wiped off the labels and state law claims are displaced would those with the facts that are alleged give rise to a federal cause of action under a particular statute that's the question in this concept of complete preemption as a basis for removal has arisen in two principle areas labor law preemption and erisa preemption now when I get to this point in my presentation to the judges I always remind them I say you know someone has told me after they heard this part of the lecture that it was like having a root canal learning about erisa preemption and lmra preemption I would rather have you think of it as that this is simply a little novocaine to figure this out because it's actually a straightforward doctrine that I think we can apply let's start with labor law preemption and to do that I think the best way we can do it is to look at a case now this is a combination of cases from two citations and that may make it even more interesting we've got here a company that institutes an undercover investigation in response to allegations of illegal drug use by certain union employees after the investigation they fired the employee after a supervisor told others he was a a substandard employee, a troublemaker and here's my favorite part and sounded like a lawyer which I suppose is libel or slander per se employee sued the employer in state court for wrongful discharge and intentional infliction of emotional distress and slander okay not a pretty good slander case huh I don't know what's the best slander case now it looks like we have state law causes of action are general rules they're masters of the complaint let's keep going because remember I said it's a union employee subject to a collective bargaining agreement that is perhaps subject to 301 of the Labor Management Relations Act we've got a defendant employer timely removes the action to federal court asserting that the claims are completely preempted by federal labor law and since the claims resolution will require construction of the governing collective bargaining agreement plaintiff files a motion to remand asserting that these claims are independent of the bargaining agreement and involve non-negotiable rights ask the question do you remand this case or do you keep this case and I suggest to you that the cases cited on your screen go both directions on this let's just figure it out though in order to have it be completely preempted we have to ask ourselves will we need to construe the collective bargaining agreement in order to resolve this case make it even easier rule of thumb the collective bargaining agreement be relevant to deciding an issue in the case the argument of those courts that hold that this would be preempted say there's an intentional inflection claim brought by a union member subject to the collective bargaining agreement in order to find out what's outrageous under that cause of action you'll need to look at the terms and conditions of employment to decide it the other side of the equation says you know what no these are claims that are independent particularly the slander claim the collective bargaining process you don't need to look at the CBA to decide you have a right to be free from things like this that's the debate so how do you first of all you spot the issue and find the cases in your circuit on lmra preemption and you ask yourself whether it's an independent right a right that's non-negotiable clearly if they beat up the employee that's non-negotiable that's not preempted that can stay in state court on the other hand if you have a wrongful discharge suit in violation of the CBA that would be a CBA claim no matter how you labeled it so if that were the case that would displace the state law claims get rid of that wrongful discharge and replace it with a 301 claim therefore it can be recharacterized in the notice of removal and removal can take place alright now that's labor law preemption ooh how about ERISA preemption now it doesn't get any more fun than ERISA preemption and if you don't like it remember the words of ring lardner who said prohibition is better than no liquor at all so we're gonna try and figure out why this is at least learning a little bit about let's take one of the really hot cases there's such a phrase some people say calling a case in ERISA hot is in oxymoron like jumbo shrimp primary physician telephones doctor hired by a covered health benefits plan to request to administer thallium stress test for her patient we've got our red flag for possible ERISA preemption that is displacement plus replacement complete preemption we've got a plan covered by ERISA health benefits plan and we've got a lawsuit that may relate to that plan and if the lawsuit relates to that plan no matter how they label the claims in state court the defendant is free to recharacterize those claims and remove them to federal court let's figure it out whether that's what's happening here plaintiff employee patient allegedly suffers increased heart disease as a result of the failure to be given the requested stress test and brings a state law medical malpractice action against the plan and the plan's doctor for negligence in the pre-certification review process the plan and physician timely remove the action to federal court and they say this is although their state law claims they were artfully pled we recharacterize them necessarily as completely preempted ERISA claims that's the question so the plaintiff files a motion to remand and says this is independent and we have here our cases that are going to help us analyze this particular issue now let me give you those citations that I've been with Paige this is these cases go in many directions on this issue clearly if the cause of action is a denial of benefits there's no question that that would be ERISA preempted clearly clearly if the claim is for a breach of contract because they didn't pay the benefits due or you were fired because you were about to vest that's something that's enforceable under ERISA the question here is is a medical malpractice case against the plan if you will and it's screening doctor or nurse or personnel covered by ERISA preemption that's the question and courts have split on this issue I assume the Supreme Court will give us an answer to this question soon enough which is that in this case some courts say it's not preempted this goes not to the quantity of care but the quality of care and their quality of care doesn't affect the ERISA plan other courts say it's a case no matter how you label it that's for benefits denied or granted that's the question and I think you'll find the case law in both directions alright now I told you something I told you the back door was a squeaky door that is the procedures must be strictly complied with that's really to the question of whether the removal is timely watch this one plane of Audi Murphy was employed as a service technician for general ceramics one weekend a month he served as the officer in the army reserves the company wasn't happy about it as you can read and it preferred that it's workers state and work overtime Murphy returned to work after one weekend reserve he was confronted by a supervisor who said you're more loyal to the government than you are to us you're gone and fired him Murphy sued general ceramics and the supervisor in state court alleging wrong with his charge in violation of state law in accordance with local pleading rules Murphy does not include any specific allegations of monetary damages general ceramics doesn't remove within 30 days of service but rather wait until it takes Murphy's deposition when he answers that he is seeking over one million dollars in emotional distress and compensatory damages general ceramics removes from the following day all right what do we got the basic rule is as a procedure you must remove if you're going to remove a case you must remove it within 30 days of service 30 days of service all right but you have to know it's a removable case the statute is clear in section 1446b that if you don't reasonably know it's a removable case from the four corners of the complaint as arguably here so they don't allege over 75,000 damages there are courts that hold you can wait like the Huffman case does until it's made clear in this case through a deposition answer or otherwise and in fact the fifth circuit and Chapman has made clear you actually even if you have a suspicion that it's more than 75,000 you can wait until you get that piece of information however these other cases that are cited here you'll see say you know what I call them the get real cases that it's more than 75,000 despite the lack of specificity in that case the defendant must remove the case of federal court within 30 days under the circumstances so that's one of the cases you're going to look at all right here we go let's try let's change it up though with a case that's been cited by the United States Supreme Court just this term in fact changes the law or the interpretation of the majority of the circuits shouldn't say it changes the law they interpret the law this time Murphy sues general ceramics for wrongful discharge of federal laws and he adds a related slander claim against John Loyola Supervisor so we've got seemingly we've got jurisdiction here we've got supplemental jurisdiction over the claim against Loyola if it's the same transaction or currents and we've got federal question jurisdiction here and we've got a private right to sue he faxes a courtesy copy of the complaint to general ceramics and Loyola on April 1st he then formally serves the summons and complaint on the defendants on May 15th general ceramics and Loyola removed the action to federal court on May 20th got it files an immediate motion to remand so the question here is does the time to remove begin with service or does it begin earlier when you receive a copy of the complaint the Supreme Court of the United States held in the Murphy in the Murphy decision this last term Supreme Court held that it runs from formal service not from when there's a courtesy copy or receipt it runs from when the defendant received a copy of the complaint through service of process now if you read the Murphy case it deals with those states which allow service of a summons without the complaint and you should read the case for how it varies there but generally speaking the 30 days run from when the summons and complaint are served on the defendant in these circumstances alright now let's try this one on the normal rules it runs from when that first defendant is served doesn't it this time Murphy formally serves Loyal on April 1st and he doesn't remove he just sleep at the removal switch on May 15 Murphy formally served General Ceramics who removes the action with Loyal's Ridden Joinder on May 17 Murphy files an immediate motion to remand the action to state court arguing the removal was untimely well you know the issue does the time to remove run from when the first defendant gets it because you know it's a joint right they've all got to agree to remove the idea being if they don't remove within 30 days or does service on a new defendant start a new clock ticking as long as they get the other defendants to join them that's the issue well what we have here I'm afraid to say to you is a split of authority we have what I dare say is the majority rule the brown case the transport case which holds that the clock starts ticking from service on the first defendant and if a later defendant doesn't get it removed with all joining together that's just the way the removal goes the argument being it's a joint right and the first defendant waged it for them jointly because they didn't agree now we have however a case that's cited here the Briarley case recently from the 6th circuit that says you know what that doesn't seem fair to me and there's nothing in the statute that specifically requires that so they allow the clock to restart on a subsequent service as long as they get the joinder of all the defendants who have already been served that will give us perhaps a somewhat moving target when parties get added I think that's still the minority rule although you'll see in the Ford case cited there some district courts have said I think it's only fair to the later serve defendant to not get booted out of court but how about this one how about how about if loyal doesn't join in the notice of removal within 30 days how about that must they join the notice of removal well almost all courts now are concluding that they must join officially and formally in the notice of removal and many of these case citations make it clear it's not even enough it's not even enough that some lawyer says well I've talked to them and they say it's okay many of these courts require a formal written notice so you're the sentinel at the courthouse door what do you do I'll tell you what you do you look at the complaint when it was served you need to be a proof of service if you've removed it and if it's more than 30 days that's a red flag to decide maybe this case was removed untimely and I should add that the plaintiff has to make a motion to remand on procedural defects ground within 30 days of removal but you know what in most circuits the federal court is allowed to get into that look at the removal while pending in that 30 days and if they act within 30 days it meets that 30 day requirement on procedural defects scan the removal now there are a few circuits that prevent courts from suesponte remanding cases on those cases you would not have the court acting suesponte in remanding a case for procedural defects remember the absence of subject matter jurisdiction can be raised at any time so in that circumstance we're not going to face that rule now one last thing we have one other doorway and that doorway is the side door of supplemental jurisdiction it's really this simple if there is one claim over which the court has original jurisdiction the court has supplemental piggyback what used to be called pendant jurisdiction in my day for related state law claims even if they're against another party I sue one person on a federal question claim say securities act violation and I join with it transaction related state law fraud claim either against them now it's called supplemental claim jurisdiction or I add a new party but it's transaction related we have jurisdiction over that claim now the plaintiff cannot do an end round complete diversity by saying oh well I'm suing one person from my own state and another person from another state but they're just supplemental parties still a requirement of complete diversity when the plaintiff is suing multiple defendants but in point of fact what we have here is 1367 subdivision C that's what we're really looking at as we talk our last way of thinking about how a case should or shouldn't be in federal court look at all that look at how well used this visual aid is just say no to supplemental jurisdiction this is discretionary jurisdiction for the court the court is not obliged to maintain that supplemental claim under appropriate circumstances is is the first way is that state law claim novel or complex such that we the federal court shouldn't be deciding it leave that novel claim to state court we'll hang on to the federal claim but we'll dismiss without prejudice that novel or complex state law claim here's one that's used often the state law claims substantially predominates what does that mean it means maybe you have a $2,000 federal orisa claim and a $2 million fraud claim the tail of the dog the federal claim cannot wag it the state law claim and so we have here the ability to decline if you will send that supplemental claim back through the pet door either by remand if it was removed or dismissal without prejudice if it's original here's number three this is the big one the federal claim is dismissed this might help you as law clerks in doing your bench memoranda here's my little tip and I'll have one other tip as we end the court dismisses the federal claim even if the court had supplemental jurisdiction over the original claim generally speaking the court will dismiss without prejudice the state law claims because once you've lost your once you've lost the peg if you will the state law claims while they are technically proper in your court assuming the original peg was jurisdiction proper and just got dismissed on the merits by summary judgment say for example you would then absent some extraordinary reasons if you would probably recommend and the judge would dismiss the supplemental claims why would you keep it? well you're right in your trial if the court can decide the supplemental claim at the exact same time on the same grounds summary judgment applies to everything statute of limitations by way of example but if you're writing a bench memorandum you want a tip an inside tip to law clerks judge it down to listen to this part when you're working on the memorandum and you're analyzing a big summary judgment motion as I used to call a honkin summary judgment motion multiple claims you're analyzing it all if the court decides to dismiss the federal claims then the state law claims would ordinarily be dismissed for lack of continuing supplemental jurisdiction absent there being some strong reason to keep them that brings us to number 4 the catch-all other compelling reason to decline jurisdiction none come to mind particularly maybe it's something as simple as the federal claim as a non-jury and the state claim has a jury and that would complicate the case that might be an example of an other compelling reason so that's what you get that brings us to our end you're the sentinels at the jurisdictional doorways you've learned federal jurisdiction in a nutshell to paraphrase Hamlet he said although I live in a nutshell I am king of my space you are now kings of your space you are able to decide jurisdictional issues and assist your judges to keep those cases that shouldn't be in your courtroom thank you very much