 You're watching FJTN, the Federal Judicial Television Network. The Federal Judicial Center presents Removal Jurisdiction, Hot Topics, an FJTN program for judges, staff attorneys, and law clerks. This broadcast is a videotaped and edited version of a lecture presented at the Federal Judicial Center on November 16, 1999 by James M. Wagstaff, an attorney with the San Francisco-based law firm Kerr and Wagstaff. Mr. Wagstaff is a frequent lecturer on jurisdiction in center orientation programs. Welcome. We're here today to talk about updates and removal jurisdiction. There's really no better way to spend an hour than to talk about removal jurisdiction and jurisdiction in general. But you know, in the federal courts, that may be one of the most important topics we address. Because federal courts are courts of limited jurisdiction. And so, as Brandeis said, one of the most important things that federal judges do is not doing, analyzing whether the case ought to be in federal court. I'm so happy to be here. I'm so happy to be here because we can learn some of the recent developments. And things are changing in this particular field. We're going to go fast. Someone said to me once, you must not eat snails because you prefer fast food. Well, the answer is that I do speak fast because we have so much to cover. When I tried my first jury trial, I was picking a jury first thing in the morning. The jury's laughing. The potential jury's laughing at my jokes. I'm just feeling great about it. I'm a brand new lawyer. At the first break, the court reporter comes up to me. He hands me a note. It's got my name printed on the block letters on the outside. I'm sure it's going to say, this is the finest war deer I've witnessed in 30 years of court reporting. I open it up and it says, if you don't slow down, I'm going to kick your butt. Well, you know, that's what we're going to do today. We're going to do our best to speed our way through this. Now, we start with a proposition that if the court exercises removal jurisdiction and it's wrong and doesn't analyze that, that can be reversed no matter how much time they've spent on the case even if they've tried it. Listen to the words of Judge Evans in a seventh circuit case this last year, when the court ruled suesponte on appeal that there was no jurisdiction. He wrote, the district judge nurtured the case for three years with 11 published decisions. And the parties come 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. So we don't want that to happen in these kind of cases. So the most important lesson we learn when we approach removal jurisdiction, as all federal jurisdiction, is jurisdiction first. Analyze the question first. In fact, the Supreme Court has told us that in cases in the last year. You don't reach the merits. You reach jurisdiction first. And ordinarily, you'll reach subject matter jurisdiction first, even before personal jurisdiction. Although the Supreme Court just this last year in the Rural Grass case has told us in rare cases the court can reach the personal jurisdiction case first. Well, as we recognize this, we're going to be addressing some interesting issues. Well, to get started, we better at least have a primer on our basic jurisdictional rules. You recall them, of course. There are four doorways to federal court. There's the front door of federal question jurisdiction. That's when the case is originated in federal court. The case arises under federal law. It's a federal cause of action created by federal law, merely because there's a defense in the case under federal law is not enough. But you know, we move to the visitor's door if you want to get into this jurisdictional courthouse. The visitor's door is complete diversity. We want national court systems to be available when we have cases between citizens of different states. As long as all the citizens on one side, the plaintiffs, are of different citizenship than all the defendants. That's our rule for getting into court that way. And there may be some special citizenship rules. Well, the one we're looking at today is the back door of removal jurisdiction. You see it right there. And it says original jurisdiction because the defendant can remove a case to federal court, even though it's filed originally in state court, if when you look at that complaint, it could have been brought originally in federal court. Well, you know, it's actually not so hard algebra. If the case is a diversity case, but the defendant, the plaintiff brought it in state court, well then it can be removed by the defendant. The same if a plaintiff brings a federal cause of action in state court, most times it's concurrent jurisdiction, the defendant can remove it to federal court. And lastly, we have supplemental jurisdiction, the side door entry to federal court. That's where you have a related state law claim to a federal claim arising out of the same transaction. So it's really all part of the same constitutional case. Prodigial economy purposes will try it in one lawsuit rather than two lawsuits. But you know, that back door of removal jurisdiction is quite amazing. Now, you gotta be as nerdy as I am to be so amazed by it. But you know what? The back door of removal jurisdiction is remarkable because the defendant, by the unilateral act of filing a notice of removal, changes the sovereignty before a case is heard. Think about it. Case is filed by the plaintiff in state court and the defendant files a notice of removal which automatically divests the state court of jurisdiction and vests the jurisdiction now in that sort of NFL handoff to the federal court. Staying there in less than until it is remanded to the state court for reasons that we have to consider. So as we start off our proposition, we recognize that in order to be removed to federal court, the case has got to be one that could originally be in federal court. So there's two basic ways. Diversity jurisdiction appears in that state court complaint or federal question jurisdiction. And that's what we're gonna spend our time today looking at these recent developments in those areas as they affect removal jurisdiction. Now, you know, if you've been to the first grade, you can get diversity jurisdiction down. And remember what context we're discussing this. We have a case in state court, maybe between Wagstaff of California and Neary of New York. That would be complete diversity. And although I filed that case in state court, it can be removed to federal court. All right, we've got that down. That's our memory test. Well, if you've been to first grade, you can take out a sheet of paper. You can write plaintiffs on one side, defendants on the other side, and draw a line down the center of the page. Then on one side, you write down the states of citizenship of all plaintiffs, Wagstaff of California. On the other side of the line, the defendant's side of the line, you write down the states of citizenship of all defendants, Neary of New York. If the same state appears on both sides of the line, you don't have complete diversity. Wagstaff of California, Sue's Neary of New York and Kelly of California. Now we've got a problem, because we've got a California on both sides of the line. So what we have to concern ourselves with is, is this going to be complete diversity? Because if there's not complete diversity, generally speaking, the case cannot be removed to federal court. Just starting with this, as as simple as this in every case, but let's do a little jurisdictional algebra and ask ourselves whether or not this case can be properly removed on diversity grounds. Let's, so let's, let's start with this one. Now, as you can see, I'm making myself the subject of all hypotheticals. Don't want to, and here you'll see my, my co-authors of the, of the federal book. Jim Wagstaff of California had a hot idea. Why not a self-lighting cigarette? So he locates the nation's leading expert on cendury objects, one William Hotpocket Schorzer, who lives in Arlington, Virginia. This is a hypothetical I might add in case Judge Schorzer are watching. Wagstaff also found a major investor, one Wally Deep Pocket Toshima, who also lived in California. Together they formed a partnership, W-A-T Limited D-B-A-U Light'em, with Wagstaff 50%, that's on the majority owner, Toshima 49 and Schorzer 1%. W-A-T developed the product and began selling it 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. But this could be a suit in state court and we ask ourselves, can it be removed? It'll be the exact same question, predicated on the court's diversity jurisdiction. So the defendant, if in this hypothetical, would remove it. Should this case stay in federal court if the defendant removes it? That's our question. So we ask ourselves, is there complete diversity? Now for individuals, you are a citizen of the state in which you are domiciled. Where you live and intend to remain permanently. If you're a corporation, you are a citizen of the states in which you're incorporated and the state where you have your principal place of business. But here's the rule and one that is the recent cases of emphasize. All artificial entities other than corporations take on the citizenship of each of their members. All artificial entities other than corporations take on the citizenship of each of their members. So let's figure it out. What do we have here? We have a partnership. Do you see it right there? We've got a plaintiff who's from Virginia who got hurt by this hot pocket steal. We've got a partnership with a partner from California, California and Virginia. So we've got a Virginia on both sides of the line because we count everybody in the partnership. Even if that partner is a 1% partner, a silent partner, a I don't care partner, they are still considered for diversity purposes. So that's our simple rule when analyzing that and that would include that. So let's see if it gets more interesting. So let's change the facts this time a little bit. At formation, the founders of the entity decide they would like a bit more protection from suit. So this time they form themselves as an LLC. Same people involved, same plaintiff. Let's make it in state court. Can that be removed on diversity grounds? Well, you know what? This is a limited liability company. Remember our rule? All artificial entities other than corporations. An LLC is not a corporation. And therefore it takes on the citizenship of each of its members. We have the same rule. We have a Virginian as one of the members of this LLC. We have a Virginian on the plaintiff's side. We don't have complete diversity. And you can see those case citations that stand for this proposition. Whatever the artificial entity, unincorporated association would be an example. Joint stock operative, it's not a corporation. On the other hand, what if it's a subchapter S corporation? Well, that's a corporation. And under the law, it would take on the citizenship only of its principal place of business and of its places of incorporation, not the place where its shareholders are domiciled. All right, now, how about this one? Let's try it one more time. This time, this comes up a lot in these modern cases, particularly with the way businesses are owned in this high tech world. Wagstaff of California and Tashima LLP are partners. So one of the partners in the partnership is a partner. Let's figure out how that's the case. So we've got, and that Tashima partnership is owned mostly by him, but he's got a one partner, one of the sons from California and one partner, one of the sons from, you got it, Virginia. So what do we got? Now we've got Kelly again suing from Virginia, a partnership which takes on the citizenship of all of its members. And then if one of its members is a partnership or a corporation, it takes on the additional citizenship of what those members are. These are called multi-tiered partnerships. And so in a case in state court, when you're analyzing whether it's removable, and you can see how these cases, these recent cases have dealt with this issue, when you're writing down the states of citizenship in those lines, you write down all the states of all members, and if one of the members is a partnership, you write some more names down if they're different states. That's sometimes how cases get removed to federal court without jurisdiction because no one's really thought about the states of citizenship of all these entities. How about Lloyds of London? Lloyds of London with all these underwriters and names, most courts other than the Sixth Circuit have held, it takes on the citizenship of each of its underwriters. Hence, since they're in every state, Lloyds of London is not in federal court on diversity grounds very often. Well, you know what? For this case to be removed to federal court, on diversity grounds, it's also got to have another item to get in that doorway. They've got to have a ticket, and that ticket means there's got to be more than $75,000 in controversy. That's the ticket. So if it's a case without that much potential value, then the case is not removed. So you know what happens? The defendant looks at that state court complaint and says that usually it doesn't say how much is involved and says, well, I think it's more than 75, or they wait to get an answer to an interrogatory or something, and it's more than 75. But you know what, $75,000 may not seem like much in today's world, but it still is a lot on some cases, and more and more cases, and as we look at the update of removal, are finding that the jurisdictional amount is not satisfied. Let's look at an example of one of those. So you know jurisdiction. It's almost like a quiz show. I'm the Regis Philburn of today. We've got A1 Term Paper Inc. is a vendor of term papers and research. It is in the business of selling term papers and research to college students. That's quite an interesting business, as you can imagine. They want to be below the radar, so they sell it on the internet. The university connects an undercover investigation of A1 Term Paper, also doing business. Don't you love these? Prestigious papers, thousands of papers in my favorite, the paper shack. The investigation confirms only one sale to a university student who actually turned in and has his own work, and a total of seven others, including one that the undercover university agent was purchasing. I would just love to read these papers. The university in Massachusetts brings a diversity action against A1 Term Paper. Let's make it originally a state court, so the defendant removes it, alleging state law claims for torches interference with university student relations and unfair business practices. The complaint alleges that misconduct has damaged the university and diminished the value of a degree. So the question is, is there diversity jurisdiction for purposes of removal? That's the question. In other words, can the defendant look at that complaint and say, not only is there complete diversity, which there would be private university owned, that's from Massachusetts Term Paper Company from some other state, there's complete diversity of citizenship, but there also has to be the ticket to get into the door through removal. And so is there? The court here holds there is not. Then you cannot say that it's a legal certainty that the plaintiff will get over 75. The court said it's not even conceivable there'll be a verdict in that amount. And so the mere fact that the plaintiff may even suggest something of a high amount does not necessarily mean it is that way. Here, the court said this is pretty speculative damage. One Robin duff, not a spring make. It's only one term paper, enough already. A more common application might be where there's a limitation in a contract on how much you can recover. Or the applicable law says you can't recover. You know what? Next time you go to a hotel room and you look in the back of the door, it'll say what time you need to check out. It'll give you that helpful map on how to walk out of the hotel room in the event of a fire following the red dot in the room you're in. In addition, oftentimes, they'll include the local state statute which says the limitation of liability under the law if something's stolen from your room. Well, in many California, it's $1,000, less than $1,000. In many states, it's a very small number. I don't think in any state is the limitation. Oh, there's a limitation damage. You can't recover more than $150,000. They limit, maybe it's the hotel lobby, but they limit the damages. If that is an enforceable limitation under law, then that would say the case can't be more than $75,000. A classic example in some of our recent cases where that's happened. Now, one other thing about diversity jurisdiction on removal. Can you ever press the delete key on a party and say you've got wags out of California versus neary of New York and schwarzer of California? Can you ever press the delete key on schwarzer and then remove the case? Well, here's two ways the delete key can get pressed. One is if the plaintiff in state court presses the key himself or herself. They voluntarily dismiss the Californian on the defense side, creating now complete diversity. It's gotta be a voluntary act. If the court dismisses the party, that's not good enough. They abandon the case. There's some, there's a crazy case out there, but it's correctly decided, in which in the middle of closing argument, the lawyer for the wag staff plaintiff says, ladies and gentlemen of the jury, I don't want you to render an award against defendant schwarzer, the Californian defendant. Abandonment of the case. As long as that abandonment is within the one year of it being filed in a diversity case, as in that case example, the defendant who, the other defendant, the neary defendant from New York, thinking it may be not going too well could actually remove the case to federal court at that point, because diversity is now evident as long as it's within one year of an event creating diversity. But the more common way where the delete key is pressed is what is known as the fraudulent jointer rule. Let's, for our purposes, call it something else. Let's call it the sham jointer rule, meaning that that non-diverse defendant, say the schwarzer defendant, I'll make Judge Schwarzer the sham defendant, because he shouldn't have been sued, of course. Well, a good example, if he was a judge, he'd have judicial immunity if he was a judge. He is a judge, and so you would have that. So let's suppose we have that. If under the law there is no valid basis whatsoever as evidence from the face of the complaint to sue that defendant, then the other defendant, now knowing there's complete diversity, can look at the complaint, press the delete key, and I mean that figuratively, on that defendant, remove the case to federal court saying there is complete diversity because the only defendant who defeats it is sham. That is, there's no valid cause of action against that defendant. Let's try it out in a very interesting context so you know jurisdiction. An insured Susan out of state insurer and the local agent for bad faith and negligence in failing to handle a claim against him. So these claims are, under the old common law doctor, an ex-contractor. They arise from the contract, don't they? Because without the insurance contract, there's no liability. And they say you didn't handle our claim, here's bad faith, you should have covered it. The insurer removes the action to federal court. Asserting in the notice removal the claim against the local agent, which would otherwise defeat diversity, right? From the same state as the plaintiff, is a sham. That defendant is fraudulently joined and I mean that in quotes because it doesn't mean they did it deliberately to harm someone, they just, the law doesn't support it. Thus the notice states there is complete diversity. So the question here is gonna be can this case be removed or does the presence of that local defendant defeat diversity? Should the court grant the motion to remand? We see our case citations. Well, the question will be, does state law allow this claim to go forward? You know, if down the line they may not win, that's not the issue. If it's not a real good case, that's not the issue. It is as a matter of clear cut law, is there no basis for liability such that we can press the delete key in our jurisdictional algebra? That's the question, all right? Well, courts have held here and you can see the citations that in this context under the governing law of the states in question, this was a case arising out of the contract. The contract was with the insured and the insurer. The agent was simply an agent for a disclosed principal working for the insurance company. No different than if my paralegal made a contract for my law firm. They don't sue the paralegal. In fact, they can't sue the paralegal. If it's a contract for a known disclosed principal, you sue the principal, right? If it's an agency theory. So the analysis of these courts was under clear cut law, you cannot sue the agent for the disclosed principal. There's no liability for that agent. Therefore, press the delete key. Now we have a plaintiff and a defendant from different states that case gets removed to federal court if the defendant chooses to do so, assuming there's $75,000 in controversy, all right? So that gets us started in this area. In fact, there have been two cases last year that have held that if the case against one of the defendants is clearly barred by the statute of limitations, you can press the delete key. It's gotta be clearly barred. I've not no good arguments against it, basically. To put it differently, there's no way the case should go forward. And by the way, this is not a hot topic. This is a common sense topic, which is if that case gets removed to federal court and the court concludes that it is a fraudulently joined sham defendant, the court should allow the removal and then they should dismiss that sham defendant. They shouldn't stay in the case if there's no possible liability against them. Sometimes people forget the last act, if you will, to dismiss. So we've got that. Well, you know, I've had Judge Schorzer, who is the former director of the Federal Judicial Center in my hypothetical. So I thought for equal time, I'll present a case now that was decided by the current director of the Federal Judicial Center, Judge Fern Smith. And let's see if she decided it correctly. Although I, although you know, my mama didn't raise no fool. You can bet by the time we get to the end of this, we're gonna agree with her decision. Plainness bring a products liability class action in state court against manufacturers of head lice remedies. This case gives me the willies. Seeking actual and punitive damages, including injunctive relief and attorney's fees. Plainness alleged the defendants continued to manufacture and sell their over the counter head lice remedies. Here it comes, despite knowledge that head lice had developed resistance to their active ingredients, rendering the product useless. The manufacturers removed the action to federal court, stating that none of the defendants are citizens of the same state as the plaintiffs. We'll see if that's the right way to do it. They also alleged that the class action satisfies the amount and controversy requirement because, and here's their arguments, compliance with the injunctive relief requested will cost each defendant more than 75 grand then. Class members have a common and undivided interest in their claims for punitive damages and the value of the claim for attorney's fees authorized by state statute will exceed $75,000 per named plaintiff. Plaintiff files a motion to remand, asserting the notice of removal fails to adequately allege diversity. The jurisdictional amount is absent because the actual monetary damage to each class member are between $9 and $17. You pay for this stuff and therefore the case should not have been removed. Should the court grant the motion to remand? That's really our question. Well, in order to answer that question, we've got to read the case to see how well Judge Smith decided. Let's start with number one. Did they adequately allege it? No. The notice of removal has got to not just have the boilerplate, this is more than 75,000, or the boilerplate were from different states than they are. The notice of removal must specify the actual grounds for removal and the basis. Identifying from which states everybody is. We did our jurisdictional algebra, the notice of removal must do that unless the complaint states it, of course. They can rely on the complaint. But as in most complaints where they don't allege, say, the principal place of business of every corporate defendant, you've got to include that in the notice of removal. In addition, so therefore this notice of removal was vague. Many courts, I think even Judge Smith would have granted leave to fix that if it was pretty clear there was diversity. But there was, as the ginshu knife ad says in the middle of the night, there's more for your $19.95. In this case, here, there's more for your $17. Well, so the next question, what about that claim for injunctive relief? Is that claim for injunctive relief gonna get us over $75,000? There's a split of authority on this question. In some jurisdictions, such as the Ninth Circuit where Judge Smith was sitting in the Northern District of California, they say you look not at how much it costs to defend it but only what it's worth to the plaintiff. In those jurisdictions, of course there's no amount of controversy here. So in other jurisdictions where they allow either viewpoint, they can look at the defendant's view point that it raises it and here that might satisfy that amount. So there's a split of authority, it's one of the hotter issues in removal and in diversity. Class members have a common undivided interest in the claim for punitive damage. Again, we have a split of authority. In the Eleventh Circuit and perhaps the Fifth Circuit, punitive damages can be aggregated in a class action. That is, the analysis is that normally you can't aggregate claims for different plaintiffs. They've each got to satisfy $75,000. And in fact, the Supreme Court of the United States held many times over the last several years that each plaintiff, even the unnamed plaintiffs must satisfy the amount of controversy. There's some interesting new cases as to whether the supplemental jurisdiction statute changes that. But here we ask ourselves, are punitive damages common and undivided? The Eleventh Circuit and the Tapscott case would say yes. They are common and undivided. Therefore it belongs to the group as a whole. Therefore it satisfies the amount. Everybody gets the 75 if you will. And clearly there's a possibility of more than 75,000 just because of the nature of this case. Other circuits, and Judge Smith certainly felt this with the view of the Ninth Circuit, say no, you don't aggregate punitives. You could bring your own individual lawsuit for punitive damages. It's not a common and undivided right. And therefore you just take the total amount that could possibly be reached in punitives and pro-rated among the plaintiffs. If you do that here with the thousands of members of this potential class, you can't do it. So that brings us to one last gasp. And that is the value of the claim for attorney's fees. How do you figure attorney's fees out for the amount and controversy? Well, the rule is that you can count attorney's fees for the amount and controversy if they're recoverable by statute or under contract. If they're treated as costs, they're not recoverable. Here they're by statute. But we have the same difficulty. We don't aggregate the amount. We pro-rate it for each plaintiff. And again, Judge Smith concluded that that would not be sufficient to give the amount and controversy. Therefore, this case, according to Judge Smith, goes back to state court. There's hidden nuggets in removal jurisdiction, believe it. One of those hidden nuggets is, although there may be complete diversity, Wagstaff of Nevada says I gotta bring the suit in New York because that's the jurisdiction there. And I sue someone from New York. There's complete diversity. But the statute says a local defendant who's been served can't remove the federal court. We're not gonna let the local who doesn't need protection from prejudice in the state courts remove it. So that's a lot of times people forget that. They forget that a local defendant, if they've been served, cannot be part of the removal. Okay, well, let's go to federal question jurisdiction. Cases filed in the state court, looks like it's got a cause of action that arises under federal law. That case can be removed. But you know what? The plaintiff is the master of their claim. So here's the rule to remember. And it's not just a hot topic. New rule, it is a rule that establishes itself in all our cases. Generally speaking, the plaintiff, if they want to choose to pitch the case under state law grounds are free to do so. Even if they could have alleged a federal claim. And if they pitch it under state law grounds, the defendant can't recast it and remove it. They chose to sue under state law. It's not a federal cause of action. That case stays in state court. Let's try it out in a context though that you might find interesting. So you know jurisdiction. School teacher brings federal civil rights action to federal court against the school district alleging demotion because of vocal objections to school policies. Okay, that's probably there. Simultaneously, she brings a state court action. You can bring parallel actions in many cases. Alleging that her demotion was a breach of contract and a violation of the right of free speech. Here it is under the state constitution. If you are professionals in watching hypotheticals, the answer is almost always in the second asterisk. The state constitution, that's gonna tell us something. Ah, but the school district says we're gonna remove that case to state court because to federal court rather asserting the state claim actually are the federal claims in disguise and that the action should be consolidated into one form for judicial economy purposes. The question is, should the court grant the motion to remand? The answer is yes. What's the cause of action alleging the state court complaint? It is a state cause of action. Could they have alleged it under federal? They could have. In fact, they did in a parallel suit but that's not enough. Now, first of all, the Supreme Court told us last year in the rivet case. The mere fact that you have a defense to the federal case, even a rest-chidicata defense that you shouldn't be bringing this case because you've already lost it. That's a defense, even if the judgment was federal. No removal on that federal defense of rest-chidicata. Here, there's no removal just because there's a parallel action pending in federal court. The plaintiff was free to pitch their case under state law. They did and that's the way it goes. Whether or not there's a case pending in federal court or not. Let's figure this out though. Here's one. This is, I think, my favorite case of the new year because it illustrates the proposition so absolutely clearly. Plaintiff brings an action in state court alleging the defendants engaged in violations of the state's little RICO statute. You're allowed to do that. You can bring us, many states have little RICO statutes. They're state RICO version. The complaint expressly alleges that the predicate acts underlying the state RICO claim were violations of the federal wire and mail fraud statutes. Defendants timely remove the action to federal court stating in their notice of removal that the action arises under federal law to wit those federal wire and mail fraud statutes. Plaintiff files a motion to remand and says this is the state law cause of action. What's the answer? You know, your first blush may be, well you know there's some federal issues in the case. Not to be in federal court but ask yourself the question, what is the cause of action? It is a state law cause of action. And although that state law cause of action is predicated, is predicated on a federal statute, the cause of action remains a state law cause of action. This is not a federal cause of action. There is no removal. The court and the pattern in case correctly so concluded. Because there's no federal action. It's not that there's no there there. There's no federal action. Now I know we're going fast because we're now about to go just a little bit faster on preemption jurisdiction. Woody Allen once said that he took a course in speed reading. He read war and peace in 20 minutes. It's about Russia. Well you know that's what we're doing here. We're gonna learn preemption jurisdiction in a nutshell as we go through this. Let's start with the same principle we just had. The mere fact there's a federal issue in a case does not mean it can get removed to federal court. Here's one of the hot topic cases of the last few years. It illustrates the principle beautifully. And at first blush again, you might have some questions. So here we go. We've got former employee of air repair station certified by the FAA was fired allegedly for testing positive on a drug test. That makes me feel better. Headlights got problems getting rid of people who work around airplanes and drug use makes me feel okay. Plain as suit or employer in state court for wrongful termination in violation of public policies set forth under the state's drug testing statute. Now if you're paying attention, that is the second asterisk. Defendant employer removed the action to federal court on federal question grounds alleging the claim was completely preempted by FAA regulations covering drug testing. After removal, the employer moved to dismiss because the plaintiff could not bring a private right of action under the regulations. Those were limited to enforcement actions by the FAA. And the state law claim was preempted. Plaintiff moved to remand the action to state court. What's the answer as the case from the 10th circuit tells us the answer is there's no federal question jurisdiction, no removal, send this case back to the state court. Why? You can't have both. You can't remove on the grounds of the federal cause of action. Then once they're say there's no federal cause of action. So what's going on here? There is a state law cause of action that may or may not be preempted, displaced, blotted out by federal law. But there's no federal cause of action when it's all said and done. When the blotting out takes place and the state law claims go away because of preemption and there's a lot of preemption out there. Cigarette labeling act, medical devices act, airline deregulation act. A lot of federal regulations and laws, preempt state laws can't get nuclear power. I mean, you're not gonna have a bunch of state laws on nuclear power. We're gonna have a national standard. But they don't replace it with a federal claim usually. There's no federal claim here. This particular individual has no right to sue under the federal statute. Therefore, this is at most a defense of preemption. Remember, you can't remove on a defense only if the cause of action is federal. So that's just really very similar to the one we just had. There's a federal issue in the case but not a federal cause of action. All right, so that brings us then. So that sounds so easy. And if we're done right now, you say, I get that. But you know what? It isn't always so easy. Was it Twain who said that thunder is good and thunder is great, but it's lightning that gets the job done? Well, there's some lightning we have to deal with now. And that lightning is the doctrine of complete preemption. Let's figure out where we are. And you know the normal rule. We look at the four corners of the complaint, the well-pleted complaint. If it's got a federal cause of action in there, remove if it doesn't, you can't remove unless there's diversity. That's our, we just learned that. And the mere existence of federal issues doesn't mean you can remove it unless there's a federal cause of action. But what if there's a state law cause of action in which federal law does completely preempt it, displace it, but in addition, it replaces it with a federal claim? Displace, no more state law claims, but replaces it necessarily with a federal claim. That is known as the complete preemption doctrine. And in such situations, the defendant is free to recharacterize the complaint as what it really is, is a federal complaint. Not the defendant, the plaintiff chose not to bring it, but that's the only thing it can be. There are two principal areas in which this arises. One is LMRA cases. Our red flag under the current cases is if there's a union employee suing their employer or their union for a case that relates to the collective bargaining agreement. If that's the case, no matter how they label the claim, they're suing their employer saying, we're a union member and you violated the collective bargaining agreement by firing me without notice or by reassigning me or whatever it is. Although they call it a state law cause of action, because of displacement, replacement, complete preemption, that is necessarily a claim arising under 301 of the LMRA. However you label it. This is not like our FAA example where they displace but don't replace. This is displace and replace. So we've got lots of examples of it. We might have a, well, let's take an example. Let's suppose our test is right there. It says resolution of the claim requires to go to the CBA. If we are trying this case with the CBA, be relevant to the decision. Oh, what do we got? Claims that are preemptive. We got a breach of contract. That's gonna be preemptive if it relates to the CBA, a wrongful discharge, defamation if it arose in the course of the grievance process, infliction of emotional stress if it's the kind of case where in order to decide how outrageous it is, we better figure out what the terms and conditions are. There are some things that are so outrageous that you don't need to turn to it. Fraud if you need to determine things that are in the agreement. Here's some claims that aren't preemptive. Things that are independent, assault and battery. The union has no right to bargain away your right to be free from assault and battery. That's a claim, that's a right that's independent. So if somebody sues someone in state court, even a union employee for assault and battery, even against their employer, that is, although it arose in the context of their employment, that's not preemptive because that's independent. It is like a discrimination suit. It is a non-negotiable right. It's something that's based on independent policy. So if someone alleges assault and battery, that's not gonna be preemptive. So let's try it out, that's our basic rule. Let's see if we're gonna have removal on complete preemption grounds as the sports casters say, let's go to the videotape. Not a very moving videotape, but here it is. Removal labor law preemption, that's to get us in the mood. I would dim the lights to get us in the mood as well, but we don't need that. Company instituted an undercover investigation in response to allegations of illegal drug use by certain union employees. There's our red flag, union employees. After this investigation, employer fired employee after supervisor had told others he was a substandard employee, a troublemaker and here's my favorite, and sounded like a lawyer, slander per se, apparently. Employee sued employer in state court for wrongful discharge, intentional infliction of emotional stress and slander. All right, those sound like state law cause of action. They have no diversity, so it can only come in through the back door by way of original jurisdiction, if at all. Defendant employer timely removes the action to federal court, asserting. The claims are completely preempted. Recharacterizes the claim as federal, that's what they do in the notice removal, and since the claims resolution will require construction of the CBA. Plaintiff files a motion to remand, asserting. The claims are independent of the collective bargaining agreement. This is a hypothetical, that's a hard one because cases have gone both directions as these two case sites illustrate. One line of cases would say, you know what? In order to resolve that intentional infliction claim, maybe even the slander claim, you may have to look at the CBA to see what communications are allowed, what is outrageous or not outrageous. On the other hand, because it relates to terms and conditions of employment to some extent, what kind of punishment will be imposed for certain workplace conduct. On the other hand, and there is another hand here, we have other courts, as you can see, the second citation, would say this is not preempted. This is the kind of assault and battery non-negotiable right. You have a right to be free from infliction of emotional stress and slander. Someone's slandering you in the course of it. Now, let's imagine the following though. What if only one of the claims is preempted completely and the others are not? So what happens? Well, here's what happens. The defendant removes the whole case to federal court and then brings the state law claims along as supplemental. So as long as the short thing to remember is if there's one claim that's completely preempted, generally speaking, the whole case gets removed to federal court. Now, the judge, as we learned when we did the side door of supplemental jurisdiction, has discretion to not handle that supplemental claim. They can remand it if they think it's better handled in the state court. Generally speaking, most courts will handle the whole case. All right? So we go with that particular line of authority. There's one other form of preemption. Now, someone told me at a judges conference fairly recently when they hear about ERISA preemption, they feel like they're having a root canal. It's just not that bad. And if it is that bad, let's spend a few minutes together taking a form of novocaine and figure it out. All right? Well, let's get our red flag. The red flag is we've got a state, what looks like it's a lawsuit in which it alleged under state law grounds in state court. But the lawsuit seems to relate to a covered plan under ERISA, a welfare benefits plan, a health plan, a pension plan, right? A plan is covered by our nationalized system and that ERISA does preempt because we want uniformity nationwide on employee retirement cases, right? So that's our red flag. The question is, will it or will it not be preempted? Well, we've got a nice little three-part test, the second part, which is the main one we need to focus on. Here's our main deal. Does the state law claim or claim relate to an employee benefit plan? All right? Basic questions you've got to ask yourself. One, is there an employee benefit plan? Is there a plan? Now that's one of the issues. Second, the big issue, does the state law relate to the covered plan? And finally, there's an issue about, they save issues that relate to the industry of insurance. That's saved. So one in three are not as common issues for us in their arcane. But the big law changes that have been happening in removal deal with this second one. Does state law relate to the covered plan? Does the state law claim relate to it? Well, let's figure it out. Let's try one out. Before we learn the rule, let's try out what is in many people's minds the hottest topic in ERISA preemption removal jurisdiction. Primary physician, telephone's doctor hired by a covered health plan to request to administer thallium stress test for her patient, a beneficiary under the plan. The doctor is part of the pre-certification review process, refuses to approve the requested test, allowing only a treadmill stress test. There's some common annality of these kind of deals because so many of us have this experience and that's why you can see ERISA cases are such a large area of federal court practice and removal. Plaintiff employee patient allegedly suffers increased heart disease as a result of the failure to be given the requested stress test. Plaintiff brings a state law medical malpractice suit against the plan and the plan's doctor for negligence in the pre-certification review. The plan and the physician timely remove the action to federal court inserting the claims related to the covered ERISA plan and thus although they call them state law claims, they're really federal claims under complete preemption. How should the court rule on the motion to remand? All right, so let's take a look at these sites because those of you who are falling along at home, you'll have some sites to read here. What do we need to understand here? First is that if those claims do relate to the covered plan, the administration of the plan, they affect the plan. If you will, enforcement claims under ERISA. Although they're called something else, they're really claims for benefits. Then, although there are state law claims, they can be re-characterized as ERISA completely preempted claims and removed to federal court. On the other hand, if it's only a tenuous connection to the plan, if it's not really the functional equivalent of an enforcement action, or if the case involves somebody who's not part of what they call the ERISA family, it's a lawsuit against the lawyer. The lawyer's not a fiduciary, not a plan administrator, although the plans bring in the suit, that wouldn't be ERISA preempted because it wouldn't be completely preempted and removal to federal court. Just like that the plan owned property and they had an unlawful tainer case. Well, that's not gonna be ERISA preemption. We don't, a complete preemption. We don't remove that case to federal court. That's tenuously connected. If we've got a wrongful termination suit, and in that wrongful termination suit, one of the damages happens to be their plan went down in value a little bit. Well, you know, we consult the plan, but that doesn't affect the plan, does it? This case, though, has a different issue. This case asks, is this really an enforcement action? Some courts, you'll see the citations, hold that this is really an enforcement action. They're saying they're entitled to benefits and that somebody didn't give them to them. And the vehicle for not giving it to them was the malpractice of giving the bad results. Other courts hold, this doesn't deal with the quantity of available coverage. This deals with the quality of the coverage once you got it. This is simply a malpractice case. This is a hot issue in ERISA. And as you can imagine, it's not abstract. The reason why many times people want to be in federal court on the defense side is because the remedies oftentimes are more limited in federal court under ERISA. It's the irony of ERISA, is that it was designed to provide nationwide benefits, but in many times the state cause of action is more powerful for the plaintiff. No punitive damages under ERISA, not a jury trial generally, et cetera. So it may be the defense wants to remove it to federal court. There's a lot at stake here, there's a lot at stake, and it involves many, many thousands of claims across this country. And we're gonna get some answers, I'm sure, from the Supreme Court. So stay tuned, this is the latest word, not the last word on this particular subject. But keep in mind that this is a very important issue under ERISA preemption as to whether there is coverage or not. Now, you know what? What if there is diversity jurisdiction? Or what if there is complete preemption or original jurisdiction evidence in that state court complaint? You know what? This back door of removal jurisdiction requires more than jurisdiction. It requires that the case be removed to federal court in a proper way. So it's a squeaky door. That is, if it squeaks when it comes in, that is, the defendant does not follow the proper procedures, the court can remand that case to state court, even though there's jurisdiction. And the idea is you've gotta comply with the rules strictly. So one of those critical rules is removing the case to federal court in the right timeframe. And it's a short time limit. The general rule is you must remove 30 days after service, you receive service. You get a copy of the complaint through service, you look at it, hey, there's complete diversity. Or hey, there's a federal question here. You can't just sit around and say, hey, I think I'll get this to federal court one of these years. If it is a removable, then you've got 30 days to remove it. But what's been happening? What are our hot topics when it comes to the squeaky door? The removal procedures, let's take one. Plaintiff, Audie Murphy was employed as a service technician for general ceramics. And one weekend a month, he served as an officer in the reserves. General ceramics was not happy with this arrangement. It wanted its workers to work a lot of overtime. Murphy returns to work after one weekend reserve duty. And sure enough, he's confronted by his supervisor, John Loyal, who tells him, and in presence of the coworkers, he was fired because he obviously cared more about his military job than he did about his service with general ceramics. Murphy sued general ceramics and Loyal and state court, alleging wrongful discharge and violation of state law in accordance with local pleading rules. Murphy does not include any specific allegations of monetary damages. General ceramics does not remove within 30 days, but rather waits until it takes Murphy's deposition when he answers that he's seeking over a million dollars in emotional distress. See that? And compensatory damages, they remove the next day. Well, you know what? There's complete diversity. Got a plaintiff and an out of state company that employs him. So we got diversity for this role. We don't have a federal question. But in order to get in the door, the back door on diversity grounds, it's gotta be the amount of controversy. But the complaint doesn't say anything about the amount of controversy. Well, first thing, the Huffman case out of the 10th Circuit tells us that you can remove on later events if it now is disclosed to you through the receipt of a paper in the case that it is really removable. And it says, you know what? If you didn't really know it was over $75,000 and at the deposition you learn it, now you learn it, then you got 30 days to remove. All right? That's the rule of timing. But, and in fact, the fifth Circuit and the Chapman case has told us even if you sort of had a hint or a pretty good idea is more than 75,000, if it's actually not saying anything of the complaint, you can wait until you get something. But you know what? The next three cases that are cited for you apply what I think are very common-sensical rules. It is the, you've gotta be kidding rule. Plaintiff sues the defendant for injuries caused and rendering the plaintiff a quadriplegic. Does not, however, allege the specific amount of controversy. You gotta be kidding if you think it's possibly less than 75. You knew it was more than 75. You had settlement demands, et cetera. Those cases say you gotta remove within 30 days. So applying some common sense about your obligation to figure it out. If it's genuinely uncertain in the complaint and otherwise you can wait until you get something to re-kick that 30 days. All right, well that gets us going. But you know what? Remember we talked about this one already? What if, what if, this time Murphy doesn't serve the complaint for a year? He says, I don't want to be in federal court. I know what those juries do or I know what those judges do. So he says it, and there's a, remember the rule? The rule is that if the case changes, you know, you get rid of somebody on diversity grounds, non-diversity grounds and now you've got complete diversity like the case in the middle trial, you can remove the case. But there's a one-year outside limit on the statute. You can't remove diversity cases that have become removable more than a year. But what about a case that was originally removable and the plaintiff just didn't serve it for a year? Well the courts have said that's just too clever by the half parts. And these cases, both in the Ninth Circuit and the Fifth Circuit, have correctly held that when the case was always removable and it just didn't get served for a year, the 30 days and the one-year rule doesn't apply. And what if, by the way, the Murphy doesn't move to remand for 45 days? The rule, you wanna talk about time clock? The plaintiff has, let's suppose it's a squeaky door problem. Not an absence of jurisdiction, there is jurisdiction. Squeaky, which can be raised at any time. Squeaky door, bad procedure, bad timing. Plaintiff has to make that motion to remand within 30 days. Within, and the courts in most circuits, if they can access to a sponte, have to access to a sponte within 30 days. Otherwise procedural defects go, by the way. Is the failure to remove within the one-year a procedural defect? Most courts hold that it is. Some courts, such as the Perez course, court hold that, no, that sounds kind of jurisdictional and therefore it can be raised any time. What about that local defendant problem? Remember, the local defendant can't remove? That's probably a procedural defect. There is jurisdiction, it's just the rule says you can't. That has to be moved within 30 days. Certainly if the removal's untimely, that's a procedural defect. If you don't raise that in 30 days, if there's jurisdiction, the case stays in federal court. You want a new Supreme Court case? Yes, you do. Let's change the facts and learn a case. I've been teaching something for years and now I gotta teach it differently. An old dog learns a new trick. This time Murphy sues general ceramics for wrongful discharge. You with me? In violation of federal law, we got a federal cause of action here. Adds a related slander claim against loyal. That whole case can be removed, can it? We've got a federal cause of action and a related state law claim. Even though it involves a different party, the whole case can be removed in federal court. He fact says a courtesy copy of the complaint to general ceramics and loyal on April 1st. You know, remember our 30-day rule? He then formally serves the summons and complaint on May 15th. General ceramics and loyal removed the action on May 20th. Murphy files an immediate motion to remand, doesn't lose that 30-day part, on the ground that removal is untimely. Should the court grant the remand motion? There were many cases, in fact the majority of cases that said, since the statute says 30 days from receipt, that would include a courtesy copy. The Supreme Court and an opinion author by Justice Ginsburg said no. Receipt is not the answer here, it is service of process. When process is served, the clock starts running. Courtesy copies by facts is not good enough. Improper service, not good enough. The general rule then, now according to court, is you remove 30 days from when your served summons. That's what gets us to the analysis. That's a procedural defect. That's one of those issues that comes up in a procedural defect context. There are other procedures that can go wrong on removal because all the defendants are required to join in the notice of removal, all the defendants. So if one defendant doesn't want to remove, then the case can't be removed, assuming that the other defendants don't have an independent right like a federal officer removal, all right? So why is that important? You wanna talk about a hot topic? When does the clock start running when you have multiple defendants? I served defendant one on April the 1st and I served defendant two on May the 6th. The first defendant didn't remove. Waved the right, if you will, to remove by not removing within 30 days. But the second defendant has not even been in the case yet. Do we get a new clock? Most courts have held you don't get a new clock. If you serve the dumbest defendant first and they don't remove, that's the end of the removal right. That's the majority rule. But I have to tell you, in this last year, including a case in the Sixth Circuit, just this last year, we have more cases now holding the second defendant gets served. It starts the clock again. The idea being it's not fair to the second defendant to be deprived of the right to remove. But all the defendants must join. So the second defendants could better get that first defendant to agree. And that jointer must, according to most cases, be in writing. It's not enough. According to most cases, to simply say, well, I've talked to them and they probably want to come along or they want to come along. So you actually have to get the jointer and that jointer must take place within the same 30 day window. So that's a procedure. And if the defendants don't all join, the case can be remanded to state court. That's a procedural defect. The squeaky door and therefore that case would properly be remanded only if the motion is made within 30 days. Now, we've learned removal jurisdiction. In the USA Today version admittedly, but we've learned removal jurisdiction. Someone once said that Wagner's music is better than it sounds. That may be how you feel about removal jurisdiction. But you know what we learned from this? We learned that the law is changing. We learned that it'll change again, even on things that we think are below the radar that never make it to C-SPAN. We get on the judicial network on preemption, but you won't see a C-SPAN program on the glories of removal preemption. It's just, I don't know why because I would watch, but I'm not sure anyone else would watch. But what you really learn from all of this is that when approaching jurisdictional issues, you do it first, not last, because you could spend a lot of time. I've always wondered about those lawyers. What do they write to their clients? When the case goes to the Supreme Court on the merits, they've been tried for five years and the Supreme Court, Sue Sponte, issues an order to show cause, as in one case some years ago in which they say, we don't think we have jurisdiction. How do you write the letter to the client, to your client? There's a following to status report in the case. You might be interested to know that although we litigated this for seven years and although we got a very large verdict here, it's all wiped out because there's no jurisdiction. Any other questions, please call me. That's a problem. So the last thing you learn is to be bold when you approach jurisdiction problems. Don't shy away from them. Let me leave you with a final family story. My brother Ray, good guy, good talker, unlike me, the quiet one of the family. Ray never got any good grades in school. He was a year behind me in school. Got C's, I was doing well. And Ray would borrow things from me. I have an image of him being in the graduation line where he steps out of line and asks me for a paper because he can't graduate without it. That's Ray, good talker. Go to college, get C's, gotta get a job. So he applies to Crocker Bank for a job. They decided that year, the one and only year to interview everybody. Well, therefore he got passed his transcript, got interviewed all the way to the final level, right? The final level. They finally sent him the letter. Dear Mr. Wagstaff, thank you for your interest in Crocker Bank, but we've selected someone else, even though there were only three candidates left. What do we do? We're not bold. We go to the next job. Ray gets the letter. He immediately calls the person who last interviewed him and says, you sent me the wrong letter. That's bold. They said, this guy's got moxie. They create a new job. They hire him. He works there for 10 years. He's now nationally known working at Texas Instruments as an excellent salesperson and head of one of their sales forces. You know what? He was bold. He took a difficult situation and he figured I can do something with it. That's what we do with jurisdiction. We stay on top of it. We keep an eye on it. Thank you very much. Thank you. Thank you.