2012 Changes to Federal Jurisdiction, Removal, and Venue

The new Federal Courts removal, venue and jurisdiction and Venue Clarification Act (H.R. 394, PL. 112-63) took effect January, 2012. The Act affects jurisdiction, venue, and removal possibilities in nearly every new federal diversity jurisdiction case.

Each new defendant now has their own 30 days to remove to federal court.

No matter when a defendant is added to the suit, that defendant now has a 30 day period to seek removal to federal court. Thus, if you add a defendant, even years into the litigation, you run the
risk of removal to federal court, even if the original defendant had failed to remove within 30 days.

When a new defendant demands removal, each earlier-served defendant gets a new option to join in the new defendant’s removal request.

The statute adds the “rule of unanimity” used previously by some circuitys. Now, it is clear that federal removal jurisdiction requires all defendants to join in the removal petition (or consent to removal) within thirty days of service of a removal petition on them. (This codified “rule of unanimity” may be change from the judicially created removal rule previously used in your circuit.)

It’s possible to ask for removal even after the one year removal period ends; a common plaintiff’s tactic now can be dangerous for the plaintiff.

District courts are now authorized to allow removal — even after the statutory one year limit on removal petitions – if the court finds that the plaintiff acted in “bad faith” to prevent removal
based on diversity of citizenship. Thus, a plaintiff can no longer safely use the common tactic of adding a non-diverse party to prevent removal from the state court, wait for the one-year removal period to end and then voluntarily drop the non-diverse party.

Amount in controversy rules allow defendants to remove more often.

Now, a defendant can allege the amount in controversy in their notice of removal — if the plaintiff’s complaint does not state an amount in controversy (e.g., state law does not allow a specific dollar demand, state law permits recovery of damages in excess of the amount demanded, or the suit is for non-monetary relief).

Furthermore, if the original claimed amount in controversy is not large enough to permit removal, a defendant still may demand removal (even after the 30-day removal period has ended) — if defendant by discovery finds there is a sufficient amount in controversy.

The new law deletes two previous previous statutory provisions that allowed a plaintiff to avoid removal based on diversity by filing a binding “declaration” reducing the amount in controversy
below the minimum specified for removal.

The new law specifically requires that the amount in controversy be shown by “the preponderance of the evidence,” rejecting conflicting standards of some circuits.

Resident aliens (and corporations with foreign connections) have less opportunity to invoke diversity of citizenship jurisdiction.

Under the new law, for diversity jurisdiction purposes, resident aliens (and corporations with foreign connections) are NOT “citizens.” The practical implication is that resident aliens (and
corporations with foreign connections) in a suit against one another cannot invoke federal court diversity jurisdiction, even if they are domiciled in different states.

All corporations, foreign or domestic, are regarded as citizens of both their place of incorporation and also their principal place of business. The practical implications are that now
diversity jurisdiction cannot be invoked (A) if a corporation with its principal place of business in a state sues, or is sued by, a citizen of that same state; or (B) if a citizen of a foreign
country sues a U.S. corporation at its principal place of business abroad.

After removal of state case to federal court because of federal question, a “separate and independent state claim” cannot be heard in federal court

The present statute strips federal courts of its present discretion to hear unrelated state law claims in cases removed on the ground of federal question jurisdiction.

Procedurally, the inclusion of an separate and independent state claim does not defeat the defendant’s right to remove an otherwise properly removable action based on federal question jurisdiction. However, once the case gets to the federal court, then the federal court must sever the claims over which it does not have original or supplemental jurisdiction and “remand the severed claims to the State court from which the action was removed.”

Parties can stipulate to transfer the case to any district.

In an expansion of permissible venues, the statute allows an action to be transferred to any district or division to which all parties have consented, even if the action could not
have originally been brought in that district or division.

Venue for diversity cases and federal question cases are now uniform.

As to venue; the new statute eliminates circuit splits and eliminate differences between diversity and federal question venues. The statute is so concise we cannot state the new venue rules more shortly. Here they are.

“(b) Venue in General- A civil action may be brought in–

(1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located;

(2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated; or

(3) if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court’s personal jurisdiction with respect to such action.

“(c) Residency- For all venue purposes–

‘(1) a natural person, including an alien lawfully admitted for permanent residence in the United States, shall be deemed to reside in the judicial district in which that person is domiciled;

(2) an entity with the capacity to sue and be sued in its common name under applicable law, whether or not incorporated, shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question and, if a plaintiff, only in the judicial district in which it maintains its principal place of business; and

(3) a defendant not resident in the United States may be sued in any judicial district, and the joinder of such a defendant shall be disregarded in determining where the action may be brought with respect to other defendants.

(d) Residency of Corporations in States With Multiple Districts- For purposes of venue under this chapter, in a State which has more than one judicial district and in which a defendant that is a corporation is subject to personal jurisdiction at the time an action is commenced, such corporation shall be deemed to reside in any district in that State within which its contacts would be sufficient to subject it to personal jurisdiction if that district were a separate State, and, if there is no such district, the corporation shall be deemed to reside in the district within which
it has the most significant contacts.’

Warning: a statutory reference may be different than it was before 2012.

The new law has greatly reorganized, changed and simplified the language of the jurisdictional statutes found in Title 28 of the U.S. Code, and completely revised the general federal venue statute, 28 U. S. C. §§ 1390 et seq. Therefore, don’t simply copy statutory citations or quotations from your past briefs or your firms past forms.