REMOVING CASES TO FEDERAL COURT – A CHECKLIST
Defendants in consumer foreclosure or finance cases regularly “remove” cases filed against them in state court to federal court. This post discusses the process of removal, including the factors defendants should consider before deciding to remove a case to federal court. It sets forth a step by step “checklist” for defendants who decide they would prefer federal court to state court.
What is removal?
Removal is the process of transferring a case from state court to federal court. It is provided for by federal statute. 28 U.S.C. §§ 1441-1453; Fed. R. Civ. Pro. 81(c). State courts have no role to play in determining whether a case is removed or not – a defendant can remove a case if it elects to do so and the case could have been filed in federal court in the first place (with some exceptions).
Once a case has been removed from state to federal court, the state court no longer has jurisdiction over the matter, though a federal court can remand a case to state court. A federal judge can remand a case without any request by the plaintiff if the judge does not believe federal jurisdiction has been properly established by the defendant. A plaintiff can also move to have the case remanded to state court if the plaintiff does not believe federal jurisdiction exists. In some cases, where the basis for removal is “federal question” jurisdiction (where a claim is based on federal law) and that claim is later dismissed, leaving only state law claims, a judge may decline to exercise jurisdiction over the remaining state law claims, and they can be re-filed in state court. However, in general once case has been removed to federal court it stays there until fully resolved.
Note that only a defendant can remove a case to federal court. The theory is that if a plaintiff files a case in state court, he, she, or it selected that forum and cannot change to federal court. In the context of mortgage servicing litigation, this can prevent removal of a borrower’s claims raised as counterclaims in a foreclosure initiated by the servicer in state court.
Why remove cases to federal court?
There are a number of reasons mortgage servicers frequently remove cases to federal court.
• Federal judges are generally more experienced with the types of cases servicers typically face (i.e., consumer finance-related matters)
- Better developed case law (a federal district court is bound by the decisions of the circuit court of appeals in which the district court is located, and the opinions of other district court judges are published – state court judges are not bound by federal court decisions and state trial court opinions are generally not published)
- More consistent – and thus predictable – treatment in federal court
- Generally better judges in federal court. This is highly variable, however. There are many, many very fine judges in state court, and there are some terrible judges in federal court. Every situation must be evaluated based on the particular judge assigned to the case in state court and the possible judge assignments in federal court.
- Usually cases move faster in federal court than in state court. The amount of time that passes between the initiation of a case and its resolution is one of the biggest factors in the overall cost of litigation – both in terms of the direct expenses of litigation and the cost of business interruption – so resolving cases quicker will generally result in lower overall litigation cost.
- Familiarity with the Federal Rules of Civil Procedureand certainty regarding expectations and obligations, which can vary in state court.
- In cases that may go to trial, the jury pool may be more favorable in federal court than in state court. Usually a federal district is broader and covers a wider demographic than a state court jury pool. This can be beneficial or detrimental depending on the particular circumstances.
- In class action litigation, the availability of interlocutory review of class
Do you really want to remove?
Although we typically advise clients to remove cases from state to federal court whenever possible, the particular circumstances of each case must be considered before making a final decision. There are situations in which a defendant will be better off in state court than federal court.
For example, your case may be assigned to a particularly favorable state court judge. If you or your counsel know that judge to be fair or to have rendered favorable decisions on key issues in the past, you will likely want to remain in that forum rather than taking your chances with an unknown federal judge. If you do not have prior experience with the judge to whom the case has been assigned in state court, obtain input from attorneys who have experience with that judge. You or your counsel should also research the state court judge’s track record. Are there published appellate opinions related to that judge’s decisions? Does that judge have any experience with the type of case you have assigned to the judge, and if so, how has he or she handled those kinds of cases in the past?
You should always get basic biographical information for the state court judge to whom you have been assigned before making a decision to remove a case from that judge’s courtroom.
There are many sources for such information, including bar association surveys, local legal newspaper guides (for example, the California Daily Journal volume of “Judicial Profiles” is an excellent resource for information about California judges) and third-party websites such as “The Robing Room” (www.therobingroom.com).
When a case is removed to federal court, it is randomly assigned to a federal district court judge and/or magistrate judge. There is no way to know in advance what judge the case will be assigned to upon removal. Therefore, a removing defendant is always taking a risk that the federal judge assigned to the case will be less favorable than the state court judge it was assigned to. However, the risk can be calculated to a degree. Certain federal judicial districts have judges with better reputations than others. If you are in a district that only has a couple of judges and they have poor reputations in the kind of case you are facing, you are less likely to remove. If you are in a jurisdiction with more judges, or a very high ratio of favorable to unfavorable federal judges, you are more likely to remove. There are no jurisdictions, however, in which the federal judges are all excellent nor are there any where the judges are all poor. Every jurisdiction has some judges that are very good and every jurisdiction has judges that are not so good.
Ultimately, whether you should remove the case to federal court requires the exercise of judgment and a balancing of the risks, but ultimately whether you get a “better” judge in federal court than state court will come down to a certain degree of luck.
If the case you are considering removing arguably relates to another case or cases pending in the same jurisdiction you are removing to, you may be able to seek to have the case you are removing transferred to that judge or consolidated with those cases. Similarly, if the case is a re-filed action (or an action that is related in some way to an earlier case), you may be able to have the case assigned to the judge who heard the earlier case. Forum or “judge” shopping is frowned upon, but if there are efficiencies to be gained by having a particular case assigned to a particular judge, judges are amenable to such transfers.
Finally, you need to take into account the published decisions involving the issues you are facing in the case. If the federal court has a number of negative opinions, or there is negative authority from the U.S. Court of Appeals that includes the district court you would remove your case to, you will probably prefer to stay in state court. Conversely, if the state court authority is negative (or non-existent) and the federal court authority is more positive, you will likely want to get your case into the federal court if you can.
Determine whether there is federal jurisdiction.
In order to remove a case to federal court, the federal court must have subject matter jurisdiction over the matter. If there is no federal jurisdiction, the case cannot be removed.
Generally speaking, a case can be removed to federal court if it could have been filed in federal court by the plaintiff. In many cases both state and federal courts may have subject matter jurisdiction over a particular matter, and the plaintiff has his or her choice of which court to present the claim to. Plaintiffs generally prefer state courts for all the same reasons defendants generally prefer federal courts. They believe the state court forum offers them leverage in settlement discussions and a more favorable forum for resolution of their claims.
Federal subject matter jurisdiction generally comes in two different varieties: Federal Question Jurisdiction and Diversity Jurisdiction. Diversity jurisdiction is now broken into two subsets – “standard” diversity jurisdiction and “CAFA” jurisdiction in putative class action
Federal Question Jurisdiction
Federal question jurisdiction exists when a claim arises pursuant to a federal law. For example, if a plaintiff alleges a claim pursuant to the Truth in Lending Act, the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, etc., the case presents a “federal question” and can be removed to federal court. In addition, certain state claims that present a “substantial federal question” can also be removed on the basis of federal question jurisdiction. For example, a state consumer fraud claim that contends that a defendant violated the state statute by acting “unlawfully,” where the “unlawful” conduct is alleged to be a violation of a federal statute, may present a federal question even though the claim is actually brought pursuant to state law. Also, certain state court claims are pre-empted by federal law, and thus present federal questions.
28 U.S.C. § 1331
The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.
When a case containing claims that present federal questions and claims that do not present federal questions, the federal court has what is called “supplemental jurisdiction” to hear the non-federal claims. However, if the court dismisses the federal claims, it has discretion to either retain the state claims or remand them to state court. You should beware that in some courts, judges regularly refuse to exercise supplemental jurisdiction over state claims if the federal claims are dismissed. This results in the state claims being dismissed without prejudice – i.e., the plaintiff can simply re-file them in state court. Thus, in cases where there is a significant likelihood that the claims presenting federal questions will be dismissed but it is less certain whether the state claims will be dismissed, you should anticipate that the state claims may wind up back in state court notwithstanding the removal. Your overall goals for the litigation should be considered when deciding whether to remove if there are both federal and non-federal claims presented. If you believe the case will be settled quickly or your goal is to resolve the litigation by way of a motion as quickly as possible, you may elect not to remove a case if there is a chance that the federal court will refuse to consider the state claims.
This is also a good reason to raise both federal question and diversity jurisdiction as the basis for removal if there is a good faith basis to assert both in the notice of removal. While a federal court has discretion to decline to exercise supplemental jurisdiction to consider the state claims if it dismisses the federal claims, the same is not true if diversity jurisdiction exists. For this reason, you should always include diversity jurisdiction as a basis for removal if possible.
28 U.S.C. § 1367
(a) Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.
(b) In any civil action of which the district courts have original jurisdiction founded solely on section 1332 of this title, the district courts shall not have supplemental jurisdiction under subsection (a) over claims by plaintiffs against persons made parties under Rule 14, 19, 20, or 24 of the Federal Rules of Civil Procedure, or over claims by persons proposed to be joined as plaintiffs under Rule 19 of such rules, or seeking to intervene as plaintiffs under Rule 24 of such rules, when exercising supplemental jurisdiction over such claims would be inconsistent with the jurisdictional requirements of section 1332.
(c) The district courts may decline to exercise supplemental jurisdiction over a claim under subsection (a) if—
(1) the claim raises a novel or complex issue of State law,
(2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction,
(3) the district court has dismissed all claims over which it has original jurisdiction, or
(4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction.
(d) The period of limitations for any claim asserted under subsection (a), and for any other claim in the same action that is voluntarily dismissed at the same time as or after the dismissal of the claim under subsection (a), shall be tolled while the claim is pending and for a period of 30 days after it is dismissed unless State law provides for a longer tolling period.
(e) As used in this section, the term “State” includes the District of Columbia, the Commonwealth of Puerto Rico, and any territory or possession of the United States
The Two Flavors of Diversity Jurisdiction
In order to avoid bias in state courts against a state’s own citizens and against citizens of other states, Congress enacted a statute that provides for federal court jurisdiction over disputes between citizens of different states. However, the rule is subject to certain conditions and limitations. Recently Congress passed the Class Action Fairness Act, or “CAFA”, which makes it easier for defendants in class action cases to remove such cases to federal court on the basis of diversity jurisdiction.
As pointed out in the previous section, diversity jurisdiction offers a defendant more certainty that the case will be fully adjudicated in federal court, as a court has discretion to refuse to exercise supplemental jurisdiction over state law claims if it dismisses claims presenting federal questions. However, if diversity jurisdiction exists, it will cover all of the claims.
“Standard” Diversity Jurisdiction
Diversity jurisdiction exists when there is complete diversity of citizenship among the parties and the amount in controversy exceeds $75,000.00 exclusive of interest and costs.
For “complete diversity” to exist, no plaintiff can be a citizen of the same state of any defendant. So if there are five plaintiffs, only one of whom is a citizen of California, and there are five defendants, and one of them is also a citizen of California, complete diversity is lacking and the case cannot be removed on the basis of diversity jurisdiction (though it still might be removed if a federal question is presented in one or more claim). If all five plaintiffs are citizens of California but none of the defendants are California citizens, then complete diversity exists.
An individual is typically a citizen of the state in which he or she resides.
Corporations are citizens of the state where it was incorporated as well as the state in which it maintains its principal place of business. Often this will be the same state, but a corporation may also often be a citizen of two states. A corporation organized pursuant to the laws of the State of Delaware whose principal place of business is located in New York is a citizen of both Delaware and New York. Determining where a corporation’s principal place of business is located can be tricky. Different courts apply different tests, so it is possible that in some courts a corporation is considered a citizen of state A and state B where another court will consider it to be a citizen of state A and state C.
National Bank Citizenship
National banks – banks organized pursuant to the laws of the United States rather than the laws of any particular state – are citizens of the state of their “main office” as specified in their articles of association. There are some wrongly decided district court opinions that hold that a national bank is a citizen of both the state specified as the location of its main office in its articles of association and the state of its principal place of business. The majority of decisions, however, hold that a national bank is a citizen of only one state – the state specified in its articles of association as the location of its main office.
Limited liability companies and partnerships are problematic because they are considered citizens of the states in which their members or partners are citizens. In larger LLCs or partnerships, this can be a large number of states, which often precludes removal on the basis of diversity jurisdiction. Fortunately, few mortgage servicers are organized as LLCs or partnerships.
Unfortunately, trusts and trustees are frequently defendants in mortgage servicing litigation, and the analysis of the citizenship of a trust is problematic. If a trustee is a “real party in interest,” then only the trustee’s citizenship is considered for purposes of diversity jurisdiction.
However, it would be a rare case in which the servicer would want to take the position that the trustee of the typical RMBS trust is the “real party in interest.” In most cases, the plaintiff is seeking relief against the trust, not the trustee individually. The trustee will want to avoid individual liability and limit liability to the trust for which the trustee serves as trustee. For example, if the plaintiff is suing for consumer fraud and includes “XYZ Mortgage Servicing, Inc., a Delaware corporation and ABC Bank, N.A., as Trustee for the 2006-1 Series 6 Certificates” as defendants, ABC Bank, N.A. will want to avoid individual liability – in other words, if plaintiff successfully obtains a $1,000,000 judgment, the ABC Bank will want satisfaction of that judgment to come exclusively from the Trust, not from the Bank’s assets.
Note that state law can vary on the ability of a trustee to avoid individual liability in this way – a topic beyond the scope of this pamphlet. For purposes of citizenship, the salient point is that if the servicer plans to take the position that the trustee is not the “real party in interest” and that the trust itself is the “real party in interest,” then the citizenship of the beneficiaries of the trust must be considered. That is, the servicer will need to know who all the investors in the trust are (as well as their citizenship) in order to use diversity as a basis for removal.
Beware of cutting corners here. If the servicer takes the position that only the citizenship of the trustee matters, the trustee could be estopped from later contending that it is not the real party in interest. Since it is very unlikely that a servicer would ever take the position that the trustee is the real party in interest, if you are removing a case in which a trust or trustee is a defendant, you will need to determine who the beneficiaries are and their citizenship, and lay those facts out in the notice of removal.
Nominal or “Fraudulently Joined” Defendants In determining whether diversity of citizenship exists, you do not consider the citizenship of “nominal” or “fraudulently joined” defendants. “Nominal” or “fraudulently joined” defendants are defendants who do not have any real interest in the outcome of the litigation and are added simply to avoid diversity jurisdiction. For example, a mortgage servicing company organized in Delaware with its principal place of business in California may have an office and operations in Texas. If it is sued in Texas state court by a Texas citizen, diversity of citizenship would exist unless the plaintiff names a co-defendant that is a Texas citizen. If the plaintiff adds one of the mortgage servicing company’s employees who happens to live in Texas, the presence of that individual defendant would break the diversity unless the employee is a “nominal” or “fraudulently joined” defendant. In other words, if the claim is for rescission pursuant to TILA, there is no way the individual defendant could possibly have liability and thus the individual defendant’s citizenship would not be considered by the court in determining whether diversity jurisdiction exists.
You should also beware of improperly joined claims. Often a plaintiff’s lawyer will join dozens of individual claims against dozens of unrelated mortgage servicers in a single action.
The loans have no relationship to each other, and other than a common issue of law, the claims are completely unrelated. Sometimes these claims are joined by a common argument that MERS is the beneficiary of the mortgages involved, and that MERS is somehow unlawful or mortgages for which MERS serves as beneficiary are unenforceable. These cases can result in loss of diversity if one of the unrelated defendants is a citizen of the same state as one of the plaintiffs.
In this case, you should seek to sever the claims and remove. In order to avoid the removal deadline, this may need to be done on an expedited basis, or you may need to remove first and seek severance in the federal court. Which course to take in a case like this is highly dependent upon the particular circumstances presented.
Amount in Controversy
When asserting “standard” diversity as the basis for federal jurisdiction, the removing party must allege and be prepared to support an argument that the “amount in controversy” is in excess of $75,000 exclusive of interest and costs. Note that “amount in controversy” is not necessarily the same thing as “damages.” Consequential expenses – such as the expenses
incurred as a result of complying with an injunction – can be considered when determining whether more than $75,000 is “in controversy.” Also, in any case where the borrower is contending that the loan is null and void or unenforceable, so long as the principal balance due exceeds $75,000 the amount in controversy standard will be satisfied.
Cases where the amount in controversy standard is hard to satisfy typically involve challenges to various fees or charges imposed by a mortgage servicer. Typically these cases are pled as class actions and may be removable pursuant to CAFA (see discussion infra). However, if a number of plaintiffs join together to seek recovery of relatively small amounts, it can be difficult or impossible to meet the amount in controversy threshold. Defendants cannot “aggregate” damages of multiple plaintiffs to meet the amount in controversy standard.
28 U.S.C. § 1332(a)
(a) The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between—
(1) citizens of different States;
(2) citizens of a State and citizens or subjects of a foreign state;
(3) citizens of different States and in which citizens or subjects of a foreign state are additional parties; and
(4) a foreign state, defined in section 1603 (a) of this title, as plaintiff and citizens of a State or of different States.
For the purposes of this section, section 1335, and
section 1441, an alien admitted to the United States
for permanent residence shall be deemed a citizen of
the State in which such alien is domiciled.
In 2005, Congress enacted the Class Action Fairness Act, which, among other things, made it easier for defendants to remove putative class action cases to federal court. CAFA can be a complicated statute to apply, but for purposes of this discussion, you need to be aware of two key differences between “standard” diversity jurisdiction and removal pursuant to CAFA.
First, only “minimal” diversity is required (not “complete” diversity). That is, only one plaintiff and one defendant need be citizens of different states – the presence of a defendant who is a citizen of the same state as one of the plaintiffs will not necessarily destroy diversity.
Second, the amount in controversy standard is raised to $5,000,000, but the claims of prospective class members can be aggregated (unlike “standard” diversity). Thus, if there are over 1,000,000 people in the class, the “amount in controversy” standard is satisfied even if each of them suffered damages of only $5.
There are several exceptions to these rules. For example, if more than 2/3 of the prospective class are citizens of the state in which the case was filed and at least one defendant is also a citizen of that state, the court will not take the case pursuant to CAFA. In other situations the court may have discretion to exercise jurisdiction depending on how many prospective class
members are citizens of the forum state.
28 U.S.C. § 1332(d)
(1) In this subsection—
(A) the term “class” means all of the class members in a class action;
(B) the term “class action” means any civil action filed under rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action;
(C) the term “class certification order” means an order issued by a court approving the treatment of some or all aspects of a civil action as a class action; and
(D) the term “class members” means the persons (named or unnamed) who fall within the definition of the proposed or certified class in a class action.
(2) The district courts shall have original jurisdiction of any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which—
(A) any member of a class of plaintiffs is a citizen of a State different from any defendant;
(B) any member of a class of plaintiffs is a foreign state or a citizen or subject of a foreign state and any defendant is a citizen of a State; or
(C) any member of a class of plaintiffs is a citizen of a State and any defendant is a foreign state or a citizen or subject of a foreign state.
(3) A district court may, in the interests of justice and looking at the totality of the circumstances, decline to exercise jurisdiction under paragraph (2) over a class action in which greater than one-third but less than two thirds of the members of all proposed plaintiff classes in the aggregate and the primary defendants are citizens of the State in which the action was originally filed based on consideration of—
(A) whether the claims asserted involve matters of national or interstate interest;
(B) whether the claims asserted will be governed by laws of the State in which the action was originally filed or by the laws of other States;
(C) whether the class action has been pleaded in a manner that seeks to avoid Federal jurisdiction;
(D) whether the action was brought in a forum with a distinct nexus with the class members, the alleged harm, or the defendants;
(E) whether the number of citizens of the State in which the action was originally filed in all proposed plaintiff classes in the aggregate is substantially larger than the number of citizens from any other State, and the citizenship of the other members of the proposed class is dispersed among a substantial number of States; and
(F) whether, during the 3-year period preceding the filing
of that class action, 1 or more other class actions asserting
the same or similar claims on behalf of the same or other
persons have been filed.
(4) A district court shall decline to exercise jurisdiction under paragraph (2)—
(i) over a class action in which—
(I) greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed;
(II) at least 1 defendant is a defendant—
(aa) from whom significant relief is sought by members of
the plaintiff class;
(bb) whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class; and
(cc) who is a citizen of the State in which the action was originally filed; and
(III) principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the
State in which the action was originally filed; and
(ii) during the 3-year period preceding the filing of that class action, no other class action has been filed asserting the same or similar factual allegations against any of the defendants on behalf of the same or other persons; or
(B) two-thirds or more of the members of all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State in which the action was originally filed.
(5) Paragraphs (2) through (4) shall not apply to any class action in which—
(A) the primary defendants are States, State officials, or other governmental entities against whom the district court may be foreclosed from ordering relief; or
(B) the number of members of all proposed plaintiff classes
in the aggregate is less than 100.
(6) In any class action, the claims of the individual
class members shall be aggregated to determine whether
the matter in controversy exceeds the sum or value of
$5,000,000, exclusive of interest and costs.
(7) Citizenship of the members of the proposed plaintiff classes shall be determined for purposes of paragraphs (2) through (6) as of the date of filing of the complaint or amended complaint, or, if the case stated by the initial pleading is not subject to Federal jurisdiction, as of the date of service by plaintiffs of an amended pleading, motion, or other paper, indicating the existence of Federal jurisdiction.
(8) This subsection shall apply to any class action before or after the entry of a class certification order by the court with respect to that action.
(9) Paragraph (2) shall not apply to any class action that solely involves a claim—
(A) concerning a covered security as defined under 16(f)(3)  of the Securities Act of 1933 (15 U.S.C. 78p (f)(3) ) and section 28(f)(5)(E) of the SecuritiesExchange Act of 1934 (15 U.S.C. 78bb (f)(5)(E));
(B) that relates to the internal affairs or governance of a
corporation or other form of business enterprise and that
arises under or by virtue of the laws of the State in which
such corporation or business enterprise is incorporated or
(C) that relates to the rights, duties (including fiduciary
duties), and obligations relating to or created by or
pursuant to any security (as defined under section 2(a)(1)
of the Securities Act of 1933 (15 U.S.C. 77b (a)(1)) and
the regulations issued thereunder).
(10) For purposes of this subsection and section 1453, an unincorporated association shall be deemed to be a citizen of the State where it has its principal place of business and the State under whose laws it is organized. (11)
(A) For purposes of this subsection and section 1453, a
mass action shall be deemed to be a class action
removable under paragraphs (2) through (10) if it
otherwise meets the provisions of those paragraphs.
(i) As used in subparagraph (A), the term “mass action”
means any civil action (except a civil action within the
scope of section 1711 (2)) in which monetary relief claims
of 100 or more persons are proposed to be tried jointly on
the ground that the plaintiffs’ claims involve common
questions of law or fact, except that jurisdiction shall exist
only over those plaintiffs whose claims in a mass action
satisfy the jurisdictional amount requirements under
(ii) As used in subparagraph (A), the term “mass action”
shall not include any civil action in which—
(I) all of the claims in the action arise from an event or
occurrence in the State in which the action was filed, and
that allegedly resulted in injuries in that State or in States
contiguous to that State;
(II) the claims are joined upon motion of a defendant;
(III) all of the claims in the action are asserted on behalf
of the general public (and not on behalf of individual
claimants or members of a purported class) pursuant to a
State statute specifically authorizing such action; or
(IV) the claims have been consolidated or coordinated
solely for pretrial proceedings.
(i) Any action(s) removed to Federal court pursuant to this
subsection shall not thereafter be transferred to any other
court pursuant to section 1407, or the rules promulgated
thereunder, unless a majority of the plaintiffs in the action
request transfer pursuant to section 1407.
(ii) This sub-paragraph will not apply—
(I) to cases certified pursuant to rule 23 of the Federal
Rules of Civil Procedure; or
(II) if plaintiffs propose that the action proceed as a class
action pursuant to rule 23 of the Federal Rules of Civil
(D) The limitations periods on any claims asserted in a
mass action that is removed to Federal court pursuant to
this subsection shall be deemed tolled during the period
that the action is pending in Federal court.
Is removal timely?
Watch the deadline carefully!
A defendant must remove within 30 days of receiving summons and complaint. There is a split of authority regarding the impact of an “earlier served” defendant on a “later served” defendant’s ability to remove. In jurisdictions known as “first served” jurisdictions, the deadline runs from the date of service on the first defendant served. It is important to know whether you are in such a jurisdiction. If a co-defendant was served 29 days ago and you were just served today, your removal may be due tomorrow! Other jurisdictions follow a “last served” defendant rule, meaning each defendant gets a full 30 days to decide whether to remove the case. While an earlier served defendant may be time-barred from removing a case, a later served defendant could still remove in such a jurisdiction.
If a case cannot be removed immediately but becomes removable later, the defendant has 30 days from the receipt of the amended complaint or pleading that makes the case removable. For example, a complaint may be amended and add a federal claim or a claim that increases the amount in controversy, or a plaintiff may settle with a non-diverse defendant, removing that party from the case. In no event can a case be removed more than one year after filing, however, unless it is a class action removable pursuant to CAFA.
Deadlines for removal cannot be extended by agreement of the parties or even by order of court. The deadlines are jurisdictional. That is, if they are not satisfied, the court does not have jurisdiction to hear the case.
Obtain Consent of Co-Defendants
All co-defendants who have been served with summons and complaint must consent to removal of a case before it can be removed. This can impose a significant hurdle, particularly if you are under significant time pressure to get a case removed. For one thing, you may not know for sure whether the co-defendants have been served or not. If there is no evidence of service of process on the docket and you have no reason to believe the co-defendants have been served, we typically allege in our notice of removal that “on information and belief” no other co-defendants have been served, and that on further “information and belief” any other co-defendants would consent to removal. However, the best practice is to contact the co-defendants and obtain their consent. If a co-defendant is a frequent defendant in litigation, it may be possible to identify its usual outside counsel and contact that attorney to obtain the consent. Otherwise, a call to a General Counsel or a law department might yield results. However, if you know that a co-defendant has been served (for example, there is a proof of service on the docket indicating service) you must have consent from that co-defendant before you can remove the case. Consenting co-defendants should file written consents with the court to ensure that the court does not remand the case to state court on a sua sponte basis due to lack of proof of consent.
We generally counsel clients to remove cases within 30 days of the date they are filed even if they have not yet been served. This avoids any issues over timeliness of the removal (a case removed within 30 days of filing is per se timely). It also helps avoid the need to obtain consent of co-defendants since there is not likely going to be any evidence of service of process on the docket this early in a case.
If a co-defendant has already removed a case, you should file a written consent to that removal (assuming you consent) and you should also file your own notice of removal if there are any additional grounds that support federal jurisdiction and/or the removal that were not stated in the co-defendant’s notice of removal. You need to do this within the same 30 day deadline for filing the notice of removal itself.
Prepare & File Documents in Federal Court
Several documents need to be prepared and filed in both federal and state court in order to effectuate the removal, including a notice of removal, a certificate of interested parties, a civil cover sheet, appearance forms and a notice of filing of notice of removal.
Document No. 1:
Notice of Removal
The key document is the notice of removal itself. This document should be prepared as if it were a motion seeking to establish federal jurisdiction. It consists of numbered paragraphs in which the removing defendant alleges all of the facts pertinent to a determination that federal jurisdiction exists. The notice of removal should be supported by evidence. Some federal judges review cases that have been removed from state court and assigned to them even without any motion to remand being filed. These judges will sua sponte remand a case to state court if they are not convinced that federal jurisdiction exists. Because you don’t know how active the judge assigned to your case will be, best practices call for the submission of the evidence necessary to support your allegations with the notice of removal. This can include an affidavit or affidavits of
knowledgeable witnesses about those facts, and will likely include documents supporting the factual allegations. The notice of removal should cite the complaint to the extent the complaint contains allegations that bear on federal jurisdiction. All of the pleadings filed in the state court must be attached to the notice of removal.
This is another place where you may be tempted to cut corners – particularly given the time pressure you may be under to get the removal accomplished. Resist that temptation. A remand will mean that you have wasted your time and incurred expenses with nothing to show for them.
Document No. 2:
Certificate of Related Parties
Another document that must be filed when you remove a case is a certificate of related parties. The specific requirements vary from court to court, but most if not all federal courts require a statement to be filed identifying any affiliates of a corporate defendant. The certificate may not need to be filed when the removal is filed, but it is a good practice to file it together with the other removal papers so that it has been taken care of and does not get overlooked later. The requirements are usually set forth in the court’s local rules and typically require disclosure of theidentity of any entity or person owning more than 5% of a corporation, the identities of the members of an LLC, the identities of the partners of a partnership, etc. as well as the affiliates of each of those (i.e., tracing ownership up the “corporate family tree”). As mentioned elsewhere, you need to be careful of how you treat trustees of trusts who may be named defendants, and consider whether you need to disclose the identity of the beneficiaries of the trusts in order to avoid an argument later that the bank or entity serving as trustee has individual liability.
Document No. 3:
Civil Cover Sheet
This is a form most district courts require to be completed and filed when the notice of removal is filed. Although it is perfunctory, it contains information the court looks at in determining whether diversity or federal question jurisdiction has been properly invoked. An error here can result in greater scrutiny of the allegations of the notice of removal.
Document No. 4:
Many, but not all, district courts will also require the attorneys appearing for the removing defendant to file separate appearance forms.
28 U.S.C. § 1446
(a) A defendant or defendants desiring to remove any civil action or criminal prosecution from a State court shall file in the district court of the United States for the district and division within which such action is pending a notice of removal signed pursuant to Rule 11 of the Federal Rules of Civil Procedure and containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders served upon such defendant or defendants in such action.
(b) The notice of removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or within thirty days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.
(c) If the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable, except that a case may not be removed on the basis of jurisdiction conferred by section 1332 of this title more than 1 year aftercommencement of the action.
(d) Promptly after the filing of such notice of removal of a civil action the defendant or defendants shall give written notice thereof to all adverse parties and shall file a copy of the notice with the clerk of such State court, which shall effect the removal and the State court shall proceed no further unless and until the case is remanded
Prepare & File Documents for State Court
Once the notice of removal has been filed in federal court, you must apprise the state court of the fact that the case has been transferred. This is accomplished by filing a “Notice of Filing of Notice of Removal” in state court.
It is the filing of this document that officially divests the state court of jurisdiction. For this reason, timing can be important. Generally speaking orders entered in state court prior to removal remain in effect after the case has been removed unless vacated or modified by the federal court. Temporary restraining orders entered in the state court will remain in effect until they expire by their terms or applicable federal rules. Preliminary injunctions, however, will continue until they have been vacated, modified or expire by their own terms. Thus, if the Plaintiff is seeking a temporary restraining order or other relief in the state court and you would prefer not to have the state court consider the issues raised in such a proceeding, you will want to not only file the notice of removal in the federal court prior to the hearing on any such matter, but also the notice of filing of notice of removal in the state court prior to that hearing. Once the notice of filing of notice of removal is filed, the state court is deprived of jurisdiction to act unless and until the federal court remands the case to state court.
Copies of all of these documents must be promptly served upon the plaintiff’s counsel.
Defend Against Motion to Remand
A motion to remand is a plaintiff’s request that the federal court return the case to state court. A motion to remand can be based upon an argument that the federal court lacks jurisdiction (e.g., the amount in controversy is less than $75,000, the citizenship allegations are incorrect in the notice of removal and the parties are not diverse, the complaint does not state a federal claim, etc.) or an argument that the removal procedure was flawed in some way (e.g., a served defendant does not consent, removal was untimely, etc.).
The plaintiff has 30 days to file a motion to remand based on a defect in the removal procedure.
A claim based on lack of subject matter jurisdiction can be raised at any time! One of the dangers of removal is a faulty assertion of subject matter jurisdiction. A plaintiff who does not believe that federal jurisdiction exists can “lie in the weeds” on that issue and see if he or she can settle the case or obtain a favorable result without seeking remand or arguing a lack of jurisdiction. If the case does not go as the plaintiff hoped, he or she can claim that the court lacked subject matter jurisdiction and that he or she gets to start all over in state court. For this reason, you must be absolutely certain that subject matter jurisdiction exists before removing a case.
Federal courts are said to “jealously guard” their jurisdiction. This means they strictly construe the removal statute in favor of remand and against removal.
Beware that the statute contains a fee shifting provision. If the court finds that there was no “objectively reasonable basis” for the removal, it can award the plaintiff its fees and costs in seeking remand.
28 U.S.C. § 1447(c)
(c) A motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal under section 1446 (a). If at any time before court lacks subject matter jurisdiction, the case shall
be remanded. An order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal. A certified copy of the order of remand shall be mailed by the clerk to the clerk of the State court. The State court may thereupon proceed with such case.
Consider Options if Remand is Ordered
Consider your options if remand is ordered, but in point of fact they are limited. An order remanding a case to state court is generally not reviewable on appeal.
There are exceptions to this rule, but they are so rare and unlikely to apply in the typical case against a mortgage loan servicer that they are not worth discussing here. Under certain circumstances you can seek a writ of mandamus from a court of appeals if remand is ordered, but this is also very rare and there is a high standard that must be satisfied to obtain it.
There is an exception for cases removed pursuant to CAFA. An order remanding a case removed pursuant to CAFA can be appealed. See 28 U.S.C. § 1453(c)(1) (notwithstanding 28 U.S.C. § 1447(d), court of appeals may review remand order where case was removed under CAFA).
Basically, if remand is ordered, you are going back to state court and will litigate there. Most state court judges will not hold your attempt to take the case away from them against you, but it is something to keep in mind.
28 U.S.C. § 1447(d)
(d) An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise, except that an order remanding a case to the State court from which it was removed pursuant to section 1443 of this title shall be reviewable by appeal or otherwise.
Impact of Removal on Deadline to Respond
Once the case is removed, you have the longer of:
- 21 days from the date you receive the summons and complaint; or
- 5 days from the date of removal
to respond to the complaint with a motion to dismiss, answer and affirmative defenses, or some other pleading. Typically we take a conservative approach and contact the plaintiff’s counsel immediately upon removal to agree to a stipulated deadline for a response to the complaint.
Normally 5 days is insufficient, but in some cases if a motion to dismiss is ready to go there is no reason to delay further.
If the case is remanded to state court, the state court rules of procedure will apply. These can vary. The best practice is once again to seek a stipulation with the plaintiff’s lawyer for a deadline for the response in state court following remand
Federal Rule of Civil Procedure 81(c)
(c) Removed Actions.
These rules apply to a civil action after it is removed
from a state court.
(2) Further Pleading.
After removal, repleading is unnecessary unless the
court orders it. A defendant who did not answer
before removal must answer or present other
defenses or objections under these rules within the
longest of these periods:
(A) 21 days after receiving — through service or
otherwise — a copy of the initial pleading stating the
claim for relief;
(B) 21 days after being served with the summons for
an initial pleading on file at the time of service; or
(C) 7 days after the notice of removal is filed.
(3) Demand for a Jury Trial.
(A) As Affected by State Law. A party who, before
removal, expressly demanded a jury trial in
accordance with state law need not renew the
demand after removal. If the state law did not
require an express demand for a jury trial, a party
need not make one after removal unless the court
orders the parties to do so within a specified time.
The court must so order at a party’s request and
may so order on its own. A party who fails to make a
demand when so ordered waives a jury trial.
(B) Under Rule 38. If all necessary pleadings have
been served at the time of removal, a party entitled
to a jury trial under Rule 38 must be given one if the
party serves a demand within 14 days after:
(i) it files a notice of removal; or
(ii) it is served with a notice of removal filed by
In most cases you will prefer to have your cases proceed in federal court rather than state court. On the surface, removing a case from state court to federal court is not difficult. However, there are many contours to federal jurisdiction, and various issues that may not be apparent at first glance that can significantly impact the litigation that must all be accounted for.
Removal should not be taken lightly – it should be carefully considered, planned for and implemented.