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VOLUME 7 February 2005 | ||||||
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TO REMOVE OR NOT TO REMOVE: THAT IS THE QUESTION By Scott D. Kirschbaum, Esq. Our firm has had the distinct pleasure of representing some of the largest corporate entities in the country, which maintain a large national presence. Many of them mandate that cases, which have been commenced in state court, be removed as a matter of due course and standard operating procedure to federal court. The removal of these cases to federal court is generally based on diversity jurisdiction. There is an impression, and in most cases, rightly so, that federal courts and the jurists are more seasoned, qualified and judicially tempered. While this is generally the case, one must keep in mind that federal courts routinely look for avenues to dismiss cases or remand them to state court. This is especially true for cases that are removed on diversity grounds. This article is intended to help guide attorneys and claims examiners alike in securing their cases’ removal to federal court and to avoid a very basic pitfall when it comes to the jurisdictional threshold required by federal courts. Removal of cases from state court to federal court are generally governed by 28 U.S.C. Sec. 1441 and requires the satisfaction of two prongs. First, there must be complete diversity of citizenship between all parties in the case pursuant to 28 U.S.C. Sec. 1332. Second, there must be an amount in controversy in excess of $75,000.00 in accordance with 28 U.S.C. Sec. 1332(a)(1). It is this second prong of the test that most savvy Plaintiff lawyers are exploiting in their Motions to Remand that has recently caught the eye of many federal court judges, their magistrates and law clerks to give them solid grounds for a remand. Plaintiffs have recently been filing Motions for Remand, claiming that while they admit that diversity of citizenship has been established, the Defendant’s removal of the case to federal court was without a good faith basis to believe that the amount in controversy would meet the federal court jurisdictional threshold requirements of $75,000.00, thus justifying remand of the case back to state court. Surprisingly, there is a stream of case law that supports this argument. It is important to keep some general principles in mind when deciding to remove a case to federal court after you have concluded that there is diversity. First, the right to remove a case to federal court is governed purely by statute and its terms and scope can be changed at anytime by Congress. Global Satellite Comm. Co. v. Starmill U.K. Ltd. Accordingly, if there is any ambiguity in the Defendant’s removal procedure, it will be construed against the validity of removal, and remand will be appropriate and not subject to appellate review once decided. Id. Consequently, the burden of establishing jurisdictional facts to support federal court jurisdiction rests upon the party seeking to invoke the jurisdiction of the federal courts. In cases of removal, that burden rests upon the Defendant. Fowler v. Safeco Ins. Co. of American. However, the most interesting case of recent history involving the burden of the removing party to establish the federal jurisdiction is that of the case of Williams v. Best Buy Co, Inc.. The Williams case involved the claim of injuries as a result of a trip and fall occurring at the Defendant’s business. The Defendant, Best Buy, operates retail establishments all over the country and removed the litigation to federal court based on diversity of jurisdiction. In response to the removal, the Plaintiff filed a Motion for Remand. The basis for the request for the remand was because there was no facially apparent evidence of the claim having met the federal jurisdictional threshold of $75,000.00. The Court agreed and held that where the pleadings are inadequate to establish the threshold, the Court may review the record for evidence to support the basis for the removal. This is very important because in jurisdictions like Florida, there is no requirement to allege a specific damage amount with the exception that the damages meet the state court’s jurisdictional threshold which is usually $15,000.00. Another problem is that many times the defense is simply not in the position of knowing what the true damages are because the complaint is often the first notice of the claim. Further, Rule 26 disclosure procedures can hinder one’s ability to discover the damages before it is time to have to defend a similar Motion to Remand as in the Williams case. Usually, the sanction threatened by most federal courts when faced with such an issue is for the defense to show cause as to what record evidence existed at the time of the removal to support a finding of good faith or face dismissal, remand or Rule 11 sanctions. Since record evidence may be scant during the time limit set by the court, strategy is most important. First, upon receipt of notice of a claim or a complaint, decide whether removal is right for the facts of the particular case. Rely upon your defense counsel to advise you of the potential pitfalls in the state court, the presiding jurist, and the best estimate you can come up with as far as potential exposure. Removal is a difficult issue to simply decide by a broad stroke rule. Not all cases should be removed. Second, once removal is decided, make sure there is enough obtained in the investigative stage (preferably before suit is filed) to support the record that the jurisdictional threshold in federal court is met. This can be in the form of medical records provided which show extensive injury, medical bills incurred, as well as settlement demands issued by the Plaintiff, which are almost always in the six figures, even for a simple herniated disc. When all else fails, try to provide the court with jury verdict research showing verdicts in excess of $75,000.00 under similar facts and circumstances as your case. Third, sometimes it may be wise to agree to a remand if the Plaintiff will stipulate that the damages are no greater than $75,000.00. Removal can be used as a tool for capping the damages. Just remember that the Williams case also ruled that the Plaintiff’s refusal to so stipulate does not establish satisfaction of the federal jurisdictional threshold and does not preclude the Plaintiff from seeking remand. |
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