When a plaintiff files in state court a civil action over which the federal district courts would have original jurisdiction based on diversity of citizenship, the defendant or defendants may remove the action to federal court, 28 U.S.C.S. § 1441(a), provided that no defendant is a citizen of the state in which such action is brought, § 1441(b). In a case not originally removable, a defendant who receives a pleading or other paper indicating the post-commencement satisfaction of federal jurisdictional requirements, for example, by reason of the dismissal of a nondiverse party, may remove the case to federal court within 30 days of receiving such information. § 1446(b). No case, however, may be removed from state to federal court based on diversity of citizenship more than one year after commencement of the action.
Respondent, a Kentucky resident who was injured while operating a bulldozer, filed a state law suit with the Kentucky state court against the petitioner, an Illinois-based manufacturer and its Kentucky-based servicer. After the respondent settled with the servicer, the manufacturer filed a notice of removal with the district court, stating that the settlement resulted to a complete diversity of citizenship so as to produce federal jurisdiction. Respondent objected and moved for a remand of the case for lack of diversity but the district court denied his motion. Meanwhile, the servicer entered into a settlement of the subrogation claim with the insurance company which led to the dismissal of the servicer from the lawsuit by the district court. The case proceeded against the manufacturer as the sole defendant and judgment was entered for the manufacturer. This was reversed on appeal on the ground that the diversity of citizenship was incomplete since the insurance company remained a defendant by reason of subrogation.
May the manufacturer claim complete diversity as a result of a settlement between an injured plaintiff and another defendant.
The court reversed the judgment from the court of appeals and remanded the cause. The court held that the district court's error in failing to remand respondent's lawsuit after it was improperly removed was not fatal to the subsequent adjudication because the federal jurisdictional requirements were satisfied when the judgment was entered. The court found that the jurisdictional defect of one nondiverse party, which existed when petitioner requested removal, was cured by an intervening settlement agreement reached by the nondiverse party. Thus, the district court had complete diversity before the trial occurred between petitioner and respondent, who were both diverse parties.