When a plaintiff files in state court a civil action over which the federal district courts would not have original jurisdiction based on diversity of citizenship, removal is proper within 30 days of the dismissal of the only non-diverse defendant.
Respondent, a Kentucky resident, was injured while operating a bulldozer, filed suit under state law 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.
Can the manufacturer claim complete diversity as a result of the settlement between the respondent and the servicer?
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.