Removal and Remand: Tips for Making Your Case Disappear from Your Opponent's Choice of Forum

By: Jim Wagstaffe and the Wagstaffe Group

This article addresses new strategies based on recent case law for a party seeking to remove a case to federal court or to avoid removal and stay in state court. The article covers topics such as forum selection clauses, pleading claims, ambiguity in the complaint, federal preemption, and amendments to the complaint.

BEFORE WE BEGIN, LET’S UNDERSTAND THE APPEARANCE and disappearance nature of federal removal jurisdiction. The plaintiff makes the case appear initially in state court, presumably choosing that sovereignty as best suited for the client. In response and generally only if the action as filed could have been brought there originally, the defendant can unilaterally remove the action to federal court. And then if the removal was jurisdictionally or procedurally improper, the plaintiff can move to remand causing the action to disappear from the federal stage teleported back to its original forum.¹

So, what magic wands can you wave per the very recent case law to ensure that your client’s case lands in the desired state or federal court? There are seven new and improved tricks to work your removal and remand magic.

One – Plaintiffs Can Prevent Removal by Sprinkling State Court Fairy Dust in Their Forum Selection Clauses

In recent years, the U.S. Supreme Court has strongly affirmed the right of parties contractually to plan the shape and location of anticipated litigation.²

For example, if the parties enter into a contract with a clause providing that all claims must be litigated exclusively in a described state court, this will constitute a waiver of the right to remove.³

By the same token, if the forum selection clause designates a county in which there is no federal courthouse, this too constitutes a waiver of the right to remove.⁴

Significantly, if a served codefendant (whose joinder ordinarily is required to remove) signed such a contractual removal waiver, it will also waive it for all removing parties.⁵

The tips for plaintiffs seeking to thwart removal are:

• First, name and serve the defendant(s) who are parties to the contractual waiver
• Make any motion to remand within 30 days of removal as this waiver itself can be waived

The tip for a removing defendant who was not a party to the waiver agreement is:

• Remove before service on a codefendant who was a party to the waiver agreement

Two – Plaintiffs Can Keep the State Court Rabbit in the Hat: Avoid Pleading Federal Jurisdiction in State Court Complaints

The magic trick for plaintiffs seeking to avoid removal of their case to federal court is to:

• Plead only state claims (to avoid federal question removal)
• Sue at least one party from the same state (to avoid diversity removal)⁶

When it comes to keeping the state court complaint jurisdictionally pristine, it is important to keep the defendant from successfully trying to make it seem like there nevertheless is a federal rabbit in the hat.

With rare exceptions, even if there is a federal issue in the case, if the complaint contains only state law claims, removal on federal question grounds is not available.⁷

By the same token, plaintiffs can keep the diversity jurisdiction rabbit in the hat by being sure to include a properly named party who is nondiverse. This includes a nondiverse member of any noncorporate entity.⁸

Three – Putative Plaintiffs Can Use the Magic Sauce of Home Depot v. Jackson by Filing Their Affirmative CAFA or Federal Claims as Third-Party Complaints

The U.S. Supreme Court in Home Depot U.S.A., Inc. v. Jackson confirmed that the right to remove actions to federal court is limited to defendants.⁹ In particular, the high court ruled that even if there is a right to remove (say per Class Action Fairness Act of 2005 (CAFA), 28 U.S.C.S. § 1453), if the removing party was sued in a counterclaim or a third-party complaint, removal is not allowed.¹⁰

Thus, if a party wants to make the removal risk disappear, the brand new trick (called a “tactic” by the Home Depot dissenters) is to wait until one is sued (e.g., on a one-off collection case) and then include the otherwise removable CAFA or federal claim as a counterclaim or third-party complaint. Tactical magic.

Four – Defendants Can Use Procedural Sleights of Hand to Remove on Diversity Grounds

Plaintiffs often draft their complaints to include nondiverse codefendants or include a forum-based opponent to thwart efforts to remove the action to federal court. In response, defendants desiring to remove can use two sleight of hand magic tricks to change the focus:

• Declare that the nondiverse parties are sham and can be ignored
• Avoid the bar on local defendants by removing before service of process

The first effort is to argue that the parties otherwise defeating complete diversity are sham parties who have been joined improperly because there is no basis for recovery.¹¹ The sham joinder rule allows defendants to press the delete key on the nondiverse party only if there is no possible basis for recovery as ascertained on a summary basis.¹²

In these extraordinary situations, the sham party’s citizenship is ignored, and the remaining defendant(s) magically can then remove the case to federal court. The examples of sham joinder, while fairly rare, find support in the recent case law.¹³

The second sleight of hand removal tactic serves to divert attention away from the general bar on diversity removal by local defendants. Even if there is complete diversity, the removal statute provides that if one of the defendants is from the forum state (a so-called local defendant), then removal cannot take place.¹⁴ The rationale for this prohibition is that even if there is complete diversity (e.g., out-of-state plaintiffs), a local defendant does not need removal to avoid local prejudice.¹⁵

However, the sleight of hand flows from the statutory language limiting this removal prohibition to served local defendants. Therefore, courts have recently authorized what is known as snap removal (i.e., removal by the local defendants before service).¹⁶

The trick thus is for the local defendant to scan the filings through available litigation databases and voluntarily appear and file a notice of removal before being served.

Five – Defendant’s Houdini Escape Act from Late Removal: Seize upon Ambiguity in Complaint to Explain Delayed Removal

The normal rule is that a defendant must remove a case within 30 days of proper service.¹⁷ And if the service is proper, ordinarily removal is unavailable if not accomplished within that 30-day window.¹⁸

So the Houdini escape act from this missed deadline is to:

• Seize upon a perceived ambiguity in the plaintiff’s complaint as to federal jurisdiction (e.g., complaint doesn’t identify parties’ citizenship, no amount in controversy stated, ambiguous reference to origin of claim)
• Generate a paper trail in the case (e.g., interrogatory response as to amount in controversy)
• Remove 30 days from receipt of that paper¹⁹

If the ambiguity is actual, the governing case law confirms that the defendant may wait to remove until receipt of the paper providing clarity.²⁰

Importantly, this seized upon the ambiguity trick can be used even if the defendant subjectively knew or should have known of the basis for removal.²¹

Six – Defendants Can Wave a Magic Federal Wand to Transform Seeming State Law Claims into Federal Removal Jurisdiction

Ordinarily, removal on federal question grounds is allowed only if the well-pleaded complaint shows on its face that the action arises under federal law. However, there are several exceptions to this doctrine, and removal can take place by defendants waving a magic federal wand to remove the action to their preferred forum. In four main circumstances, this happens when the state court claims are recharacterized as federal in defendant’s notice of removal:

• Claims raise a substantial and disputed federal question. There may be limited situations in which a case is removable even though only state law claims are stated because they necessarily raise a substantial and disputed federal question.²² Of course, such situations are rare and occur only when allowing removal would not disturb the federal-state balance approved by Congress.²³
• Preemption. There are also limited areas where federal law completely preempts the artfully pled state law claims and replaces them with the necessary federal claim. This occurs primarily in the areas of Labor Management Relations Act, Employee Retirement Income Security Act of 1974, and copyright law.²⁴
• Federally chartered corporations. Removal jurisdiction is allowed as to claims involving federally chartered corporations if they have a charter that provides that the entity may sue and be sued in federal court.²⁵
• Federal officer. The federal officer removal statute, 28 U.S.C.S. § 1442, allows removal if the federal officer raises a colorable federal defense and establishes that the suit is for an act under color of office.²⁶ The statute also authorizes removal to federal court by persons acting under an officer or agency of the United States who are sued for acts “for or relating to any act under color of such office.” This also includes such persons raising colorable federal defenses.²⁷ Thus, even private persons or corporate entities who acted under the direction of a federal officer or agency can remove actions to federal court if there is a causal nexus to their actions under color of federal office.²⁸

Seven – Plaintiff’s Post-removal Fortune Telling Efforts to Change the Future Course of the Action

If the defendant indeed has properly removed the action, the plaintiff may still perform a sovereign-changing remand magic trick by seeking to amend the complaint post-removal. The fortune telling change-effort occurs when the plaintiff files an amendment:

• To dismiss the federal claim
• To add a nondiverse party

The defendant may then file a follow-up remand motion.

Section 1447(e) of Title 28 clearly authorizes courts to consider a plaintiff’s post-removal changes to the case and remand the case to state court if appropriate (e.g., by the destruction of diversity with the joinder of a nondiverse party). However, since removal jurisdiction is measured at the time of removal, the court has discretion to deny the requested changes—especially if the plaintiff’s motives are transparently unjustified.²⁹

If the plaintiffs succeed in achieving a remand, they may move for attorney’s fees and costs if there was no objectively reasonable basis for the defendant to have removed the action.³⁰ However, plaintiffs may well decide not to seek such relief as there often is no magic in sanctions because—unlike the remand decision itself—an award of sanctions is subject to an appeal. Such an appeal almost certainly will cost more than what is at stake.

Conclusion

When it comes to the magic of removal and remand, attorneys should keep up on the most recent case law.

James M. Wagstaffe is a renowned author, litigator, educator, and lecturer, and the premier industry authority on pretrial federal civil procedure. He is a partner and co-founder of Kerr & Wagstaffe LLP, where he heads the firm’s Federal Practice Group. He maintains a diverse litigation practice, including complex litigation, professional and governmental representation, will and trust disputes, legal ethics, First Amendment cases, and appeals in state and federal courts. He has particular expertise on virtual world issues, including electronic discovery and Wi-Fi technology. In 2017, California Lawyer named him Attorney of the Year for his successful representation of The State Bar of California in a high-profile privacy trial. He has authored and co-authored a number of publications, including The Wagstaffe Group^® Practice Guide: Federal Civil Procedure Before Trial. As one of the nation’s top authorities on federal civil procedure, Jim has helped shape the direction and development of federal law.

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1. See Wagstaffe Prac. Guide: Fed. Civ. Proc. Before Trial Ch. 8: Analyzing Removal Jurisdiction (LexisNexis 2019). 2. See Atl. Marine Constr. Co., Inc. v. U.S. Dist. Ct., 571 U.S. 49 (2013); see also Wagstaffe Prac. Guide: Fed. Civ. Proc. Before Trial § 12-III[H]. Specifically, the parties may contractually waive the right to remove a case by doing so in a valid forum selection clause limiting venue to state court. 3. See Medtronic Sofamor Danek, Inc. v. Gannon, 913 F.3d 704 (8th Cir. 2019) (forum selection clause providing claims must be litigated in specific state court precludes removal); FindWhere Holdings, Inc. v. Sys. Env’t Optimization, LLC, 626 F.3d 752 (4th Cir. 2010) (same); Wagstaffe Prac. Guide: Fed. Civ. Proc. Before Trial § 8-VII[A][2]. 4. See Bartels v. Saber Healthcare Group, LLC, 880 F.3d 668 (4th Cir. 2018) (forum selection clause limiting venue to county in which there is no federal court precludes removal); Grand View v. Helix Electric, 847 F.3d 255 (5th Cir. 2017) (same); City of Albany v. CH2M Hill, Inc., 924 F.3d 1306 (9th Cir. 2019) (same). 5. See Autoridad de Energia Electrica v. Vitol S.A, 859 F.3d 140 (1st Cir. 2017). 6. See Wagstaffe Prac. Guide: Fed. Civ. Proc. Before Trial § 8-II[B]. 7. See, e.g., Burrell v. Bayer Corp., 918 F.3d 372 (4th Cir. 2019) (state law claim for damages caused by sterilization product not properly removed simply because device regulated by FDA); Estate of Cornell v. Bayview Loan Servicing, 908 F.3d 1008 (6th Cir. 2018) (no removal of state law claim). See also Sec’y of Veteran Affairs v. Smith, 2018 U.S. Dist. LEXIS 48530 (S.D. Cal. March 28, 2018) (no removal of unlawful detainer action removed under federal Protecting At Foreclosure Act) (12 U.S.C.S. § 5220)); Jackson County Bank v. Dusablon, 915 F.3d 422 (7th Cir. 2019) (no federal jurisdiction in trade secret violation suit by bank against former employee even if implicating federal securities law); Mays v. City of Flint, 871 F.3d 437 (6th Cir. 2017) (no substantial federal question over tainted drinking water case simply because state officers working with EPA). 8. See, e.g., Settlement Funding LLC v. Rapid Settlements, 851 F.3d 530 (5th Cir. 2017) (any nondiverse member of LLC defeats removal); Purchasing Power LLC v. Bluestem Brands, Inc., 851 F.3d 1218 (11th Cir. 2017) (same). 9. 139 S. Ct. 1743 (2019). 10. See also Renegade Swish, L.L.C. v. Wright, 857 F.3d 692 (5th Cir. 2017) (no removal based on federal counterclaim); Wagstaffe Prac. Guide: Fed. Civ. Proc. Before Trial § 8-V[C]. 11. Wagstaffe Prac. Guide: Fed. Civ. Proc. Before Trial § 8-VI[D]. 12. See Grancare, LLC v. Thrower, 889 F.3d 543 (9th Cir. 2018) (nursing facility administrator could be personally liable and hence was not a sham defendant). 13. See Couzens v. Donahue, 854 F.3d 508 (8th Cir. 2017) (defendant not properly sued in individual capacity); Alviar v. Lilllard, 854 F.3d 286 (5th Cir. 2017) (no evidence of required willful intent for agent’s individual liability for tortious interference); Casias v. Wal-Mart Stores, Inc., 695 F.3d 428 (6th Cir. 2012) (joinder of nondiverse corporate manager a sham party in wrongful termination suit because he did not actively participate in termination decision); see also Hoyt v. Lane Constr. Corp., 927 F.3d 287 (5th Cir. 2019) (removal permitted even if sham party involuntarily eliminated by summary judgment). 14. 28 U.S.C.S. § 1446(b); Wagstaffe Prac. Guide: Fed. Civ. Proc. Before Trial § 8-VI[E][4]. 15. Id. 16. Gibbons v. Bristol-Myers Squibb Co., 919 F.3d 699 (2d Cir. 2019); Encompass Insur. Co. v. Stone Mansion Rest. Inc., 902 F.3d 147 (3d Cir. 2018); contra Gentile v. Biogen Idec, Inc., 934 F. Supp. 2d 313 (D. Mass. 2013). 17. 28 U.S.C.S. § 1446. 18. Compare Shakouri v. Davis, 923 F.3d 407 (5th Cir. 2019) (defendant not properly served need not yet remove, although snap removal allowed); Elliott v. Am. States Ins. Co., 883 F.3d 384 (4th Cir. 2018) (service on statutory agent does not start 30-day removal clock); Anderson v. State Farm Mut. Auto Ins. Co., 917 F.3d 1126 (9th Cir. 2019) (same). 19. See Morgan v. Huntington Ingalls, 879 F.3d 602 (5th Cir. 2018) (no need to remove until receipt of deposition transcript); Wagstaffe Prac. Guide: Fed. Civ. Proc. Before Trial § 8-X[D]. 20. See Cutrone v. Mortgage Electronic Registration Systems, Inc., 749 F.3d 137 (2d Cir. 2014) (if plaintiff’s pleading is ambiguous, defendant may wait to remove until receipt of pleading or paper providing clarity); see also Quinn v. Guerrero, 863 F.3d 353 (5th Cir. 2017) (if state court complaint is uncertain and does not clearly refer to a federal claim for relief, removal need not take place until and if the claims are clarified by amendment or otherwise as arising under federal law). 21. Harris v. Bankers Life & Cas. Co., 425 F.3d 689 (9th Cir. 2005); Graiser v. Visionworks, 819 F.3d 277 (6th Cir. 2016) (CAFA removal time not triggered until defendant receives sufficient information from plaintiff). 22. See Hornish Joint Living Trust v. King Cty., 899 F.3d 680 (9th Cir. 2018) (state claims to declare property rights in railway corridor raised substantial federal question under National Trails System Act due to federal interest to preserve shrinking rail trackage); Bd. of Comm’rs v. Tenn. Gas Pipeline Co., 850 F.3d 714 (5th Cir. 2017) (suit by local flood protection authority alleging oil companies’ activities damaged coastal lands raised substantial federal question since federal law provides standard of care); Turbeville v. Fin. Indus. Regulatory Auth., 874 F.3d 1268 (11th Cir. 2017) (removal jurisdiction existed over case against Financial Industry Regulatory Authority for defamation based on its federally regulated disclosure and investigation). 23. Wagstaffe Prac. Guide: Fed. Civ. Proc. Before Trial § 8-V[B][5][c]. 24. Wagstaffe Prac. Guide: Fed. Civ. Proc. Before Trial § 8-V[E]. See, e.g., Cavallaro v. UMass Mem’l Healthcare, Inc., 678 F.3d 1 (1st Cir. 2012) (claims for money had and received, unjust enrichment, and conversion brought by union employee essentially were ones for unpaid wages, hinging on an interpretation of the collective bargaining agreement and hence removal proper on complete preemption doctrine); but see Dent v. NFL, 902 F.3d 1109 (9th Cir. 2018) (state discrimination suit not completely preempted). 25. Fed. Home Loan Bank of Bos. v. Moody’s, 821 F.3d 102 (1st Cir. 2016); but see Lightfoot v. Cendant Mortg. Corp., 137 S. Ct. 553 (2017) (Fannie Mae’s charter providing for jurisdiction in “any court of competent jurisdiction” does not provide for federal jurisdiction since it contemplates court in which there is an otherwise existing source of subject matter jurisdiction); see also Wagstaffe Prac. Guide: Fed. Civ. Proc. Before Trial § 8-VII[A][1]. 26. Jefferson Cty. v. Acker, 527 U.S. 423 (1999). 27. See Wagstaffe Prac. Guide: Fed. Civ. Proc. Before Trial § 8-VIII[B][2]. 28. See Butler v. Coast Elec. Power Ass’n, 926 F. 3d 190 (5th Cir. 2019) (federal officer removal allowed to cooperatives raising federal preemption defense arising from federal loan agreements); Zeringue v. Crane Co., 846 F.3d 785 (5th Cir. 2017) (federal officer removal over asbestos claim against government contractor supplying product to Navy and lawfully assisting federal officer in performance of officer’s duties); Sawyer v. Foster Wheeler LLC, 860 F.3d 249 (4th Cir. 2017) (same); Hammer v. U.S. Dept. of Health and Human Services, 905 F.3d 517 (7th Cir. 2018) (federal officer removal of civil actions includes motions for declaratory relief); but see Mays v. City of Flint, 871 F.3d 437 (6th Cir. 2017) (rejecting federal officer removal when state officials not acting under supervision of federal agency); Fidelitad, Inc. v. Insitu, Inc., 904 F.3d 1095 (9th Cir. 2018) (no federal officer removal if not acting at federal officer’s direction); Wagstaffe Prac. Guide: Fed. Civ. Proc. Before Trial § 8-VII[B][2][d]. 29. See Wagstaffe Prac. Guide: Fed. Civ. Proc. Before Trial § 8-XI[B][H]. 30. Martin v. Franklin Capital Corp., 546 U.S. 132 (2005); Wagstaffe Prac. Guide: Fed. Civ. Proc. Before Trial § 8-XI[G]