The issue does not come up every day, but it can be critical when it surfaces. “A civil action in any State court arising under the workmen’s compensation laws of such State may not be removed to any district court of the United States.” 28 U.S.C. § 1445(c). The defendant argued for removal based on common-law bad faith claims — an argument that once worked — but amendments to Texas law meant that “claims of bad faith no longer arise outside of the workers’ compensation laws.” Trahan v. Liberty Mutual Ins. Co., No. 13-20717 (June 10, 2014, unpublished) (citing Tex. Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430 (Tex. 2012)). Accordingly, the case returned to state court.
“The central issue in this case is whether a district court has jurisdiction over an inventorship dispute where the contest patent has not yet issued.” Camsoft Data Systems v. Southern Electronics Supply, Inc., No. 12-31013 (June 19, 2014). After a removal based on patent jurisdiction, the plaintiff amended to add federal antitrust and RICO claims. The Fifth Circuit held: “where — as here — a plaintiff [timely] objects to jurisdiction at removal, that plaintiff does not waive her jurisdictional arguments via post-removal amendment to her complaint.” Then, as to patent jurisdiction — acknowledging some uncertainty in the law on this specific topic — the Court found that the Patent & Trademark Office had “sole discretion” over a pending patent, not the federal courts. Returning to the other federal claims, because those claims had not proceeded to trial, a potential argument against remand based on Caterpillar, Inc. v. Lewis, 519 U.S. 61, was unavailable. Accordingly, the district court’s order of remand to state court was affirmed.
In the published opinion of Davoodi v. Austin ISD, the Fifth Circuit revisited the recurring question of how substantial a federal question must be to create jurisdiction (and thus, allow removal). No. 13-50823 (June 16, 2014). Notably, the Court did not analyze whether the plaintiff stated a claim under federal law in the causes of action alleged in his pleading. Rather, the decision turns on how much the pleaded facts involved violation of federal law. This focus contrasts with the framework of Howery v. Allstate Ins. Co., which rejected jurisdiction because “[f]rom its context, it appears that Howery’s mention of federal law merely served to describe types of conduct that violated the DTPA, not to allege a separate cause of action under the FCRA,” and because a violation of federal law was not an “essential element” of Howery’s state law claims. 243 F.3d 912, 918-919 (5th Cir. 2001).
Davoodi sued in Texas state court, alleging state law claims for “national origin discrimination” and intentional infliction of emotional distress, and a claim for “retaliation” without a specified basis in state or federal law. The first of the two paragraphs in the “Facts” section of the petition said:
“On or about June 2, 2011 Plaintiff filed a Charge of Discrimination with the EEOC and the Texas Human Rights Commission. (See Charge attached as Exhibit ‘A’ and fully incorporated herein). This charge alleged that Defendant discriminated against Plaintiff based on his National Origin (Iranian). On February 3, 2012 the EEOC issued a Dismissal and Notice of Rights. The Texas Human Rights Commission did not issue a dismissal/right to sue.”
The Court noted that the incorporation of the Charge made it “part of [plaintiff’s] complaint for all purposes,” and created federal jurisdiction because the Charge contained the averment and claim: “I have been and continue to be discriminated against, in violation of Title VII of the 1964 Civil Rights Act, as amended, [and] the Texas Commission on Human Rights Act, as amended, because of my national origin (Iranian).” The Court remanded as to the Rule 12 dismissal of the case, however, to allow the plaintiff a chance to replead under Lozano v. Ocwen Federal Bank, 489 F.3d 636 (5th Cir. 2007).
The movant’s Rule 12 arguments, as reflected in the appellate record excerpts, address whether the plaintiff’s pleading stated a claim for “retaliation” under either state or federal law. The Fifth Circuit did not engage the basis for that claim in its analysis of federal question jurisdiction, focusing entirely on the fact allegations described above and the statement made to the EEOC. Allstate can be reconciled with Davoodi because the mention of federal law in the Allstate pleading is substantially smaller, as a percentage of the overall allegations. That analytical framework — different than Allstate‘s focus — may invite new removals based on a “percentage-based” analysis of a pleading’s factual allegations.
In the recent case of French v. EMC Mortgage Corp., No. 13-50417 (April 29, 2014, unpublished), these allegations were deemed to “reference the FDCPA by way of asserting a cause of action under this federal statute,” and thus allowing removal:
“V. ILLEGAL MORTGAGE SERVICING AND DEBT COLLECTION PRACTICES.
. . .
Specifically in collection calls and notices, monthly statements, payoff statements, foreclosure notices, and otherwise, EMC routinely makes misrepresentations to borrowers about their loans, including: [6 topics]
. . .
Plaintiffs submit that Defendant EMC’s conduct in this matter is in direct violation of the Texas Fair Debt Collection Practices Act, the Federal Fair Debt Collection Practices Act and the above referenced stipulated injunction.”
This case rested on Howery v. Allstate Ins. Co., 243 F.3d 912 (5th Cir. 2001), in which the following allegations did not create federal question jurisdiction, because “[f]rom its context, it appears that Howery’s mention of federal law merely served to describe types of conduct that violated the DTPA, not to allege a separate cause of action under the FCRA”:
The acts, omissions, and other wrongful conduct of Allstate complained of in this petition constituted unconscionable conduct or unconscionable course of conduct, and false, misleading, or deceptive acts or practices. As such, Allstate violated the Texas Deceptive Trade Practices Act, Sections 17.46, et seq., and the Texas Insurance Code, including articles 21.21, 21.21-1, 21.55, and the rules and regulations promulgated thereunder, specifically including 28 TAC Section 21.3, et seq. and 21.203.
Allstate’s destruction of [Howery’s] file … constituted a further violation of the Texas Deceptive Trade Practices Act, for which plaintiff sues for recovery. Allstate also engaged in conduct in violation of the Federal Trade Commission rules, regulations, and statutes by obtaining Plaintiff’s credit report in a prohibited manner, a further violation of the Texas Deceptive Trade Practices Act….
While these holdings are consistent, the line between them is only a few words in a lengthy pleading. They underscore the importance of detail in considering whether removal is appropriate.
The unfortunate plaintiff in Robinson v. Wal-Mart Stores LLC argued that her state court petition referenced a $23,500 medical bill, which was in fact only $235. No. 12-41411 (April 9, 2014, unpublished). The Fifth Circuit affirmed the denial of her motion to remand, reminding: “If at the time of removal it is facially apparent from the state-court petition that he amount in controversy exceeds $75,000, a plaintiff’s subsequent request to amend her petition to ‘clarify’ the amount in controversy cannot divest jurisdiction.” The Court also observed: “In addition, prior to removal, Wal-Mart proposed to Robinson that she stipulate to no more than $75,000 in damages in exchange for not removing the case to federal court,” and that the plaintiff had declined to make that stipulation.
In Haase v. Countrywide Home Loans, Inc., the district court dismissed the plaintiff’s RESPA claim, declined to exercise supplemental jurisdiction over the remaining state law claims, and remanded them to state court. No. 12-20806 (April 9, 2014). Appellees argued that “because this judgment remanded the remaining state claims to the state court without addressing their respective merits, it is not a final disposition of all claims in the case, and therefore not appealable under 28 U.S.C. § 1291.” The Fifth Circuit disagreed, concluding that “as a practical matter, remands end federal litigation and leave the district court with nothing else to do.” (applying Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (1996)).
The State of Louisiana sued several insurers, alleging it was the beneficiary of assignments made by the insured in return for help rebuilding after Hurricane Katrina. The insurers removed to federal court under CAFA. After extensive proceedings, the district courts ultimately severed the actions by individual policy and ordered remand to state court. State of Louisiana v. American National Property & Casualty Co., No. 14-30071 (March 26, 2014). The Fifth Circuit reversed because “at the time of removal, these claims clearly possessed original federal jurisdiction as an integrated part of the CAFA class action.” Noting language in Honeywell International v. Phillips Petroleum that “a severed action must have an independent jurisdictional basis,” 415 F.3d 429, 431 (5th Cir. 2005), the Court limited that language as “appl[ying] only to severed claims that are based on supplemental jurisdiction.”
Taylor sued his employer in state court for violations of Texas law. Taylor v. Bailey Tool & Manufacturing Co., No. 13-10715 (March 10, 2014). Later, he amended his pleading to add federal claims. Defendant removed and moved to dismiss on limitations grounds. Under Texas law, Taylor’s new claims would not relate back because the original state law claims were barred by limitations when suit was filed. Under Fed. R. Civ. P. 15(c), however, the claims would relate back because they “arose out of the conduct, transaction, or occurrence set out” in the original pleading. Noting that Rule 81(c) says the Federal Rules “apply to a civil action after it is removed,” the Fifth Circuit concluded that they did not “provide for retroactive application to the procedural aspects of a case that occurred in state court prior to removal to federal court.” Accordingly, it affirmed dismissal.
Plaintiff Jongh sued “State Farm Lloyds” and Johnson, a local insurance adjuster, relating to the handling of her property insurance claim for storm damage. Jongh v. State Farm Lloyds, No. 13-20174 (Feb. 20, 2014, unpublished). State Farm answered and removed, arguing that (1) Johnson was improperly joined to destroy diversity; (2) Jongh had improperly named Lloyds, a separate entity; and (3) State Farm and Jongh were diverse. The trial court ruled for the defendants after a 1-day bench trial. The Fifth Circuit agreed with Plaintiff — who appears to have raised subject matter jurisdiction for the first time on appeal — that “State Farm never became a party in this action. Jongh did not name State Farm as a defendant in her original petition; although it asserted in its answer and notice of removal that Jongh incorrectly named Lloyds as a defendant, State Farm did not move to intervene or otherwise request that the district court substitute it as the proper party in interest.” The Court noted that Plaintiff, the “master of her complaint,” consistently asserted that her claim was against Lloyds and not State Farm. The judgment was vacated and the case remanded.
A recurring issue in federal litigation arises from cases that “overstay their welcome” in the federal courthouse; for example, where only state law claims remain after dismissal of federal claims. A variation of that situation arose in Energy Management Services LLC v. City of Alexandria, where a city sued its electricity provider. After that litigation was removed to federal court, the city then removed a second suit, brought by its utility consulting firm, on the ground of supplemental jurisdiction — after the first case had been settled. 12-31184 (Jan. 9, 2014). The remand order was certified for interlocutory appeal and the Fifth Circuit reversed, finding that there was no original jurisdiction over the second case as required by the removal statute. The Court acknowledged that the district court could have continuing jurisdiction over matters related to the original settlement, which could potentially even extend to such matters involving third parties — but here, the second case had no connection to those settled matters.
Su, a citizen of Taiwan, served on the board of Vantage, an offshore drilling contractor. Vantage is incorporated in the Cayman Islands with its principal place of business in Texas. Vantage sued Su in Texas state court for breach of fiduciary duty and related claims. Su removed, remand was denied, and the district court certified the jurisdictional issue for interlocutory appeal. Vantage Drilling Co. v. Su, No. 13-20379 (Jan. 7, 2014). The Fifth Circuit reversed and ordered remand, relying primarily upon Chick Kam Choo v. Exxon Corp., 764 F.2d 1148 (5th Cir. 1985). Section 1332(a)(2) requires complete diversity, and section 1332(c)(1) deems a corporation a citizen of “every State and foreign state” in which it is incorporated — thus, “there are aliens on both sides of the litigation, complete diversity is lacking, and there can be no diversity jurisdiction.” Su argued that Choo could be read to allow federal jurisdiction to protect against local bias, but the Court rejected that argument as inconsistent with the statute.
Mississippi brought six parens patriae actions alleging inappropriate charges for credit card “ancillary services” in violation of state law. Defendants removed under CAFA and on the ground of complete preemption, and the district court denied remand. Hood v. JP Morgan Chase & Co. (Dec. 2, 2013). The Fifth Circuit reversed. As to CAFA, it found that defendants (who have the burden) did not establish that any plaintiff had a claim of $75,000 – especially when Mississippi offered evidence that the average yearly charge at issue was around $100. The Court also observed that the defendants likely had similar information in their records. The Court acknowledged that federal usury laws have the effect of complete preemption, but found that the charges at issue in these cases could not be characterized as “interest” within the meaning of those laws.
In Ortega v. Young Again Products, the plaintiff sued a judgment creditor and its counsel, claiming that they took assets that belonged to him rather than the judgment debtor. No. 12-20592 (Nov. 27, 2013, unpublished). The Fifth Circuit recognized that Texas extends qualified immunity to claims by a third-party against an attorney for conduct requiring the “office, professional training, skill, and authority of an attorney.” The focus is on the type of conduct, not its merit. Accordingly, removal of the case was proper because the attorney was fraudulently joined, and dismissal for various reasons was affirmed.
Moore sued PPG Industries and several local parties for injuries at a chemical complex; the defendants removed, arguing fraudulent joinder. After some jurisdictional discovery, Moore sought to add three more local parties, and the district court denied him leave to do so. Moore v. Manns, No. 12-31265 (Oct. 8, 2013). The Fifth Circuit affirmed, first reminding; “If after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court”; accordingly, a district court should review such a proposed amendment “more closely than an ordinary amendment.” Factors include the extent to which the amendment is solely for jurisdictional purposes, whether plaintiff was dilatory, and potential harm to plaintiff of not allowing the amendment. Here, the Court agreed that the “general responsibilit[y]” for safety under which the new parties were sued did not trigger personal fault under Louisiana law, making the amendment tactical and impermissible.
In Fontenot v. Watson Pharmaceuticals, a long-running products liability and medical malpractice case about a transdermal pain patch, plaintiffs sought to add nondiverse health care providers to the case after removal. No. 12-30711 (June 10, 2013). The district court remanded pursuant to 28 U.S.C. § 1447(e). The Fifth Circuit dismissed for lack of appellate jurisdiction, concluding that a remand for lack of subject jurisdiction was unreviewable under Thermtron just like a jurisdictional remand under 1447(c), and noting that all other circuits facing the issue reached the same conclusion. The Court also found that the joinder ruling that led to the jurisdictional issue was unreviewable as a collateral order.
Plaintiff sued for violations of Louisiana’s version of RICO; defendants removed and moved to dismiss. The trial court said in part: “there is no standing, there is no jurisdiction and the court will grant the Motion to Dismiss pursuant to 12(b)(1).” Cox, Cox, Filo, Camel & Wilson LLC v. Sasol North America, Inc., No. 12-31123 (May 24, 2013, unpublished). The Fifth Circuit found error in dismissing with prejudice, noting that “to dismiss with prejudice under Rule 12(b)(1) is to disclaim jurisdiction and then exercise it.” The Court also found it unclear whether the trial court had dismissed on constitutional standing grounds or standing under the racketeering statute, “[b]ut instead of rewriting the district court’s order to affirm on the merits,” it vacated and remanded for further proceedings consistent with its opinion.
The borrowers in Priester v. JP Morgan Chase alleged two violations of the Texas Constitution about their home equity loan — not receiving notice of their rights 12 days before closing, and closing the loan in their home rather than the offices of a lender, attorney, or title company. 708 F.3d 667 (5th Cir. 2013). A cure letter was not answered and they sued for forfeiture of interest and principal under the state constitution. The Fifth Circuit affirmed the dismissal of the claim under the Texas 4-year “residual” limitations period, finding that was the prevailing view of courts that had examined the issue, and disagreeing with a district court that had found no limitations period. That court reasoned that a noncompliant home equity loan was void, but the Fifth Circuit concluded that the cure provision in the Constitution instead made it voidable. Tolling doctrines did not apply since it was readily apparent where the closing occurred. The Court also affirmed the denial of a motion for leave to amend to add new claims and non-diverse parties, reviewing the factors for both aspects of such a motion.
The plaintiff in Akerblom v. Ezra Holdings sued several companies for damages arising from their business dealings. No. 12-20182 (Jan. 28, 2013, unpublished). Federal jurisdiction turned on whether one defendant, called “Subsea” in the opinion, was improperly joined. To determine whether “the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant,” the Court reminded that the focus is on pleadings at the time of removal — any later pleadings or affidavits can only “amplify or clarify facts alleged in the state-court complaint.” Id. at 7. Applying Texas’s “fair and adequate notice” standard for proper pleading, the Court found that the fraud claim against Subsea failed to say that misrepresentation Subsea allegedly made, or who from Subsea allegedly made it. Id. at 10. There were also substantive issues as to whether several alleged representations were actionable. The Court’s focus on “what” and “who” under Texas law echoes recent opinions under the federal Twombly standard.
The parties’ agreement said: “State Farm agrees not to remove any Hurricane Ike cases filed by your firm to Federal Court.” Horn v. State Farm Lloyds, No. 12-40410 (Dec. 21, 2012). Roughly a year later, the firm filed a 100,000-member class action against State Farm, who removed the case. State Farm argued that the agreement was intended to resolve large numbers of individual claims and extending it to a class action was not consistent with the specific consideration given. The Fifth Circuit affirmed the remand order, finding that the terms “any” and “cases” were not ambiguous. The Court’s emphasis on contract wording, especially in the insurance context, is consistent with other recent cases, see, e.g., Ballard v. Devon Energy, 678 F.3d 360 (5th Cir. 2012).
In State of Mississippi v. AU Optronics Corp., the Fifth Circuit reversed a remand order, finding that a suit brought to protect consumers by the Mississippi Attorney General was a “mass action” under CAFA. 701 F.3d 796 (2012). The Court reviewed the pleading, the relevant Mississippi statutes, the general contours of parens patriae law, and its prior case of Louisiana ex rel Caldwell v. Allstate Insurance, 536 F.3d 418 (5th Cir. 2008), which found that policyholders rather than the Louisiana AG were the real parties in interest in an analogous suit. Based on this analysis, the Court concluded that the numerical requirements of CAFA for a mass action were satisfied, and the “general public policy” exception in the statute was not. A concurrence endorsed the outcome but questioned the framework used to analyze the statutory exception.
Globeranger Corp. v. Software AG involved Texas state law claims about the development of a radio frequency identification system. No. 11-10939 (Aug. 17, 2012). The defendants removed and obtained dismissal on the grounds of Copyright Act preemption. The Fifth Circuit agreed that section 301(a) of the Act creates complete preemption, and on the applicable test: “whether [the claim] falls ‘within the subject matter of copyright'” and whether it “protects rights that are ‘equivalent'” to those of a copyright. Id. at 6 (citing Carson v. Dynegy, 344 F.3d 446, 456 (5th Cir. 2003)). After through review of prior cases, the Court held that the conversion claim was likely preempted (thereby maintaining federal jurisdiction), but that the general basis for the claims included business practices excluded from copyright protection, making dismissal at the Rule 12 stage inappropriate. Id. at 10-12.
In a detailed opinion that surveyed differing Circuit opinions on several topics, the Court found that “the purchase or sale of securities (or representations about the purchase or sale of securities) is only tangentially related to the fraudulent scheme alleged” in state class actions about the Allen Stanford scandal. Roland v. Green (March 19, 2012). Therefore, the Securities Litigation Uniform Standards Act (SLUSA) did not preclude those actions. The opinion will likely have a significant influence on future cases about the scope of SLUSA in the Fifth Circuit.
Bepco v. Santa Fe Minerals presented the appeal of a remand order, which was based in part on a contractual waiver issue (reviewable) and in part on a timeliness issue (not generally reviewable). No. 11-30986 (March 15, 2012). While the timeliness issue was arguably not presented within 30 days of the removal, the Court held: “Whether a removal defect is not raised by a plaintiff in the motion to remand, or is raised more than 30 days after removal, does not matter. . . . [W]hat does matter is the timing of the remand motion.” Op. at 8. Because the motion itself was timely, and thus satisfied the statutory time limit, and because the remand order relied on a permissible statutory ground for remand, the Court dismissed the appeal for lack of appellate jurisdiction. Id.
The United States removed a case after entry of a default judgment against two doctors associated with the federal government (and after their motion for new trial was overruled by operation of law under Texas rules). Oviedo v. Hallbauer (revised October 14, 2011) After reviewing several potentially applicable removal statutes, the Court held: “The weight of authority thus holds that, by the time the government filed its notice of removal in this case, there was no pending case to remove, inasmuch as nothing remained for the state courts to do but execute the judgment.” (Op. at 7) Given this conclusion about the timeliness of the removal, the Court also rejected an argument based on the Federal Tort Claims Act that the state court may have lacked jurisdiction over this case. (Op. at 8-10)