A 2-1 panel decision about an issue of federal-officer removal produced a close vote against en banc review, broken down as follows:

Unsurprisingly, given all three judges’ discomfort with the Fifth Circuit precedent that dictated the panel holding in Abraham Watkins v. Festeryga, that case will be considered by the en banc court. The issue, as summarized by the panel majority, is this:

Edward Festeryga, an attorney embroiled in a dispute with his former law firm, wants this case heard in federal court and contends we have appellate jurisdiction over the district court’s remand order because waiver is neither an issue of subject-matter jurisdiction nor a defect in removal procedure under 28 U.S.C. § 1447(c). We agree, but our 40-plus-year-old precedent provides otherwise, holding that a waiver-based remand order is jurisdictional under § 1447(c) and thus unappealable under § 1447(d).

While no longer in the academy, the capable Rory Ryan offered this insightful analysis of this case on X.

28 U.S.C. § 1447(d) says: “An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise.”

But under the Supreme Court’s Thermtron precedent, that statute is read in concert with § 1447(c), such that § 1447(d) “’only prohibits appellate review of … remand orders … specified in neighboring subsection 1447(c).’ Thus, to the extent a district court remands a case for lack of subject-matter jurisdiction (e.g., non-diverse parties) or a defect in removal procedure (e.g., missing the 30-day removal deadline), we cannot review that order on appeal.” (citation omitted).

In Abraham Watkins v. Festeryga, the district judge remanded a case after finding that the removing party waived the right to remove by active participation in stae-court proceedings. Thus, the question for the Fifth Circuit was: “whether the district court’s remand order in this case … is a specified ground within § 1447(c) and thus barred from our review under § 1447(d) or a discretionary ground outside § 1447(c) and thus an appealable collateral order ….”

The panel held that it was bound by Circuit precedent from 1980, which held–albeit obliquely and vaguely–that state-activity waiver was a 1447(c) ground about jurisdiction and thus unreviewable. A concurrence recommends en banc review of that precedent.

Palmquist v. Hain Celestial Group, Inc. provides helpful summaries of two important standards for evaluating motions to remand:

1. Repleading. “[A] plaintiff should not be penalized for adhering to the pleading standards of the jurisdiction in which the case was originally brought. Otherwise, where there are potentially diverse parties, plaintiffs would essentially have to plead the federal pleading standard in state court for fear of having their claims against non-diverse parties thrown out upon reaching federal courts for failing to comply with the demands of Rule 12(b)(6).”
2. New Matters in Repleading. “[A]dding new causes of actions and clarifying already alleged causes of actions are not mutually exclusive. We have already determined that the Palmquists may not expand the substance of their pleadings, for jurisdictional purposes, with the negligent-undertaking allegations. We, too, follow circuit precedent by permitting them to ‘clarify’ their already averred jurisdictional allegations after removal for purposes of an improper joinder analysis.”

No. 23-40197 (May 28, 2024).

Martin v. LCMC Health Holdings, Inc. presents a creative use of the “federal officer” removal statute. A hospital argued that because its patient-portal systems were part of a federal information program created by Congress, it “acts under the direction of a federal officer when embedding tracking pixels onto its website where patients may access their medical records.” While creative, the argument didn’t work: “LCMC’s relationship with the federal government is too attenuated to show any delegation of legal authority, and consequently, LCMC cannot show that it acted pursuant to a federal officer’s directions for purposes of federal officer removal. ” No. 23-30522 (May 13, 2024).

The Chitimacha Indian tribe owns a casino. The casino’s former CFO sued the tribe for allegedly violating his civil rights by reporting him to law enforcement. He sued in state court, the defendants removed, and the district judge both denied the CFO’s motion to remand and dismissed the case with prejudice, citing the tribe’s sovereign immunity.

The Fifth Circuit reversed, noting that the controlling statute (28 USC § 1447(c)) requires that a removed case “shall be remanded” if the court lacks subject matter jurisdiction. Because that language “admits of no exceptions,” it “requires remand even when the district court thinks it futile” (here, because the district court concluded that the same immunity problems would also bar state-court litigation against the tribe.

Further, the dismissal should not have been with prejudice–“it’s precisely because the jurisdiction-less court cannot reach the merits that it also cannot issue with-prejudice dismissals that would carry res judicata effect.” Montie Spivey v. Chitimacha Tribe of Louisiana, No. 22-30436 (Aug. 16, 2023).

Levy (a citizen of Louisiana) sued Dumesnil (also a citizen of Louisiana), along with Zurich American Insurance Company (not a citizen of Louisiana), and another entity that “claims to be citizen of Louisiana, and nothing in the record indicates otherwise.”

Complete diversity thus did not exist. A citizen of Louisiana was on both sides of the “v.”

Nevertheless, Zurich persisted. It removed to federal court. At the time it removed, it was the only defendant that had been served. Thus, argued Zurich, it had successfully completed a “snap” removal under Texas Brine Co. v. American Arbitration Association, Inc., 955 F.3d 482 (5th Cir. 2020).

The Fifth Circuit granted mandamus relief as to the trial court’s denial of the plaintiff’s motion to remand. Yes, Zurich had removed before the in-state defendant had been served, and thus satisfied that requirement for a successful snap removal. But Zurich had not satisfied the more basic requirement for a snap – or for that matter, any – removal based on diversity: complete diversity of citizenship.

Because “the existence of diversity is determined from the fact of citizenship of the parties named and not from the fact of service,” removal was improper. In re Levy, No. 22-30622 (5th Cir. 2022) (applying New York Life Ins. Co. v. Deshotel, 142 F.3d 873, 883 (5th Cir. 1998))

In Dune, Duke Leto Atreides cautions his son about the family’s move to Arrakis, telling him to watch for “a feint within a feint within a feint…seemingly without end.” In that spirit, Advanced Indicator & Mfg. v. Acadia Ins. Co. analyzed a complex removal issue, noting:

• “Ordinarily, diversity jurisdiction requires complete diversity—if any plaintiff is a citizen of the same State as any defendant, then diversity jurisdiction does not exist.”
• “‘However, if the plaintiff improperly joins a non-diverse defendant, then the court may disregard the citizenship of that defendant, dismiss the non-diverse defendant from the case, and exercise subject matter jurisdiction over the remaining diverse defendant.’ … A defendant may establish improper joinder in two ways: ‘(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court.’”
• But see: “[T]he voluntary-involuntary rule … dictates that ‘an action nonremovable when commenced may become removable thereafter only by the voluntary act of the plaintiff.’”

These principles applied to this situation:  Advanced Indicator (a Texas business) sued Acadia Insurance (diverse) and its Texas-based insurance agent (not-diverse). But after suit was filed, Acadia invoked a Texas statute “which provides that should an insurer accept responsibility for its agent after suit is filed, ‘the court shall dismiss the action against the agent with prejudice.'”

The Fifth Circuit, noting different district-court opinions about this statute and carefully reviewing its own precedents, concluded that “because [the agent] was improperly joined at the time of removal, Acadia’s removal was proper.” No. 21-20092 (Oct. 3, 2022) (emphasis added, citations removed).

The Fifth Circuit found that the federal courts had “related to” jurisdiction because of the relationship between litigation and a bankruptcy plan:

“In Zale, the dispute between NUFIC and Cigna risked disrupting Zale’s reorganization by threatening Zale’s recovery from and access to the Cigna policy funds. Here, NFC’s claims risked the same disruptions: GenMa had pledged to pay the Lessors lots of money and to keep specified cash reserves as part of a global settlement between several parties to GenOn’s restructuring. By threatening GenMa’s ability to fulfill those commitments, NFC’s claims pertained to ‘the implementation and execution’ of that crucial settlement, which was part of GenOn’s plan. Craig’s Stores, 266 F.3d at 390. So we have related-to jurisdiction. 28 U.S.C. § 1334(b).”

Natixis Funding Corp. v. Gen-On Mid-Atlantic, LLC, No. 21-20557 (July 29, 2022).

In reaching an important holding about the scope of “federal officer” removal, as applied to “critical infrastructure” businesses operating during the pandemic:

In this case, we must decide whether Tyson Foods, Inc. was “acting under” direction from the federal government when it chose to keep its poultry processing plants open during the early months of the COVID-19 pandemic. Tyson argues that it was, and that the district courts erred in remanding these cases back to state court. But the record simply does not bear out Tyson’s theory. Tyson received, at most, strong encouragement from the federal government. But Tyson was never told that it must keep its facilities open. Try as it might, Tyson cannot transmogrify suggestion and concern into direction and control.

(emphasis in original), the Fifth Circuit provided some interesting history about that important statute:

Congress enacted the first “federal officer removal statute” during the War of 1812 to protect U.S. customs officials. New England states were generally opposed to the war, and shipowners from the region took to suing federal agents charged with enforcing the trade embargo against England. Congress responded by giving customs officials the right to remove state-court actions brought against them to federal court. Since that time Congress has given the right of removal to more and more federal officers. Today all federal officers as well as “any person acting under that officer” are eligible.

(footnotes omitted). Glenn v. Tyson Foods, Inc., No. 21-40622 (July 7, 2022).

The Fifth Circuit reversed the denial of a motion to remand when:

1. The defendant’s claimed amount in controversy did not tie to the plaintiff’s specific claim. “Deutsche Bank failed to establish by a preponderance of the evidence that the amount in controversy was over $75,000. Deutsche Bank submitted evidence of the Property’s value [$427,662], which obviously exceeded the jurisdictional threshold. But Deutsche Bank failed to show that the automatic stay at issue here put the house’s value in controversy.”
2. The plaintiff stipulated it sought no more than $74,500. Citing a statement in the plaintiff’s pleading and an near-identical one in a later declaration, the Court said: “The best reading of these two statements is that Durbois is seeking–and will accept–no more than $74,500.” It continued: “Deutsche Bank claims these statements are insufficient. We don’t see why. Durbois used two forms of the word ‘stipulation’ and even bolded it once. A reasonable reader would understand that Durbois was limiting not only what he demanded but what he would accept from the suit. Perhaps Deutsche Bank thinks Durbois “should have used CAPITAL LETTERS …. [o]r maybe … should have added: ‘And [I] really mean it!!!’” But we don’t think such measures are necessary.” (The opinion did not address the potential role of semaphore signals in providing emphasis.)

Durbois v. Deutsche Bank, No. 20-11082 (June 16, 2022) (emphasis added, citation omitted)). The opinion thoroughly reviews the case law on these basic issues, and the “CAPITAL LETTERS” point may prove meme-worthy in the months ahead.

The plaintiff’s pleading at the time of removal in Turner v. GoAuto Ins. Co. described a putative class made up of only “citizens of Louisiana.” The defendant argued “that the Louisiana law contravened Louisiana law in several ways by allowing [Plaintiff] to amend his complaint to redefine the class.” But that argument ran afoul of the “basic precept of our federal system … that federal courts do not exercise authority over the proceedings of a sovereign state’s judiciary as it relates to that state’s laws,” which meant that the amended pleading controlled, and that the defendant could not establish the necessary diversity of citizenship. No. 22-30103 (May 2, 2022).

Some years ago, I unsuccessfully litigated a case about a contractual waiver of the right to remove. (The unique facts of that case were that Collin County had no federal courthouse at the time, but the Eastern District’s Plano facility was under construction.) Collin County v. Siemens Business Services, 250 F. App’x 45 (5th Cir. 2007). That case prompted me and two colleagues to write a thorough survey of the law on this topic, see Coale, Visosky & Cochrane, “Contractual Waiver of the Right to Remove to Federal Court,” 29 Rev. Litig. 327 (2010), after which I thought I had “seen it all” as to contractual waivers of removal rights.

However, I was wrong, as Dynamic CRM Recruiting Solutions LLC v. UMA Education, Inc. examines yet another turn of phrase in such a clause–what it means for an action to be “brought before” a particular tribunal. The Fifth Circuit held that “by using terminology similar to that which courts have generally construed as forbidding removal, they were waiving their right to remove an action filed in Harris County district court to federal court.” No. 21-20351 (April 19, 2022). The article now needs a pocket part.

The PREP Act — a 2005 law allowing the HHS secretary to make a declaration that immunizes certain disaster responders from liability — was held not to completely preempt state-law negligence claims in Mitchell v. Advanced HCS. The Fifth Circuit noted:

• “First, the only cause of action [the PREP Act] creates is for willful misconduct. Assuming—without deciding—that the willful misconduct cause of action is completely preemptive, the question is whether Mitchell ‘could have brought’ the instant claims under that cause of action. He could not. The Act clearly states that its willful-misconduct cause of action creates ‘a standard for liability that is more stringent than a standard of negligence in any form or recklessness.'”
• “Second, the compensation fund that the Act creates is not completely preemptive under this court’s precedents. To begin, a ‘compensation fund is not a cause of action.’ It may be a civil-enforcement provision, but such provisions must nevertheless ‘create[] a cause of action.’ … Assuming arguendo that the compensation fund suffices as a cause of action, the Act nevertheless does not create ‘a specific jurisdictional grant to the federal courts for enforcement of the right.’ Instead, the Secretary oversees administration of the fund. Worse, the statute expressly withdraws jurisdiction from any court, state or federal, concerning ‘any action [taken] by the Secretary’ in doing so.”

No. 21-10477 (March 10, 2022) (citations omitted, emphasis added).

A Louisiana-based defendant removed a class action brought by an individual citizen of Louisiana, contending that a co-defendant’s “non-diverse Louisiana citizenship could be disregarded because the [statutory] claims against [the co-defendant] were ‘improperly and egregiously misjoined’ with the assignment-based bad faith claim against the removing defendant.”

This concept — called “fraudulent misjoinder” and reliant upon state-law procedural rules — is distinct from the traditional concept of “improper joinder” (a/k/a “fraudulent joinder”), which focuses on the viability of the claim against the nondiverse defendant.

The panel majority in Williams v. Homeland Ins. Co., written by Judge Haynes and joined by Judge Ho, soundly rejected removal based on fraudulent misjoinder, emphasizing the doctrine’s practical consequences: “Adopting the fraudulent misjoinder doctrine will dramatically expand federal jurisdiction, putting the federal district courts in this circuit in the position of resolving procedural matters that are more appropriately resolved in state court—all without a clear statutory hook.” No. 20-30196 (Nov. 30, 2021).

A concurrence by Judge Ho emphasized the importance of the statutory text in rejecting the doctrine; a dissent by Judge Jones focused on “the unusual circumstances here, which bespeak obvious joinder machinations undertaken to avoid federal court.” (both opinions are in the above link). The trio of opinions suggests that this case may receive serious consideration for en banc review.

• In reviewing a claim of improper joinder, a court may “conduct a Rule 12(b)(6)-type analysis” to determine if the claim against the in-state defendant “is plausible on its face.”
• Alternatively, if “discrete and undisputed facts . . . would preclude plaintiff’s recovery against the in-state defendant,” then “the district court may, in its discretion, pierce the pleadings and conduct a summary inquiry.”
• But, “unlike summary judgment, which can be granted when there is ‘lack of substantive evidence’ to support a plaintiff’s claim, improper joinder requires the defendant to ‘put forward evidence that would negate a possibility of liability on the part of ‘ the in-state defendant.

Accordingly, the Fifth Circuit reversed a finding of improper joinder in Hicks v. Martinrea Automotive Structures (USA), Inc., No. 20-60926 (Sept. 7, 2021), noting that the defendant’s argument about the tortious-interference element of malice “rel[ies] on evidence developed during merits discovery, which is far afield from Rule 12(b)(6) [and] the evidence they cite relates to the crucial question of Clark’s motive in terminating Hicks.” No. 20-60926 (Sept. 7, 2021).

The able Rory Ryan of Baylor’s law school has Tweeted in detail about a recent district-court opinion on a thorny, and persistent, removal-jurisdiction issue. The case, which arose under a Texas Insurance Code provision with a specific procedure about claims against insurance agents, presented these facts:

Plaintiffs sued their insurer, Chubb (who is diverse), and agent, Smith (who is non-diverse), in state court. Chubb then elected to accept whatever liability Smith might have, and the state court dismissed Smith. Chubb then removed the case under diversity jurisdiction.

Leading to this issue: “[I]n determining diversity jurisdiction, does the Court consider Smith’s citizenship?”

After an extensive review of the relevant statutes and cases, the Court concluded:

Without binding authority, the Court must rely on the policy and rationale supporting the improper-joinder rule. The improper-joinder rule holds that the non-diverse defendant never should have been a party.  As the Fifth Circuit has said: “If no reasonable basis of recovery exists, a conclusion can be drawn that the plaintiff’s decision to join the local defendant was indeed fraudulent …,” and therefore improper.  As shown above, this rationale explains the improper-joinder rule’s past application.

 

But the rationale does not support an improper-joinder finding when the plaintiff’s claims against the non-diverse defendant were initially valid. In this situation, it is false to say an improper-joinder finding amounts to a determination that the non-diverse defendant was never properly before the court. It was.

(citations omitted, emphasis in original). The case was thus remanded to state court.

Removals under the federal-officer statute have drawn increased scrutiny in recent years. In BP P.L.C. v. Mayor and City Council of Baltimore, the Supreme Court addressed an important issue about appellate review of remand orders involving that statute, concluding: “To remove a case, a defendant must comply with 28 U. S. C. §1446. Essentially, that statute requires the defendant to provide affected parties and
courts with a notice stating its grounds for removal. §§1446(a), (d). The combination of these actions ‘effect[s] the removal.’ §1446(d). To remove a case ‘pursuant to’ §1442 or §1443, then, just means that a defendant’s notice of removal must assert the case is removable ‘in accordance with or by reason of’ one of those provisions. Here, everyone admits the defendants’ notice of removal did just that by citing §1442 as one of its grounds for removal. Once that happened and the district court ordered the case remanded to state court, the whole of its order became reviewable on appeal.” No. 19-1189 (U.S. May 17, 2021) (footnotes omitted).

A Louisiana statute lets private citizens sue to enforce certain state environmental laws, provided that “any injunction the citizen might obtain must be entered in favor of the Commissioner of Louisiana’s Office of Conservation.” Straightforward substantively, this statute raises federal-jurisdiction questions “that would make for a tough Federal Courts exam.” Grace Ranch LLC v. BP Am. Prod. Co., No. 20-30224 (Feb. 26, 2021). Specifically:

• Is Louisiana a party to the suit? If so, diversity jurisdiction does not apply. The Fifth Circuit concluded that it was not a party, notwithstanding the potential for relief issued in its name, “because [Louisiana] has not authorized landowners to sue in its name” in the relevant statute. Similarly, Louisiana is not a real party in interest because the potential for an injunction in its favor is a “contingency,” which would make it “highly inefficient to remand the case to state court only at the end stage of the lawsuit when the injunction might issue.”
• Does the 5th Circuit have jurisdiction? The matter was removed to federal court and the district court decided to abstain. Reviewing the not-always-clear history of 28 USC § 1447(c) and the cases applying it, the Court concluded that “a discretionary remand such as one on abstention grounds does not involve a removal ‘defect’ within the meaning of section 1447(c).”
• Was Burford abstention appropriate? Grace Ranch involved the remediation of environmental damage caused by a now-outlawed way of storing waste from oil and gas production. The Court reversed the district court’s decision to abstain, agreeing that the case presented “the potential need to decide an unsettled question of state law, in an area of general importance to the State”–but also finding that the case does not involve “an integrated state regulatory scheme in which a federal court’s tapping on one block in the Jenga tower might cause the whole thing to crumble.”

After the plaintiff voluntarily dismissed the federal securities claims that justified removal, the district court retained jurisdiction over the case based on supplemental jurisdiction and granted a motion to compel arbitration. The Fifth Circuit rejected the supplemental-jurisdiction argument and vacated the motion to compel: “All of SJAP’s claims against Cigna arise from or concern the In-Network Agreement and the resulting business relationship. SJAP’s federal claim against the Insight Defendants, by contrast, was based on SJAP’s purchase of securities from Insight as part of the Lab Operating Agreement, a completely separate contract that had nothing to do with Cigna that was consummated several years before the events giving rise to SJAP’s claims against Cigna. Other than SJAP’s vague assertion that Insight and the Cigna Affiliates previously ‘had a lengthy and sordid relationship’ that resulted in an undisclosed settlement agreement, the operative complaint when the case was removed demonstrated no connection between Cigna and the Insight controversy, let alone the specific federal security claim that conferred original jurisdiction on the district court.” SJ Associated Pathologists v. Cigna Healthcare of Texas, No. 20-20188 (July 6, 2020) (emphasis added).

Feeling salty about the handling of a AAA arbitration, Texas Brine (not a Louisiana citizen) sued the AAA (not a Louisiana citizen) and two Louisiana-based arbitrators in New Orleans state court. The AAA was served with process and immediately removed the case, before the two Louisiana citizens were served.

The Fifth Circuit held that such a “snap removal” was permitted by the plain text of the removal statute, noting that the “forum defendant rule” only applied once an in-state defendant was served. (In relevant part, 28 U.S.C. § 1441(b)(2) says that a civil action “. . . may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.” (emphasis added)).

The Court declined to find that this situation produced an “absurd result,” noting the Second Circuit’s observation that: “Congress may well have adopted the ‘properly joined and served’ requirement in an attempt to both limit gamesmanship and provide a bright-line rule keyed on service, which is clearly more easily administered than a fact-specific inquiry into a plaintiff’s intent or opportunity to actually serve a home-state defendant.”  Texas Brine Co. LLC v. AAA, No. 18-31184 (April 7, 2020).

Faced with “extraordinarily confused” case law within the Circuit about the federal-officer removal statute (28 USC sec. 1442(a)(1)), the en banc Court’s opinion in Latiolais v. Huntington Ingalls is intended to “strip away the confusion, align with sister circuits, and rely on the plain language of the statute, as broadened in 2011.” The new test requires a defendant to show: “(1) it has asserted a colorable federal defense, (2) it is a ‘person’ within the meaning of the statute, (3) that has acted pursuant to a federal officer’s directions, and (4) the charged conduct is connected or associated with an act pursuant to a federal officer’s directions.” It abandons a previously-recognized “causal nexus” requirement. Accordingly, the defendant shipbuilder “was entitled to remove this negligence case filed by a former Navy machinist because of his exposure to asbestos while the Navy’s ship was being repaired at the Avondale shipyard under a federal contract.” No. 18-30652 (Feb. 24, 2020). (Above, the formidable bow of the U.S.S. Somerset, the last ship launched from the long-serving shipyard.)

After a 2011 amendment, the removal statute allowed a motion to remand based on diversity after a year if the “district court finds that the plaintiff has acted in bad faith in order to prevent a defendant from removing the action. 28 U.S.C. § 1441(c)(1).  One of the removal-jurisdiction issues in Hoyt v. Lane Construction  was the applicable legal standard to determine bad faith. The district court focused on the plaintiffs’ affidavits, which explained “why the Hoyts were reluctant to go to trial against Storm or accept Storm’s (apparently low) settlement offer,” but “do not explain why the Hoyts waited until just two days after the one-year deadline to dismiss Storm. On appeal, the plaintiffs argued for a standard based on equitable estoppel that had been developed in prior Fifth Circuit precedent, but the Court rejected those authorities as having been mooted by the 2011 amendment. No. 18-10289 (June 10, 2019).

Rural electric cooperatives, created pursuant to the New Deal’s Rural Electrification Act, and that “‘act under’  and the [Rural Utilities Service]’s direction
based on a close and detailed lending relationship and shared goal of furthering
affordable rural electricity,” sought to remove litigation about governance issues under the “federal officer” statute. The district court remanded but the Fifth Circuit reversed: “[I]t was error to conclude that the cooperatives have not presented a colorable federal defense, as required for federal officer removal jurisdiction. Again, this is not to say that the cooperatives will inevitably be successful in their preemption defense. Rather, our conclusion is a natural byproduct of the
fact that ‘one of the most important reasons for [federal officer] removal is to have the validity of the [federal defense] tried in a federal court.'” Butler v. Coast Elec. Power Assoc., No. 18-60365 (June 7, 2019).

In the category of “not very surprising en banc votes”: After a plea for en banc review in a recent case about federal jurisdiction over injury claims arising from asbestos exposure at the Avondale Shipyard (in its heyday, the largest employer in Louisiana), the Fifth Circuit has accepted that case for en banc review. Latiolas v. Huntington-Ingalls, No. 18-30652 (May 8, 2019). (To the right, the launch at Avondale of a Knox-class frigate, an unheralded but stalwart antisubmarine-warfare vessel of the late Cold War.)

Louisiana’s courts have seen a host of claims about asbestos exposure involving the Avondale Shipyard near New Orleans. (Now closed, Avondale was once the largest employer in Louisiana; to the right is the USS Iowa entering the shipyard for repairs.). In turn, those asbestos claims have led to a  stream of federal-court removals based on the “federal officer” statute. Those cases have brought to light some inconsistencies in Fifth Circuit precedent, culminating in a plea for en banc review in Latiolais v. Huntington Ingalls, which summarizes the present situation:

This case exemplifies the problem. Avondale refurbished vessels using asbestos insulation as directed by the Navy. Because Avondale ran its  own safety department free of Navy directives, however, any alleged failure by Avondale to warn its employees or others about asbestos is not an act under color of federal office, so Avondale is not being sued “for” a federal act. However, Avondale’s failure to warn about asbestos certainly “relates to” its federal act of building the ships. Applying the [current] statutory language would change the outcome of this appeal and would authorize removal of many more cases than the causal nexus test permits.

No. 18-30652 (March 11, 2019).

The removal statute does not allow an in-state defendant to remove a case, even if diversity exists. That rule imposes a substantial limitation on removable cases. But if such a removal survives to final judgment, the judgment will stand: ” The removal bar of 28 U.S.C. § 1441(b), however, is procedural and not jurisdictional. Therefore, ‘where there is improper removal, the pertinent question is whether the removed action could have been filed originally in federal court; and, if it could have been and the action has proceeded to judgment on the merits in federal court, that judgment will not be disturbed.'”   There is complete diversity, so the case could have been brought originally in federal district court. Furthermore, Lamb did not object to removal in the district court, and the case has proceeded to a judgment on the merits. Lamb v. Ashford Place Apartments LLC, No. 18-30469 (Jan. 30, 2019) (citations omitted, emphasis in original).

Mauldin sued Gonzalez, Hernandez, and Allstate Insurance. The district court denied Mauldin’s motion to remand as to Gonzalez and entered a final judgment in Gonzalez’s favor. Two weeks later, it transferred the remaining claims to Oklahoma under § 1404(a). As to Gonzalez, it found that the remand ruling was appealable because it was combined with a final judgment – an exception to the general rule that denials of motions to remand are interlocutory and not appealable. And it found that the Fifth Circuit retained jurisdiction over the appeal about Gonzalez notwithstanding the transfer – an important if rarely-encountered point about the interplay among the jurisdiction of the federal circuits. Mauldin v. Allstate Ins. Co., No. 17-11274 (Dec. 10, 2018, unpublished).

The district court found improper joinder and thus denied a motion to remand; the Fifth Circuit reversed in Cumpian v. Alcoa World Alumina LLC. The Court dissected the sometimes-confusing standard for determining whether a party’s joinder should be disregarded in determining the basis for a removal based on diversity jurisdiction, specifically concluding: “On a question of improper joinder at the early stage of a case, it is error to use the no-evidence summary judgment standard because the determination is being made before discovery has been allowed. . . . the evidence that is dispositive . . . are the facts that could be easily disproved if not true.” No. 17-40825 (Dec. 6, 2018)

In Porter v. Times Group, the plaintiff sued People Magazine and two journalists for defamation. The case was removed, and then remanded – one of the individual defendants died and the district court allowed joinder of the Louisiana citizen appointed as that defendant’s “succession representative” under Louisiana law, which destroyed diversity. The Fifth Circuit would not ordinarily have jurisdiction over a remand order because of 28 USC § 1447(d) (“An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise . . . .”) People Magazine argued that the joinder decision was reviewable as a collateral order, and the Fifth Circuit disagreed, finding that it did not establish the third and fourth requirements for appeal of such an order (that the order be “effectively unreviewable on an appeal from final judgment” and “too important to be denied review”).

A pro se complaint in a mortgage servicing dispute stated a federal claim, and thus allowed removal, when “[I]n the ‘Facts’ section . . . [Plaintiffs’] wrote: ’17. In April, 2009 BANK OF AMERICA CORPORATION claimed to be the new mortgage servicer and payments were to be made to them. BANK OF AMERICA CORPORATION was not an “original party” to the “original negotiable instrument” which the “borrowers” negotiated. BANK OF AMERICA CORPORATION was a 3rd party debt collector, pretending to be the Lender. BANK OF AMERICA CORPORATION failed to adhere to the Fair Debt Collection Practice Act, as all 3rd party debt collectors are required to do.'”  The Fifth Circuit observed: “[P]laintiffs may state a claim for relief by pleading facts that support the claim. The Smiths did just that—and cited the legal theory underlying their claim. The Smiths’ explicit reference to the ‘Fair Debt Collection Practice[s] Act’ (and its position in the U.S. Code), coupled with a description of conduct that could subject the Defendants to liability under the Act, solidifies our conclusion” about federal question jurisdiction. Smith v. Barrett Daffin Frappier Turner & Engel LLP, No. 16-51010  (June 12, 2018, unpublished).

In Alice in Wonderland, the Mad Hatter remarked: “If I had a world of my own . . . Nothing would be what it is, because everything would be what it isn’t. And contrary wise, what is, it wouldn’t be. And what it wouldn’t be, it would. You see?” In that spirit,  under 28 U.S.C. §  1447(d), a remand order is unreviewable on appeal if issued under one of the grounds in § 1447(c) – either a lack of subject matter jurisdiction, or the plaintiff moves ” to remand the case on the basis of any defect other than lack of subject matter jurisdiction . . .  within 30 days after the filing of the notice of removal.” In Exxon Mobil Corp. v. Starr Indemnity, the plaintiff argued that the district court erred by remanding based on subject matter jurisdiction, when the issue before it was properly characterized as a late-raised procedural matter. The Fifth Circuit agreed, but held: “[Defendants],  however, cannot evade the reviewability bar of § 1447(d) by establishing this defect. . . . . Indeed, each passage from the district court’s order to which the Insurers point as a clear and affirmative statement of a non-§ 1447(c) ground in fact expressly invokes that court’s perceived lack of subject matter jurisdiction. This belief, however erroneous, ‘sufficiently cloaks the remand order in the § 1447(c) absolute immunity from review’ and ends the inquiry.” No. 16-20821 (March 26, 2018, unpublished).

In 16 Front Street v. Mississippi Silicon, the Fifth Circuit addressed a fundamental issue about federal question subject matter jurisdiction, with surprisingly little guidance in the current case law. A plaintiff sued in federal court under the Clean Air Act; in response to the trial judge’s concerns  about subject matter jurisdiction, the plaintiff amended to add a new defendant and invoke another provision of that Act. The Fifth Circuit concluded that while this amendment could be problematic in a removed case under the “time-of-filing” rule, it did not present that problem when the case was initially filed in federal court and did not implicate the removal statute. The Court’s analysis involves two important Supreme Court – Mollan v. Torrance, 22 U.S. 537 (1824), in which Chief Justice Marshall first stated the “time-of-filing” rule (albeit, in a diversity case), and Caterpillar, Inc. v. Lewis, 519 U.S. 61 (19960, a recent treatment of a “cure” of a problem with subject matter jurisdiction. No. 16-60050 (March 30, 2018).

In Legendre v. Huntington Ingalls, the Fifth Circuit found no “causal nexus” to support removal jurisdiction under the “federal officer” statute. The plaintiff alleged exposure to asbestos fibers brought home on her father’s clothing; he worked in a shipyard in the 1940s building tugs for the U.S. government. Under pre-2011 Fifth Circuit authority, that claim had a problem because the shipyard’s safety practices were not restricted by the government. The statute, however, was amended in 2011 “to allow the removal of a state suit ‘for OR RELATING TO any act under color of such [federa] office.'” Acknowledging that “significant argument,” and noting that other circuits have read the 2011 amendments to eliminate the “causal nexus” requirement, the Court affirmed remand – while plainly inviting a petition for en banc consideration of the issue.No. 17-30371 (March 16, 2018).

Plaintiffs, represented by the same counsel, sought to consolidate two actions in state court; the defendant removed under CAFA’s “mass action” provision. A Fifth Circuit panel majority affirmed the denial of Plaintiff’s motion to remand, rejecting arguments about timeliness, retroactivity, and CAFA’s text. The majority reasoned that “it is the mass action, not claims against particular defendants, that is removable,” and that the plaintiff’s motion satisfied the CAFA requirement of “100 or more persons . . . proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact.” A dissent would remand based on CAFA’s “not-retroactivity” language, as one of the state cases was filed before CAFA took effect. Lester v. Exxon Mobil Corp., No. 14-31383 (Jan. 9, 2018).

While both sides made cogent policy arguments, plain meaning triumphed in Morgan v. Huntington Ingalls, and the Fifth Circuit held that the thirty-day removal deadline begins to run from receipt of a deposition transcript that may create a basis for removal, rather than the oral testimony itself.  “[P]aper” is defined as “[a] written or printed document or instrument.” “[R]eceipt” is defined as the “[a]ct of receiving; also, the fact of receiving or being received; that which is received.” “Copy” is defined as “[t]he transcript or double of an original writing.” “‘Ascertain’ means ‘to make certain, exact, or precise’ or ‘to find out or learn with certainty.’” No. 17-30523 (Jan. 11, 2018).

In this not-unusual situation, the Fifth Circuit found that a removal based on diversity was timely: In response to special exceptions, [the Strongs] filed an amended petition stating the maximum amount of damages in controversy by specifying that the Strongs sought “monetary relief of $100,000 or less.” Cf. Tex.  R. Civ. P. 169 (requiring the “$100,000 or less” language to allow for expedited actions). The Strongs also sought injunctive relief ordering both a loan modification to prevent further TDCA violation and “the arrearage . . . to be deleted and/or capitalized . . . so that the loan is brought current.” Green Tree did not remove to federal district court until after it received a response to its request for disclosure in which the Strongs explicitly indicated that they were seeking damages in excess of $75,000.” The Court rejected the Strong’s argument that the petition implictly placed the entire property value at issue. Strong v. Green Tree Servicing LLC, No. 16-11346 (Dec. 11, 2017) (unpublished).

Griffith sued his former employer under state law, referring in the pleading to a charge he filed with the EEOC and its issuance of a right-to-sue notice. Alcon removed based on federal question jurisdiction; the district court accepted the removal and granted summary judgment to the employer. The Fifth Circuit reversed: “Although Griffith indeed referenced his dealings with the EEOC in his complaint, he did not mention Title VII or any similar federal statute. As such, the district court lacked subject-matter jurisdiciton and was not entitled to render judgment in Alcon’s favor.” Griffith v. Alcon Research, No. 17-20290 (Dec. 6, 2017, unpublished).

Johnson v. Real Estate Mortgage Network, Inc. reminds of a technical but important point about the review of remand orders under CAFA in the Fifth Circuit: “Facing our CAFA deadline, we continue to apply [prior preceden’s] suggestion that our jurisdiction to review a CAFA remand order stops at the edge of the CAFA portion of the order,” and does not extend to “every issue decided in the remand order, including federal question jurisdiction.” No. 17-30768 (Nov. 30, 2017).

A business named “Renegade Swish” sued Wright in Texas state court for breach of an employment agreement. Wright counterclaimed for violations of the FLSA. For reasons not explained in the opinion, Swish then nonsuited its contract claims, moved to realign the parties so it would be the new defendant, and removed the case to federal court based on federal jurisdiction. The Fifth Circuit held that Swish lacked an objectively reasonable basis for removal, citing both precedent (primarily, Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U.S. 826 (2002)), and the text of 28 U.S.C. § 1441(a), which refers to removal by “defendants.” The Court did not credit Swish’s reliance on the pending motion to realign, declining to “invite federal courts to dream of counterfactuals when actual litigation has defined the parties’ controversy,” and rejected the cases cited by Swish as not presenting a meaningful conflict: “As compared to [a controlling case]m where the disagreement among the courts was ‘hotly contested,’ any disagreement here is tepid and lopsided.” Renegade Swish v. Wright, No. 16-11152 (May 22, 2017).

The case of Decatur Hospital Authority v. Aetna Health Inc. involved a remand order, granted on the basis of timelieness (a ruling not ordinarily appealable because of 28 USC § 1447(c)), but where the notice of removal referred to the federal officer removal statute (made reviewable by the less-well-known § 1447(d)). The Fifth Circuit concluded that its review involved “[n]ot particular reasons for an order, but the order itself,” and went to affirm the remand and a related fee award, finding that the defendant did not learn new facts from an interrogatory answer that were not also contained in the original petition. No. 16-10313 (April 18, 2017).

Foster sued about a foreclosure; the state court granted a TRO (so no foreclosure occurred); and the mortgage servicer defendants removed and obtained summary judgment. Foster challenged the denial of her motion to remand, arguing that she did not improperly join the substitute trustee appointed to conduct the foreclosure sale. The Fifth Circuit affirmed: “[B]reach of a trustee’s duty does not constitute an independent tort; rather, it yields a cause of action for wrongful foreclosure. A claim of wrongful foreclosure cannot succeed, however, when no foreclosure has occurred.” Foster v. Deutsche Bank, No. 16-11045 (Feb. 8, 2017).

Defendants removed, the plaintiff moved to remand, and the the district court granted the motion. It found a waiver of the right to remove, noting this contract provision: “The Parties hereto hereby irrevocably and unconditionally consent to the sole and exclusive jurisdiction of the courts of Harris County in the State of Texas for any action, suit or proceeding arising out of or relating to this Agreement or the Proposed Transaction . . . .” The defendants claimed ambiguity (which would make the waiver no longer be “clear and unambiguous,” and thus not satisfy the demanding standard in this area) from (1) the definition of “Proposed Transaction,” (2) the definitions of the relevant parties, and the use of “Proposed Transaction” in the above part of the relevant clause, but not in another, similar provision later in it. The Fifth Circuit rejected these arguments and affirmed, but also affirmed the denial of any award of attorneys’ fees. Grand View PV Solar Two, LLC v. Helix Elec., Inc., No. 16-20384 (Feb. 1, 2017). The opinion is a good summary of the law on this topic, which has not been addressed in detail recently.

The plaintiff in GlobeRanger Corp. v. Software AG won a $15 million judgment for misappropriation of trade secrets. The Fifth Circuit affirmed, holding:

1. After a thorough review of Circuit precedent – not all entirely consistent – “that GlobeRanger’s trade secret misappropriation claim requires establishing an additional element than what is required to make out a copyright violation: that the protected information was taken via improper means or breach of a confidential relationship. Because the state tort provides substantially different protection than copyright law, it is not preempted.”
2. Recognizing the “jurisdictional Catch-22” created by that ruling, and referring back to an earlier panel opinion from the time of the case’s removal: “As the complaint [then] alleged only conversion of intangible property for which there is equivalency between the rights protected under that state tort and federal copyright law, complete preemption converted the conversion claim into one brought under the Copyright Act that supported federal question jurisdiction at the time of removal and supplemental jurisdiction after it was dismissed.”
3. Found that GlobeRanger had offered sufficient evidence of: (1) what specifically constituted its claimed trade secrets; (2) whether Software AG acquired trade secrets improperly or with notice of impropriety, particularly in light of federal contracting regulations; and (3) whether Software AG “used” any trade secret.

The opinion concluded with an unfortunately apt observation about the business litigation that is the focus of this blog: “This case demonstrates the unfortunate complexity of much of modern civil litigation. A trial involving a single cause of action—misappropriation of trade secrets (plus a derivate conspiracy claim)—has resulted in an appeal raising numerous issues that span the lifecycle of the lawsuit: jurisdiction; preemption; federal contracting regulations; expert testimony on damages; and jury instructions.

Jefferson v. Certain Underwriters at Lloyds visited the intricate rules surrounding appellate review of remand orders. Here: “Dismissals of non-diverse parties allow for the exercise of diversity jurisdiction, and the propriety of remand in a properly removed case is judged on the basis of the district court’s jurisdiction over the claims remaining at the time of remand, not the time of removal.” Accordingly, “the district court had no discretion to remand this case if the remaining parties were diverse at the time of removal.” No. 15-30211 (Aug. 15, 2016, unpublished).

In Wright v. ANR Pipeline, the Fifth Circuit concluded that the plaintiff had not stated a plausible claim against a (nondiverse) employee of a pipeline company, and affirmed the remand of the matter to state court. It changed the disposition of the merits, however, reminding that because the improper joinder “inquiry does not concern the merits, where the court determines that defendant has been improperly joined and should be dismissed, that dismissal must be without prejudice.” No. 15-30741 (June 14, 2016, unpublished).

The plaintiff in Watson v. City of Allen sued, in Texas state court, several Texas cities about the operation of their “red light camera” programs.No. 15-10732 (May 5, 2016). The cities removed based on his RICO claim and CAFA. Plaintiff then dropped the RICO claim and sought remand based on CAFA’s “local controversy” and “home state” exceptions. The district court kept the case, finding it untimely as to CAFA, finding supplemental jurisdiction over the remaining state-law claims, and dismissing many claims for lack of standing. The Fifth Circuit reversed, concluding:

1. The 30-day deadline in 28 U.S.C. § 1447(c) does not apply to CAFA mandatory abstention provisions, since it “does not deprive federal courts of subject matter jurisdiction, but rather, acts as a limitation upon the exercise of jurisdiction granted by CAFA.”
2. The CAFA motion was filed within a reasonable time of removal, when “[a]ll indications are that [Plaintiff] acted diligently to gather evidence,” and because “fifty-two days is simply not a very long time.”
3. The “home state” exception applied because “[t]his suit’s primary thrust is an attempt to declare unconstitutional red light camera scheme,” meaning that the State of Texas and its municipalities were the “primary defendants,” and not the companies hired to carry out the program.
4. The district court should have declined to exercise supplemental jurisdiction, since “Texas courts have a strong interest” in the remaining issues and the plaintiff’s “motion to amend . . . to delete the federal claims is not a particularly egregious form of forum manipulation, if it is manipulation at all.”

Alleging that a toe joint implant did not work properly, Flagg sued “Manufacturing Defendants” (who built the implant) and “Medical Defendants” (who surgically installed it in Flagg’s foot.)  The Manufacturing Defendants were diverse from Flagg,  a Louisiana citizen, while the Medical Defendants were not.

Affirming the district court while reversing the panel, an 11-4 en banc opinion holds “the plaintiff had improperly joined the non-diverse defendants because [he] has not exhausted his claims against those parties as required by statute.”  That Louisiana statute requires review by a “medical review panel” before suit is filed against a health care provider; the Fifth Circuit concluded that pursuant to it, “there is no doubt that the state court would have been required to dismiss the Medical Defendants from the case,” as no such review had occurred at the time of removal.  A vigorous dissent raised questions about the Court’s standard for analyzing claims of improper joinder, as well as whether this kind of state statute (“a non-adjudicative, non-comprehensive, waivable process since concluded in this case”) was a proper foundation for an improper joinder claim.  Flagg v. Stryker Corp., No. 14-31169 (March 24, 2016) (en banc).

Collins challenged bankruptcy court jurisdiction over “illusory indemnity and contribution claims” that he alleged had no conceivable effect on the bankruptcy estate due to their lack of merit.  The Fifth Circuit rejected his argument: “Both the Supreme Court and this court have gravitated away from conflating jurisdiction and merits, and Collins’s proposed standard results in exactly that conflation.”  The Court also noted that the claims, based on a principal’s alleged commitment to indemnify its agent, were not “wholly insubstantial and frivolous” on their merits.  Collins v. Sidharthan, No. 14-41226 (Dec. 15, 2015).

The defendants in Bartel v. Alcoa Steamship Co. sought to remove three Jones Act cases to federal court under the Federal Officer Removal Statute, 28 U.S.C. § 1442(a)(1).  While each of the cases involved a United States Naval Ship (one owned by the Navy but operated by civil contractors), “no evidence show[ed] that the government actually exercised continuing oversight over operations aboard ship,” meaning that “the Federal Officer Defendants operated the vessels  in a largely independent fashion and, at a minimum, were free to adopt the safety measures the plaintiffs now allege would have prevented their injuries.”  Accordingly, the Fifth Circuit affirmed the remand of the cases. No. 15-30004 (Oct. 19, 2015).  [As a procedural note, those defendants had already been dismissed, but their dismissal did not affect the analysis of whether removal was proper at the time it occurred.]