Amendments to Federal Jurisdictional Statutes Significantly Alter Federal Rules on Removal, Jurisdiction and Venue

The Federal Courts Jurisdiction and Venue Clarification Act of 2011, which significantly amends the federal statutes governing removal, jurisdiction, and venue, takes effect today, January 6, 2012.¹ Among the changes² are the:

• Resolution of a longstanding circuit split regarding the period during which defendants in multiple-defendant cases may remove the action from state to federal court.
• Amendment of the rules and procedures surrounding the amount in controversy requirement to alleviate several problems faced by defendants seeking to remove when the amount in controversy is uncertain.
• Amendment of the removal statute to prohibit federal district courts from hearing unrelated state law claims joined with removable federal claims.

Summary of Several Notable Changes

Title I of the Act amends the federal removal³ and diversity jurisdiction⁴ statutes. Of the numerous substantive changes it contains, three are particularly important. First, the Act resolves a longstanding circuit split regarding the period during which defendants in multiple-defendant cases may remove the action from state to federal court. Previously, the removal statute gave “the defendant” 30 days from receipt of the complaint to remove, but did not address cases with multiple defendants served at different times. Courts disagreed on how to interpret the statute in these cases. For example, some held that the first-served defendant and all then-served defendants must join in the notice of removal within 30 days after service upon the first-served defendant.⁵ Others concluded that the 30-day period runs from the date of service on the last-served defendant and permitted earlier-served defendants who failed to act during their own 30-day period to join in the last-served defendant’s timely removal.⁶ The Act settles this issue by amending the removal statute to explicitly grant each defendant 30 days from the time they are served to initiate removal and to permit earlier-served defendants to consent to and join in removal by later-served defendants.⁷

Second, the Act amends the rules and procedures surrounding the amount in controversy requirement to alleviate several problems faced by defendants seeking to remove when the amount in controversy is uncertain. For example, a defendant may now assert the amount in controversy in the notice of removal in three instances: (i) where the plaintiff seeks nonmonetary relief, (ii) where state practice prohibits demands for a specific sum, or (iii) where state practice permits recovery of damages in excess of the amount demanded.⁸ The Act also clarifies that the defendant’s discovery in state court may be used to help determine the amount in controversy — and, where such discovery reveals that the amount in controversy is sufficient, it now triggers another 30-day period in which the defendant may remove the action.⁹

Third, the Act amends the removal statute to prohibit federal district courts from hearing unrelated state law claims joined with removable federal claims. Previously, when a defendant removed a case involving a “separate and independent” federal question claim joined with a non-removable state law claim, the statute authorized the federal district court to either retain the whole case or remand all matters in which state law claims “predominated.” In response to constitutional concerns raised by this provision¹⁰, the Act now mandates that the district court sever all claims not within its original or supplemental jurisdiction and remand them to state court.¹¹

Title II of the Act amends the federal venue statutes.¹² Among several significant changes, the Act removes a restriction on change of venue. Previously, a district court could only transfer an action to a venue “where it might have been brought,” which the Supreme Court interpreted to mean where venue would have originally been proper.¹³ Now, a district court may transfer an action “to any district or division to which all parties have consented.”¹⁴

The Act also resolves a circuit split regarding the interpretation of the rule that, in a suit against a natural person, venue may lie where the defendant “resides.”¹⁵ A minority of circuit courts interpreted “resides” for the purposes of venue as potentially broader than the concept of domicile. For example, these circuits suggested that the term “resides” might include a jurisdiction in which a party has a summer home, while the concept of domicile is generally defined as a person has his “true, fixed and permanent home.”¹⁶ The Act rejects this interpretation and clarifies that a person “shall be deemed to reside in the judicial district in which that person is domiciled,” thereby narrowing the scope of venue under 28 U.S.C. Sec. 1391(b)(1) in some jurisdictions.¹⁷