A Refresher on Federal
Subject-Matter Jurisdiction or,
How to Keep Your Case Out Of Federal Court
Choice of forum can mean joyous victory or depressing defeat. A wrong selection and it’s enemy territory: a jurisdiction where the prevailing law, available remedies, courtroom procedures, and juror attitudes are inimical to your client. A correct choice and, as Don Corleone once said, “They will fear you.”
—Gita F. Rothschild, Forum Shopping, 24 Litig. 40 (1998)
One of the most important decisions a trial lawyer has to make in every single case that gets filed is selecting the forum and venue (often among several possible options) in which a case is to be heard. Despite defendants’ indignant cries of “forum shopping!,” courts and commentators alike have long recognized that maintaining control over the forum by being strategic about what claims to pursue and who to pursue them against is a legitimate tactical decision that plaintiffs and their lawyers must make.1 But if that decision is made without an understanding of the nuances of federal jurisdiction and removal practices, the plaintiff might lose her ability to control the forum for her case to be heard. Whether you want to stay in or out of federal court, it is critical that trial lawyers understand the rules governing federal subject-matter jurisdiction.
Before addressing how you can keep your case out of federal court, it makes sense to briefly review the two primary ways that a case can properly end up in federal court. First, the federal district courts have original jurisdiction over all actions “arising under the Constitution, laws, or treaties of the United States.”2 There is no amount of careful drafting that can allow a plaintiff to defeat removal of a claim pursuant to the Constitution or any federal statute.3 Second, a case, even one arising purely under state law, can enter federal court by way of diversity jurisdiction, which extends to any civil action in which the amount in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between citizens of different states.4 With these very general principles in mind, here are five more specific aspects of jurisdictional jurisprudence that are often overlooked by lawyers on both sides of the “v.”
1. Federal-Question Jurisdiction Cannot Be Premised on a Defendant’s Defenses or Counterclaims
Federal-question jurisdiction exists only when a federal question is “presented on the face of the plaintiff’s properly pleaded complaint.”5 A defense or counterclaim arising under federal law, even if anticipated by the plaintiff and preemptively addressed in the complaint, and even if the counterclaim is compulsory, is insufficient to create federal-question jurisdiction.6 The plaintiff is always “the master of the claim.”7 But note that a plaintiff cannot defeat removal by “artful pleading” that simply omits reference to necessary federal questions; when that occurs, the “complete preemption” doctrine – which is distinct from ordinary preemption – will still allow removal where federal law completely preempts a plaintiff’s state-law claim.8
2. Federal-Question Jurisdiction Must Be Premised on a Federal Question That Is “Substantial”
A second exception or corollary to the well-pleaded complaint rule involves the requirement that a federal question be “substantial.” “[Federal courts are without power to entertain claims otherwise within their jurisdiction” if those federal claims are “absolutely devoid of merit,” “wholly insubstantial,” “obviously frivolous,” “plainly unsubstantial,” or “no longer open to discussion.” Hagans v. Lavine, 415 U.S. 528, 536-37 (1974). This doctrine can be helpful if a defendant is removing a case that involves some question of federal law, but those questions are insubstantial relative to the other issues in the case.9
3. Know the Rules Governing Parties’ Citizenship for Diversity Purposes
No single body of law results in more cases being remanded to state court than that which governs the determination of parties’ citizenship for diversity purposes. Recall that for diversity to exist, no plaintiff can be a citizen of the same state as any defendant at the time the complaint is filed.10 A natural person is a citizen of the state in which she or he is domiciled, meaning the place where they physically reside and where they have an intent to remain.11 A corporation, in turn, is a citizen of the state where it is incorporated and the state where it has its principal place of business.12
Significantly, the rules that apply to corporations do not apply to unincorporated associations, such as limited liability companies and partnerships. The citizenship of an unincorporated entity depends on the citizenship of that entity’s members.13 Thus, a limited liability company is deemed to be a citizen of any state in which any of its members is a citizen14; a limited partnership is a citizen of any state in which any of its partners (general or limited) is a citizen15; an unincorporated union is a citizen of any state in which any of the workers affiliated with it are citizens16; and so on. When an unincorporated association has another unincorporated association as a member, you must drill down and identify each member of the member association, in what can at times feel like a game of nesting Russian Matryoshka dolls.17 A limited liability company that is unwilling to disclose who its members are and where they are citizens, therefore, will rarely be able to successfully invoke a federal court’s diversity jurisdiction.18
4. A Georgia Defendant Cannot Rely on Diversity to Remove a Case to Federal Court
Another frequently overlooked aspect of removal proceedings is contained in the text of the removal statute itself. Under 28 U.S.C. § 1441(b)(2), “[a] civil action otherwise removable solely on the basis of [diversity jurisdiction] 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.” This so-called “forum-defendant rule” is a significant restraint on the ability of defendants to remove a case to federal court.
Lately, some defendants have attempted to circumvent this rule using a tactic known as “snap” removal, a procedure that has become increasingly popular as it has become easier for defendants to monitor electronic dockets.19 “Forum defendants looking to remove point to the ‘properly joined and served’ language in the statute and argue that a forum defendant can remove on the basis of diversity if removed before service of the complaint.”20 The Eleventh Circuit has not ruled on the permissibility of this practice, but it has frequently been criticized by district courts as inappropriate.21
5. All Doubts Must Be Resolved in Favor of Remand
As a fifth and final point, the fact that federal courts are courts of limited jurisdiction works to the benefit of every plaintiff fighting removal. The burden is always on the party asserting the existence of federal jurisdiction to prove that it exists.22 Because of the “significant federalism concerns” involved when a case is removed from state court to federal court, “all doubts about jurisdiction should be resolved in favor of remand to state court.”23
As trial lawyers, we cannot always prevent removal of our cases, but often there are decisions that we and our clients can make about what claims to pursue, what parties to name as defendants, and what court to initially file in that can make it less likely that a case will get removed. And once a case is removed, we must not blindly accept that the defendant’s assertion that federal subject-matter jurisdiction exists is correct. Hopefully the practice pointers in this article prove helpful in your fight to maintain control over the forum in which your case will be resolved. ●
ABOUT THE AUTHOR
Jenn Coalson is a partner at Parks, Chesin & Walbert, P.C. in Atlanta and a former law clerk to the Honorable Timothy C. Batten, Sr., United States District Judge for the Northern District of Georgia. She represents clients throughout the State of Georgia in cases involving women’s and civil rights, employment law, complex litigation, and other issues that frequently are litigated in federal court. Jenn can be contacted at 404-873-8000 or email@example.com.
See, e.g., Baddie v. Berkeley Farms, Inc., 64 F.3d 487, 490-91 (9th Cir. 1995); Goad v. Celotex Corp., 831 F.2d 508, 512 n.12 (4th Cir. 1987); Georgene M. Vairo, The Last Frontier Forward, 40 Loyola L.A. L. Rev. 1247, 1248 (2007) (“Lawyers should not be chastised and punished unless they bring frivolous claims, or the forum they chose plainly lacks jurisdiction over the case. Rather, they should be applauded for engaging in the appropriate and necessary practice of forum selection. Forum shopping is bad and evil only if we use the phrase to mean the bringing of frivolous claims in an improper forum.”).
28 U.S.C. § 1331. If federal-question jurisdiction exists over one or more claims in a case, the court can then exercise supplemental jurisdiction over any non-federal claims that “form part of the same case or controversy” under Article III of the Constitution. 28 U.S.C. § 1367.
Similarly, even if a plaintiff’s claim purports to arise under state law, it may be deemed to “arise under” federal law if it implicates substantial questions of federal law, i.e., “if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.” Gunn v. Minton, 568 U.S. 251, 258 (2013).
See 28 U.S.C. § 1332.
Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987).
See id. at 393; Holmes Grp., Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 831 (2002).
Id. at 392.
Rivet v. Regions Bank of La., 522 U.S. 470, 475 (1998) (internal punctuation and citation omitted). Complete preemption is a very narrow doctrine that has only been found in limited circumstances. See 13D Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 3566 (3d ed. 2019).
See, e.g., Adventure Outdoors, Inc. v. Bloomberg, 552 F.3d 1290, (11th Cir. 2008); see also Oak Park Trust & Savings Bank, 209 F.3d 648 (7th Cir. 2000) (court lacked jurisdiction over a RICO counterclaim that was “so feeble” and “so transparent an attempt to move a state-law dispute to federal court” that it could not be said to “arise under federal law at all”).
Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir. 1998).
Molinos Valle del Cibao, C. por A. v. Lama, 633 F.3d 1330, 1341 (11th Cir. 2011); McCormick v. Aderholt, 293 F.3d 1254, 1257 (11th Cir. 2002). Allegations that an individual party is a “resident” of a particular state is not sufficient. Taylor v. Appleton, 30 F.3d 1365, 1367 (11th Cir. 1994).
28 U.S.C. § 1332(c); MacGinnitie v. Hobbs Grp., LLC, 420 F.3d 1234, 1239 (11th Cir. 2005).
Americold Realty Trust v. Conagra Foods, Inc., 136 S. Ct. 1012, 1015 (2016).
Rolling Greens MHP, L.P. v. Comcast SCH Holdings, L.L.C., 374 F.3d 1020, 1021-22 (11th Cir. 2004).
Carden v. Arkoma Assocs., 494 U.S. 185, 195-96 (1990).
Americold Realty Trust, 136 S. Ct. at 1015.
See, e.g., Empire Petrol. Partners, LLC v. Patel, No. 1:13-cv-3497-WSD, 2013 WL 6196549 (N.D. Ga. Nov. 27, 2013) (finding no subject-matter jurisdiction where the plaintiff failed to identify the members of LLCs and an LLP that were themselves members of the plaintiff LLC).
See Rolling Greens MHP, 374 F.3d at 1022; see also D.B. Zwirn Special Opportunities Fund, L.P. v. Mehrotra, 661 F.3d 124, 126 (1st Cir. 2011) (“negative” allegations about citizenship – i.e., allegations that a party is “not” a citizen of a state – are insufficient to establish diversity).
See, e.g., Delaughder v. Colonial Pipeline Co., 360 F. Supp. 3d 1372, 1377-78 (N.D. Ga. 2018).
Id. at 1377.
Id. (remanding case); Timbercreek Asset Mgmt., Inc. v. De Guardiola, No. 9:19-cv-80062, 2019 WL 947279, at *4 (S.D. Fla. Feb. 27, 2019) (remanding case); Gentile v. Biogen Idec, Inc., 934 F. Supp. 2d 313, 317 (D. Mass. 2013) (analyzing the treatment of snap removal by courts throughout the country and collecting cases).
Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994); Word v. U.S. Commodity Futures Trading Comm’n, 924 F.3d 1363, 1366–67 (11th Cir. 2019).
See Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 411 (11th Cir. 1999).