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Friday, December 02, 2011

UPDATED: Jurisdiction and Venue Clarification Act

Update: Here is the enrolled bill that was sent to the President.

One More Update: President Obama signed the bill into law on Wednesday.


After the jump is a post from Arthur Hellman at Pittsburgh, discussion the Jurisdiction and Venue Clarification Act, which just passed Congress and is on its way to the President. The law makes significant changes in a number of confusing areas of jurisdiction and venue, including diversity cases involving resident aliens, the 30-day removal clock in cases involving multiple defendants, and all of venue.

My civ pro class is going to change once again. But, as I said in a comment on the earlier post, for once I am glad civ pro is a spring course here.

Shortly after 7:30 p.m. yesterday (Nov. 30), the Senate gave final passage to H.R. 394, the Federal Courts Jurisdiction and Venue Clarification Act of 2011 (JVCA). The bill, which President Obama is expected to sign, embodies the most far-reaching package of revisions to the Judicial Code since the Judicial Improvements Act of 1990. The amendments deal primarily with removal and venue. Here are some highlights:
-- The Act revises the notoriously troublesome “separate and independent” claim provision of § 1441(c), dealing with the removal of civil actions that include both federal and unrelated state claims.  To protect the defendant’s right to remove the federal claims – and to avoid constitutional problems that some courts have perceived – the new provision requires severance and remand of claims not within the original or supplemental jurisdiction of the district court.
-- The Act codifies the judicially created “rule of unanimity” for removal in cases involving multiple defendants; it then gives each defendant 30 days in which to initiate removal, thus resolving a longstanding conflict in the lower courts over the deadline for removal when different defendants are served at different times.
-- It resolves several issues relating to the determination of the amount in controversy when the defendant removes a civil action based on diversity.
-- It adopts a carefully crafted “bad faith” exception to the statutory provision prohibiting removal of a diversity case more than one year after filing.
-- It completely rewrites Chapter 87 on venue, finally abolishing the hairsplitting distinction between backup venue in diversity and federal-question cases and also doing away with § 1392’s separate provision dealing with “local” as opposed to “transitory” actions.  The JVCA further abrogates the Supreme Court decision in Hoffman v. Blaski, 363 U.S. 335 (1960), by authorizing transfer of venue to a district where the action could not have been brought initially, as long as all parties consent.
-- In the single provision affecting original jurisdiction, the Act narrows the resident-alien proviso now located at the end of § 1332(a). The purpose is to avoid the interpretative and even constitutional problems generated by the current language, which was added by a 1988 amendment to the Judicial Code.
The Act’s provisions will apply to newly filed actions starting 30 days after enactment.
The JVCA has a long and somewhat convoluted history. Fortunately, I need not recount that history here, because it is nicely summarized on pp. 2-3 of the House Judiciary Committee Report (linked below).
With unusual candor, the Report acknowledges that the purpose of the vetting process in the latter stages of the bill’s evolution was “to identify and delete those provisions that were considered controversial by prominent legal experts and advocacy groups.” I particularly regret the deletion of two provisions that would have allowed a plaintiff to avoid removal based on diversity by filing a “declaration” (i.e. stipulation) reducing the amount in controversy below the minimum specified in § 1332(a). One of the provisions would have applied in state courts to forestall removal; the other would have operated in federal courts to encourage remand. The latter would have abrogated decisions like Rogers v. Wal-Mart Stores, Inc., 230 F.3d 868 (6th Cir. 2000). Perhaps these provisions will resurface in future jurisdictional legislation.
Final passage of H.R. 394 was delayed by the need to resolve a conflict with the “Holmes Group fix” enacted as part of the Leahy-Smith America Invents Act (AIA) that President Obama signed in September. The AIA added a new section 1454 to Chapter 89 authorizing removal of state-court actions involving patent and copyright claims. H.R. 394 also added a new section 1454, this one specifying the procedure for removing criminal cases. (The contents of the new section are currently included in section 1446.) A Senate amendment to H.R. 394 changed the number of the criminal removal section to 1455.
The JVCA also intersects with another piece of jurisdictional legislation passed by Congress this fall. That is H.R. 368, the Removal Clarification Act of 2011, which was signed into law on Nov. 9 and became Pub. L. No. 112-51. The Act’s title is somewhat misleading; it deals only with removal of actions against federal officers. A final amendment to H.R. 394 corrected a cross-reference in a new subsection of section 1446 added by Pub. L. 112-51.
I wish to thank Professor Tom Rowe for help in preparing this summary of this extremely important legislation. Tom (and, of course, others) may have more to say about the changes in jurisdiction and venue law that will take effect just as we’ll be starting to teach our second-semester courses in Federal Courts and Civil Procedure.
 House Report on H.R. 394 can be found here.

Posted by Howard Wasserman on December 2, 2011 at 09:46 AM | Permalink


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There is an interesting change that nobody seems to be discussing, unless I've missed it.

Present law calls for removal to be effected within 30 days of receipt "through service or otherwise" of the complaint by the defendant. This has been interpreted to mean that service upon a statutory agent, such as the secretary of state, does not start the removal clock running.

The amended law requires the filing within "30 days after receipt by or service on that defendant". "Receipt" and "service" are distinguished, meaning that service does not have to mean receipt. Service thus on a statutory agent, which is proper service but which does not result in receipt by the defendant, would appear, under this revision, to start the clock running. As established case law recognizes, such a result is unreasonable.

Posted by: Adam | Dec 29, 2011 2:28:01 PM

I'm particularly interested in the "issues relating to the determination of the amount in controversy when the defendant removes a civil action based on diversity." The big problem is how to determine the amount in controversy when a case has been removed, and the state-court complaint doesn't name a dollar figure, because one is either not-required or not-permitted to do so under state law. (The courts have been tied in a knot about this. See McPhail v. Deere, 529 F.3d 947 (10th Cir. 2008) and Meridian v. Sadowski, 441 F.3d 536 (7th Cir. 2006) for discussion.)

I may well be missing something or perhaps some illuminating elements of the legislative history, but I'm not sure whether the "clarification" will turn out to work. For example, the bill adopts a "preponderance of the evidence" standard without resolving the confusion over what that means (discussed in McPhail), or (more importantly) without addressing the problem that there frequently won't *be* any "evidence" beyond the complaint so early in the proceedings.

The bill also sets a rule for 1, when the state-court complaint contains a "sum demanded," or 2, "the State practice either does not permit demand for a specific sum or permits recovery of damages in excess of the amount demanded." But it doesn't seem to address the case of a state court that does "permit" but does not *require* that a sum be demanded-- if a complaint in such a state lacks a "sum demanded," then neither 1 nor 2 applies. In such a case should courts fall back on their pre-JVCA practice, or should they do the same thing they would do if sum-naming were forbidden? Or something else?

Posted by: William Baude | Dec 4, 2011 11:08:23 PM

I think the link in the update is to the wrong file. Here's a link to the enrolled bill on Thomas.

Posted by: William Baude | Dec 4, 2011 10:45:06 PM

Ironically enough, it didn't take long for a court (without intent, obviously, and unclearly) to point out a hole in even the revised venue and transfer rules.
In re Link_A_Media Devices Corp., No. 2011-M990 (Fed. Cir. 02 Dec 2011), held (under Third Circuit law) that the District of Delaware abused its discretion in refusing to transfer a matter to the Northern District of California where the witnesses and documents and corporate headquarters of both plaintiff and defendants were. As I read the JVCA, it still leaves the standards for how to apply the various factors in resolving a motion for change of venue in the hands of the individual circuits -- which gets really interesting in patent litigation, because the Federal Circuit must use the procedural law of the regional circuit in which the case arose.

Posted by: C.E. Petit | Dec 3, 2011 11:57:33 AM

A question for Civ Pro professors/nerds: If I understand correction, the overrule of Hoffman, as it appears in this statute, takes the form of an amendment to section 1404, with no corresponding change in section 1406 (or section 1631, for that matter). Prior to the amendment, sections 1404 and 1406 used functionally identical language ("where it might have been brought" in 1404, "in which it could have been brought" in 1046, and "in which the action or appeal could have been brought in 1631"). Because of the functionally identical language in 1404, 1406, and 1631, I've always thought that the Hoffman rule applied to transfers under all three statutes. If I was right about that, then isn't it the case that a transfer to a forum that would not have been a proper one had the plaintiff filed there as an original matter, but to which the parties would consent, is now allowed ONLY if the transfer is made pursuant to 1404, and not made pursuant to 1406 (or 1631)? Add to that what I understood to be the interpretation that prevents 1404's broad "any civil action" language from swallowing 1406, namely, that 1404 applies only to cases in which the original filing was in a forum where venue (perhaps both venue and jurisdiction) were proper. If all of this is right, do we now have a situation in which transfer to a forum that would not have been a proper one had the plaintiff filed there as an original matter, but to which the parties would consent, is allowed ONLY if the forum in which the case was originally filed was one where venue (perhaps both venue and jurisdiction) were proper? But transfer to a forum that would not have been a proper one had the plaintiff filed there as an original matter, but to which the parties would consent, is NOT allowed if the original filing were in an improper forum? If this is right, can anyone justify such a result in functional terms? Could I just add that I'm really hoping I have this wrong (so please correct me)?

Posted by: Jim Greiner | Dec 3, 2011 6:20:02 AM

I only wish Professor Boyden was right in practice; it's really easy to "find" a corporate defendant somewhere that it's not subject to general personal jurisdiction. This is a particular problem in IP cases...

Posted by: C.E. Petit | Dec 2, 2011 2:59:00 PM

"finally abolishing the hairsplitting distinction between backup venue in diversity and federal-question cases"

Awww, that was fun to teach. "What's the difference between 'is subject to personal jurisdiction' and 'may be found'? ... Nothing!"

Posted by: Bruce Boyden | Dec 2, 2011 11:35:16 AM

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