Removal to the Fed; Why, what to expect, and what can be done

Many litigants pro se, and learned counsel alike often file a civil complaint challenging a party’s right to foreclose in the state venue and the defendant bank’s will remove the case to the federal court and not understand why, particularly pro se litigants who aren’t accustom of this practice. More often than not it is because the litigant mentioned a federal statute, or through a chain of wholly owned subsidiaries will claim diversity of jurisdiction, but there is an ulterior motive at play here in the strategy for the attorney defending his “alleged” client bank.

In order for counsel to successfully claim diversity of jurisdiction he would have to prove at the onset of the case that his alleged client bank does not have an office located in the state in which the suit is filed thus creating a controversy regarding whose law to use, the state in which the suit was filed, or the state in which the defendant is located thus creating “diversity” of jurisdiction.

Whether for federal issues or diversity, more often than not the reasons counsel will remove a suit to the federal court is because he feels relatively certain that he can overcome the federal issues if any have been raised and counsel will file a motion do dismiss under Federal Rules of Civil Procedure, Rule 12(b)(6), “failure to state a claim upon which relief can be granted”.

This 12(b)(6) motion to dismiss usually comes very quickly after removal and has been very effective for many foreclosure mill attorneys particularly against pro se litigants. It leaves most pro se litigants standing in court with both hands full of disheveled paperwork down at their sides and jaws dropped to their chest in utter amazement at how fast their case went south on them. Chances are that had the case remained in the state court or if the removal was successfully challenged and remanded back to the state the plaintiff may have prevailed on his state issues, but we know the bank’s attorneys can’t afford to loose in the state so they play dirty little tricks like this and in a flash it over and it works nearly every time,,, until now.

On December 7th, 2011 the United States Congress changed 200 years of well established American Juris Prudence by passing Public Law 112–63, and in 2012 the law went into effect when it was codified into the United States Code and is cited from code as 28 U.S.C. §§ 1332, 1441, 1446, or sited from the public law as the Federal Courts Jurisdiction and Venue Clarification Act of 2011.

At first glance one would think that this clarification act is the “Holy Grail” for removal, but this has been a good lesson to me as it should be for all pro se litigants. Lesson: When we read a section of code we should continue reading. If a section of code refers to another section, GO READ IT. This is usually where you will find something called “applicability”. Key points are in bold.

Under TITLE 1; § 103(c)(2) of Public Law 112-63 it states as follows, ‘‘Upon removal of an action described in paragraph (1), the district court shall sever from the action all claims described in paragraph (1)(B) and shall remand the severed claims to the State court from which the action was removed.”

Section 103(c)(2) makes reference to paragraph 1 of the same section which provides as follows, “If a civil action includes—

‘‘(A) a claim arising under the Constitution, laws, or treaties of the United States (within the meaning of section 1331 of this title), and

‘‘(B) a claim not within the original or supplemental jurisdiction of the district court or a claim that has been made nonremovable by statute, the entire action may be removed if the action would be removable without the inclusion of the claim described in subparagraph (B).”

Sounds good doesn’t it. Now let’s go down the rabbit holes. For this part let’s look at the codified version of the act as noted above.

28 USC 1441(a); “Generally.— Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction…”

28 USC 1441(c) Joinder of Federal Law Claims and State Law Claims.

(1) If a civil action includes—

(A) a claim arising under the Constitution, laws, or treaties of the United States (within the meaning of section 1331 of this title), and

(B) a claim not within the original or supplemental jurisdiction of the district court or a claim that has been made nonremovable by statute..

28 USC 1332(a) – The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between — (1) citizens of different States;

Review – Most houses have a value exceeding $75,000, and in many if not most cases the bank is in another state than the property. This gives the federal court original jurisdiction over most subject matters.

By nature, all matters regarding the United States Constitution, United States Cod (laws), or treaties of the United States should be filed in the federal venue from the beginning.

So where we would first think we found the pot of gold at the end of the rainbow, what we have actually found is pyrite or ‘fool’s gold’.

If there is any saving grace in this new act it would be in the event that a defendant party cannot prove diversity of jurisdiction in which case the property value alone would not grant the defendant the right to remove to the fed. I say this because of one, three letter word, “and”. Take note that section in section 1411, between subparagraphs (A), and (B) there is the word “and” meaning that a suit must fall within the requirements of both (A), and (B).

If a defendant can “prove” diversity, the issues not under the original or supplemental jurisdiction of the federal court shall be severed and remanded and the jurisdictions of both state and federal venues run concurrent. The plaintiff will then have two suits in action, one on the federal venue where his federal issued were removed to, and another in the state venue where he filed his original petition. What effect this relatively new law has on the case is monumental. This means that it will be more difficult for the foreclosure mill attorneys to get their 12(b)(6) motion to dismiss granted, and even if he does the plaintiff has a second bite at this apple in the State court.

Construal of Pleadings

“Pleadings must be construed so as to do justice.” Fed. R. Civ. P. 8(e).

“A document filed pro se is `to be liberally construed,´ … and `a pro se complaint, however inartfully pleaded, must be held to less stringent standards than formal pleadings drafted by lawyers[.]´” Erickson v. Pardus, 127 S.Ct. 2197, 2200 (Supreme Court 2007) (citing Estelle v. Gamble, 429 US 97 at 106, 97 S.Ct. 285 (internal quotation marks omitted); Fed. R. Civ. P. 8(f) (“All pleadings shall be so construed as to do substantial justice”)).

Removal Jurisdiction; Limits of Removal Jurisdiction

A federal court has subject matter jurisdiction over civil cases “arising under the Constitution, laws, or treaties of the United States,” or over civil cases in which the amount in controversy exceeds $75,000, exclusive of interest and costs, and in which diversity of citizenship exists between the parties. 28 U.S.C. §§ 1331 and 1332. They are courts of limited jurisdiction and must have statutory or constitutional power to adjudicate a claim. See Home Builders Ass’n of Miss., Inc. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998).

Burden to Actually Prove, Not Just Allege, Removal Jurisdiction

“The burden of establishing subject matter jurisdiction in federal court rests on the party seeking to invoke it.” St. Paul Reinsurance, 134 F.3d at 1253; see also Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3rd Cir. 1990).

Where a case is removed from a state court to a federal court, the party seeking removal must show that “federal jurisdiction exists and that removal was proper.” Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002).

The removing defendant’s burden to establish a basis for federal jurisdiction is beyond dispute in the 5th Circuit. Patterson v. Dean Morris LLP, 448 F.3d 736, 739, n.2 (5th Cir. 2006); see also, Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001); Jernigan v. Ashland Oil, Inc., 989 F.2d 812, 815 (5th Cir. 1993); Stafford v. Mobil Oil Corp., 945 F.2d 803, 804 (5th Cir. 1991); Gaitor v. Peninsular & Occidental S.S. Co., 287 F.2d 252, 253-54 (5th Cir. 1961).

“The jurisdictional facts supporting removal are examined as of the time of removal.” Id. (citing Gebbia v. Wal-Mart Stores, Inc., 233 F.3d 880, 883 (5th Cir. 2000)).

A “strong presumption” exists against removal jurisdiction and “the defendant always has the burden of establishing that removal is proper.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (citations omitted).

In the 5th Circuit, “bare allegations [of jurisdictional facts] have been held insufficient to invest a federal court with jurisdiction.” St. Paul Reinsurance Co., Ltd. v. Greenberg, 134 F.3d 1250, 1253 (5th Cir. 1998); see also Hernandez v. Sikorsky Support Services, Inc., No. 2:13-CV- 192 (5th Cir. 2013) (“Removal cannot be based simply upon conclusory allegations.”) (citing Allen v. R & H Oil & Gas Co., 63 F.3d 1326, 1335 (5th Cir. 1995)).

Evidence is Required to Prove Removal Jurisdiction

“A defendant bears the burden of proving by a preponderance of the evidence that jurisdiction exists.” Janke v. Babcock Company, Inc., Civ. No. 12-513 (Dist. Court, ED Louisiana, 2012) (citing De Aguilar v. Boeing Co., 47 F.3d 1404, 1412 (5th Cir. 1995)).

When a case has been removed to federal court, the defendant bears the burden of establishing jurisdiction by a preponderance of the evidence. Illinois Bell Tel. Co. v. Global NAPS Ill., Inc., 551 F.3d 587, 590 (7th Cir. 2008).

“When a party seeks removal, it `must present evidence of federal jurisdiction once the existence of that jurisdiction is fairly cast into doubt.´” Hart v. FedEx Ground Package Sys. Inc., 457 F.3d 675, 682 (7th Cir. 2006) (emphasis in original) (internal quotation omitted); White v. Humana Health Plan, Inc., No. 06 C 5546, 2007 WL 1297130, at *1 (Dist. Court, ND Illinois, 2007); 14C Wright, Miller & Cooper, Federal Practice & Procedure § 3733 at 350-53 (3rd ed. 1998).

Elements of Diversity; Citizenship of Limited Liability Companies

“For diversity jurisdiction, the parties must be completely diverse.” Marion County Economic Development District v. Wellstone Apparel, LLC, Civ. No. 2:13-CV-44-KS-MTP (Dist. Court, SD Mississippi 2013) (citing Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1079 (5th Cir. 2008)).

“Complete diversity requires that all persons on one side of the controversy be citizens of different states than all persons on the other side.” Id. (quoting Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1079 (5th Cir. 2008)).

The 5th Circuit has made clear that, for diversity jurisdiction purposes, citizenship of a limited liability company “is determined by the citizenship of all of its members.” Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1080 (5th Cir. 2008); see Carden v. Arkoma Associates, 494 U.S. 185, 110 S.Ct. 1015, 1021 (1990).

To properly allege the citizenship of a limited liability company, the party asserting removal jurisdiction must identify each of its members and the citizenship of each member in accordance with the requirements of 28 U.S.C. § 1332(a) and (c). Further, the same requirement applies to any member of a limited liability company which is also a limited liability company or a partnership. Turner Bros. Crane and Rigging, LLC v. Kingboard Chemical Holding Ltd., 2007 WL 2848154 (M.D.La. Sept. 24, 2007) (when partners or members are themselves entities or associations, citizenship must be traced through however many layers of members or partners there are).

Remand

“Any ambiguities and all disputed questions of fact are construed against removal because the removal statute should be strictly construed in favor of remand.” Hernandez v. Sikorsky Support Services, Inc., No. 2:13-CV-192 (5th Cir. 2013) (citing Allen; Dodson v. Spiliada Maritime Corp., 951 F.2d 40, 42-43 (5th Cir. 1992)); see also Boyer, supra, at 111; Steel ValleyAuth. v. Union Switch and Signal Div., 809 F.2d 1006, 1010 (3rd Cir. 1987) (emphasis added); Manguno v. Prudential Prop. & Cas. Ins. Co., supra; In re Hot-Hed Inc., 477 F.3d 320, 323 (5th Cir. 2007).

“The strict construction rule arises because of `significant federalism concerns.´” Hernandez, supra (citing generally Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868, 85 L.Ed. 1214 (1941)).

“Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance.” Gaus, supra, at 566.

Further, “doubts as to the procedural propriety of removal should be resolved in favor of remand.” Laney v. Independence Blue Cross, No. 06-4175, 2007 U.S. Dist. LEXIS 68407, at *8- 9 n.9 (E.D. Pa. Sept. 17, 2007) (emphasis in original); Syngenta Crop Prot., Inc. v. Henson, 537 U.S. 28, 32 (2002) (“[S]tatutory procedures for removal are to be strictly construed.”).

Judicial Duties

Cannon 1 of the Code of Conduct for United States Judges.

Cannon 2(A) of the Code of Conduct for United States Judges.

Cannon 3(A)(1) of the Code of Conduct for United States Judges.

In some cases, a litigant no longer has to worry about loosing his case because it has been removed to the federal venue if he knows about this law and raises the issue that arises from § 103(c)(2) in the federal venue because it is a duty of the federal district court to sever and remand all of the state issues in the petition, but keep in mind that these cases are rare, and chances are that you will have to adjudicate your federal and state issues in the federal venue.

Steve Skidmore

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