Friday, November 16, 2012

Diversity-based Jurisdiction and the One Year Rule


            In lawsuits where the sole source of federal subject-matter jurisdiction is diversity of citizenship, Congress imposed a repose-like feature on the ability to remove the matter to federal court.  For example, after the expiration of a specified time, there is no removal jurisdiction when a plaintiff dismissed a non-diverse defendant beyond the specified time.

            For cases filed before January 6, 2012, the applicable statute reads:  “[A] case may not be removed on the basis of [diversity] jurisdiction more than 1 year after commencement of the action.”  [Former] 28 U.S.C. § 1446(b).

            For cases filed on or after January 6, 2012, the applicable statute reads:  “A case may not be removed … on the basis of [diversity] jurisdiction more than 1 year after commencement of the action, unless the district court finds that the plaintiff has acted in bad faith in order to prevent a defendant from removing the action.”  [Current] 28 U.S.C. § 1446(c)(1).

            A civil action is commenced on the date that the civil action was commenced in a state court within the meaning of that state’s law.  In Alabama, a civil action is commenced when the complaint is filed and the filing fee is paid or a hardship exemption is obtained.  Ala. R. Civ. P. 3(a).  Thus, in Alabama, the one-year repose-like feature starts to run when the complaint is successfully filed in a state court.

            Under the former § 1446(b), most Circuits, including the Eleventh Circuit, rigidly applied the one-year rule regardless of the plaintiff’s behavior.  The Fifth Circuit adopted an “equitable” exception that would be applied when the plaintiff was especially outrageous in keeping a non-diverse defendant in the lawsuit for one year.  This exception was rather narrowly applied in the Fifth Circuit.

            The current § 1446(c)(1) allows for an exception to the one-year rule when a plaintiff has “acted in bad faith.”  To date, no federal court has had to address what constituted “bad faith” sufficient to allow an exception.  I would expect that federal courts will look to how courts in the Fifth Circuit applied the “equitable” exception and will require overwhelming evidence that the plaintiff knowingly acted in a manner intended to “run out the clock” and was particularly egregious in not dismissing the non-diverse defendant before the expiration of the one-year deadline. 

 

Tuesday, November 13, 2012

Chinese Drywall Fairness Hearing Heard Today

Today, the much anticipated fairness hearing occurred in Judge Fallon's courtroom in New Orleans. Judge Fallon is the presiding judge over the Chinese drywall MDL. A call-in line was not set up, so attorneys outside of the courtroom could not monitor the hearing. Judge Fallon was urged to accept the proposed settlement agreements between the Plaintiffs and the Defendants.

What complicates matters is that the different agreements ultimately affect different categories of Plaintiffs. Also, the deadlines for the Defendants to opt-out of the agreements have been extended past today's date. Below are two links to stories covering the hearing. Of note is the figure that 300 or so Plaintiffs have opted out of the proposed settlements.

http://www.chron.com/news/article/Judge-urged-to-approve-Chinese-drywall-settlements-4033488.php

http://www.myfoxal.com/story/20086215/judge-urged-to-approve-chinese-drywall-settlements


NCAA Lawsuit Picking Up Steam

There have been some big things coming out of the NCAA games lawsuit lately. We have received some great documents through discovery. An article posted on al.com yesterday sums up what is going on. Click on the below link to read.

http://www.al.com/sports/index.ssf/2012/11/ncaa_knew_ea_sports_video_game.html#incart_river_default