Schillinger, George v. Union Pacific

In the

United States Court of Appeals

For the Seventh Circuit

No. 05-8019

GEORGE and RUTH SCHILLINGER,

Respondents,

v.

UNION PACIFIC RAILROAD COMPANY and

UNION PACIFIC CORPORATION,

Petitioners.

Appeal from the United States District Court

for the Southern District of Illinois.

No. 04-cv-0437 MJR—Michael J. Reagan, Judge.

S UBMITTED A UGUST 11, 2005 — D ECIDED October 5, 2005*

Before POSNER , KANNE , and WOOD , Circuit Judges.

WOOD , Circuit Judge. Union Pacific Railroad Company

and Union Pacific Corporation removed this suit to

federal court, invoking the Class Action Fairness Act of

2005, Pub. L. No. 109-2, 119 Stat. 4 (2005) (CAFA). The

district court remanded after determining that the case

formally began before CAFA’s effective date of

February 18, 2005, and thus was not subject to the Act.

*

This Opinion is being released initially in

typescript form. A printed version will follow.

2 No. 05-8019

The companies acknowledge that the suit predates

CAFA, but they argue that two developments that post-

date CAFA have changed the case so profoundly that

they may now remove it: the addition of a new

defendant, and the expansion of the class definition.

Because we agree with the district court’s conclusions

that the apparent naming of a new defendant in

plaintiff’s amended complaint was a scrivener’s error

and that the expansion of the class was not significant

enough to create a new claim or new action, we deny

the petition for permission to appeal.

I

This case began on June 7, 2002, when George and

Ruth Schillinger sued Union Pacific Corporation (UPC)

and Union Pacific Railroad Company (UPRR) in state

court. The Schillingers contended that the companies,

which allegedly had a right-of-way on plaintiffs’ land,

committed trespass and were unjustly enriched when

they leased space on the land to telecommunications

providers. The complaint proposed a class of Illinois

land owners who also allegedly had been harmed by the

companies’ use of rights-of-way belonging to the class

members.

Both companies, represented by the same lawyer,

removed the case to the District Court for the Southern

District of Illinois, invoking the general removal

authority of 28 U.S.C. § 1441. Although the parties

were diverse (the Schillingers are citizens of Illinois,

UPC is incorporated in Utah and has its principal place

of business in Nebraska, and UPRR is incorporated in

Delaware and has its principal place of business in

Nebraska), the district court concluded that the amount

in controversy did not exceed $75,000. See 28 U.S.C.

§ 1332. It also rejected the defendants’ argument that

federal question jurisdiction existed because the

putative class members’ rights could be determined

only by reference to the federal rights-of-way. The

No. 05-8019 3

district court accordingly remanded the case to state

court based on the lack of federal jurisdiction. See 28

U.S.C. § 1447(c). Back in state court, plaintiffs realized

that UPC did not operate a railroad or own any right-

of-way and voluntarily dismissed UPC from the case.

In May 2003 the Schillingers moved to amend their

complaint, attaching a copy of the proposed amended

complaint to the motion. The amended complaint

expanded the proposed class of plaintiffs to include

property owners nationwide who owned land over

which UPRR had a right-of-way. Although UPC had

already been dismissed, the motion to amend and the

proposed amended complaint listed both UPRR and

UPC as defendants. Plaintiffs and UPRR briefed the

motion, arguing only the merits of expanding the class

definition. Neither party addressed the fact that UPC

shows up in the amended complaint’s caption and was

mentioned in the allegations. In fact, it appears that

UPC was never served with a copy of the amended

complaint, though it probably had actual notice of the

complaint through its common lawyer with UPRR.

Before the state court ruled on the motion to amend

the complaint, it stayed proceedings pending resolution

of another case. When the litigation resumed in 2005,

the parties continued to debate the merits of the motion

to amend, filing supplemental briefs and orally arguing.

Again, neither party commented on the inclusion of

UPC in the proposed amended complaint.

In May 2005 the state court granted the motion to

amend and the clerk of court filed the amended

complaint that was attached to the 2003 motion. The

clerk stamped the amended complaint with a May 2005

filing date. Plaintiffs mailed a copy of the filed amended

complaint to counsel for UPRR. UPRR and UPC

together then removed the case again to the federal

district court.

II

4 No. 05-8019

We address first the companies’ contention that the

addition of a new defendant—in this case the apparent

reinstatement of UPC as a defendant—must be treated

as the commencement of a new action for purposes of

CAFA. The companies correctly observe that in general,

“a defendant added after February 18 [2005] could

remove because suit against it would have been

commenced after the effective date[.]” Schorsch v.

Hewlett-Packard Co., 417 F.3d 748, 749 (7th Cir. 2005).

See also Knudsen v. Libery Mutual Ins. Co., 411 F.3d

805, 807 (7th Cir. 2005).

The problem for the companies here is that the

district court found, in effect, that UPC was never

really brought back into the case, when it concluded

that the inclusion of UPC as a defendant in the

amended complaint was a scrivener’s error. We review

the district court’s finding with deference, see Sparrow

v. Heller, 116 F.3d 204, 206 (7th Cir. 1997), and there

is ample support in the record for the district court’s

determination. The Schillingers did not discuss the

addition of UPC in their motion to amend or supporting

memorandum, nor did they serve UPC with a copy of

either the motion to amend or the filed amended

complaint. Most importantly, plaintiffs’ counsel filed an

affidavit in which he explained that his staff used the

original complaint as a word processing template in

drafting the amended complaint and failed to notice

that this resulted in the incorporation of the old caption

and introductory allegations into the amended

complaint. The district court acted within its discretion

in finding that UPC’s inclusion in the amended

complaint was a clerical error, that plaintiffs had no

intention of bringing UPC back into the litigation, and

that UPC was in fact not a new party to the suit.

This case should not come to federal court if the only

ground for jurisdiction is a clerical error, however

careless. Consider if the district court had allowed

plaintiffs to amend their complaint to correct the error

No. 05-8019 5

by removing UPC from the allegations, as it surely

could have done. See FED . R. CIV . P. 15(a), 60(a). In all

likelihood, the court would have been required to

remand at that point. When a plaintiff amends his

complaint after removal in a way that destroys

diversity, a district court must consider the reasons

behind the amendment in determining whether remand

is proper. If the plaintiff amended simply to destroy

diversity, the district court should not remand. See

Charles Alan Wright, Arthur R. Miller, & Edward H.

Cooper, Federal Practice and Procedure (1998 and

Supp.), § 3723, at p. 591 (citing district court cases).

But an amendment that is made for legitimate

purposes may be a proper ground for a remand to state

court. See id. at p. 592 (“the court will take account of

whether the plaintiff has been dilatory or is trying to

destroy diversity, whether the plaintiff will be

significantly disadvantaged if the amendment is not

allowed, and whether remanding the action to state

court will prejudice the defendant”); see also Costain

Coal Holdings, Inc. v. Resource Inv. Corp., 15 F.3d 733,

734-35 (7th Cir. 1994) (directing district court to

remand case to state court after indispensable party

intervened destroying diversity). The correction of a

clerical mistake falls into the latter category, and the

district court would properly have granted a motion to

remand if plaintiffs had amended their complaint to

correct the mistake. It is a short step from that to the

conclusion that the district court correctly held that

jurisdiction is defeated if one of the pleading elements

necessary to establish jurisdiction is a scrivener’s error.

Cf. Selim v. Pan American Airways Corp., 254 F.

Supp.2d 1316, 1319 (S.D. Fla. 2003) (refusing to

exercise diversity jurisdiction over a matter “where

such jurisdiction clearly does not exist, merely due to

an error by Plaintiff.”).

Even if the inadvertent inclusion of UPC does not

support CAFA removal here, the companies argue that

6 No. 05-8019

the expansion of the proposed class does so. After the

amendments to the complaint, however, this suit is still

between the Schillingers and others similarly situated

(whomever that may turn out to include) and UPRR,

and it concerns the same claim alleged in the original

complaint. As Schorsch explains, the expansion of a

proposed class does not change the parties to the

litigation nor does it add new claims. 417 F.3d at 750.

Recognizing that plaintiffs’ amendment did not add

any parties or add a new claim, the companies contend

instead that the expansion was a “step sufficiently

distinct that courts would treat it as independent for

limitations purposes” and accordingly it commenced a

new piece of litigation under CAFA. See Knudsen, 411

F.3d at 807. This is the same argument that Hewlett-

Packard advanced and this court rejected in Schorsch.

In that case, plaintiff expanded the proposed class from

consumers of one computer-printer product that

contained an allegedly faulty chip to consumers of two

other computer-printer products that contained the

same allegedly faulty chip. The original complaint

furnished Hewlett-Packard with the information

necessary to defend against the amended complaint,

this court held, and as a result the amendment would

relate back to the original complaint for Illinois statute-

of-limitation purposes. This also implies that the

amendment did not commence a new action under

CAFA. Schorsch, 417 F.3d at 750-51.

We acknowledge that the Schillingers’ expansion of

the class (if successful) may have greater repercussions

for UPRR than Hewlett-Packard potentially faced in its

litigation. If plaintiffs’ nationwide class is eventually

certified, UPRR will have more rights-of-way to

research and more state laws under which to analyze

various claims than if it was facing only a class of

Illinois plaintiffs. But, as we explained in Schorsch and

Knudsen, the potential for a larger amount of legal

research and discovery in and of itself is not a

No. 05-8019 7

significant enough step to create new litigation.

There is another potential reason why the changes

here may not have been enough to qualify as the

“commencement” of a new action for CAFA. Illinois law

governs the statute of limitations in the trespass action.

In determining whether an amended complaint meets

the statute-of-limitations deadline, Illinois courts look

to the date plaintiffs filed their motion to amend the

complaint rather than the date the trial court grants

the motion and files in the pleading. See, e.g.,

Enzenbacher v. Browning-Ferris Ind. of Ill., Inc., 774

N.E.2d 858, 864,(2d Dist. 2002); Onsite Engineering &

Management, Inc. v. Illinois Tool Works, Inc., 744

N.E.2d 928, 933 (1st Cir. 2001). The logic underlying

this practice is that defendants are on notice of the

amendment when the motion is filed and it would be

unfair to plaintiffs if a trial court waited months or

years to rule. See generally Moore v. State of Ind., 999

F.2d 1125, 1131 (7th Cir. 1993) (“As a party has no

control over when a court renders its decision regarding

the proposed amended complaint, the submission of a

motion for leave to amend, properly accompanied by the

proposed amended complaint that provides notice of the

substance of those amendments, tolls the statute of

limitations, even though technically the amended

complaint will not be filed until the court rules on the

motion”).

It is not clear whether this state practice would

govern federal procedure in the circumstances

presented here. On the one hand, in cases for which

state law provides the rule of decision, federal courts

apply state statutes of limitations, including

qualifications on those statutes. See, e.g., Walker v.

Armco Steel Corp., 446 U.S. 740, 751 (1980). On the

other hand, federal courts have their own rules

governing when an action is “commenced” for federal

procedural purposes. See FED . R. CIV . P. 3. If Illinois

regarded the new claims as “commenced” against

8 No. 05-8019

UPRR back in 2003, then UPRR had notice of their

existence at that time for purposes of the ongoing state

court action. The district court’s earlier decision that

there was no jurisdiction had nothing to do with the

existence (or nonexistence) of UPC as a party, and thus

the amendment would not have prompted a new

removal effort under the normal rules of 28 U.S.C.

§ 1446. There is a reasonable argument for saying that

the operative events here all occurred before CAFA’s

effective date, regardless of the fact that the formal

acceptance of the amended pleading took place after

CAFA was available. If so, then this is an independent

reason why UPRR’s current effort to remove cannot

succeed.

We recognize, however, that this is a complex

question. CAFA may make state rules about statutes of

limitations irrelevant to the type of commencement

that is necessary for federal removal. CAFA permits a

class action to be removed “in accordance with [28

U.S.C.] section 1446 . . . .” It defines a “class action” as

“any civil action filed under rule 23 of the Federal

Rules of Civil Procedure or similar State statute or rule

of judicial procedure . . . .” 28 U.S.C. § 1332(d)(1)(B).

The date of filing, in the context of an amended

pleading, may refer to the date when the court accepts

a proposed amendment, not the date when the

amendment is proffered. If, therefore, contrary to our

finding above, the amendment here was enough to

make this a new case for CAFA purposes, then UPRR

may have been entitled to rely on the date when the

amendment was finally accepted by the state court. We

prefer to save this complex issue for another day, when

the choice of law and interpretation of federal law will

govern the outcome.

III

The district court correctly held that this case was

commenced before CAFA’s enactment. Neither the

No. 05-8019 9

scrivener’s error that purported to add UPC as a “new”

party nor the expanded class definition changed the

case sufficiently to change that fact. Accordingly, the

petition for permission to appeal is DENIED.