Petitioners Brief — Caterpillar Inc. v. Lewis

In the Supreme Court of the

OCTOBER TERM, 1995.

CATERPILLAR INC.,

Petitioner,

V.

JAMES DAVID LEWIS,

Respondent.

On Writ of Certiorari to the

United States Court of Appeals

For the Sixth Circuit

BRIEF FOR THE PETITIONER

JAMES B. BUDA KENNETH S. GELLER*

Caterpillar Inc. MICHAEL R. FEAGLEY

100 N.E. Adams St. JOHN E. MUENCH

Peoria, IL 61629-7310 CHARLES ROTHFELD

Mayer, Brown & Platt

WILLIAM F. MAREADY 2000 Pennsylvania Ave., N.W.

Robinson Maready Lawing Washington, D.C. 20006

& Comerford, L.L.P. (202) 463-2000

380 Knollwood St.

Suite 300 LESLIE W. Morris Il

Winston-Salem, NC 27103 Stoll, Keenon & Park, LLP

201 E. Main St.

Suite 1000

Lexington, KY 40507

* Counsel of Record

QUESTION PRESENTED

This case was removed from state to federal court at a

time when there was not complete diversity of citizenship

among the parties. The district court nevertheless declined to

remand the case to state court. The absence of diversity was

cured prior to trial and judgment in federal court. The

question presented is:

Whether, when diversity of citizenship was not complete

at the time of removal, but complete diversity existed during

trial and at the time of final judgment, the case must be

remanded for a new trial in state court.

ij

RULE 29.6 STATEMENT

“ , ' Its

Petitioner Caterpillar Inc. has no parent companies.

non-wholly owned subsidiaries are Cyclean, Inc.; Advanced

Filtration Systems, Inc.; Health Plan of Central Illinois, Inc.;

Caterpillar Commercial N.V.; AO Nevarnash; and UNOC

Equipment and Supply, LLC.

BECAUSE THE DISTRICT COURT PLAINLY

HAD FEDERAL JURISDICTION AT THE TIME

THAT THIS CASE WAS TRIED AND

JUDGMENT WAS ENTERED, THE COURT OF

APPEALS ERRED IN REVERSING THE

JUDGMENT AND ORDERING A REMAND TO

EEE ee

A. The District Court Hac Subject Matter

Jurisdiction To Decide The Case ........

B. Even When A Case Is Improperly Removed

From State Court, The Removal Statutes Do

Not Require A Remand When The Error Was

Cured, Was Harmless, Or Was Waived ....

DUPER E wobsccccccleoccccccs

TABLE OF CONTENTS

Page

QUESTION PRESENTED .................. (I)

RULE 29.6 STATEMENT.................. ii

TABLE OF AUTHORITIES................. iv

EEC cc escccccececccess l

STATUTORY PROVISIONS INVOLVED ....... l

DTTC WES See sececcceccceces l

SUMMARY OF ARGUMENT .............. 6

TEES la SG Ss pec cccccccece cc 7

8

13

22

iv

TABLE OF AUTHORITIES

Pages

Cases

Able v. U; Co. , 829 F.2d 1330 (4th

Cir. , cert. denied, 485

iG | =a ree ee 10, 17, 20

Alligator Co., Inc. v. La Chemise

Lacoste, 421 U.S. 937 (1975) ......---455- 20

American Fire & Casualty Co. v. Finn, 341

Te GED no cc ctbwescovceeseee 6, 9-13

Carneal v. Banks, 23 U.S. (10 Wheat.)

ft Baar eee 11

Carnegie-Mellon University v. Cohill, 484

8 RY =P Ue ee 12, 17

Finn v. American Fire & Casualty Co., 207

F.2d 113 (Sth Cir. 1953) .. 1... ee eee eee 11

Franchise Tax Board v. Construction

Laborers Vacation Trust, 463

(Sf eS Terereererie co 16

Gould v. Mutual Life Ins. Co., 790 F.2d

769 (9th Cir.), cert. denied,

ry Lig of. Fee 10, 16, 20

405 U.S. 699 (1972) ....... bf . 9, 10, 12, 14, 20

v. McMahon, 872 F.2d 1132

ol. 9S Feaerrerrrrer eres 18

La Chemise Lacoste v. Alligator Co., Inc.,

506 F.2d 339 (3d Cir. 1974) .... 2... 6525s 21

Lambert Run Coal Co. v. Baltimore & Ohio

R. Go., 3B US. S77 (SEZ) . ww cece cceess 16

Vv

TABLE OF AUTHORITIES — Continued

Pages

Lytle v. Household Mfg. Co., 494 U.S.

EE a ale ela n st oo eo ee 64 13

M v. Uinta Development Co., 229 U.S.

RR A ae ae 14

M ld, Coldwater & Lake Michigan R.

. Vv. Swan, 111 U.S. 379

TR a a 19

Mullaney v. Anderson, 342 U.S. 415 (1952) .... 11, 21

Newman-Green, Inc. v. Alfonzo-Larrain

490 U.S. 826 (1989)........ 8, 10-12, 17, 18, 21

Riggs v. Island Creek Coal Co. , 542 F.2d

re 11

Sheeran v. General Electric Co..,

593 F.2d 93 (9th Cir.),

cert. denied, 444 U.S.

Ne ele wa ae 10

St. Paul Mercury I ity Co. v. Red Cab

Se EE, nnn wb bo cae 6 ovens 12

State Farm Fire & Cas. Co. v. Tashire,

a 19

v. Curtiss, 7 U.S. (3 Cranch)

eT 3

Thermtron Products, Inc. v.

Hermansdorfer, 423 U.S. 336

Tr Nt 2 2 Sa ec AT 15

Union Planters Nat’l Bank of Memphis v.

CBS, Inc. , 557 F.2d 84 (6th

DE £20 sh btha née wh bie wee ca wees 19

vi

TABLE OF AUTHORITIES — Continued

Pages

Van Cauwenberghe v. Biard, 486 U.S. 517

DE 66-66 se endeCbes Obde ee Ceuse es 20

Statutes

ey es ED coc ccncnccccsecssesin l

Bp es ED ccc ete ces ctevereuss 19, 21

SU EEE nk hac vecesenevesecb ence 3

oF ee a ee ee 1-3

Be UE fcc cccesceeeeeocees 2,14

BP Us DH UUEED ce ccc cceces ec eseeseee 16

SE co bee erences eeeseeeesen 14

PU LED oo ccbaccncececeasseesieee 14

PU EE oes bebe sc wa eesaseedaee 2

Se OE Saw cbeawib ecu au es 1, 2, 19

Ss ED cc ecccesceebeseces 2, 15, 16

«Aree TS eee ce ee 15

Pe EE obec ese veces cccesteekoens 14

§ ff & errr Te ree CE Ee eee 11

Miscellaneous

1A MOorE’s FEDERAL PRACTICE

GRP GE, TRUE oc cccccccscces 10, 11, 15-17, 19

vii

TABLE OF AUTHORITIES — Continued

Pages

14A C. Wright, A. Miller, & E. A

FEDERAL PRACTICE AND —_

re 12, 18, 19

H.R. . No. 423, 99th Cong., 2d Sess.

ES re 16

Rothfeld, Rationalizing Removal, 1990

Se EE ow eect crecceuses 18, 19

BRIEF FOR THE PETITIONER

OPINIONS BELOW

The opinion of the court of appeals (J.A. 84-90) is not

reported. The opinion of the district court denying the motion

to remand (J.A. 53-56) is not reported.

JURISDICTION

The judgment of the court of appeals was entered on

October 11, 1995, and a petition for rehearing was denied on

November 21, 1995 (Pet. App. 15a-16a). The petition for a

writ of certiorari was filed on February 8, 1996, and was

granted on April 15, 1996 (J.A. 91). The jurisdiction of this

Court is invoked under 28 U.S.C. § 1254(1).

STATUTORY PROVISIONS INVOLVkw

28 U.S.C. § 1441(a) provides in relevant part:

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, may be removed by the

defendant or the defendants, to the district court of

the United States for the district and division

embracing the place where such action is pending.

28 U.S.C. § 1447(c) provides in relevant part:

1.

A motion to remand the case on the basis of any

defect in removal procedure must be made within 30

days after the filing of the notice of removal under

section 1446(a). If at any time before final judgment

it appears that the district court lacks subject matter

jurisdiction, the case shall be remanded.

STATEMENT

The federal removal statutes permit a defendant to

remove from state to federal court “any civil action brought

2

in a State court of which the district courts of the United

States have original jurisdiction.” 28 U.S.C. § 1441(a).

This rule makes the availability of removal turn on whether

the case could have been brought in federal court as an initial

matter, although a case may be removed on grounds of

diversity of citizenship “only if none of the parties in interest

properly joined and served as defendants is a citizen of the

State in which such action is brought.” 28 U.S.C. § 1441(b).

A notice of removal must be filed within 30 days of the

defendant’s receipt of the complaint. If, however, “the case

stated by the initial pleading is not removable,” a notice of

removal may be filed within 30 days after the defendant

learns that the case has become removable. 28 U.S.C. §

1446(b).

Once a case has been removed to federal court, “[a]

motion to remand the case [to state court] on the basis of any

defect in removal procedure must be made within 30 days

after the filing of the notice of removal under section 1446(a).

If at any time before final judgment it appears that the district

court lacks subject matter jurisdiction, the case shall be

remanded.” 28 U.S.C. § 1447(c). Orders remanding cases

to state court are expressly made unreviewable “by appeal or

otherwise.” 28 U.S.C. § 1447(d).

2. Respondent James Lewis (“Lewis”) was injured on

July 9, 1988, while operating a bulldozer manufactured by

petitioner Caterpillar Inc. (“Caterpillar”) and serviced by

Whayne Supply Co. (“Whayne Supply”). Lewis alleged in

his complaint that a hydraulic hose near the front of the

bulldozer ruptured, allowing hydraulic fluid to escape. The

fluid thereafter ignited, causing him to suffer burns. See J.A.

85-86. Liberty Mutual Insurance Group (“Liberty Mutual”),

the insurance carrier for Lewis’s employer, paid Lewis

workers’ compensation benefits on account of his injuries.

On June 22, 1989, Lewis brought suit in Kentucky state

court against Caterpillar and Whayne Supply. Liberty Mutual

intervened as a plaintiff, asserting its subrogation interest in

ee tet ORI ~

3

the workers’ compensation benefits. Lewis contended that the

fire and resulting injuries were the result of Caterpillar’s

negligence in manufacturing the bulldozer and failing to give

adequate warnings of its dangerous condition, and of Whayne

Supply’s negligence in overhauling and maintaining the

equipment. J.A. 86-87.

3. At the time the complaint was filed in state court,

Caterpillar could not have removed the case to federal court

because complete diversity of citizenship was absent. See

Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806).

Although Liberty Mutual, the intervening plaintiff, was a

Massachusetts corporation with its principal place of business

in Massachusetts, and Caterpillar, the defendant, was a

Delaware corporation with its principal place of business in

Illinois, both Lewis, the plaintiff, and Whayne Supply, the

other defendant, were citizens of Kentucky.

On June 12, 1990, however, Caterpillar learned that

Lewis had agreed to a settlement with Whayne Supply, the

non-diverse defendant. J.A. 31-32.' Shortly thereafter,

Caterpillar removed the case to the United States District

Court for the Eastern District of Kentucky pursuant to 28

U.S.C. §§ 1441(a) and 1332. J.A. 30-33.

Lewis moved to remand the case to state court on the

ground that the case was not removable because “there is not

complete diversity [of citizenship] between the parties

hereto.” J.A. 36. Specifically, although Lewis conceded that

' Although Lewis reached his settlement with Whayne Supply at

an earlier time, he withheld information about the settlement from

Caterpillar. Accordingly, Caterpillar did not learn of the settlement

until June 12, and it removed the case as soon as it was able to

confirm that the settlement had in fact been made. J.A. 31-35. On

August 2, 1990, while this case was pending in federal court,

Lewis filed in state court an agreed order purporting to dismiss

Whayne Supply from the removed state action. J.A. 52.

4

he had settled his claims with Whayne Supply, he asserted

that the settlement did not resolve Liberty Mutual’s

subrogation claim against Whayne Supply, and therefore that

Whayne Supply remained a party to the suit. J.A. 36.

Caterpillar responded that the settlement automatically

invoked Liberty Mutual’s right of subrogation against Whayne

Supply as a matter of state law. J.A. 39-42. Kentucky law

provides that, when an employee receives workers’

compensation benefits and then recovers from the tortfeasor,

the workers’ compensation carrier may recover its

proportionate share of the recovery. KRS 342.700(1).

Lewis, however, excluded from his settlement with Whayne

Supply that portion of the settlement funds to which Liberty

Mutual was entitled by Kentucky law. Caterpillar took the

position that Liberty Mutual’s claim was derivative of Lewis’s

claim against Whayne Supply, which had been settled; that

under Kentucky law the settlement automatically took account

of Liberty Mutual’s subrogation rights against Whayne

Supply; that Lewis could not circumvent these derivative

rights through settlement; and that Liberty Mutual’s presence

in the case therefore should not be viewed as destroying

diversity. The district court agreed with Caterpillar that

federal jurisdiction existed and denied the motion to remand

on September 24, 1990. J.A. 53-56.

The case then proceeded through discovery and pretrial

proceedings in the district court. On June 8, 1993, Liberty

Mutual and Whayne Supply entered into a settlement of the

subrogation claim and Whayne Supply formally was dismissed

from the case. J.A. 79. Thereafter, the case was tried

before a jury from November 15 through November 22,

1993, ending in a unanimous verdict for Caterpillar. J.A. 83.

The court entered judgment for Caterpillar on November 23,

1993.

4. The court of appeals reversed. J.A. 84-90. In the

Sixth Circuit’s view, the district court should have remanded

the case to state court in 1990 because complete diversity did

ee ee

5

not exist at the moment of removal, and the lack of subject

matter jurisdiction at the time of removal required it to vacate

the district court’s judgment and remand the case to state

court. J.A. 87-90.? The Sixth Circuit explained that,

at the time Caterpillar removed the case to federal court,

plaintiff, a resident of Kentucky, remained a party to the

case by virtue of his claim against defendant Caterpillar.

Defendant Whayne Supply Co., a Kentucky corporation,

was also a party to the case in light of intervening

plaintiff Liberty Mutual’s subrogation claim against it.

Thus, complete diversity did not exist at the time the

case was removed to federal court. Unfortunately, we

must remand a case that has proceeded through judgment

in the district court.

J.A. 89-90 (footnote omitted). The court of appeals evidently

was of the view that the absence of complete diversity at the

time of removal meant that “the district court lacked

jurisdiction over this case.” J.A. 90 n.3. The court below

did not mention that diversity became complete when Whayne

Supply was dismissed from the case pursuant to its settlement

with Liberty Mutual, and that complete diversity existed at all

times during the trial and when final judgment was entered.

> The court of appeals rejected Caterpillar’s argument that there

was complete diversity when the case was removed because Liberty

Mutual should not have been considered for diversity purposes.

J.A. 90 n.2. This Court denied review of Caterpillar’s challenge

to this holding (J.A. 91), and we accordingly will not repeat the

arguments on that point here.

6

SUMMARY OF ARGUMENT

1. The court of appeals was plainly wrong in holding

that the judgment of the district court had to be reversed

because diversity was not complete at the time of removal.

This Court has made clear that, even when jurisdiction did

not exist when a case was removed, a remand to state court

is unnecessary so long as the jurisdictional defect was cured

by the time of trial or judgment; the district court has

jurisdiction to decide the case if it “would have had

jurisdiction of the controversy had it been brought in the

federal court in the posture it had ar the time of the actual

trial of the cause or of the entry of judgment.” American Fire

& Casualty Co. v. Finn, 341 U.S. 6, 16 (1951) (emphasis

added).

There is nothing anomalous in this rule. To the contrary,

the Court has held in a variety of contexts that proceedings in

a district court need not be vacated so long as jurisdiction was

perfected by the time of judgment. This approach does not

involve “jurisdiction retroactively conferred.” Newman-

Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 836 (1989).

Instead, it reflects a recognition that Congress established

pragmatic rules of jurisdiction under which technical defects

cannot be used to undo complete and otherwise fair

proceedings. It therefore is indisputable that the district court

had the authority to try and enter judgment in this case.

2. Because there is no jurisdictional defect that requires

remand of the case, Lewis’s contention must be that the

federal removal statute was violated and that he accordingly

has a statutory right to demand a remand to state court. But

any such contention is insubstantial. Congress drafted the

Statutory removal provisions to encourage efficiency and

avoid unnecessary relitigation, and this Court accordingly has

interpreted the removal rules in a manner that “best

promote[s] the values of economy, convenience, fairness, and

comity.” Carnegie-Mellon University v. Cohill, 484 U.S.

SO ME ly ee te en FN OR Oe i ae el

at ee a ee

7

343, 353 (1983). Against this background, Lewis’s

contention fails for several reasons.

First, remand would be pointless because the statutory

error (the removal of a case in which diversity was

incomplete) was cured prior to trial. Second, the error was

harmless: Lewis has not identified any manner in which he

was prejudiced by having to try this case in a federal forum.

And third, Lewis effectively waived his statutory objection to

removal by failing to seek an immediate appeal of the district

court’s refusal to remand; in the meantime, of course, the

jurisdictional defect was cured and the parties proceeded to

trial and judgment. In this setting — where a remand would

toss onto the trash heap six years of federal court proceedings

and a six-day jury trial, requiring the parties to start the

litigation over from scratch — Lewis would sacrifice

congressional intent and common sense for the sake of

“hypertechnical jurisdictional purity.” Newman-Green, 490

U.S. at 837. This Court’s decisions reject such an approach.

ARGUMENT

BECAUSE THE DISTRICT COURT PLAINLY HAD

FEDERAL JURISDICTION AT THE TIME THAT

THIS CASE WAS TRIED AND JUDGMENT WAS

ENTERED, THE COURT OF APPEALS ERRED IN

REVERSING THE JUDGMENT AND ORDERING A

REMAND TO STATE COURT

The result mandated by the court of appeals in this case

may fairly be characterized as nonsensical. It is undisputed

that there was complete diversity between the parties both at

the time of trial and when judgment was rendered. There can

be no doubt that the district court had jurisdiction to decide

the case. And there is no suggestion that the district court’s

decision of the case denied Lewis particular rights conferred

by federal law. Nevertheless, the court below held that the

district court’s judgment must be vacated because diversity

between the parties was not complete during an earlier stage

8

of the litigation — a holding that renders nugatory a six-day

jury trial and requires remand of the case to state court,

where the parties will have to start the litigation over a 1988

injury from scratch.

The delay — and the waste of judicial and litigants’

resources — that will flow from this holding are manifest.

Yet the court of appeals’ rule is not necessary to preserve the

integrity of federal jurisdiction. It does not advance any

interest served by the removal statute. And it frustrates the

clear federal policy of avoiding delay and duplicative

proceedings when the right to remove is invoked. This

accordingly is, quite plainly, a case where Caterpillar “should

not be compelled to jump through judicial hoops merely for

the sake of hypertechnical jurisdictional purity.” Newman-

Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 837 (1989).

Because the only value served by the decision below is that of

the most “hypertechnical” and wooden formalism, that

decision should be set aside.

A. The District Court Had Subject Matter

Jurisdiction To Decide The Case

The court of appeals evidently accepted Lewis’s

contention below that “the district court lacked subject matter

jurisdiction because complete diversity between the parties did

not exist at the time of removal.” J.A. 87-88 (emphasis

added). See J.A. 90 n.3 (“the district court lacked

jurisdiction over this case”). That conclusion, however, was

fundamentally wrong. In fact, repeated decisions of this

Court — none of which were cited or discussed by the court

below — make clear that a federal court has the power to

decide a case when jurisdiction exists at the time of tha!

court’s decision. Because it is undisputed that diversity was

complete at the time of trial and judgment, the district court

plainly had jurisdiction to decide the case.

1. This Court long ago settled the proposition that

remand to the state court is unnecessary even if jurisdiction

9

did not exist at the time of removal, so long as the district

court had subject matter jurisdiction at the time of judgment.

In American Fire & Casualty Co. v. Finn, 341 U.S. 6, 16-17

(1951) (emphasis added) the Court explained:

There are cases which upheld judgments in the district

courts even though there was no right to removal. In

those cases the federal trial court would have had original

jurisdiction of the controversy had it been brought in the

federal court in the posture it had at the time of the

actual trial of the cause or of the entry of judgment.

That is, if the litigation had been initiated in the federal

court on the issues and between the parties that

comprised the case at the time of trial or judgment, the

federal court would have had cognizance of the case.

This circumstance was relied upon as the foundation of

the holdings.

The Court went on to hold that the district court’s judgment

had to be vacated in Finn because “[t)he posture of the case

even at the time of judgment also barred federal jurisdiction.”

Id. at 17 (emphasis added).

The Court subsequently confirmed that Finn meant

exactly what it said, holding that the judgment in a case that

had been improperly removed to federal court did not have to

be set aside because jurisdiction existed at the time of

decision. In Grubbs v. General Electric Credit Corp. , 405

U.S. 699, %2 (1972) (emphasis added), the Court declared

that

[ljongstanding decisions of this Court make clear * * *

that where after removal a case is tried on the merits

without objection and the federal court enters judgment,

the issue in subsequent proceedings on appeal is not

whether the case was properly removed, but whether the

federal district court would have had original jurisdiction

of the case had it been filed in that Court.

10

The Court characterized this as a “requirement that

jurisdiction exist at the time of judgment” (id. at 705

(emphasis added)); in Finn, the Grubbs Court added, “[s}ince

complete diversity did not obtain even as of the date of

judgment, and since there was no other basis for federal

jurisdiction, this Court reversed the judgment of the Court of

Appeals, which had held tix case properly removable.” Jd.

at 704 (emphasis added).

Citing Finn and Grubbs, other courts have agreed that,

even when jurisdiction did not exist at the time of removal,

the crucial question is whether complete diversity (or some

other ground of federal jurisdiction) was present at the time

of judgment. See, e.g., Able v. Upjohn Co. , 829 F.2d 1330,

1333 (4th Cir. 1987) (Wilkinson, J.) (“The Supreme Court

has recognized [in Finn] that a judgment entered in a case that

was improperly removed may stand where, as here, the

judgment works no expansion of federal jurisdiction”), cert.

denied, 485 U.S. 963 (1988); Gould v. Mutual Life Ins. Co.,

790 F.2d 769, 773 (9th Cir.), cert. denied, 479 U.S. 987

(1986); Sheeran v. General Electric Co., 593 F.2d 93, 97

(9th Cir.), cert. denied, 444 U.S. 868 (1979). The leading

commentators in the area therefore have concluded that “even

where a case is not, or does not appear to be within the

jurisdiction of the federal court at the time of removal, a

judgment entered by a trial court is valid if at the time of the

actual trial or the entry of judgment the requisites of original

jurisdiction existed.” 1A MoOoRE’S FEDERAL PRACTICE

¢ 0.157 [11.-3], at 172 (2d ed. 1996) (emphasis in original).

2. There is nothing anomalous in this rule. To the

contrary, the Court has held in a variety of settings that

proceedings in a district court need not be vacated so long as

jurisdiction is perfected by the time of trial or judgment —

or, indeed, while the case is on appeal. To be sure, the

Court has indicated that “the existence of federal jurisdiction

ordinarily depends on facts as they exist when the complaint

is filed.” Newman-Green, 490 U.S. at 830. The Court has

11

hastened to add, however, that “[I]ike most general principles

* * * this one is susceptible to exceptions.” Jbid.

The Court sketched out some of these exceptions in

Newman-Green, where it stated that Fed. R. Civ. P. 21

“invests district courts with the authority to allow a

dispensable nondiverse party to be dropped at any time, even

after judgment has been rendered.” 490 U.S. at 832. And

the Court went on to hold that when complete diversity did

not exist at the time of trial, courts of appeals also have “the

power to dismiss jurisdictional spoilers” (id. at 830); so long

as jurisdiction is perfected while the case is on appeal, the

absence of diversity at an earlier stage of the case does not

render the district court proceedings nugatory. See id. at

835-837. Indeed, this Court itself has permitted the addition

of parties when “necessary to establish the existence of a

justiciable case” (id. at 834 n.8, citing Mullaney v. Anderson,

342 U.S. 415 (1952)), holding that a cure for the

jurisdictional defect even at that late stage of the case made

it unnecessary to “‘dismiss[] the petition and thereby requir[e]

the plaintiffs to start over again in the District Court.” Jd. at

833. See id. at 835 (noting that in Carneal v. Banks, 23

U.S. (10 Wheat.) 181 (1825), “this Court itself dismissed the

nondiverse parties while acting in an appellate capacity”).’

* Finn reflects an application of this principle. On remand from

this Court’s decision in that case, the plaintiff was allowed to

dismiss his claims against the non-diverse defendant. With federal

jurisdiction thus perfected, the court of appeals held that the

original trial was not a nullity and a new judgment was entered on

the verdict returned at that trial. Finn v. American Fire & Casualty

Co., 207 F.2d 113 (Sth Cir. 1953). This Court denied review of

the decision affirming that judgment. 347 U.S. 912 (1954). See

Riggs v. Island Creek Coal Co., 542 F.2d 339, 343 (6th Cir.

1976); 1A Moore’s FEDERAL PRACTICE, supra, 4 0.157[11.-3], at

171.

12

This holding, like the rule stated in Finn and Grubbs,

does not involve “jurisdiction retroactively conferred.”

Newman-Green, 490 U.S. at 836. Instead, it reflects a

recognition that Congress established pragmatic rules of

jurisdiction under which technical defects cannot be used to

undo complete and otherwise fair proceedings, so long as

jurisdiction was perfected at some point prior to the

completion of the litigation. As the Court put it in Newman-

Green, “[a}ppellate-level amendments to correct jurisdictional

defects may not be the most intellectually satisfying approach

to the spoiler problem, but, as Judge Posner eloquently noted,

because ‘law is an instrument of governance rather than a

hymn to intellectual beauty, some consideration must be given

to practicalities.” Jd. at 836-837 (citation omitted).

This focus on the creation of a workable system that

avoids setting aside or duplicating completed proceedings has

led the Court to hold in a wide range of contexts that it is not

necessary for jurisdictional requirements to be satisfied

continuously throughout the course of a proceeding. A

remand to state court, for example, is not necessary when the

amount in controversy falls below the jurisdictional minimum

after removal; “‘events occurring subsequent to removal

which reduce the amount recoverable ... do not oust the

district court’s [diversity] jurisdiction.’” Carnegie-Mellon

University v. Cohill, 484 U.S. 343, 356 n.12 (1983), quoting

St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S.

283, 293 (1938) (ellipses and bracketed material added by the

Court). Similarly, jurisdiction is retained if a party changes

citizenship after removal in a manner that destroys complete

diversity. See St. Paul Mercury Indemnity Co., 303 U.S. at

293-296; 14A C. Wright, A. Miller, & E. Cooper, FEDERAL

PRACTICE AND PROCEDURE § 3721, at 214 (1985).

Indeed, in this Court Lewis evidently acknowledges the

point and implicitly concedes that the district court had

jurisdiction to decide the case. In his brief in opposition to

the petition for certiorari (at 6), Lewis recognized that, had

13

he not sought a remand at the time of removal, he would

have waived his asserted right to trial in state court. But it

is, of course, black-letter law that subject matter jurisdiction

cannot be conferred by consent or waiver. See, e.g., Finn,

341 U.S. at 17-18. Lewis’s concession that he could have

waived his right to remand therefore necessarily concedes as

well that the district court had subject matter jurisdiction.

Thus, it is indisputable that the district court had the authority

to try and enter judgment in this case, and that the court of

appeals erred in holding that the judgment had to be vacated

for lack of subject matter jurisdiction.

B. Even When A Case Is Improperly Removed From

State Court, The Removal Statutes Do Not

Require A Remand When The Error Was Cured,

Was Harmless, Or Was Waived

Since there is no jurisdictional defect that requires

remand of this case, Lewis’s contention must be that the

federal removal statutes were violated and that those

provisions grant plaintiffs a statutory right to demand a

remand to state court whenever removal was improper.

Lewis did not, however, make any such argument either in

the court below or in his brief in opposition to the petition for

certiorari.* In any event, if this is Lewis’s position it plainly

lacks merit, for several reasons. First, the statutory error

here (removal of a case in which diversity was incomplete)

was cured prior to trial when the non-diverse party was

dismissed. Second, the error was harmless; Lewis received

a fair trial before a competent tribunal. And third, Lewis

effectively waived his objection to removal by failing to seek

an immediate appeal of the district court’s refusal to remand,

* Lewis therefore is foreclosed from raising the argument now.

See, e.g., Lytle v. Household Mfg. Co., 494 U.S. 545, 551-552 n.3

(1990).

14

a failure that rendered his statutory objection moot when

jurisdiction subsequently was perfected.

1. “Removal proceedings are in the nature of process to

bring the parties before the United States court.” Mackay v.

Uinta Development Co., 229 U.S. 173, 176 (1913). To be

sure, certain errors in the removal process’ may be urged in

the district court as grounds for remand. And if those crrors

are overlooked by the district court, are not cured during

trial, and were not waived by the party seeking remand, they

may be considered on appeal® — subject, of course, to the

* Examples might include removal to the wrong federal judicial

district or a failure of all defendants to seek removal. See 28

U.S.C. § 1446.

* That apparently was the situation in Grubbs, where there was

an error in the removal process — an error that was not cured prior

to trial — rather than an absence of jurisdiction at the time of

removal. There, a New York corporation brought suit against a

Texas resident in Texas state court. The defendant subsequently

filed a cross-action against the United States pursuant to 28 U.S.C.

§ 2410. See 405 U.S. at 700-701. The United States then

removed the entire action to federal court pursuant to 28 U.S.C. §

1444, which permits removal in actions brought under Section

2410; the plaintiff did not object to removal and the court

proceeded to rule for the defendant.

On appeal, the court of appeals on its own motion concluded

that Section 2410 could not be invoked in the case, that Section

1444 therefore provided no basis for removal, that no other basis

for removal was available, and that the case accordingly must be

remanded to state court. See 405 U.S. at 702. In reversing, this

Court observed that the district court had diversity jurisdiction to

decide the controversy between the New York plaintiff and the

Texas defendant (even though that diversity did not itself provide

a ground for removal, because under 28 U.S.C. § 1441(b) removal

is permitted on diversity grounds only if none of the defendants are

residents of the forum state). See 405 U.S. at 704-705. Yet the

statutory removal error had never been cured because Section 1444

15

normal harmless error inquiry. See 28 U.S.C. § 2111; 1A

Moore’s FEDERAL PRACTICE, supra, 4 0.157[10.-2], at 165.

But however much sense that approach might make when the

mistake in the removal process is never corrected, it makes

no sense at all to permit a removal error to be challenged on

appeal after final judgment when, as in this case, the defect

was cured prior to trial. Setting aside the judgment in such

a case because the district court made what has proved to be

a wholly inconsequential error would represent a triumph of

“hypertechnical” formalism over common sense and sound

judicial administration.

In fact, Lewis’s approach plainly is inconsistent with the

intent of Congress, which drafted the statutory removal

provisions to encourage efficiency and avoid unnecessary

relitigation. For example, because Congress was aware that

“federal removal provisions may become a device affording

litigants a means of substantially delaying justice” (Thermtron

Products, Inc. v. Hermansdorfer, 423 U.S. 336, 355 (1976)

(Rehnquist, J., dissenting)), it provided in 28 U.S.C. §

1447(d) that parties may not appeal a district court’s decision

to remand a case to state court, “whether [the decision is]

erroneous or not.” Thermtron Products, 423 U.S. at 343.

As at least one court of appeals has recognized, a rule that

remained unavailable and there was no other statutory basis for

removal.

It was in this setting that the Court applied the rule “that

where after removal the case is tried on the merits without objection

and the federal court enters judgment, the issue in subsequent

proceedings on appeal is not whether the case was properly

removed, but whether the federal district court would have had

original jurisdiction of the case had it been filed in that court.” /d.

at 702 (emphasis added). It made sense in that context to note that

there had been no objection to removal because the removal error

— the mistaken invocation of Section 1444 — had never been

cured. Here, in contrast, the error (the lack of diversity) was cured

after removal.

16

precludes a remand after trial so long as the district court had

jurisdiction at the time of judgment “promotes finality and

judicial efficiency [in the same manner] as does 28 U.S.C. §

1447(d).” Gould, 790 F.2d at 774.

Similarly, Congress has acted to remove other

inefficiencies from the removal process. At one time the

court-created doctrine of “derivative jurisdiction” was thought

to require dismissal of suits removed to federal court, even

though the federal court had jurisdiction to decide the case.

That doctrine was premised on the view that “[t)he

jurisdiction of the federal court on removal is, in a limited

sense, a derivative jurisdiction. If the state court lacks

jurisdiction of the subject-matter or of the parties, the federal

court acquires none, although it might in a like suit originally

brought there have had jurisdiction.” Lambert Run Coal Co.

v. Baltimore & Ohio R. Co., 258 U.S. 377, 382 (1922). See

Franchise Tax Board v. Construction Laborers Vacation

Trust, 463 U.S. 1, 26 n.27 (1983).

Under this rule, if a plaintiff brought suit in state court

on a claim over which the federal courts had exclusive

jurisdiction, and the case subsequently were removed to

federal court, the federal court would be obligated to dismiss

the suit because the state court would have lacked jurisdiction

to decide it. See 1A MOoRE’S FEDERAL PRACTICE, {

0.157[3.-1], at 55-58 (citing cases). Not surprisingly, this

approach was criticized as “indefensibl[{e] from the standpoint

of practical judicial administration.” Jd. 0.157[3.-2], at 58;

see id. at 59-60. Congress agreed, providing in 28 U.S.C.

§ 1441(e) that “[t]he court to which [a] civil action is

removed is not precluded from hearing and determining any

claim in such civil action because the State court from which

such civil action is removed did not have jurisdiction over

that claim.” See H.R. Rep. No. 423, 99th Cong., 2d Sess.

13 (1986). The rule advanced by Lewis is in clear tension

with this statutory structure, which Congress crafted to

eschew the technical and to limit delay.

a

17

2. Here, these same “practicalities weigh heavily in

favor” of a rule that would leave the district court’s judgment

intact. Newman-Green, 490 U.S. at 837. The Court has

noted that “requiring dismissal after years of litigation would

impose unnecessary and wasteful burdens on the parties,

judges, and other litigants waiting for judicial attention.” Jd.

at 836. As a consequence, the Court has sought to interpret

the rules of removal in a manner that “best promote[s] the

values of economy, convenience, fairness, and comity. Both

litigants and States have an interest in the prompt and

efficient resolution of controversies based on state 'aw.”

Carnegie-Mellon University, 484 U.S. at 353. Indeed, it is

particularly important to avoid an overly rigid approach in the

removal area, which “remains technically difficult” (1A

MoOoRE’S FEDERAL PRACTICE, supra, 4 0.157[1.-3], at 44)

and where the occasional immaterial mistake may be

unavoidable.

With these principles in mind, as Judge Wilkinson wrote

for the Fourth Circuit in a case identical to this one, “judicial

economy and finality require that the district court’s judgment

be allowed to stand. Where a matter has proceeded to

judgment on the merits and principles of federal jurisdiction

and fairness to parties remain uncompromised, to disturb the

judgment on the basis of a defect in the initial removal

process would be a waste of judicial resources.” Able, 829

F.2d at 1334. That surely describes the situation in this case.

This suit was filed almost seven years ago; it was removed to

federal court almost six years ago. It was resolved in a six-

day jury trial before a competent court some two and one-half

years ago, in November 1993. Yet Lewis would vacate the

judgment entered by that court, throw six years’ worth of

federal court proceedings into the trash bin, and start the case

over from the beginning, all because the district court made

what proved to be an inconsequential error at the time of

removal.

18

Lewis’s approach is more faithful to Bleak House than it

is to the requirements of federal law. The Third Circuit’s

observation, addressed to a proceeding, like this one, in

which there was “a brief lack of complete diversity at the

beginning of the case” (Knop v. McMahon, 872 F.2d 1132,

1139 n.16 (3d Cir. 1989)), is equally appropriate here:

This factually complex dispute has been completely

adjudicated by a court which had jurisdiction over the

parties throughout the trial and at the time of judgment.

The parties and the court have devoted extensive

resources to its adjudication. They have had the benefit

of a full assessment of the disputed evidence by an

impartial factfinder. To erase the result of that process

by requiring them to litigate these claims all over again

in a state court does not seem to us necessary under the

case law with respect to removal for diversity.

3. That conclusion is especially apt because, “[iJn the

instant case, it is evident that none of the parties [were]

harmed” by trial of the case in federal rather than state court.

Newman-Green, 490 U.S. at 838. See id. at 833. The

federal court was, of course, fully competent to resolve

Lewis’s claims. Indeed, because complete diversity in fact

existed at the time of trial, federal court was the

presumptively better forum; trial there served to “protect

nonresidents from the local prejudices of state courts.” 14A

C. Wright, A. Miller & E. Cooper, supra, § 3721 at 187.

See Rothfeld, Rationalizing Removal, 1990 B.Y.U.L. REV.

221, 226 (removal assures “the availability of a sympathetic

and competent forum * * * to prevent bias against out-of-state

litigants”).

In these circumstances, as the leading commentators in

the area have suggested,

[t]he federal courts could * * * make a very constructive

contribution by eschewing the technical. Hypertechnical

application of the removal statutes furthers no goal of

ES Ne A es Oe ee

19

federalism and can be disruptive of state jurisdiction.

While the purposes of the removal statute should be

effectuated, we believe that harmless error should be

treated as harmless error.

1A Moore’s FEDERAL PRACTICE, supra, { 0.157[13], at

199. See 28 U.S.C. § 2111 (appellate courts shall ignore

“errors or defects which do not affect the substantial rights of

the parties”). This principle requires reversal of the decision

below.’

4. It should be added that the rule upon which we rely

does not leave the plaintiff without a remedy when the district

court errs in declining to remand a case to state court. If the

district court accepts a removed case in violation of the

removal statute and the defect is never cured, the plaintiff

may seek remand (see 28 U.S.C. § 1447(c)) and may present

the error on appeal after final judgment. See Mansfield,

Coldwater & Lake Michigan R. Co. v. Swan, 111 U.S. 379

(1884); Rothfeld, supra, 1990 B.Y.U.L. REV. at 242 &

n.106. And pursuant to 28 U.S.C. § 1292(b), the plaintiff

may seek certification to take an immediate interlocutory

appeal of the district court’s refusal to remand. The courts

generally have recognized the availability of certification on

the question whether removal was proper (see 1A MOORE’S

FEDERAL PRACTICE, supra, { 0.169 [2.-3], at 707; 14A C.

Wright, A. Miller, & E. Cooper, supra, § 3740, at 596-598),

and the procedure had been recognized in the Sixth Circuit

prior to the removal of this case. See Union Planters Nat’!

Bank of Memphis v. CBS, Inc., 557 F.2d 84, 86 (6th Cir.

1977). Lewis, however, failed to seek certification under

Section 1292(b).

” The jurisdictional defect here, before it was cured, was purely

statutory; the Constitution itself, of course, does not require

complete diversity. See State Farm Fire & Cas. Co. v. Tashire,

386 U.S. 523, 530-531 (1967).

20

This failure effectively waived Lewis’s complaint that the

procedure followed on removal failed to comply with the

requirements of the removal statute. “Interests of finality and

judicial economy * * * strongly suggest that the district

court’s judgment should not be disturbed where a party fails

to avail himself of a remedy that might earlier have resolved

the removal question.” Able, 829 F.2d at 1333. Thus,

[w]hen a party elects to forego an interlocutory appeal,

he runs the risk that the federal court will enter judgment

on the basis of complete diversity. * * * This rule

forces parties to give careful consideration to the

importance of their objection to removal, [and] brings the

benefit of early determination of the proper forum.

Able, 829 U.S. at 1333-1334. See Gould, 790 F.2d at 774.

The risk addressed by Judge Wilkinson in Able, of course, is

what materialized here: during the period between removal

and final judgment diversity became complete. Lewis

accordingly forfeited his opportunity to challenge the

propriety of the removal when he failed to pursue an

interlocutory appeal.

This conclusion is strongly supported by the analysis of

three Justices in Alligator Co., Inc. v. La Chemise Lacoste,

421 U.S. 937 (1975) (White, J., dissenting from denial of

certiorari). They were of the view that, where the propriety

of removal could be raised in an interlocutory appeal (in that

case, on appeal from denial of a preliminary injunction),

“Grubbs * * * should be extended so as to require that the

question be raised in such an appeal. Otherwise, wasteful

litigation is invited, and the losing party on the merits is

given another bite at the apple.” Jd. at 938-939 (emphasis in

original).* Cf. Van Cauwenberghe v. Biard, 486 U.S. 517,

* In fact, it appears that federal subject matter jurisdiction was

absent in that case even at the time of the court of appeals’

judgment, which seemingly made a remand to state court

21

529-530 (1988) (Court relied in part on the availability of

interlocutory appeal under Section 1292(b) in refusing to

permit interlocutory appeals as of right challenging forwn non

conveniens determinations). In this case as well, where

Lewis failed to pursue an opportunity to obtain immediate

review of the order denying a remand, his dilatory approach

should not be rewarded by allowing him “to start over in the

District Court,” an outcome that “‘would entail needless

waste and runs counter to effective judicial administration.’”

Newman-Green, 490 U.S. at 833, quoting Mullaney, 342

U.S. at 417.

In sum, the remand ordered by the court of appeals

represents a gross miscarriage of justice. The jurisdictional

defect in the case was cured, Lewis was not prejudiced, and

he received a trial in federal court that was fair in every

respect. No decision of this Court, no requirement of any

federal statute, and no principle of sound judicial

administration requires setting aside the results of that trial

and giving Lewis a second bite at the apple in state court.

mandatory. See La Chemise Lacoste v. Alligator Co., Inc., 506

F.2d 339, 343-346 (3d Cir. 1974). That consideration may explain

the Court’s denial of review.

22

CONCLUSION

The judgment of the court of appeals should be reversed.

Respectfully submitted.

JAMES B. BUDA KENNETH S. GELLER*

Caterpillar Inc. MICHAEL R. FEAGLEY

100 N.E. Adams St. JOHN E. MUENCH

Peoria, IL 61629-7310 CHARLES ROTHFELD

Mayer, Brown & Platt

WILLIAM F. MAREADY 2000 Pennsylvania Ave., N.W.

Robinson Maready Lawing Washington, D.C. 20006

& Comerford, L.L.P. (202) 463-2000

380 Knollwood St.

Suite 300 LesLigE W. Morais II

Winston-Salem, NC 27103 Stoll, Keenon & Park, LLP

201 E. Main St.

Suite 1000

Lexington, KY 40507

* Counsel of Record

JUNE 1996