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The American Law Institute’s (ALI) newly published Federal Judicial Code Revision Project addresses many of the most difficult areas of federal jurisdiction and practice. In my last two columns, I discussed the ALI’s venue recommendations and its supplemental jurisdiction proposal. In this column, I will complete my discussion of the ALI’s supplemental jurisdiction proposals and related removal recommendations. Finally, my next column will discuss the ALI’s proposed revisions to removal procedure. My last column explained that the ALI’s proposals for rewriting �� 1367 and 1441 use the distinction between “claim specific” and “action specific” to provide the basis for a more coherent analysis of when federal jurisdiction exists, and which supplemental claims are within the courts’ jurisdiction. Section 1367(a) first defines a “freestanding” claim as one that is within the original jurisdiction of the federal courts; second, it defines a “supplemental” claim as one that is not freestanding but related to any freestanding claim asserted in the action; and third, it creates a new analytical term-claims “asserted in the same pleading.” The use of these three concepts allows for a more coherent approach to determining if a case is within federal jurisdiction for original or removal purposes. I further explained proposed � 1367(b), which sets out the standard for determining whether a supplemental claim is related to a freestanding claim, and 1367(c), which contains limitations on the extent to which supplemental jurisdiction may be exercised in diversity cases. Discretionary supplemental jurisdiction proposals Proposed subsections (d) and (e) both address the district court’s discretion. The ALI’s proposal for when a district court may decline to exercise supplemental jurisdiction, contained in � 1367(d), reads much like the current statute. However, the changes in language are designed to make clear that the district court must exercise jurisdiction over freestanding claims, and that it ordinarily should exercise supplemental jurisdiction. The courts of appeals differ on the degree of discretion that district courts have with respect to exercising jurisdiction over supplemental claims. The ALI is essentially taking the view of a majority of the circuits that the statute circumscribes the district court’s discretion. In my view, the proposal here simply iterates the better rule. Subsection (e), on the other hand, provocatively provides district courts with the discretion to enlarge significantly supplemental jurisdiction in the context of removed cases. Proposed � 1367(e) deals with a common scenario. Once defendants remove a case to federal court on the ground of diversity, a plaintiff often seeks to amend the complaint to add a nondiverse defendant, hoping that the court will grant the motion and thereafter remand the case to state court. Under current � 1447(e), the district court may deny the motion, or grant the motion, but then dismiss the case because complete diversity would be destroyed. The ALI suggests essentially moving � 1447(e) from the removal statute to proposed � 1367(e), and then provides district courts with a third option: the discretion to grant the motion but retain jurisdiction. This is an important provision, and a good idea. If the court thinks that the plaintiff is merely trying to forum-shop, i.e., get the case back to state court, the district court still can do what district court judges now often do: refuse to grant the motion. But if the court thinks that it makes sense to join the defendants, the court may allow the joinder and proceed with the case. This is a fair result. The plaintiff chose a state court forum. The defendant, not the plaintiff, invoked federal jurisdiction. A plaintiff in this scenario has not done the forbidden end run around the complete diversity rule. One might argue that this provision invites plaintiffs to try to end run the complete diversity rule: plaintiffs file in state court against a diverse defendant; wait for the defendant to remove the case; then seek to add all the other possible defendants, including the nondiverse ones. Under the ALI’s proposal, however, in such a case, if the district court believed that the plaintiff was playing games, the court could simply deny the motion, or grant it and remand the case to state court. Like the ALI’s venue recommendations, the removal recommendations are designed to codify, clarify and simplify substantive and procedural aspects of removal. The ALI proposal with respect to the basic removal statute, 28 U.S.C. 1441, which governs the types of cases that are removable, would not by its terms enlarge or diminish the number of cases that would be removable. But the proposed revised statute contains new language and is reorganized in an attempt to clarify the standards for which cases are removable. The new language also dovetails with the new approach that the ALI proposes for revising the supplemental jurisdiction statute. The proposed revisions to � 1367 speak in terms of jurisdiction over particular claims, as opposed to civil actions. The proposed revision to � 1441(a) makes the same distinction and introduces the concept of a “removable claim” and � 1441(a)(2) would further provide that a civil action is removable if every claim asserted in the complaint is removable. Proposed � 1441(a) also addresses the problem of fraudulent joinder. As this column has discussed on numerous occasions, often plaintiffs seeking to remain in state court will name nondiverse defendants to defeat the right of removal. The proposal reminds litigants of the fraudulent-joinder problem by noting that claims against parties not properly joined will be disregarded. Proposed � 1441(b) applies to removal of claims based on diversity, and would maintain the rule that cases sought to be removed solely on the basis of diversity may not be removed if any of the served defendants is a citizen of the state in which the case was filed. The ALI would retain the much-maligned Section 1441(c), which allows the removal of a case in which a removable claim is “separate and independent” from nonremovable claims. Together with its proposal for rewriting the supplemental jurisdiction statute, however, the revised � 1441(c) clarifies how and when it ought to be used to remove a case in contrast to when a case would be removable under � 1441(a), the general removal provision. I am sure that many of you who have encountered � 1441(c) have been frustrated when trying to figure out the meaning of “separate and independent.” You may recall that the test for when � 1441(c) removal is proper is rather stringent. In American Fire & Cas. Ins. Co. v. Finn, 341 U.S. 6 (1951), the Supreme Court announced what can be stated as the “one fire” rule: “[W]here there is a single wrong to a plaintiff, for which relief is sought, arising from an interlocked series of transactions, there is no separate and independent claim under � 1441(c).” The plaintiff had suffered a fire loss, and there was an insurance coverage dispute. The plaintiff sued the insurance agent, who may have negligently failed to acquire the coverage for the plaintiff’s property, and the insurance companies, who allegedly were breaching an agreement to pay. The Supreme Court held that the case was not removable because the claims against the diverse insurance companies were not separate and independent from the claim against the nondiverse broker-all the claims arose out of the same fire. A 1990 amendment raises an interesting question When Congress amended � 1441(c) in 1990 to restrict its availability to cases in which a federal question within the meaning of � 1331 was presented, an interesting question also was presented. Perhaps one explanation for the restrictive interpretation of the meaning of “separate and independent” in Finn is that the rule was a product of the fact that it was a diversity case. Permitting removal would have amounted to an end run around the complete diversity rule, which would be against Congress’ wishes. I wondered whether courts would continue to be as restrictive in interpreting the meaning of separate and independent once the basis of removal jurisdiction had to be a � 1331 federal question. I also wondered whether � 1441(c) would ever be used. The amendment was enacted the same year that Congress enacted the supplemental jurisdiction statute. If a defendant wanted to remove a case, and the plaintiff had alleged a federal question, and the other claims alleged were related in the supplemental jurisdiction sense-part of the same case and controversy-to the federal claim, the case would generally be removable under � 1441(a) because the case could have been filed originally in federal court. The federal claim would have provided a foothold in the federal court, and then supplemental jurisdiction would provide the basis for subject-matter jurisdiction over the state law claims. So � 1441(c) raised some constitutional questions. Suppose one or more of the nonfederal question claims were not related-part of the same case or controversy-as the federal question claim. How could it be constitutional for the court to exercise jurisdiction over the claims? Section 1441(c) contains a discretionary remand provision, but does not expressly require the court to remand otherwise nonremovable claims. Where does separate and independent fit into all of this? If a claim is related enough for constitutional purposes, then the case should be removable under � 1441(a). If not, then it is outside the scope of federal jurisdiction. The ALI’s proposal would help to solve the problem. It eliminates the “separate and independent” language, and substitutes language consistent with its supplemental jurisdiction proposal. When a case is not removable solely because a federal question claim “has been joined to a nonremovable claim that is not part of the same case and controversy . . . such nonremovable claim shall be disregarded and the entire action may be removed.” However, the proposal states that the court shall sever all such nonremovable claims and remand them to state court. Georgene M. Vairo is a professor of law and William M. Rains Fellow at Loyola Law School, Los Angeles. She can be reached at [email protected].

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