Thursday, October 13, 2005

Harris v. Bankers Life & Cas. Co. (9th Cir. - Oct. 6, 2005)

Here's another opinion for those desperately interested in civil procedure. (And aren't we all?) When does the 30-day period for removal start to run if the complaint itself doesn't clearly reveal the basis for removal; e.g., if it doesn't contain allegations about the residence of the parties? Judge McKeown holds that it essentially doesn't: rather, that this 30-day period starts only once (and if) the face of the complaint itself affirmatively reveals the facts necessary for removal.

I'm not going to complain much about the result in this case, which I think Judge McKeown gets right. It is a classic case where removal was indeed likely proper. Judge McKeown also does a good job of providing some reasonably persuasive justifications for her adopted rule.

But easy cases sometimes make bad law, and I think that this somewhat happens here. Judge McKeown's rule properly resolves the case before her, and this case also exemplifies the problems of any rule that would start the 30-day clock based upon constructive knowledge of various jurisdictional facts. But, in my mind, Judge McKeown has to -- or at least should -- do a little more than that. Because her rule has definite downsides of its own, and rather than address them, she instead ignores them. Which makes me wonder whether she didn't even consider them, doesn't have a response, or thinks that they involve a different rule.

For example, Judge McKeown holds that the 30-day period only begins to run when the complaint itself contains the jurisdictional facts; further, that the defendant's "knowledge, constructive or otherwise," of the possibility of removal doesn't start the clock. Really? So let's say I (a resident of California) sue IBM (a Delaware corporation with its PPB in New York) in state court, but my complaint only alleges that I'm a California resident and doesn't say anything about IBM's residence. Does IBM's 30-day clock for removal really not start running from the day of service?! After all, my complaint itself doesn't allege the necessary jurisdictional facts. And Judge McKeown has expressly held that the subjective knowledge of IBM -- which surely knows its own residence -- is irrelevant, and has also provided policy reasons (bright line rule, etc.) why that should be the case. So she'd seemingly hold that IBM can remove anytime it wants (within, of course, the year-long deadline) since the 30-day clock didn't start ticking yet. So IBM can remove once it learns who the state court judge will be, once the state court judge has issued a tentative decision on a motion for summary judgment, once various discovery stages are approaching or have transpired, etc. In other words, pursuant to Judge McKeown's rule, IBM can engage in precisely the type of manipulative and abusive removal that the 30-day clock was designed in large part to avoid. Ditto for post-filing and amended complaints that create the possibility of removal; e.g., the 30-day clock starts whenever IBM wants it to start when Shaun initially sues IBM and Sandy (another California resident) and then subsequently dismisses Sandy. The fact that IBM knows that the case is removable immediately upon Sandy's dismissal is irrelevant. It gets to wait and remove whenever it feels like it.

Now, I'm not saying that the rule that Judge McKeown adopts in this regard isn't a possible interpretation of Section 1441. You could adopt such a rule (though I think it'd be a little bit hard to square with the text). But it'd nonetheless be a bad rule. And that's essentially the one that Judge McKeown adopts. At the very least, she needs to articulate why these untoward results of her rule won't occur, won't matter, or are somehow distinguishable. But, in all honesty, without amending her opinion, I don't think she can. Once she holds that the subjective knowledge of the defendant doesn't matter, she's got to bite the bullet on some extremely bad consequences. Sufficiently bad, in my mind, that they clearly outweigh the benefits of her holding, especially since the downsides of her rule will transpire much more often (since they're much more common) than the downsides (e.g., disputes over "what and when defendant knew X") she discusses in her opinion.

I like Judge McKeown. She's smart and fair. But she goes a bit overboard on this one, and lets a bad case make bad law.