This is Part 1 of an 8-part series which covers:
- Part 1 – Federal Question Jurisdiction;
- Part 2 – Supplemental Jurisdiction;
- Part 3 – Diversity Jurisdiction: Complete Diversity;
- Part 4 – Diversity Jurisdiction: Amount in Controversy;
- Part 5 – Diversity Jurisdiction: Resident Defendants;
- Part 6 – Timing of Removal;
- Part 7 – Checklist for Removal;
- Part 8 – Remand
Part 1 – Federal Question Jurisdiction
Plaintiffs often wonder how filing an action in state court can lead to them standing before a federal judge a few weeks later. The answer is a defendant’s power of removal.
The Well-Pleaded Complaint Rule
One way in which a defendant can gain the power of removal is through the “well-pleaded complaint rule.” Under the well-pleaded complaint rule, a federal court has jurisdiction over an action when a federal question is presented on the face of the plaintiff’s properly pleaded complaint. Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). The key word in this rule is complaint—as federal jurisdiction is determined solely on the claims pled in the complaint. A defendant cannot remove an action to federal court based on a federal question raised in a defense, a counterclaim, a cross-claim, or a third-party claim. Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 16 (1983); Holmes Group, Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 832 (2002). Similarly, a defendant cannot remove an action to federal court merely because the plaintiff could have alleged a federal claim in his or her complaint but chose only to assert state law claims instead. Sullivan v. First Affiliated Sec., Inc., 813 F.2d 1368, 1371-72 (9th Cir. 1987). Finally, third-party plaintiffs and third-party defendants have no right of removal. Thomas v. Shelton, 740 F.2d 478, 488 (7th Cir. 1984); Metro Ford Truck Sales, Inc. v. Ford Motor Co., 145 F.3d 320, 327 (5th Cir. 1998).
The Artful Pleading Rule
The one exception to the well-pleaded complaint rule is the “artful pleading rule.” Under this rule, if a complaint does not assert any federal claims on its face—because of the artful pleading of the attorney—but the claims asserted in the complaint are actually federal in nature because they have been preempted by federal law, then the defendant can still remove the action to federal court. The key to the artful pleading rule is preemption. Sullivan, 813 F.2d at 1372.
Here’s an example: Robert Doe works for a sofa manufacturer, Sofa Inc. Robert wants to sue Sofa Inc. in state court for either failing to properly manage and control pension plan assets or for fraud under Nevada’s racketeering statute, because pension plan information that Sofa, Inc. mailed to him failed to disclose the high-risk investments made by the plan administrators. Robert’s attorney tells him that his strongest claim is for failing to properly manage and control the pension plan assets, as the racketeering claim will be very hard to prove. Robert now has a tough decision on his hands, as only the racketeering claim will ensure that his case stays in state court.
Specifically, the pension plan claim is governed by ERISA (the Employee Retirement Income Security Act of 1974). The federal statute has preempted state laws on this subject. Therefore, no matter how skillfully (or artfully) Robert’s attorney pleads the pension plan claim under state law, Sofa Inc. could remove the preempted claim to federal court. The federal Racketeer Influenced and Corrupt Organizations Act (RICO), on the other hand, has not preempted state racketeering statutes. Therefore, if Robert pleads fraud under Nevada’s racketeering statutes, Sofa Inc. cannot remove the claim merely because Robert could have alleged the same claims under the federal RICO act. Thus, Robert must now determine which is more important to him — trying his claims in state court or proving his claims and potentially recovering damages from Sofa Inc.
Stay tuned for Part 2 in this series, posted here, in which I will discuss supplemental jurisdiction.
Please email me if you would like a copy of this series.
About Sarah Harmon:
Sarah E. Harmon is a partner at Bailey Kennedy and has over 18 years of experience in the areas of appellate advocacy and civil/business litigation, including breach of contract, fraud, legal malpractice, products liability, complex civil litigation, and many other types of business disputes. Her experience with appellate advocacy includes appeals from adverse judgments and orders as well as petitions for extraordinary writ relief. Ms. Harmon can assist clients with obtaining settlements and judgments before going to trial, avoiding errors at trial, and properly preserving issues for an appeal.
If you have any questions about appeals or civil/business litigation, please call or email Sarah Harmon at 702-562-8820 or email@example.com. Additional resources can also be found at www.baileykennedy.com/category/articles/ or linkedin.com/in/sarahharmonbk/.
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