Month: March 2020

Where Exactly Do You Live?


This may seem to be an unimportant question, but for federal jurisdiction it may make all the difference. In the case of Eberle v. Overdrive, Inc., No. 19-cv-466-jdp (W.D. Wisconsin January 28, 2020), the plaintiff filed suit against a former employer in Wisconsin state court. Overdrive sought to move the case to Ohio based on a forum clause. In response Eberle filed an affidavit that stated that he was a long-term resident of Wisconsin with deep ties to the state. Overdrive then removed the case to federal court. Eberle then moved to remand and filed a new affidavit that he was a citizen of Ohio and was raising children there. The court held an evidentiary hearing and determined that Eberle was, in fact, a citizen of Ohio and dismissed the case because both litigants were citizens of Ohio.

The more important question was: would Eberle face consequences for filing an affidavit in Wisconsin that contradicted the affidavit he later filed in federal court?

Sadly, Eberle did not face any adverse consequences because the arguably problematic affidavit was filed in the state court, not the federal court. The court held that Eberle would not be sanctioned. The explanation:

At the hearing, the court expressed concern that Eberle’s state-court affidavit regarding his ties to Wisconsin had been misleading. The affidavit portrayed Eberle as a current Wisconsin resident who stood to be inconvenienced by any transfer of his case to Ohio. See, e.g., Dkt. 1-3, at 11 (“I am a longtime resident of Wisconsin, having been born and raised here, and lived here most of my adult life. Until Defendant hired me in 2017, I lived in Gleason, Wisconsin where I have been residing since 2008.”); id. at 12 (“I still maintain a residence at W1446 Bear Trail Road, Gleason, WI 54435. I filed my taxes earlier this year as a Wisconsin resident.”). After the hearing, the court ordered Eberle to show cause why he should not be sanctioned under Federal Rule of Civil Procedure 11(c)(3).

Eberle contends that all his statements were and are factually accurate. That’s not true in every detail: as of the date of the affidavit, May 24, 2019, he had not yet filed his taxes for the year. But the main problem is not affirmative false statements; it is that Eberle intentionally omitted material facts. Eberle failed to disclose in state court that he had been a nearly fulltime resident of Ohio since 2017, that he had moved his family there, continued to work there, and intended to remain there permanently. It is inconceivable that Eberle was unaware of these facts, or that he and his counsel did not realize that these facts were highly material to Overdrive’s motion to stay the state case in favor of litigation in Ohio.

The court will decline to impose sanctions under Rule 11, but not because Eberle’s statements are factually accurate. The court would impose sanctions under Rule 11 for intentional material omissions in an appropriate case. But Eberle’s intentional material omissions related to statements made to the state court, not to this court. If Eberle had relied on his state-court affidavit in advocating for remand, I would consider Rule 11 sanctions for his counsel. See Fed. R. Civ. P. 11 advisory committee’s note to 1993 amendment (“[I]f after a notice of removal is filed, a party urges in federal court the allegation of a pleading filed in state court ([including] in disputes regarding removal or remand), it would be viewed as `presenting’—and hence certifying to the district court under Rule 11—those allegations.”). As it stands, I have found that Eberle was honest with this court; it was the state court whose dignity was insulted by the material omissions that made Eberle’s state-court submissions so misleading.

The court did award Overdrive its legal fees in removing the case under 28 USC 1447(c).

But that’s not the end of the matter. Under 28 U.S.C. § 1447(c), courts remanding an improperly removed case “may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” Eberle asked the court to shift costs and expenses to Overdrive for removing the case without an “objectively reasonable basis.” Dkt. 7, at 8-9 (quoting Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005)). That request is denied; Eberle’s state-court affidavit gave Overdrive a reasonable basis to infer that Eberle was a Wisconsin citizen. The court will, however, grant Overdrive’s request that Eberle be ordered to pay its removal-related fees and expenses. Although § 1447(c) is more commonly invoked against the defendant, there is “no party-based limitation in § 1447(c) on a district court’s discretion to award fees and costs.” Micrometl Corp. v. Tranzat Techs., Inc., 656 F.3d 467, 470 (7th Cir. 2011). Fee-shifting is appropriate here. Eberle’s misleading representations in state court prompted unnecessary expenditure of time and resources addressing a reasonable but ultimately flawed removal. See Martin, 546 U.S. at 141 (“a plaintiff’s . . . failure to disclose facts necessary to determine jurisdiction may affect the decision to award attorney’s fees”).

This is an excellent example of how removal issues can be confusing and complicated.

http://www.clintonlaw.net

Lawyer Sanctioned For Removing Case After Deadline Passed


The right of a defendant to remove a case to federal court is set forth in several statutes. To remove the defendant normally has to prove that there is federal jurisdiction. In this slip and fall case, the defendant had to show that the plaintiff and defendant were citizens of different states and that the amount in controversy exceeded $75,000. There is also a rule that no case can be removed more than one year after it was first filed.

Here, in Hajdasz v. Magic Burger, LLC, No. 19-12528 (unpublished) (11th Circuit, March 11, 2020), the case was a slip and fall case. The plaintiff had medical expenses of $26, 434, 31 and some future medical expenses. An expert testified that those expenses would be $2,800 per year for 22 years. The defendant then removed the case. The federal court remanded the case back to the state court and assessed Rule 11 sanctions in the amount of $2750 against the lawyer. The lawyer appealed the sanctions award.

Result: sanctions were affirmed. The lawyer’s decision to remove a case more than one year after it was filed was unreasonable. The explanation:

Because Metsch’s decision to remove his clients’ case is the basis for the Rule 11 sanctions, we review that law here. Any removal to federal court on the basis of diversity jurisdiction must satisfy both the substantive jurisdiction requirements of 28 U.S.C. § 1332 and the “procedural requirements regarding the timeliness of removal” pursuant to 28 U.S.C. § 1446. Pretka v. Kolter City Plaza II, Inc., 608 F.3d 744, 756 (11th Cir. 2010). Where the requirements for diversity jurisdiction can be derived from the face of the complaint, “notice of removal of a civil action or proceeding shall be filed within 30 days after the receipt by the defendant . . . of a copy of the initial pleading.” 28 U.S.C. § 1446(b)(1). Where, as here, the complaint does not state facts that satisfy diversity jurisdiction, “a notice of removal may be filed within 30 days after receipt by the defendant . . . of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.” Id. § 1446(b)(3). This late-removal procedure has a time limit, however, as a case that comes to satisfy the substantive requirements of federal diversity jurisdiction may not be removed “more than 1 year after the commencement of the action.” Id. § 1446(c)(1). The sole exception to this one-year removal cutoff is where “the district court finds that the plaintiff has acted in bad faith in order to prevent a defendant from removing the action.” Id. § 1446(c)(1). Bad faith is shown where the district court determines that “the plaintiff deliberately failed to disclose the actual amount in controversy to prevent removal.” Id. § 1446(c)(3)(B).

Here, Metsch removed his client’s case beyond the one-year anniversary of the filing of the complaint. Thus, one-year bar was plainly implicated. Id.. § 1446(c)(1). Metsch argues nonetheless that his client was excepted from the one-year deadline for two reasons: (1) Hajdasz’s refusal during discovery to provide a damages calculation amounted to “bad-faith”; and (2) our cautionary language in Lowery v. Alabama Power Co., where we stated that, in the context of a § 1446(b)(3)-type removal, a defendant removing a case to federal court must possess a document containing an “unambiguous statement that clearly establishes federal jurisdiction.” 483 F.3d 1184, 1213 n.63 (11th Cir. 2007). For these reasons, Metsch contends he had no option but to wait until Hajdasz moved in writing for a directed verdict of more than $75,000—which just happened to occur at the end of trial—before removing the case, and thus his decision to remove the case was not frivolous.

The district court found that Metsch’s invocation of the bad-faith exception to § 1446(c)(1) was “insupportable.”[9] We agree.[10] The district court found that the plaintiff’s discovery objections were well-taken and that there was no “bad-faith pattern” or failure to disclose the amount in controversy. Metsch has not demonstrated that the district court abused its discretion in so ruling.

Further, as the district court noted, the delay in learning the total damage amount was squarely attributable to Metsch:

The most telling factor in this particular case is the timeline of the discovery and the lack of any effort by Magic Burgers to take any steps whatsoever within the one-year removal period to compel [Hajdasz’s] damages response which it now alleges [Hajdasz] “deliberately withheld to avoid removal.”

Hajdasz v. Magic Burgers, LLC, No. 6:18-cv-01755-ACC-LRH, 2018 WL7436133, at *8 (M.D. Fla. Dec. 10, 2018) (emphasis added). Indeed, Magic Burgers took Hajdasz’s deposition 10 months after the suit was filed, asked only a few questions at that deposition pertaining to the damage amount, and neglected to move to compel answers to those deposition questions for nearly 16 months after the complaint was filed. And not once did Magic Burgers seek to compel responses to written discovery regarding damages. Because of Metsch’s lack of diligence, the one-year deadline passed. His untimely attempt to remove during trial, accordingly, was arguably frivolous. And therefore the district court did not abuse its discretion in so ruling. See A.S. ex rel. Miller v. SmithKline Beecham Corp., 769 F.3d 204, 212 (3d Cir. 2014) (finding that the bad-faith exception to the one-year limit applies only where a defendant can demonstrate “(1) that he has been pursuing his rights diligently, and (2) that some extraordinary circumstances stood in his way.” (quoting Pace v. DiGuglielmo, 544 U.S. 408, 418 (2005))).

Federal removal rules are tricky and contain traps for the unwary. Federal judges often find ways to remand cases to state court, even where it seemed clear that there was removal jurisdiction. In this case, a bad decision to remove cost a lawyer $2,750.

Edward X. Clinton, Jr.

http://www.clintonlaw.net

Plaintiff Given One More Chance – Rule 37 Sanctions Denied


In Rhodes v. Hilton Resorts Corporation, LLC 2-19-cv-00938-JAD-EJY, the defendant served discovery requests on the plaintiff. Plaintiff did not answer any of them and the defendant moved for Rule 37 sanctions and requested dismissal of the case.

Plaintiff has not complied with her discovery obligations pursuant to Fed. R. Civ. P. 33 or 34. Plaintiff’s responses to discovery propounded by Defendants was untimely (resulting in a waiver of all objections), incomplete, and misleading. After a meet and confer in which Plaintiff’s Counsel did not disagree with Defendants’ position, Plaintiff continued to ignore her duties to engage in discovery in a timely and appropriate manner.

The Court is empowered with wide discretion, pursuant to Fed. R. Civ. P. 37, to fashion a sanction for Plaintiff’s repeated discovery failures. When a party believes its opponent has failed to timely comply with the requirements of disclosure, that party may move for sanctions under Rule 37(c). Rule 37 “gives teeth” to the disclosure requirements of Rule 26(e). Yeti by Molly, Ltd. v. Deckers Outdoor Corp.,259 F.3d 1101, 1106 (9th Cir. 2001). District courts are entrusted with wide latitude when exercising their discretion to impose Rule 37(c) sanctions. Id.

Defendants are correct that dismissal of Plaintiff’s Complaint is severe. In fact, even in the face of bad faith or willfulness courts are loathe to enter a case-terminating sanction in the first instance. See Cooley v. Leung, Case No. 2:10-cv-1138-RLH-RJJ, 2013 WL 209730, *1-2 (D. Nev. Jan. 16, 2013). Here, Plaintiff’s conduct is egregious; however, the Court considers alternative sanctions before it will order dismissal of Plaintiff’s Complaint. Specifically, the Court provides Plaintiff one opportunity to change her course and participate timely and in good faith in the case that she brought to Court. Plaintiff’s failure to obey this Court Order will result in an Order to Show Cause why her case should not be dismissed.

Comment: the court granted the motion to compel and gave the plaintiff one more chance to comply with discovery.

Ed Clinton, Jr.