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Federal Courts

Fraudulent Removal

Introduction

In TransUnion LLC v. Ramirez,1×1. 141 S. Ct. 2190 (2021). the Supreme Court held that individuals claiming a violation of a federal statute had no standing unless they could show they suffered a concrete injury.2×2. Id. at 2200. The availability of a statutory penalty alone, the Court explained, was not enough to confer standing to sue in federal court.3×3. Id. at 2205. This narrowing of federal standing, as Justice Thomas observed in dissent, might lead plaintiffs to bring federal claims in state courts with more permissive standing rules.4×4. Id. at 2224 n.9 (Thomas, J., dissenting) (“By declaring that federal courts lack jurisdiction, the Court has thus ensured that state courts will exercise exclusive jurisdiction over these sorts of class actions.”). If plaintiffs followed this advice, however, defendants might remove cases from state to federal court and then try to kill them on standing grounds. By doing so, though, the defendants essentially admit that the removals were improper because the federal court lacked jurisdiction in the first place. While this maneuver is not new, recent standing decisions in TransUnion and Spokeo, Inc. v. Robins5×5. 136 S. Ct. 1540 (2016). will only make it more appealing. Indeed, in another case last Term, the Court acknowledged that a newly announced rule of appellate jurisdiction also might increase the frequency with which defendants offer questionable arguments for removal from state court.6×6. BP P.L.C. v. Mayor of Balt., 141 S. Ct. 1532, 1542–43 (2021) (“[Plaintiff] warns that our interpretation will invite gamesmanship: Defendants may frivolously add § 1442 or § 1443 to their other grounds for removal, all with an eye to ensuring appellate review down the line if the case is remanded.” Id. at 1542.). The case involved the rather arcane issue of appellate review of remand orders that send removed cases back to state court. Id. at 1536. Remand orders are generally not reviewable, but there is an exception for cases involving federal officers. Id. The Court held that an appellate court may consider the entire remand motion as long as the federal officer question is among the issues presented. Id. at 1538, 1543.

This Essay draws attention to this phenomenon and gives it a name: fraudulent removal. Removal is the process by which a defendant in state court seeks to transfer a case to federal court, provided that the federal court would have had original jurisdiction over the proceeding.7×7. See 28 U.S.C. § 1441. “Fraudulent removal” occurs when a removing defendant’s assertion of federal jurisdiction is made in bad faith or is wholly insubstantial.8×8. Note that our definition of fraudulent removals differs from Professor Lonny Hoffman and Erin Mendez’s idea of “wrongful removals,” which they define as cases in which defendants seek to extend the existing law of removal to situations the authors find exorbitant. See Lonny Hoffman & Erin Horan Mendez, Wrongful Removals, 71 Fla. L. Rev. F. 220, 221 (2020) (defining wrongful removal as cases “in which defendants have invoked arguments to gain access to the federal forum that were — or, still are — highly questionable”). Most of their examples of wrongful removal would not be fraudulent under our definition. Note also that our definition differs from Professors Theodore Eisenberg and Trevor Morrison’s idea of “erroneous removals,” which they define to include any case that is removed and then remanded. See Theodore Eisenberg & Trevor W. Morrison, Overlooked in the Tort Reform Debate: The Growth of Erroneous Removal, 2 J. Empirical Legal Stud. 551, 551 (2005). Our fraudulent removals are a subset of erroneous removals. See infra note 30 and accompanying text. Our definition is closer to their “abusive removal,” a topic they briefly mention but do not analyze deeply. See Eisenberg & Morrison, supra, at 561–62.

The clearest example of fraudulent removal is when a defendant removes a case to federal court and plans to immediately argue that the federal court lacks subject matter jurisdiction. This self-incriminating motion shows that the defendant knew or should have known that removal was improper. For example, in Mocek v. Allsaints USA Ltd.,9×9. 220 F. Supp. 3d 910 (N.D. Ill. 2016). the plaintiff filed a putative consumer class action in state court.10×10. Id. at 911. Although the plaintiff sued under a federal statute, the state and federal courts had concurrent jurisdiction.11×11. Id. at 912. The defendant removed and a month later moved to dismiss (with prejudice) for lack of standing.12×12. Id. at 911, 913. The plaintiff then sought an order to remand the case.13×13. Id. at 911. The plaintiff argued that it was the defendant’s burden to prove that the federal court had jurisdiction under the removal statute and that the defendant had admitted that the court lacked jurisdiction in its motion to dismiss, thus clarifying that it could not meet its burden for removal in the first place.14×14. Id. The district court ultimately remanded the case to state court and awarded attorney fees to the plaintiff for litigating the motion on grounds that the defendant should have known “that with no party asking for the merits of plaintiff’s claim to be decided in federal court, and both sides arguing against federal jurisdiction, the only possible outcome was for the case to end up right back where it started: in state court.”15×15. Id. at 914–15.

As this example suggests, fraudulent removal wastes judicial resources, needlessly delays proceedings, and offends notions of federalism. It is different from merely forum shopping, but instead is more like a form of misrepresentation, a fraud upon the court. If litigation were a game, it would be cheating. But litigation is not a game. When a defendant removes, it should have both a colorable basis for arguing that the federal court has jurisdiction and the intention to argue that position zealously in support of its motion.

Fraudulent removal may not be rampant, but it exists. With the narrowing of Article III standing to sue, it may become an even larger problem for the courts. Defendants may be tempted to engage in fraudulent removal when they stand to benefit from it, such as when the cost that delay imposes on plaintiffs is worth the risk of fee shifting. Cases such as Mocek show that existing sanctions are not sufficient deterrents. The ability of the Mocek court to award attorney fees, while better than nothing for the plaintiff, did not stop the defendant from executing a fraudulent removal.

This Essay aims to assist courts in solving the problem of fraudulent removal by naming the phenomenon and proposing ways to curb it without waiting for legislative action. In the first Part of this Essay, we briefly explain the law of removal and when removal is fraudulent. We then show in Part II that fraudulent removal offends notions of federalism and fairness. In the final Part, we propose some solutions judges can adopt without any statutory changes to punish and deter fraudulent removal.


* Professor of Law at Northwestern Pritzker School of Law.
** Ellen Ash Peters Professor of Law at the University of Connecticut School of Law. Both authors take equal credit and blame for the arguments we make. The corresponding author is Lahav ([email protected]). Thank you so much to Kevin Clermont, Scott Dodson, Matthew Kugler, Michael Morley, Tejas Narechania, and James Pfander for comments that greatly improved the piece, and to Jay Edelson for focusing our attention on this phenomenon.