skip to Main Content

In defending complex civil matters, one important consideration is the question of whether the matter must stay in the state court in which plaintiff filed, or, is there a basis for removal to federal court.  Trying a matter in federal court could present a host of benefits.  They include: a wider and deeper jury pool, avoiding feeling as if the matter is being tried on plaintiff’s “home turf,” and a more predictable application of procedural and substantive rules, authorities, customs, and practices.

 

The most common basis for seeking removal to federal court is where there is diversity of citizenship amongst the parties and the amount in controversy exceeds $75,000.  While the U.S. Code (see 28 U.S.C.A. § 1332) is fairly straight forward, it is not uncommon for confusion or ambiguity to exist over the “citizenship” of a corporate party.  This is particularly true where the corporate party is regional, national, or even international, thereby having a reach that extends beyond one discrete state.

 

28 U.S.C.A. § 1332(c) identifies a corporation as a citizen of every (U.S.) state and foreign state where it has been incorporated and where it has its principal place of business.  “Principal place of business” does not mean simply a state where it conducts business, or even a state where it has substantial connections.  Rather, the Supreme Court has held that “the phrase ‘principal place of business’ refers to the place where the corporation’s high level officers direct, control, and coordinate the corporation’s activities.  Lower federal courts have often metaphorically called that place the corporation’s “nerve center.”  Hertz Corp. v. Friend, 559 U.S. 77, 80–81 (2010).  The nerve center “should normally be the place where the corporation maintains its headquarters.”  Id. at 93.  Moreover, a “principal place of business” is one, singular place, within a state.  Id.

 

Depending on the factual situation, the application of the diversity of citizenship consideration or standard is not necessarily complicated.  However, knowing the appropriate consideration is key.  Given the similar factors, but with differing considerations, for personal jurisdiction and venue analysis, having the necessary facts about your corporate client and analyzing the issue in the appropriate context allows for the most thorough and efficient advice to a client about whether or not a matter can and should be removed to federal court.

 

Similarly, analysis of the amount in controversy aspect is more nuanced than one might believe on first glance.  Where a case has been removed to, or is pending in, federal court, remand, or dismissal, is governed by the Red Cab test.  The test provides that “the case must be dismissed or remanded ‘only if “from the face of the pleadings, it is apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed, or if, from the proofs, the court is satisfied to a like certainty that the plaintiff never was entitled to recover that amount.”’”  Frederico v. Home Depot, 507 F.3d 188, 194 (3d Cir. 2007).  Put differently, [t]here is a significant difference between a standard requiring a removing defendant to prove the value of plaintiff’s claim and a standard requiring the defendant to demonstrate that recovering over $75,000 is not foreclosed by the allegations of the complaint.”  Morrison v. Spirit Airlines, Inc., No. CV 19-18743 (SRC), 2019 WL 6907481, at *2 (D.N.J. Dec. 17, 2019).  However, it is worth noting that “a defendant seeking removal would indeed have to meet the more onerous burden of proving that the plaintiff can recover the jurisdictional amount, that standard applies only where the complaint specifically avers that the amount in controversy is less than the jurisdictional minimum.”  Id.

 

Overall, the important thing to remember is that just because a plaintiff has “made the first move” in filing a claim in a certain court, making certain allegations, and claiming certain damages, a defendant still has options.  This includes evaluating and challenging allegations regarding principal place of business and amount in controversy to potentially have the matter removed to federal court.

 

Back To Top