February 21, 2012 

By Michael R. Nelson, Kymberly Kochis and G. Franklin McKnight IV

This article is an interpretation of current law and is offered for informational purposes only. This material is not legal advice and should not be construed or used as a substitute for the advice of an attorney.

Legislation revising the federal jurisdictional statutes for obtaining federal court jurisdiction went into effect on January 6, 2012. This legislation changes the standards governing removal and remand procedures for federal question and diversity jurisdiction. Referred to as the Federal Courts Jurisdiction and Venue Clarification Act of 2011 (Act), the new law changes federal jurisdictional practice in a number of areas, including the treatment of resident aliens; citizenship of corporations and insurance companies with foreign contacts; removal and remand procedures in federal question and diversity proceedings; and venue.

The removal and remand amendments codify and resolve divergent federal court practices as well as address constitutional concerns and practical problems arising under the prior rules. These amendments include:

• Allowing a defendant to assert an amount in controversy in the notice of removal when the complaint is not specific or seeks non-monetary relief. If the defendant's claimed amount in controversy is challenged by plaintiff, the Act establishes that the amount in controversy will be determined by a preponderance of evidence standard.
• Codification that in cases with multiple defendants, each defendant has 30 days from its own date of service to seek removal and not 30 days from the first-served defendant's date of service (resolving a split among federal circuit courts regarding this issue), and codifying that all defendants must consent to removal.
• An exception to the general one-year limitation period on exercising federal court jurisdiction if plaintiff acted in bad faith thereby preventing defendant from removing.
• A new requirement that federal courts remand unrelated state law causes of action to state court when jurisdiction rests solely on federal question.

The Act has brought about important and significant changes to federal jurisdiction and provides substantial clarification to defendants contemplating removal.