SCOTUS: If Federal Claims Are Voluntarily Dismissed, State Court Must Take Over the Case
The Supreme Court’s recent ruling on when cases can remain in federal court has a major impact on claims nationwide. The Court held that if a plaintiff amends the complaint to remove the only claim giving rise to federal question jurisdiction, the district court must send the case back to state court. District courts can no longer decide if the complaint can maintain federal jurisdiction; they must remand.
Moving forward, both plaintiff and defense teams may need to adjust their approach to secure jurisdiction in state or federal court.
When can federal courts hear a case? Who decides whether a case rests in state or federal court?
There are a few ways federal courts can decide cases. As courts of limited jurisdiction, Congress only grants these courts authority over cases giving rise to diversity jurisdiction or "arising under" federal law (commonly known as federal question jurisdiction). If a plaintiff's complaint contains a claim arising under federal law, then any federal court has jurisdiction. Under "supplemental jurisdiction," the federal court can also decide the state law claims alongside a federal claim in the same complaint. In other words, complaints are a package deal. Congress doesn't force litigants to straddle federal and state court on the same case.
A plaintiff is the "master of the complaint" and can choose to have a case heard in state court. But a defendant has the right to remove any case to federal court that could have been filed originally in federal court—i.e., any case with diversity or federal question jurisdiction. The removal right carries with it the right to tack on accompanying state law claims through supplemental jurisdiction.
Royal Canin U. S. A., Inc. v. Wullschleger
What happens when, after moving a case to federal court, a plaintiff amends their complaint to remove the claims "arising under" federal law, the only federal jurisdiction-granting claims? In Royal Canin, the plaintiff sued a manufacturer for violating state manufacturing and antitrust law, as well as violating the Federal Food, Drug, and Cosmetic Act (FDCA). The defendant removed the case to federal court based on the FDCA claim, bringing with it the state law claims. But to get back to state court, the plaintiff amended her complaint to remove the FDCA claim, leaving only her state law claims, and sought remand.
Some circuits prior to Royal Canin held that because federal jurisdiction is based on the complaint as it existed at the time of removal, post-removal amendments cannot affect supplemental jurisdiction. Some circuits gave district courts the discretion to send the case back to state court to decide the remaining state law claims. In Royal Canin, however, the Eighth Circuit held that district courts cannot keep jurisdiction over state law claims once a plaintiff voluntarily dismisses all federal claims.
On Jan. 15, the Supreme Court unanimously sided with the Eighth Circuit. It held: "When a plaintiff amends her complaint following her suit's removal, a federal court's jurisdiction depends on what the new complaint says. If (as here) the plaintiff eliminates the federal-law claims that enabled removal, leaving only state-law claims behind, the court's power to decide the dispute dissolves."
The Court held that the text of the supplemental jurisdiction statute "contemplates that when an amended complaint is filed, the jurisdictional basis for the suit is reviewed anew. If nothing in the amended complaint now falls 'within [the federal court's] original jurisdiction,' then neither does anything fall within the court's 'supplemental jurisdiction.'"
The Court ruled the substance of a lawsuit remains the deciding factor of federal jurisdiction. Federal jurisdiction, or lack thereof, "does not depend on whether the plaintiff first filed suit in federal or state court." Instead, it depends, "on the substance of the suit—the legal basis of the claims (federal or state?) and the citizenship of the parties (diverse or not?)."
On a related note, the Supreme Court emphasized that when a district court dismisses the federal claims—for example on a 12(b)(6) or summary judgment motion—the court “ordinarily should[] kick the case to state court.” Remand is technically discretionary, in that scenario, however, because those dismissed claims may not be “gone for good” as “an appellate court may yet revive them.” But when a plaintiff amends the complaint to dismiss all federal claims, “there is no discretion to decline supplemental jurisdiction” because those federal claims are “gone for good.”
In a removed case just the same as a case originally filed in federal court, the Court held "jurisdiction follows the operative pleading," which "ensures that the case, as it will actually be litigated, merits a federal forum." The district court, therefore, as a matter of law and not discretion, should have remanded the suit once the plaintiff amended her petition to remove the federal claim.
How does this ruling affect parties involved in federal lawsuits?
Plaintiffs who want to maximize their chances of staying in federal court are likely to allege both federal question and diversity jurisdiction in the complaint, where appropriate. When seeking to remove a case to federal court as a defendant, defense teams may start claiming both federal question jurisdiction and diversity jurisdiction in their notices of removal. Royal Canin does not affect diversity jurisdiction because supplemental jurisdiction only attaches to federal question jurisdiction. Claiming diversity jurisdiction could permit the federal court to retain jurisdiction even if the complaint is later changed to remove federal claims.
Contact Patrick Judd or any member of the Phelps litigation or appellate teams with questions or for advice and guidance.
