Doe Ex Rel. Houdersheldt v. Blair , 819 F.3d 64 ( 2016 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 15-1211
JANE DOE #1, a minor, by her next friends and guardians, Ben
and Kelly Houdersheldt; BEN HOUDERSHELDT; KELLY
HOUDERSHELDT; JANE DOE #2, a minor, by her next friends and
guardians, Ben and Kelly Houdersheldt,
Plaintiffs - Appellees,
v.
MATT BLAIR, an individual; RES-CARE, INC., a foreign
company,
Defendants - Appellants.
Appeal from the United States District Court for the Southern
District of West Virginia, at Beckley. Irene C. Berger,
District Judge. (5:14-cv-23501)
Argued: January 28, 2016 Decided: March 21, 2016
Before SHEDD and FLOYD, Circuit Judges, and Loretta C. BIGGS,
United States District Judge for the Middle District of North
Carolina, sitting by designation.
Reversed and remanded by published opinion. Judge Floyd wrote
the opinion, in which Judge Shedd and Judge Biggs joined.
ARGUED: Edward Taylor George, MACCORKLE LAVENDER, PLLC,
Charleston, West Virginia, for Appellants. Erwin Leon Conrad,
CONRAD & CONRAD, PLLC, Fayetteville, West Virginia, for
Appellees. ON BRIEF: Michael E. Mullins, MACCORKLE LAVENDER,
PLLC, Charleston, West Virginia, for Appellant Matt Blair. John
P. Fuller, Suleiman O. Oko-ogua, BAILEY & WYANT, PLLC,
Charleston, West Virginia, for Appellant Res-Care, Inc. Jamison
T. Conrad, CONRAD & CONRAD, PLLC, Fayetteville, West Virginia;
Thomas A. Rist, RIST LAW OFFICES, Fayetteville, West Virginia,
for Appellees.
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FLOYD, Circuit Judge:
This appeal challenges the district court’s sua sponte
order remanding the underlying case to state court. The
district court determined that federal diversity jurisdiction
had not been established because the removing defendant—a
corporation—failed to allege its principal place of business.
Defendants argue that the district court did not have authority
to remand the case. Plaintiffs contend that we do not have
jurisdiction to review the remand order. Because the district
court based its remand order on a procedural defect in the
removal notice, we conclude both that we have jurisdiction to
review the remand order and that the district court did not have
authority to issue the remand order sua sponte. Accordingly, we
reverse the district court’s remand order and remand this case
to the district court for further proceedings.
I.
On March 27, 2014, Jane Doe #1, through her next friends
and guardians Ben and Kelly Houdersheldt, filed a complaint in
West Virginia state court against Matt Blair (Blair) and Res-
Care, Inc. (Res-Care). On July 14, 2014, Res-Care removed the
case to federal court, asserting subject matter jurisdiction
based on diversity of citizenship. In the removal notice, Res-
Care alleged that Jane Doe #1 was a West Virginia resident,
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Blair was a Virginia resident, and it was incorporated in
Kentucky. However, Res-Care did not allege the state in which
it had its principal place of business. An amended complaint
subsequently added Jane Doe #2 and the Houdersheldts—all West
Virginia residents—as plaintiffs.
On January 20, 2015, 191 days after Res-Care removed the
case, the district court sua sponte remanded the case to state
court because “federal diversity jurisdiction has not been
established.” J.A. 54. The court determined that “[a]bsent
some assertion from either party as to ResCare’s principal place
of business, th[e] Court lacks jurisdiction.” J.A. 56. Blair
filed a motion to alter or amend under Federal Rule of Civil
Procedure 59(e) and for reconsideration under Rule 60, which
Res-Care joined. Blair noted in his motion that no party had
challenged the court’s jurisdiction and that the parties were
able to determine that Res-Care’s principal place of business is
Louisville, Kentucky. Plaintiffs did not oppose the motion.
The district court denied the motion and Res-Care and Blair
timely appealed.
II.
A.
At the outset, we must determine whether we have
jurisdiction to review the district court’s remand order.
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“Congress has placed broad restrictions on the power of federal
appellate courts to review district court orders remanding
removed cases to state court.” Things Remembered, Inc. v.
Petrarca, 516 U.S. 124, 127 (1995). Title 28 U.S.C. § 1447(d)
provides that remand orders are generally “not reviewable on
appeal or otherwise.” However, the Supreme Court has
“interpreted § 1447(d) to cover less than its words alone
suggest.” Powerex Corp. v. Reliant Energy Servs., Inc., 551
U.S. 224, 229 (2007). As we have previously noted, § 1447(d)
is tightly circumscribed to cover only remand orders
within the scope of 28 U.S.C. § 1447(c), based on (1)
a district court’s lack of subject matter jurisdiction
or (2) a defect in removal other than lack of subject
matter jurisdiction that was raised by the motion of a
party within 30 days after the notice of removal was
filed.
Ellenburg v. Spartan Motors Chassis, Inc., 519 F.3d 192, 196
(4th Cir. 2008) (citing 28 U.S.C. § 1447(c)) (internal quotation
marks omitted); see also Things Remembered, 516 U.S. at 127(“[O]nly remands based on grounds specified in § 1447(c) are
immune from review under § 1447(d).” (citation omitted)).
Under this statutory scheme, a district court may remand a
case sua sponte for lack of subject matter jurisdiction at any
time, 28 U.S.C. § 1447(c), and such an order is not reviewable,
id. § 1447(d). However, “a remand based on a defect other than
lack of subject matter jurisdiction must be effected by granting
a timely filed motion”; if such an order is “entered without a
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motion at all,” § 1447(d) does not bar our review. Ellenburg,
519 F.3d at 197; see also Corp. Mgmt. Advisors, Inc. v. Artjen
Complexus, Inc., 561 F.3d 1294, 1296 (11th Cir. 2009) (“[W]e
have jurisdiction to review whether the district court exceeded
its authority under § 1447(c) by remanding this case because of
a perceived procedural defect in the removal process without
waiting for a party’s motion.” (citation and internal quotation
marks omitted)).
“[A] district court’s mere citation to § 1447(c) is
insufficient to bring a remand order within the purview of that
provision.” In re Blackwater Sec. Consulting, LLC, 460 F.3d
576, 584 (4th Cir. 2006). “We must instead look to the
substantive reasoning behind the order to determine whether it
was issued based upon the district court’s perception that it
lacked subject matter jurisdiction.” Id. Our jurisdiction to
review the district court’s remand order here depends on whether
the order was based on lack of subject matter jurisdiction or a
procedural defect in the removal process.
B.
Three other circuits have considered the precise issue
here: whether a failure to establish a party’s citizenship at
the time of removal is a procedural or jurisdictional defect.
All three circuits determined that such a failure is
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“procedural, rather than jurisdictional.” In re Allstate Ins.
Co., 8 F.3d 219, 221 (5th Cir. 1993); see also Artjen, 561 F.3d
at 1296; Harmon v. OKI Sys., 115 F.3d 477, 479 (7th Cir. 1997).
In Allstate, the Fifth Circuit held that a procedural defect
within the meaning of § 1447(c) refers to “any defect that does
not go to the question of whether the case originally could have
been brought in federal district court.” 8 F.3d at 221(citation and quotation marks omitted). The court determined
that the defendant’s failure to allege the plaintiff’s
citizenship in its notice of removal was merely a procedural
error because “although [the defendant] failed conclusively to
demonstrate diversity, the record discloses no dispute that it
in fact existed.” Id. (emphasis in original). Because the
failure to allege citizenship was a procedural defect, the Fifth
Circuit determined that it had jurisdiction to review the remand
order. Id. at 223-24. The Eleventh Circuit relied on Allstate
in reaching the same conclusion. Artjen, 561 F.3d at 1297.
Our decision in Ellenburg is also instructive. There, the
complaint filed in state court stated no dollar amount for the
value of the damages claimed. Ellenburg, 519 F.3d at 194. The
notice of removal, which was based on diversity jurisdiction,
stated that the amount in controversy exceeded $75,000. Id. at
194–95. The district court sua sponte considered whether to
remand the case to state court. Id. at 197. First, it “recited
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the well-established principles” of subject matter jurisdiction.
Id. The court then determined that the defendants’ allegation
of diversity jurisdiction was “‘inadequate’ and that their
Notice of Removal failed ‘to establish that the amount in
controversy exceeds the jurisdictional amount.’” Id. (quoting
district court). The district court concluded that “‘the
removing party ha[d] not presented a sufficient factual basis
for the Court to make an informed decision’ as to the amount in
controversy.” Id. (emphasis by Fourth Circuit) (quoting
district court). Within days, the defendants filed a Rule 59(e)
motion with facts supporting their allegation of the amount in
controversy. Id. at 198. The district court denied the motion,
relying on its earlier ruling that defendants had failed to
include the factual basis in the removal notice itself. Id.On appeal, we determined that § 1447(d) did not bar our
review because the district court’s remand order was not based
on finding a lack of subject matter jurisdiction, but rather on
the procedural insufficiency of the removal notice. Id. at 198.
We noted that even when the defendants presented the district
court with evidence (in their Rule 59(e) motion) that it may
indeed have subject matter jurisdiction, the district court
nonetheless relied on its procedural ruling and denied the
motion. Id.
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C.
The district court here proceeded in much the same way as
the district court in Ellenburg. In its order remanding the
case to state court, the court recited the well-established
principles of subject matter jurisdiction. It then determined
that “federal diversity jurisdiction has not been established”
because “neither party has alleged Defendant ResCare’s principal
place of business.” J.A. 54–55. Accordingly, the court
remanded the case to West Virginia state court. The court later
denied Blair’s Rule 59(e) motion despite the fact that Blair
provided evidence of Res-Care’s principal place of business.
The district court’s remand order does differ from the
order at issue in Ellenburg in one respect. Whereas the
district court in Ellenburg “never reached the conclusion that
it lacked subject matter jurisdiction,” 519 F.3d at 197, the
district court here stated at the end of its order that it
“lacks jurisdiction.” J.A. 56. We must, however, look at the
“substantive reasoning behind the order.” Blackwater, 460 F.3d
at 584. Here, it is clear to us that the court based its
decision on the fact that the removal notice did not present a
factual basis sufficient to permit the court to determine
whether subject matter jurisdiction existed. The district
court, in the first line of its opinion, observed that “federal
diversity jurisdiction has not been established.” J.A. 54
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(emphasis added). And the court’s conclusion that it lacked
jurisdiction was based on the inadequacy of the removal notice:
“Absent some assertion from either party as to ResCare’s
principal place of business, this Court lacks jurisdiction.”
J.A. 56. As was the case in Allstate, however, “although [Res-
Care] failed conclusively to demonstrate diversity, the record
discloses no dispute that it in fact existed.” 8 F.3d at 221(emphasis in original).
We conclude that the district court’s remand order was not
based on a lack of subject matter jurisdiction, but rather on
the procedural insufficiency of the removal notice. See Artjen,
561 F.3d at 1296-97 (finding that “a perceived lack of subject
matter jurisdiction” based on a failure to establish citizenship
did not prevent appellate review of the remand order). Because
no party filed a motion raising this procedural deficiency, the
order falls outside the scope of § 1447(c) and, therefore, our
review is not barred by § 1447(d).
III.
As in Ellenburg, “[o]ur conclusion that we have
jurisdiction to review the district court’s remand order also
tends to forecast our ruling on the outcome of that review.”
519 F.3d at 198. In other words, the fact that we can review
the district court’s remand order because it fell outside the
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scope of § 1447(c) leads to the conclusion that the order fell
outside the district court’s authority to order remand. Id.
“Section 1447(c) effectively assigns to the parties the
responsibility of policing non-jurisdictional questions
regarding the propriety of removal, permitting them to assert a
procedural defect or to waive the defect if they choose to
remain in the federal forum.” Id. (emphasis in original).
Therefore, a district court exceeds its statutory authority when
it remands a case sua sponte based on a procedural defect absent
a motion from a party. Id. (collecting cases).
Because the district court here exceeded its statutory
authority by remanding this case sua sponte, we reverse the
court’s remand order and remand this case to district court for
further proceedings. Additionally, we grant Res-Care’s motion
to amend its removal notice pursuant to 28 U.S.C. § 1653, which
provides that “[d]efective allegations of jurisdiction may be
amended, upon terms, in the trial or appellate courts.”
REVERSED AND REMANDED
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