Schillinger, George v. Union Pacific ( 2005 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 05-8019
GEORGE and RUTH SCHILLINGER,
Respondents,
v.
UNION PACIFIC RAILROAD COMPANY and
UNION PACIFIC CORPORATION,
Petitioners.
Appeal from the United States District Court
for the Southern District of Illinois.
No. 04-cv-0437 MJR—Michael J. Reagan, Judge.
S UBMITTED A UGUST 11, 2005 — D ECIDED October 5, 2005*
Before POSNER , KANNE , and WOOD , Circuit Judges.
WOOD , Circuit Judge. Union Pacific Railroad Company
and Union Pacific Corporation removed this suit to
federal court, invoking the Class Action Fairness Act of
2005, Pub. L. No. 109-2, 119 Stat. 4 (2005) (CAFA). The
district court remanded after determining that the case
formally began before CAFA’s effective date of
February 18, 2005, and thus was not subject to the Act.
*
This Opinion is being released initially in
typescript form. A printed version will follow.
2 No. 05-8019
The companies acknowledge that the suit predates
CAFA, but they argue that two developments that post-
date CAFA have changed the case so profoundly that
they may now remove it: the addition of a new
defendant, and the expansion of the class definition.
Because we agree with the district court’s conclusions
that the apparent naming of a new defendant in
plaintiff’s amended complaint was a scrivener’s error
and that the expansion of the class was not significant
enough to create a new claim or new action, we deny
the petition for permission to appeal.
I
This case began on June 7, 2002, when George and
Ruth Schillinger sued Union Pacific Corporation (UPC)
and Union Pacific Railroad Company (UPRR) in state
court. The Schillingers contended that the companies,
which allegedly had a right-of-way on plaintiffs’ land,
committed trespass and were unjustly enriched when
they leased space on the land to telecommunications
providers. The complaint proposed a class of Illinois
land owners who also allegedly had been harmed by the
companies’ use of rights-of-way belonging to the class
members.
Both companies, represented by the same lawyer,
removed the case to the District Court for the Southern
District of Illinois, invoking the general removal
authority of 28 U.S.C. § 1441. Although the parties
were diverse (the Schillingers are citizens of Illinois,
UPC is incorporated in Utah and has its principal place
of business in Nebraska, and UPRR is incorporated in
Delaware and has its principal place of business in
Nebraska), the district court concluded that the amount
in controversy did not exceed $75,000. See 28 U.S.C.
§ 1332. It also rejected the defendants’ argument that
federal question jurisdiction existed because the
putative class members’ rights could be determined
only by reference to the federal rights-of-way. The
No. 05-8019 3
district court accordingly remanded the case to state
court based on the lack of federal jurisdiction. See 28
U.S.C. § 1447(c). Back in state court, plaintiffs realized
that UPC did not operate a railroad or own any right-
of-way and voluntarily dismissed UPC from the case.
In May 2003 the Schillingers moved to amend their
complaint, attaching a copy of the proposed amended
complaint to the motion. The amended complaint
expanded the proposed class of plaintiffs to include
property owners nationwide who owned land over
which UPRR had a right-of-way. Although UPC had
already been dismissed, the motion to amend and the
proposed amended complaint listed both UPRR and
UPC as defendants. Plaintiffs and UPRR briefed the
motion, arguing only the merits of expanding the class
definition. Neither party addressed the fact that UPC
shows up in the amended complaint’s caption and was
mentioned in the allegations. In fact, it appears that
UPC was never served with a copy of the amended
complaint, though it probably had actual notice of the
complaint through its common lawyer with UPRR.
Before the state court ruled on the motion to amend
the complaint, it stayed proceedings pending resolution
of another case. When the litigation resumed in 2005,
the parties continued to debate the merits of the motion
to amend, filing supplemental briefs and orally arguing.
Again, neither party commented on the inclusion of
UPC in the proposed amended complaint.
In May 2005 the state court granted the motion to
amend and the clerk of court filed the amended
complaint that was attached to the 2003 motion. The
clerk stamped the amended complaint with a May 2005
filing date. Plaintiffs mailed a copy of the filed amended
complaint to counsel for UPRR. UPRR and UPC
together then removed the case again to the federal
district court.
II
4 No. 05-8019
We address first the companies’ contention that the
addition of a new defendant—in this case the apparent
reinstatement of UPC as a defendant—must be treated
as the commencement of a new action for purposes of
CAFA. The companies correctly observe that in general,
“a defendant added after February 18 [2005] could
remove because suit against it would have been
commenced after the effective date[.]” Schorsch v.
Hewlett-Packard Co., 417 F.3d 748, 749 (7th Cir. 2005).
See also Knudsen v. Libery Mutual Ins. Co., 411 F.3d
805, 807 (7th Cir. 2005).
The problem for the companies here is that the
district court found, in effect, that UPC was never
really brought back into the case, when it concluded
that the inclusion of UPC as a defendant in the
amended complaint was a scrivener’s error. We review
the district court’s finding with deference, see Sparrow
v. Heller, 116 F.3d 204, 206 (7th Cir. 1997), and there
is ample support in the record for the district court’s
determination. The Schillingers did not discuss the
addition of UPC in their motion to amend or supporting
memorandum, nor did they serve UPC with a copy of
either the motion to amend or the filed amended
complaint. Most importantly, plaintiffs’ counsel filed an
affidavit in which he explained that his staff used the
original complaint as a word processing template in
drafting the amended complaint and failed to notice
that this resulted in the incorporation of the old caption
and introductory allegations into the amended
complaint. The district court acted within its discretion
in finding that UPC’s inclusion in the amended
complaint was a clerical error, that plaintiffs had no
intention of bringing UPC back into the litigation, and
that UPC was in fact not a new party to the suit.
This case should not come to federal court if the only
ground for jurisdiction is a clerical error, however
careless. Consider if the district court had allowed
plaintiffs to amend their complaint to correct the error
No. 05-8019 5
by removing UPC from the allegations, as it surely
could have done. See FED . R. CIV . P. 15(a), 60(a). In all
likelihood, the court would have been required to
remand at that point. When a plaintiff amends his
complaint after removal in a way that destroys
diversity, a district court must consider the reasons
behind the amendment in determining whether remand
is proper. If the plaintiff amended simply to destroy
diversity, the district court should not remand. See
Charles Alan Wright, Arthur R. Miller, & Edward H.
Cooper, Federal Practice and Procedure (1998 and
Supp.), § 3723, at p. 591 (citing district court cases).
But an amendment that is made for legitimate
purposes may be a proper ground for a remand to state
court. See id. at p. 592 (“the court will take account of
whether the plaintiff has been dilatory or is trying to
destroy diversity, whether the plaintiff will be
significantly disadvantaged if the amendment is not
allowed, and whether remanding the action to state
court will prejudice the defendant”); see also Costain
Coal Holdings, Inc. v. Resource Inv. Corp., 15 F.3d 733,
734-35 (7th Cir. 1994) (directing district court to
remand case to state court after indispensable party
intervened destroying diversity). The correction of a
clerical mistake falls into the latter category, and the
district court would properly have granted a motion to
remand if plaintiffs had amended their complaint to
correct the mistake. It is a short step from that to the
conclusion that the district court correctly held that
jurisdiction is defeated if one of the pleading elements
necessary to establish jurisdiction is a scrivener’s error.
Cf. Selim v. Pan American Airways Corp., 254 F.
Supp.2d 1316, 1319 (S.D. Fla. 2003) (refusing to
exercise diversity jurisdiction over a matter “where
such jurisdiction clearly does not exist, merely due to
an error by Plaintiff.”).
Even if the inadvertent inclusion of UPC does not
support CAFA removal here, the companies argue that
6 No. 05-8019
the expansion of the proposed class does so. After the
amendments to the complaint, however, this suit is still
between the Schillingers and others similarly situated
(whomever that may turn out to include) and UPRR,
and it concerns the same claim alleged in the original
complaint. As Schorsch explains, the expansion of a
proposed class does not change the parties to the
litigation nor does it add new claims. 417 F.3d at 750.
Recognizing that plaintiffs’ amendment did not add
any parties or add a new claim, the companies contend
instead that the expansion was a “step sufficiently
distinct that courts would treat it as independent for
limitations purposes” and accordingly it commenced a
new piece of litigation under CAFA. See Knudsen, 411
F.3d at 807. This is the same argument that Hewlett-
Packard advanced and this court rejected in Schorsch.
In that case, plaintiff expanded the proposed class from
consumers of one computer-printer product that
contained an allegedly faulty chip to consumers of two
other computer-printer products that contained the
same allegedly faulty chip. The original complaint
furnished Hewlett-Packard with the information
necessary to defend against the amended complaint,
this court held, and as a result the amendment would
relate back to the original complaint for Illinois statute-
of-limitation purposes. This also implies that the
amendment did not commence a new action under
CAFA. Schorsch, 417 F.3d at 750-51.
We acknowledge that the Schillingers’ expansion of
the class (if successful) may have greater repercussions
for UPRR than Hewlett-Packard potentially faced in its
litigation. If plaintiffs’ nationwide class is eventually
certified, UPRR will have more rights-of-way to
research and more state laws under which to analyze
various claims than if it was facing only a class of
Illinois plaintiffs. But, as we explained in Schorsch and
Knudsen, the potential for a larger amount of legal
research and discovery in and of itself is not a
No. 05-8019 7
significant enough step to create new litigation.
There is another potential reason why the changes
here may not have been enough to qualify as the
“commencement” of a new action for CAFA. Illinois law
governs the statute of limitations in the trespass action.
In determining whether an amended complaint meets
the statute-of-limitations deadline, Illinois courts look
to the date plaintiffs filed their motion to amend the
complaint rather than the date the trial court grants
the motion and files in the pleading. See, e.g.,
Enzenbacher v. Browning-Ferris Ind. of Ill., Inc., 774
N.E.2d 858, 864,(2d Dist. 2002); Onsite Engineering &
Management, Inc. v. Illinois Tool Works, Inc., 744
N.E.2d 928, 933 (1st Cir. 2001). The logic underlying
this practice is that defendants are on notice of the
amendment when the motion is filed and it would be
unfair to plaintiffs if a trial court waited months or
years to rule. See generally Moore v. State of Ind., 999
F.2d 1125, 1131 (7th Cir. 1993) (“As a party has no
control over when a court renders its decision regarding
the proposed amended complaint, the submission of a
motion for leave to amend, properly accompanied by the
proposed amended complaint that provides notice of the
substance of those amendments, tolls the statute of
limitations, even though technically the amended
complaint will not be filed until the court rules on the
motion”).
It is not clear whether this state practice would
govern federal procedure in the circumstances
presented here. On the one hand, in cases for which
state law provides the rule of decision, federal courts
apply state statutes of limitations, including
qualifications on those statutes. See, e.g., Walker v.
Armco Steel Corp., 446 U.S. 740, 751 (1980). On the
other hand, federal courts have their own rules
governing when an action is “commenced” for federal
procedural purposes. See FED . R. CIV . P. 3. If Illinois
regarded the new claims as “commenced” against
8 No. 05-8019
UPRR back in 2003, then UPRR had notice of their
existence at that time for purposes of the ongoing state
court action. The district court’s earlier decision that
there was no jurisdiction had nothing to do with the
existence (or nonexistence) of UPC as a party, and thus
the amendment would not have prompted a new
removal effort under the normal rules of 28 U.S.C.
§ 1446. There is a reasonable argument for saying that
the operative events here all occurred before CAFA’s
effective date, regardless of the fact that the formal
acceptance of the amended pleading took place after
CAFA was available. If so, then this is an independent
reason why UPRR’s current effort to remove cannot
succeed.
We recognize, however, that this is a complex
question. CAFA may make state rules about statutes of
limitations irrelevant to the type of commencement
that is necessary for federal removal. CAFA permits a
class action to be removed “in accordance with [28
U.S.C.] section 1446 . . . .” It defines a “class action” as
“any civil action filed under rule 23 of the Federal
Rules of Civil Procedure or similar State statute or rule
of judicial procedure . . . .” 28 U.S.C. § 1332(d)(1)(B).
The date of filing, in the context of an amended
pleading, may refer to the date when the court accepts
a proposed amendment, not the date when the
amendment is proffered. If, therefore, contrary to our
finding above, the amendment here was enough to
make this a new case for CAFA purposes, then UPRR
may have been entitled to rely on the date when the
amendment was finally accepted by the state court. We
prefer to save this complex issue for another day, when
the choice of law and interpretation of federal law will
govern the outcome.
III
The district court correctly held that this case was
commenced before CAFA’s enactment. Neither the
No. 05-8019 9
scrivener’s error that purported to add UPC as a “new”
party nor the expanded class definition changed the
case sufficiently to change that fact. Accordingly, the
petition for permission to appeal is DENIED.