341 U.S. 6 (1951), 252, American Fire & Casualty Co. v. Finn

Docket Nº:No. 252
Citation:341 U.S. 6, 71 S.Ct. 534, 95 L.Ed. 702
Party Name:American Fire & Casualty Co. v. Finn
Case Date:April 09, 1951
Court:United States Supreme Court
 
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341 U.S. 6 (1951)

71 S.Ct. 534, 95 L.Ed. 702

American Fire & Casualty Co.

v.

Finn

No. 252

United States Supreme Court

April 9, 1951

Argued December 7, 1950

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Syllabus

In a suit brought in a Texas court by a resident of that State to recover for a loss by fire, the complaint named as defendants two foreign insurance companies (one of which is the petitioner here) and a resident agent of the companies. The single wrong for which relief was sought was the failure to compensate for the loss, and the three defendants were joined because of uncertainty as to who was liable. After September 1, 1948, petitioner removed the case to the Federal District Court, which rendered judgment against petitioner and absolved the other defendants. Petitioner thereafter moved to vacate the judgment and to remand the case to the state court.

Held:

1. In the light of the allegations of the complaint in this case, separate and independent causes of action were not stated; and, under 28 U.S.C. § 1441(c), there was no right of removal of the case from the state court to the federal court. Pp. 9-16.

(a) In adopting the "separate and independent claim or cause of action" test for removability, 28 U.S.C. § 1441(c) (1948), Congress intended to avoid the difficulties experienced in determining the meaning of the former provision of 28 U.S.C. § 71, and to limit removal from state courts. Pp. 9-10.

(b) A separable controversy is no longer an adequate ground for removal unless it also constitutes a "separate and independent claim or cause of action." Pp. 11-12.

(c) The phrase "cause of action," as used in § 1441, must be given a meaning which will accomplish the congressional purpose of limiting and simplifying removal. Pp. 12-13.

(d) Where a plaintiff seeks relief for a single wrong, arising from an interlocked series of transactions, there is no "separate and independent claim or cause of action" under 28 U.S.C. § 1441(c). Pp. 13-14.

2. Because of the presence of a citizen of Texas on each side, the District Court would not have had original jurisdiction of this suit, either as stated in the complaint or in the posture of the case at the time of judgment. Therefore, the judgment of the District Court must be vacated. Pp. 16-19.

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(a) To permit a federal trial court to enter judgment in a case removed without right from a state court where the federal court could not have original jurisdiction of the suit, even in its posture at the time of judgment, would, by the act of the parties, work a wrongful extension of federal jurisdiction and give district courts power that Congress has denied them. Pp. 17-18.

181 F.2d 845, reversed.

In a suit removed by petitioner from a state court, the District Court entered judgment against petitioner. The District Court's denial of petitioner's subsequent motion to vacate the judgment and remand the case to the state court was affirmed by the Court of Appeals. 181 F.2d 845. This Court granted certiorari. 340 U.S. 849. Reversed and remanded, p. 19.

REED, J., lead opinion

MR. JUSTICE REED delivered the opinion of the Court.

These proceedings present for determination the proper federal rule to be followed on a motion by a defendant to vacate a United States District Court judgment, obtained by a plaintiff after removal from a state court by defendant, and to remand the suit to the state court. Petitioner, the movant, urges that 28 U.S.C. § 1441 did not permit this removal, and therefore the District Court was without jurisdiction to render the judgment which respondent, the plaintiff below, seeks to retain. The issue arose in this way:

Petitioner, the American Fire and Casualty Company, a Florida corporation, and its codefendant, the Indiana Lumbermens Mutual Insurance Company, an Indiana corporation, removed, in accordance with 28 U.S.C. § 1446, a suit brought by respondent Finn in a Texas state court against the two corporations and an individual,

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Reiss, local agent of both corporations and a resident of Texas. The suit was for a fire loss on Texas property suffered by respondent, a resident of Texas. Respondent tried to have the case remanded before trial, but was unsuccessful. After special issues were found by the jury, judgment was entered against petitioner for the amount of insurance claimed and costs, and in favor of the other two defendants. The District Court denied the motion to vacate the judgment, and the Court of Appeals affirmed. 181 F.2d 845. The latter court concluded there were causes of action against the foreign insurance companies "separate and independent" from that stated against the resident individual. Since the causes against the companies would have been removable if sued on alone, the entire suit was removable. 28 U.S.C. § 1441(c). That ruling required consideration of the changes concerning removal made by § 1441(c), which superseded 28 U.S.C. (1946 ed.) § 71. The Court of Appeals said:

The difference, if any, between separable controversies under the old statute and separate and independent claims under the new one is in degree, not in kind. It is difficult to distinguish between the two concepts, but it is not necessary to attempt it in a case like this, which would be removable under either statute.

181 F.2d 846.

Consideration of the ruling on the motion to vacate the judgment requires a determination of whether the suit contained separate and independent causes of action under § 1441(c), and, if the conclusion is that it did not, a ruling on the effect of a judgment after a removal without right, initiated by the party against whom the judgment was ultimately rendered. As prompt, economical and sound administration of justice depends to a large degree upon definite and finally accepted principles governing important areas of litigation, such as the respective jurisdictions of federal and state courts, we granted certiorari.

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340 U.S. 849. See also Mayflower Industries v. Thor Corporation, 184 F.2d 537; Bentley v. Halliburton Oil Well Cementing Co., 174 F.2d 788.

I

The removal took place after September 1, 1948, the effective date of the revision of the laws relating to judicial procedure. 62 Stat. 992. The former provision governing removal, 28 U.S.C. (1946 ed.) § 71, read:

And when, in any suit mentioned in this section, there shall be a controversy which is wholly between citizens of different States, and which can be fully determined as between them, then either one or more of the defendants actually interested in such controversy may remove said suit into the [71 S.Ct. 538] district court of the United States for the proper district.

The new section, 28 U.S.C. § 1441(c), states:

(c) Whenever a separate and independent claim or cause of action, which would be removable if sued upon alone, is joined with one or more otherwise nonremovable claims or causes of action, the entire case may be removed, and the district court may determine all issues therein, or, in its discretion, may remand all matters not otherwise within its original jurisdiction.

One purpose of Congress in adopting the "separate and independent claim or cause of action" test for removability by § 1441(c) of the 1948 revision in lieu of the provision for removal of 28 U.S.C. (1946 ed.) § 71 was by simplification to avoid the difficulties experienced in determining the meaning of that provision.1 Another and important

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purpose was to limit removal from state courts.2 Section 71 allowed removal when a controversy was wholly between citizens of different states and fully determinable between them. Such a controversy was said to be "separable." The difficulties inherent in old § 71 show plainly in the majority and concurring opinions in Pullman Co. v. Jenkins, 305 U.S. 534, 542. See note, 41 Harv.L.Rev. 1048. Often plaintiffs in state actions joined other state residents as defendants with out-of-state defendants so that removable controversies wholly between citizens of different states would not be pleaded. The effort frequently failed, see Pullman Co. v. Jenkins, at 538, and removal was allowed. Our consideration of the meaning and effect of 28 U.S.C. § 1441(c) should be carried out in the light of the congressional intention. Cf. Pullman Co. v. Jenkins, supra, at 547; Phillips v. United States, 312 U.S. 246, 250.

The Congress, in the revision, carried out its purpose to abridge the right of removal.3 Under the former provision,

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28 U.S.C. (1946 ed.) § 71, separable controversies authorized removal of the suit. "Controversy" had long been associated in legal thinking with "case." It covered all disputes that might come before federal courts for adjudication. In § 71 the removable "controversy" was interpreted as any possible separate suit that a litigant might properly bring in a federal court so long as it was wholly between citizens of different states. So, before the revision, when a suit in a state court had such a separate federally cognizable controversy, the entire suit might be removed to the federal court.4

A separable controversy is no longer an adequate ground for removal unless [71 S.Ct. 539] it also constitutes a separate and independent claim or cause of action. Compare Barney v. Latham, 103 U.S. 205, 212, with the revised § 1441. Congress has authorized removal now under § 1441(c) only when there is a separate and independent claim or

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cause of action.5 Of course, "separate cause of action" restricts removal more than "separable controversy." In a suit covering multiple parties or issues based on a single claim, there may be only one cause of action and yet be separable controversies.6 The addition of the word "independent" gives emphasis to congressional intention to require more complete disassociation between the federally cognizable proceedings and those cognizable only in state courts...

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