Holbein v. TAW Enterprises, Inc.

• Decision Date: 30 December 2020
• Docket Number: No. 18-2892,18-2892
• Citation: 983 F.3d 1049
• Parties: Brendan HOLBEIN, Plaintiff - Appellant v. TAW ENTERPRISES, INC., doing business as Baxter Chrysler Dodge Jeep Ram of Bellevue, Defendants - Appellees
• Court: U.S. Court of Appeals — Eighth Circuit

983 F.3d 1049

Brendan HOLBEIN, Plaintiff - Appellant

v.TAW ENTERPRISES, INC., doing business as Baxter Chrysler Dodge Jeep Ram of Bellevue, Defendants - Appellees

No. 18-2892

United States Court of Appeals, Eighth Circuit.

Submitted: October 19, 2020

Filed: December 30, 2020

John Lyon Spray, Patricia L. Vannoy, Mattson & Ricketts, Lincoln, NE, for Plaintiff-Appellant.

Nathan D. Clark, Shawn D. Renner, Cline & Williams, Lincoln, NE, Tara A. Stingley, Cline & Williams, Omaha, NE, for Defendant-Appellant.

Before SMITH, Chief Judge, LOKEN, COLLOTON, GRUENDER, BENTON, SHEPHERD, KELLY, ERICKSON, GRASZ, STRAS, and KOBES, Circuit Judges, En Banc.

GRUENDER, Circuit Judge.

Brendan Holbein sued his former employer, TAW Enterprises, Inc., in Nebraska state court. TAW Enterprises removed the action to federal court and moved to dismiss for failure to state a claim. See generally Fed. R. Civ. P. 12(b)(6). The district court¹ dismissed the action with prejudice. Holbein v. Baxter Chrysler Jeep, Inc. , No. 8:18CV222, 2018 WL 9538221 (D. Neb. Aug. 6, 2018). On appeal, a panel of this court vacated the dismissal and ordered the action remanded to state court, concluding that a removal defect left the district court without subject-matter jurisdiction. Holbein v. Baxter Chrysler Jeep, Inc. , 948 F.3d 931 (8th Cir. 2020). TAW Enterprises petitioned for rehearing en banc , asking us to reconsider the precedents that dictated the panel's disposition. See generally id. at 934 (discussing Horton v. Conklin , 431 F.3d 602, 605 (8th Cir. 2005), and Hurt v. Dow Chemical Co. , 963 F.2d 1142, 1146 (8th Cir. 1992) ). We then vacated the panel opinion and granted rehearing en banc . Order, Holbein v. Baxter Chrysler Jeep, Inc. , No. 18-2892 (8th Cir. Mar. 19, 2020) . We now overrule those precedents to the extent they hold that a violation of 28 U.S.C. § 1441(b)(2) —the so-called forum-defendant rule, e.g. , Hurley v. Motor Coach Indus., Inc. , 222 F.3d 377, 378 (7th Cir. 2000) —is an unwaivable jurisdictional defect in removal. We thus have jurisdiction to reach the merits of Holbein's appeal. Doing so, we affirm the district court's dismissal.

I.

In the fall of 2015, Holbein accepted a position as general manager of TAW Enterprises’ automobile dealership in Bellevue, Nebraska. In June 2016, he learned that customers’ confidential financial information in the possession of TAW Enterprises’ finance director had been stolen. The customers were not informed of this theft. Instead, the finance director "devised a clever method of re-obtaining the financial information" from these customers without informing them that their financial information had been compromised. Holbein subsequently informed TAW Enterprises of this issue as well as other issues regarding TAW Enterprises’ or its employees’ noncompliance with certain provisions of the Gramm-Leach-Bliley Act (the "Act"), see generally Pub. L. No. 106-102, 113 Stat. 1338 (1999) (codified as amended in scattered sections of 12 U.S.C., 15 U.S.C., 16 U.S.C., 18 U.S.C., and 29 U.S.C.), and those provisions’ implementing regulations. In October 2016, TAW Enterprises demoted Holbein, resulting in a sixty-five percent reduction in his compensation. Holbein claimed TAW Enterprises demoted him because of his internal reporting about these matters.

In 2018, Holbein (then a citizen of Arizona) sued TAW Enterprises (a Nebraska corporation with its principal place of business there) in Nebraska state court. He asserted two causes of action. The first, labeled as arising under the Act, included two separate "theor[ies]" of recovery, one for "retaliation in contravention of public policy" and the other for "constructive discharge." The second was for breach of contract. Holbein alleged more than $2.5 million in damages.

TAW Enterprises removed the case to federal court, asserting federal-question jurisdiction given Holbein's reference to the Act in his complaint. See generally 28 U.S.C. § 1331. It then moved to dismiss. Holbein did not object to removal, though he opposed dismissal. The district court granted TAW Enterprises’ motion to dismiss with prejudice. Holbein , 2018 WL 9538221, at *5.

Holbein appealed, challenging only the district court's dismissal of his first cause of action. In response to a question at oral argument before the panel, Holbein for the first time indicated he did not believe the district court had subject-matter jurisdiction. Subsequently, the panel held the district court lacked subject-matter jurisdiction, vacated the district court's dismissal, and ordered the case remanded to state court. Holbein , 948 F.3d 931. The panel found Holbein's first cause of action did not present a federal question, see id. at 936, leaving diversity jurisdiction under 28 U.S.C. § 1332 as the sole potential basis for federal subject-matter jurisdiction, see id. at 934. But, as TAW Enterprises admitted, it could not have removed on this basis because doing so would have violated the forum-defendant rule, 28 U.S.C. § 1441(b)(2), given that it is a citizen of Nebraska and was sued in Nebraska state court. Under circuit precedent, "violation of the forum-defendant rule is a ‘jurisdictional defect.’ " Holbein , 948 F.3d at 934 (quoting Horton , 431 F.3d at 605 ); see also Hurt , 963 F.2d at 1145-46. The district court thus lacked subject-matter jurisdiction over the action. Holbein , 948 F.3d at 936.

TAW Enterprises petitioned for rehearing en banc , asking us to reconsider whether violation of the forum-defendant rule is a jurisdictional defect in removal. After receiving Holbein's response to this petition, we ordered rehearing en banc .²

II.

Congress has granted defendants sued in state court the right to remove the suit to federal district court if the civil action is one "of which the district courts ... have original jurisdiction." 28 U.S.C. § 1441(a). When the action is "removable solely on the basis of the jurisdiction under [§] 1332(a)," however, the forum-defendant rule provides that the action "may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." Id. § 1441(b)(2). When an action is removed improperly, the plaintiff may move to have it remanded to state court. See id. § 1447(c). If the motion to remand is based on any removal "defect other than lack of subject matter jurisdiction," that motion "must be made within 30 days after the filing of the notice of removal." Id. Otherwise, objections to removal based on such defects are waived. 14C Charles Alan Wright et al., Federal Practice & Procedure § 3739.2 (Rev. 4th ed. 2020). But if the removal defect leaves the district court without subject-matter jurisdiction, that defect cannot be waived and can be raised at any time, even on appeal. See 28 U.S.C. § 1447(c) ; United States v. Afremov , 611 F.3d 970, 975 (8th Cir. 2010).

Holbein did not challenge removal until oral argument before the panel. That delay did not matter because, in our circuit, removal in violation of the forum-defendant rule results in "an absence of subject-matter jurisdiction." Hurt , 963 F.2d at 1146 n.1 ; see also Horton , 431 F.3d at 605 (reaffirming Hurt ). Nine other circuits have addressed whether the forum-defendant rule is jurisdictional in nature. All of them have held that violation of the rule is a nonjurisdictional, and thus waivable, removal defect. Morris v. Nuzzo , 718 F.3d 660, 665 (7th Cir. 2013) ; Lively v. Wild Oats Mkts., Inc. , 456 F.3d 933, 939 (9th Cir. 2006) ; Handelsman v. Bedford Vill. Assocs. Ltd. P'ship , 213 F.3d 48, 50 n.2 (2d Cir. 2000) ; Pacheco de Perez v. AT&T Co. , 139 F.3d 1368, 1372 n.4 (11th Cir. 1998) ; Korea Exch. Bank, N.Y. Branch v. Trackwise Sales Corp. , 66 F.3d 46, 50 (3d Cir. 1995) ; In re Shell Oil Co. , 932 F.2d 1518, 1521-23 (5th Cir. 1991) ; Moores v. Greenberg , 834 F.2d 1105, 1106 n.1 (1st Cir. 1987) ; Plastic Moldings Corp. v. Park Sherman Co. , 606 F.2d 117, 119 n.1 (6th Cir. 1979) ; Am. Oil Co. v. McMullin , 433 F.2d 1091, 1093-95 (10th Cir. 1970).

We now eliminate this lopsided circuit split and conclude that violation of the forum-defendant rule is a nonjurisdictional defect in removal that is waived if not raised in "[a] motion to remand ... made within 30 days after the filing of the notice of removal." See § 1447(c). Holbein did not challenge removal until long after this period had expired, so he has waived TAW Enterprises’ violation of the forum-defendant rule as a basis for remand to state court. In concluding that the forum-defendant rule is nonjurisdictional, first we consider the text of § 1441(a) - (b), then we examine § 1447(c) and its history, and finally we consider precedents relevant to the analysis. See Murphy v. Smith , 583 U.S. ––––, 138 S. Ct. 784, 790, 200 L.Ed.2d 75 (2018) (looking at "the full field of textual, contextual, and precedential evidence" to interpret a statute).

A.

Whether the forum-defendant rule is jurisdictional ultimately turns on "whether Congress mandated" it be treated as such. See Henderson ex rel. Henderson v. Shinseki , 562 U.S. 428, 435, 131 S.Ct. 1197, 179 L.Ed.2d 159 (2011). The question before us, then, is principally one of statutory interpretation. Accordingly, as in any statutory-interpretation case, "we start ... with the statutory text."

Liscomb v. Boyce , 954 F.3d 1151, 1154 (8th Cir. 2020) ; accord Henderson , 562 U.S. at 438, 131 S.Ct. 1197.

In § 1441(a), Congress gave defendants the right to remove from state to federal court "any civil action brought in a State court of which the district courts of the United States have original jurisdiction," "[e]xcept as otherwise expressly provided by Act of Congress." Congress provided otherwise in the forum-defendant rule by prohibiting removal of a "civil action otherwise removable solely on the basis of the jurisdiction under [§] 1332(a) ... if any of the parties in interest properly joined and served as defendants is a...