Hurley v. Motor Coach Industries

• Decision Date: 31 August 2000
• Docket Number: No. 98-3888,98-3888
• Citation: 222 F.3d 377
• Parties: (7th Cir. 2000) FREDERICK A. HURLEY and CHRISTINE A. HURLEY, Plaintiffs-Appellants, v. MOTOR COACH INDUSTRIES, INCORPORATED, Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 377

222 F.3d 377 (7th Cir. 2000)

FREDERICK A. HURLEY and CHRISTINE A. HURLEY, Plaintiffs-Appellants, v. MOTOR COACH INDUSTRIES, INCORPORATED, Defendant-Appellee.

No. 98-3888

In the United States Court of Appeals For the Seventh Circuit

Argued September 16, 1999

Decided July 25, 2000

Rehearing and Rehearing En Banc Denied Aug. 31, 2000

Appeal from the United States District Court for the Southern District of Illinois. No. 95-169-CJP--Clifford J. Proud, Magistrate Judge.

Before RIPPLE, MANION, and Diane P. Wood, Circuit Judges.

Diane P. Wood, Circuit Judge.

While driving a Greyhound bus from St. Louis to Columbus, Ohio on February 25, 1993, Fred Hurley was involved in a serious accident with a jack-knifed double trailer. Hurley himself suffered severe lower body injuries in the collision, which collapsed the front wall of the bus. The bus that Hurley was driving was equipped only with a standard two point seat belt. It had neither an airbag nor any structural enhancements that would provide additional protection to the driver in the event of a high speed crash like the one in which he was involved. Hurley believes that these flaws make the bus he was driving unreasonably dangerous and, consequently, render the bus's manufacturer, Motor Coach Industries, liable for his injuries.

He and his wife (whose loss of consortium claims are entirely dependent on his success in this litigation) thus decided to sue Motor Coach, as well as Consolidated Freightways (the operators of the trailers that his bus hit), Road Systems, Inc. (the makers of the trailers that Hurley struck), and Pines Trailer Corporation (another trailer manufacturer). Hurley began in Illinois state court, but Consolidated Freightways removed the action to the District Court for the Southern District of Illinois on diversity grounds. After the removal, Hurley settled his claims against Consolidated Freightways and Road Systems and dismissed Pines under Fed. R. Civ. P. 41(a). Except as they relate to a jurisdictional problem that we address below, Hurley's claims against these parties are not at issue in this appeal. The parties agreed to submit their case to a magistrate judge, as 28 U.S.C. sec. 636(c) permits. Finding that Hurley's case was preempted by the federal crashworthiness standard, Magistrate Judge Proud dismissed the action; this appeal followed.

I

Before we discuss the merits of Hurley's appeal, we must address a potential jurisdictional problem. Hurley's original suit involved four defendants--Motor Coach, Consolidated Freightways, Road Systems, and Pines Trailer. For jurisdictional purposes, the Hurleys are citizens of Arkansas. Motor Coach is a Delaware corporation with its principal place of business in Arizona. Consolidated Freightways is also a Delaware corporation, but its principal place of business is Oregon. Road Systems is a California corporation and its principal place of business is there, too. Finally, Pines Trailer is an Illinois corporation with its principal place of business in Illinois. Complete diversity, which is required for jurisdiction under 28 U.S.C. sec. 1332, therefore exists between the Hurleys and all defendants. (Given the severity of Hurley's injuries, nobody is contesting the adequacy of the amount in controversy.)

Not every diversity case qualifies for removal, however. For cases that start out in state court, where it is the defendant who wants the federal forum, there is an additional hurdle to clear before successfully reaching federal court. Under 28 U.S.C. sec. 1441(b), a non-federal question case "shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." This rule, sometimes called the "forum defendant" rule, means that Pines's presence in the case, if proper, would normally keep the case in state court. We say "normally" because in the typical case, a plaintiff who is about to see her chosen court slip away will object to removal if there is an in-state defendant, and thereby secure a speedy return to state court.

That did not happen in this case. After the defendants filed their removal petition, Hurley did nothing. Since 28 U.S.C. sec. 1447(c) gives plaintiffs only 30 days to object to removal, Motor Coach argues that Hurley has waived any objection to removal. Of course, waiver is possible only if the forum defendant rule is nonjurisdictional; true jurisdictional flaws are nonwaivable and can be raised at any time. See, e.g., Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999) ("subject-matter delineations must be policed by the courts on their own initiative even at the highest level"). Section 1447(c) spells out this fundamental rule for removed cases, where it states specifically that "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." Justice Kennedy explained the bedrock importance of the rule requiring courts to notice jurisdictional defects at any time in United States Catholic Conference v. Abortion Rights Mobilization, Inc., 487 U.S. 72 (1988):

The distinction between subject-matter jurisdiction and waivable defenses is not a mere nicety of legal metaphysics. It rests instead on the central principle of a free society that courts have finite bounds of authority, some of constitutional origin, which exist to protect citizens from the very wrong asserted here, the excessive use of judicial power. The courts, no less than the political branches of the government, must respect the limits of their authority.

Id. at 77.

We must decide, therefore, whether the forum defendant rule is jurisdictional, in the sense we have been using the term, or if it is of a lesser status. That question has been bouncing around the federal courts of appeals for more than 75 years, yet oddly enough it remains unresolved in this circuit. LaMotte v. Roundy's, Inc., 27 F.3d 314, 316 n.3 (7th Cir. 1994). The overwhelming weight of authority, however, is on the "nonjurisdictional" side of the debate. Compare Korea Exch. Bank v. Trackwise Sales Corp., 66 F.3d 46, 50 (3d Cir. 1995) (nonjurisdictional); In re Shell Oil Co., 932 F.2d 1518, 1522 (5th Cir. 1992); Farm Constr. Serv. v. Fudge, 831 F.2d 18, 21-22 (1st Cir. 1987); 428 F.2d 880, 882 (2d Cir. 1970) (Friendly, J.) (nonjurisdictional); Bailey v. Texas Co., 47 F.2d 153, 155 (2d Cir. 1931) (L. Hand, J.) (nonjurisdictional); Hanley- Mack Co. v. Godchaux Sugar Co., 2 F.2d 435, 437 (6th Cir. 1924) (nonjurisdictional) with Hurt v. Dow Chemical Co., 963 F.2d 1142, 1145-46 (8th Cir. 1992) (jurisdictional). See also Snapper, Inc. v. Redan, 171 F.3d 1249, 1258 (11th Cir. 1999) (interpreting 1996 statutory changes as resolving the conflict and making the forum defendant rule waivable).

A number of reasons persuade us that the majority rule is the correct one. First, the theme of several recent Supreme Court decisions that have considered curable defects in diversity jurisdiction has been to find that as long as the court's jurisdiction is proper at the time of trial and judgment, the case need not be dismissed because of an earlier jurisdictional problem. This was the precise holding of Caterpillar, Inc. v. Lewis, 519 U.S. 61 (1996), where the question was whether a lack of complete diversity at the time of removal required dismissal, even though all claims concerning the nondiverse defendant were settled and that party was dismissed before the trial began. The Court held that the answer was no, explaining that "the jurisdictional defect was cured, i.e., complete diversity was established before the trial commenced. . . . But a statutory flaw-- Caterpillar's failure to meet the sec. 1441(a) requirement that the case be fit for federal adjudication at the time the removal petition is filed--remained in the unerasable history of the case." 519 U.S. at 73 (emphasis in original). Particularly in light of the strong interests in finality, efficiency, and economy that attach to a completed trial, the Court found that the plaintiff's opportunity to raise objections within the 30 days afforded by sec. 1447(c) was sufficient to protect his interests.

Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826 (1989), took the same general approach to a different problem with diversity jurisdiction. In Newman-Green, indeed, the problem was more severe the case had proceeded to judgment in the district court while an individual whose presence spoiled complete diversity remained a party. The defect in jurisdiction was noticed only at the court of appeals level. The Supreme Court held that Rule 21 of the Federal Rules of Civil Procedure allows the courts of appeals (in addition to the district courts) to dismiss a dispensable party whose presence spoils statutory diversity jurisdiction. Once again, therefore, the note the Court struck is that the last chance for ensuring that jurisdiction is proper occurs as late as the final judgment in the case.

The situation we face is different, and in many ways less troublesome, than the problem the Court encountered in Caterpillar and Newman-Green. If Hurley's case had been filed in the first instance in federal court, jurisdiction under sec. 1332 would have been clear. Or, if Hurley had originally filed a state court action against Motor Coach, Consolidated, and Road Systems, those defendants could have removed the case to federal court since none was an in-state defendant. Once in federal court, Hurley could have filed an amended complaint adding Pines, if it turned out that Pines might have been responsible for his injuries. In short, the case as it arrived in federal court met every requirement for federal jurisdiction it simply took the wrong path, in a sense, because there was an in-state defendant. This, we think, is more a matter of removal procedure, and hence waivable, than a matter of jurisdiction.

The policy behind the forum defend...