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Tuesday, May 4, 2010

4th Circuit extends rule on curing improper removals.

by Kirsten E. Small

The Fourth Circuit issued one published opinion on May 3, holding in Moffit v. Residential Funding Company, LLC that the establishment of federal jurisdiction cures an improper removal even when the issue is brought to the court's attention before final judgment.

Plaintiffs filed this case in Maryland state court in 2003. In 2009, plaintiffs notified defendants by letter of their intent to file an amended complaint containing allegations that would establish jurisdiction in federal court under the Class Action Fairness Act. Defendants removed to federal court pursuant to 28 U.S.C. § 1446(b). Following removal, plaintiffs filed the amended complaint; they then sought remand on the basis that federal jurisdiction did not exist at the time of removal.

On interlocutory review, the Fourth Circuit affirmed the district court's denial of the motion to remand. Under settled authority, an erroneous removal is cured by the plaintiff's subsequent voluntary amendment of the complaint to allege facts giving rise to federal jurisdiction.

Plaintiffs acknowledged this authority but argued that the rule applies only after final judgment. The Fourth Circuit disagreed, holding that "this line of precedent is grounded not only in the interest of 'finality' but also in larger considerations of 'judicial economy.'" Because defendants would have had the right to remove even if the district court had granted the motion to remand, judicial economy favored application of the rule that an erroneous removal is cured by subsequent amendment of the complaint.

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