Monday, February 23, 2009

Moving Cases From State To Federal Court: A Defense Ploy To Make Filing Suit More Costly, Burdensome On Individual Plaintiffs?

A recent story in the Toledo Blade involved an Ohio couple fighting off foreclosure by challenging the right of mortgage servicing companies and trustees to commence foreclosure proceedings. The foreclosing lender responded to the challenge by employing a defense tactic not uncommon in consumer cases: it is seeking to move the case from a state court to a federal court.

An article in the ABA Journal offers this observation on the defense tactic commonly used in civil cases of moving a case from a state to a federal court:

  • [I]t is widely believed that plaintiffs, particularly individuals rather than corporations, fare better in state courts where they have greater likelihood of getting to a jury and often benefit from more favorable interpretations of law. Defendants in turn tend to prefer the federal courts. Thus removals can become a cat-and-mouse game in which a plaintiff names a party having nothing to do with the matter as one of the defendants to prevent the other side from removing the matter to federal court. That court can find fraudulent joinder and keep the case or remand it.

  • But studies have shown a greater increase in recent years of defendants removing cases to federal court, only for them to be dispatched back to state court for erroneous removal. One researcher, a third-year student at New York University School of Law, found that most often in such situations, the plaintiffs are individuals. And the rate of their cases being remanded back to state court is higher, too, wrote Christopher Terranova in last summer’s edition of the Willamette Law Review (PDF).

  • He adds that “the delays and costs of that extra procedural step to federal court are more costly and burdensome for most individual plaintiffs than they are for bigger defendants with more assets.”

For more on the ABA Journal story, see Judge Says Firm Must Explain ‘Fraudulent’ Removals or Pony Up $25K.

For the Willamette Law Review article, see Erroneous Removal As A Tool For Silent Tort Reform: An Empirical Analysis Of Fee Awards And Fraudulent Joinder (article also available at

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