Seventh Circuit Affirms Dismissal Under the Doctrine of Derivative Jurisdiction, But Devises Prospective 30-Day Deadline for Defendants to Raise This Objection

In Ricci v. Salzmanin, No. 19-3035 (7th Cir. Oct. 1, 2020) (per curiam), a two-judge panel affirms dismissal of a complaint removed to federal court, because the state court where it was originally filed lacked jurisdiction, but also holds henceforth that defendants must raise this defect within 30 days of removal. (This is the first published opinion of the Seventh Circuit where Circuit Judge Amy Coney Barrett, nominee to the U.S. Supreme Court, took herself off the panel.)

The Social Security Administration (SSA) removed Ricci “as representative payee” for his minor daughter “because they determined that he was not his daughter’s legal guardian.” He challenged the decision in a state-court filing. The SSA “removed the case to federal court under the federal officer removal statute, 28 U.S.C. § 1442. Then, [SSA] moved to dismiss the action under the doctrine of derivative jurisdiction. They argued that the state court had no jurisdiction over the case when it was originally filed, and therefore, the federal court could not hear the case after it was removed.” The district court agreed, dismissed the complaint without prejudice, and “instructed Ricci to initiate a new federal action.”

The Seventh Circuit affirms. The doctrine of derivative jurisdiction provides that “if the state court lacks jurisdiction over the subject matter or the parties, the federal court acquires none upon removal, even though the federal court would have had jurisdiction if the suit had originated there.” Arizona v. Manypenny, 451 U.S. 232, 242 n.17 (1981). Derivative jurisdiction doctrine is not a strictly jurisdictional rule but in any event “creates a procedural defect in removal.”

Derivative jurisdiction was once the norm, though Congress amended the general removal statute to abolish it for most removal cases in 28 U.S.C. § 1441(f). “But it has not abrogated the doctrine with respect to the federal officer removal statute at issue here, 28 U.S.C. § 1442.”

The panel also holds that the defect could not be corrected by plaintiff “filing an amended complaint that properly invokes federal jurisdiction.” This route may be used “only in the context of a case where the dispute has proceeded to a disposition on the merits,” not at the pleading stage. “When the derivative jurisdiction doctrine is timely raised, then, it properly results in dismissal without prejudice.”

“In sum, we hold that when a defendant timely raises the derivative jurisdiction doctrine, it erects a mandatory bar to the court’s exercise of federal jurisdiction, and a plaintiff cannot circumvent that bar merely by filing an amended complaint invoking federal jurisdiction.”

The panel, while affirming dismissal, also concedes the harsh result if a case is dismissed after the limitations period has already run. Thus, “we think it appropriate to adopt a . . . rule requiring defendants to assert the derivative jurisdiction doctrine within 30 days from removal. If raised within 30 days, it results in dismissal without prejudice. But after that window passes, it is forfeited and the plaintiff may proceed …. [N]othing in our precedent requires that we permit future defendants to assert the derivative jurisdiction doctrine at any point before judgment.”

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