In Wullschleger v. Royal Canin U.S.A., Inc., No. 22-1796 (8th Cir. July 31, 2023), on its second trip to the Eighth Circuit, the court holds that a class-action plaintiff successfully outfoxed the defendants by promptly amending their removed complaint to strike out all federal-law allegations, thus depriving the district court of subject-matter jurisdiction.
This is an antitrust, unfair-trade, and unjust enrichment class action brought against two manufacturers under Missouri law challenging the use of the word “prescription” to sell dog food. “The crux of Wullschleger’s complaint is that the ‘prescription’ requirement is misleading because the Food and Drug Administration never actually evaluates the product. And the damages came from its higher sales price.” The defendants removed the complaint from state to federal court.
On its first trip to the Eighth Circuit, the panel held that “antitrust and unjust-enrichment claims had important federal ingredients that would require ‘explication of federal law,’” creating a basis for federal-question jurisdiction. Wullschleger v. Royal Canin U.S.A., Inc., 953 F.3d 519, 522 (8th Cir. 2020). “The antitrust claim, for example, alleged a conspiracy consisting of unlawful parallel conduct between the manufacturers, pet-food stores, and other pet-food producers to ignore Food and Drug Administration guidance and bypass regulatory approval.” The complaint also requested an injunction that the manufactureres stop violations of federal law.
On remand from the first appeal, “Wullschleger switched gears once she returned to the district court. She eliminated every reference to federal law in the complaint, cut the antitrust and unjust-enrichment claims, and narrowed her request for injunctive relief. As a replacement, she added a civil-conspiracy claim.” The district court held that the amendments did not affect subject-matter jurisdiction and it ruled on the merits, dismissing the case for failure to state a claim.
On this second appeal, the Eighth Circuit holds that it now lacks subject-matter jurisdiction and dismisses the case. “Original jurisdiction is the key to getting into federal court, whether by filing there from the start or by removal . . . . At first, original jurisdiction came through the federal questions in Wullschleger’s complaint. Wullschleger, 953 F.3d at 521–22 (citing 28 U.S.C. § 1331).” The first panel held that the antitrust and unjust-enrichment claims “implicate[d] significant federal issues.” But “now those claims are gone. All that remains are the Missouri Merchandising Practices Act claims, which do not necessarily raise a substantial federal issue . . . . Wullschleger kept those claims largely the same on remand, so they cannot supply the now-missing federal question” for subject-matter jurisdiction. “[T]here is nothing federal about it.”
The manufacturers argued that the operative complaint for judging subject-matter jurisdiction was the removed complaint, not subsequent amended complaints. But the panel rejoins that “an amended complaint [supersedes] an original complaint and renders the original complaint without legal effect” and “[i]t makes no difference whether the case ends up in federal court through removal.”
“There is, to be sure, another rule that ‘the jurisdiction of the [c]ourt depends upon the state of things at the time of the action brought.’ Mollan v. Torrance, 22 U.S. 537, 539 (1824). But both can be true: we can assess ‘the state of things’ at the time of filing and still evaluate jurisdiction according to the allegations in an amended complaint . . . . The distinction between the two is subtle. The ‘state of things,’ which is subject to the time-of-filing rule, refers to the actual facts on the ground. Suppose, for example, that one party destroys diversity by moving to another state after filing. This change to the ‘state of things’ does not destroy diversity jurisdiction, even if living in that state from the beginning would have.”
Bottom-line, the panel holds that the “state of things” does not change simply by changing the legal theories alleged in the complaint.
The panel notes that other circuits, notably the Second and Fifth, appear to hold otherwise, citing “forum-manipulation concerns” that the plaintiff should not be allowed to “subtract[] federal claims to thwart removal.” But the panel holds that “first principles” of federal jurisdiction favors the plaintiff. (The panel notes that “it is not even clear that the time-of-filing rule applies in federal-question cases.”)
In a footnote, the panel observes that “[t]here is a straightforward procedural answer to curbing potential forum manipulation. Unless amendments to the complaint happen quickly, a district court can withhold ‘leave’ to amend if the only reason for the changes is to destroy federal jurisdiction. Fed. R. Civ. P. 15(a)(1) (explaining when a party may amend as of right), (a)(2) (allowing a district court to deny leave to amend ‘when justice so requires’).” But here, the defendants apparently failed to raise this argument below.
Paul Mollica's Federal Courts Blog 