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Springman v. AIG Marketing

April 15, 2008

THOMAS SPRINGMAN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF-APPELLANT,
v.
AIG MARKETING, INC. AND ILLINOIS NATIONAL INSURANCE CO., DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Southern District of Illinois. No. 07-737-GPM-G. Patrick Murphy, Judge.

The opinion of the court was delivered by: Posner, Circuit Judge.

ARGUED APRIL 4, 2008

Before POSNER, ROVNER, and EVANS, Circuit Judges.

The plaintiff filed this class action suit in an Illinois state court in July 2003 against AIG Claim Services (AIGC), a company that processes insurance claims, as well as against Illinois National Insurance Company, which issues insurance policies; the policies give rise to claims for payment. The complaint charged the defendants with having violated Illinois fraud and consumer protection law by underpaying accident-insurance claims submitted by the plaintiff and the members of his class.

In December 2003, in response to an interrogatory served by the plaintiff, AIGC stated that it had not handled his insurance claim. But not until October of the next year did he serve an interrogatory asking who had handled it. AIGC and Illinois National responded the following month that the claim had been handled by an affiliate of AIGC called AIG Marketing (AIGM). Three years (less two months) later, and thus nearly four years after first being told that he had sued the wrong party, the plaintiff moved the court for leave to amend his complaint to add AIGM as a defendant and drop AIGC. The court granted the motion.

In the meantime, however, Congress had passed the Class Action Fairness Act, which allows certain types of class action suit filed in state court and governed by state law to be removed to federal district court despite the absence of complete diversity, 28 U.S.C. §§ 1331(d), 1453, provided the suit was "commenced" on or after the Act's effective date, which was February 18, 2005. Both the plaintiff and Illinois National are citizens of Illinois, though neither of the AIG companies is. AIGC therefore could not have removed the case to federal court because the suit against it was filed before the Act's effective date and thus at a time when complete diversity was required for removal of a diversity case. But AIGM was substituted for AIGC after that date. So, promptly after the amendment of the complaint (and incidentally before a class had been certified), AIGM removed the case to federal district court, which denied the plaintiff's motion to remand to state court, precipitating this appeal under 28 U.S.C. § 1453(c)(1). The question we have to answer is whether the substitution of AIGM for AIGC was the commencement of a suit against AIGM within the meaning of the Class Action Fairness Act, thus enabling removal of the entire suit. 28 U.S.C. § 1453(b).

That the suit had been filed before the Act's effective date might seem to doom removal. But the plaintiff does not argue that; he bows to our case law, which rejects the position that nothing that happens after suit is filed can affect removal. E.g., Phillips v. Ford Motor Co., 435 F.3d 785, 786-88 (7th Cir. 2006); Knudsen v. Liberty Mutual Ins. Co., 411 F.3d 805, 806-07 (7th Cir. 2005). All but one of the other circuits to have addressed the question agree with us. Smith v. Nationwide Property & Casualty Ins. Co., 505 F.3d 401, 405-06 (6th Cir. 2007); Prime Care of Northeast Kansas, LLC v. Humana Ins. Co., 447 F.3d 1284, 1285-86 (10th Cir. 2006); Braud v. Transport Service Co., 445 F.3d 801, 803-04 (5th Cir. 2006); Plubell v. Merck & Co., 434 F.3d 1070, 1071-72 (8th Cir. 2006). The outlier is the Ninth Circuit. E.g., McAtee v. Capital One, F.S.B., 479 F.3d 1143, 1145-48 (9th Cir. 2007).

The cases that allow removal under the Class Action Fairness Act on the basis of certain events that take place after the case was filed are consistent with federal removal doctrine; "an amendment to the pleadings that adds a claim under federal law (where only state claims had been framed before), or adds a new defendant, opens a new window of removal." Knudsen v. Liberty Mutual Ins. Co., supra, 411 F.3d at 807; see 28 U.S.C. § 1446(b). The Ninth Circuit, however, believes that a simpler approach, one that disregards post-filing developments, is warranted because all that is at stake in removal under the Class Action Fairness Act is whether the same case, governed by state law, will be litigated in a state court or in a federal court. But that is all that's at stake whenever a suit is removed to federal court on the basis of diversity.

Nowhere does the Act state or suggest that removal pursuant to it is more limited than in the usual diversity case. On the contrary, the Act lengthened the time within which a normal diversity suit can be removed, 28 U.S.C. § 1453(b), as well as making a particular class of diversity cases, namely class actions in which diversity is only partial, removable to federal court for the first time.

On the Ninth Circuit's view, a plaintiff can defeat removal by first filing a complaint that does not include a claim or a defendant that would trigger the Act's right of removal and later substituting a claim or defendant that would have triggered the right. Suppose that with the Act's effective date looming, the plaintiff had not completed even a minimal pre-complaint investigation. Under the Ninth Circuit's view, the plaintiff could sue Donald Duck for violating a Chicago noise ordinance and then at his leisure amend the complaint to substitute a proper claim against a proper defendant, and the new defendant would not be able to remove.

But even the cases that reject the Ninth Circuit's position forbid removal if the new claim or defendant (new in the sense of having been added after the effective date of the Class Action Fairness Act) "relates back" to the original claim or the original defendant. It would not do so in the Donald Duck case, although that would not faze the Ninth Circuit, which considers relation back important only when necessary to avoid a statute of limitations defense, since, if successful, the defense kills the plaintiff's claim rather than just forcing it to be litigated in a different court system. McAtee v. Capital One, F.S.B., supra, 479 F.3d at 1147.

The majority view, because it makes relation back important, raises a threshold question: should state or federal law govern whether a claim or defendant relates back? The cases thus far have assumed that it is state law, e.g., Schorsch v. Hewlett-Packard Co., 417 F.3d 748, 750-51 (7th Cir. 2005); Plubell v. Merck & Co., supra, 434 F.3d at 1071, but with little discussion of the issue, probably because its resolution rarely matters (it doesn't matter in this case, as we shall see). What may have influenced the assumption is that state law determines the date on which a diversity suit was commenced for purposes of determining whether the statute of limitations has run. Walker v. Armco Steel Corp., 446 U.S. 740 (1980). The statute of limitations, however, is a substantive defense the application of which depends on the length of time that elapsed between the date on which the plaintiff's claim accrued and the date on which he filed suit. If state law governs the statute of limitations defense, as it normally will in a diversity case, it makes sense to defer to the state law's determination of when a claim accrues and when a suit is commenced, for those are the dates that determine whether the suit is barred by the statute. But the validity of a state-law defense is not the issue when the district court is asked to decide in which court system, the federal or the state, the case shall be litigated. Suppose that in an effort to delay the effective date of the Class Action Fairness Act, a state court defined "relation back" so broadly that even the replacement of Donald Duck by AIGM would relate back to the date of the original complaint and therefore AIGM could not remove. That would defeat the Act's goal, and as the Act is silent on relation back, the interpretation that is consistent with that goal is permissible as well as preferable.

We need not choose between state and federal law (we are merely flagging the issue for possible consideration in the future) because Illinois's relation-back rule is identical to the federal rule. Both rules provide that a party may be changed if, within the deadline for service of the complaint on it, (1) the new party had received enough notice of the original suit that it would not be "prejudiced in maintaining a defense on the merits" if it were brought into the case belatedly, and (2) it "knew or should have known that, but for a mistake concerning the identity of the proper party, the action would have been brought against" it. 735 ILCS 5/2-616(d)(2); Fed. R. Civ. P. 15(c)(1)(C). The plaintiff argues that these conditions have been satisfied.

The first may have been, but not the second. The plaintiff learned by December 2003, or at the latest by November 2004, that he had sued the wrong party, yet he waited almost three years to substitute the right one. He offers no excuse for having waited so ...


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