Sequence of Decisionmaking — Decision on Statutory Removal May Precede Resolution of Motions to Dismiss for Lack of Subject Matter or Personal Jurisdiction

From Red Cloud Assets, LLC v. Harris Aviation, LLC, 2011 U.S. Dist. LEXIS 52284 (W.D. Okla. May 16, 2011):

Priority of the Parties' Motions

Each side urges the Court to take up its Motion first. The removing defendants contend the issue of personal jurisdiction is easily resolved and should result in their prompt dismissal from the case so they are not burdened by litigation in a distant forum. Similarly, Plaintiffs argue the lack of subject matter jurisdiction is obvious and the competence of state courts to decide the remaining issues should be respected. Both sides acknowledge in their response briefs, however, that each lacks sufficient factual information about the other to dispose of the jurisdictional issues without an opportunity for discovery. Plaintiffs have filed a separate motion requesting authorization to conduct jurisdictional discovery.... Defendants' request appears only as argument in their brief, but they acknowledge a lack of information concerning certain members of Plaintiff B47 Investment Fund I, LLC. ***

Although federal subject matter jurisdiction generally is a threshold issue, the Supreme Court has determined that federal district courts have discretion to sequence jurisdictional issues in any order warranted by the circumstances, based on concerns of judicial economy and federalism. See Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 587-88 (1999). Recently, the Supreme Court broadened a district court's discretion "to choose among threshold grounds for denying audience to a case on the merits." Sinochem Intern. Co. Ltd. v. Malaysia Intern. Shipping Corp., 549 U.S. 422, 431 (2007) (internal quotation omitted). Specifically, the Court authorized district courts to "dispose of an action by a forum non conveniens dismissal, bypassing questions of subject-matter and personal jurisdiction, when considerations of convenience, fairness, and judicial economy so warrant." Id. at 432. The Supreme Court concluded that the district court had properly chosen that course in Sinochem because "subject-matter jurisdiction presented an issue of first impression" and "[d]iscovery concerning personal jurisdiction would have burdened [the foreign company] with expense and delay" for "scant purpose" given the inevitable nonmerits dismissal. Id. at 435.

In this case, the Court finds that a threshold, nonmerits issue presents the most expeditious avenue for the disposition of this federal case. Although not jurisdictional, the statutory bar to removal of a diversity case against a forum defendant, 28 U.S.C. § 1441(b), has been timely raised by Plaintiffs and can easily be resolved on the pleadings alone. It requires no discovery of jurisdictional facts and no resolution of novel issues raised by the removing defendants in their brief regarding subject matter jurisdiction, such as, whether Red Cloud's citizenship should be disregarded because its suit may be unauthorized by Wyoming law (under which it was organized) or whether Red Cloud's citizenship should be determined by the corporate rule of § 1332(c)(1) in a case where a limited liability company is suing some of its members.... Accordingly, the Court considers only Plaintiffs' Motion to Remand based on a violation of the forum defendant rule, and finds that it clearly has merit.

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