Commercial Litigation and Arbitration

Removal — § 1441 Does Not Permit Removal of Proceeding in State Agency, Only from State Courts — Circuit Split

Smith v. Detroit Entm’t, LLC, 919 F. Supp. 2d 883 (E.D. Mich. 2013):

Section 28 U.S.C. §1441 provides that "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant . . . ." 28 U.S.C. § 1441(a). The magistrate judge determined that remand is warranted here because the MAHS [Michigan Administrative Hearing System] is not a "state court" from which removal is permitted by the statute. MotorCity objects to that determination and argues that the MAHS may be treated as a state court for the purpose of removal. The issue is a matter of first impression in the Sixth Circuit. A split exists among other circuits.

Specifically, MotorCity contends that this Court should follow the approach taken by the First and Seventh Circuits. See Volkswagen de Puerto Rico, Inc. v. Puerto Rico Labor Relations Bd., 454 F.2d 38 (1st Cir. 1972); Floeter v. C.W. Transport, Inc., 597 F.2d 1100 (7th Cir. 1979). In Floeter, for example, a group of employees filed an action to enforce a collective bargaining agreement with the Wisconsin Employment Relations Commission ("WERC"), a state agency. In determining whether removal was proper, the Seventh Circuit held that removal from a state agency -- rather than a "State court," as provided in § 1441 -- may be authorized under § 1441 if the state agency "functions" like a state court. Floeter's "functional test" has two inquiries: The court must "evaluate [1] the functions, powers, and procedures of the state tribunal and . . . [2] the respective state and federal interests in the subject matter and in the provision of a forum." Floeter, 597 F.2d at 1101-02. A federal court should assume jurisdiction only if the agency functions as a court and federal interests predominate over state interests. Applying this test, the Floeter court held that the proceedings before the WERC in the case at issue were "essentially judicial" and that the state's interest in providing a convenient and expeditious forum to resolve labor disputes did "not outweigh the defendant's right to remove the action to federal court." Id. The court approved removal.

Footnote 1. MotorCity contends that the Fourth Circuit adopted the First and Seventh Circuit's approach in Kolibash v. Committee on Legal Ethics of West Virginia Bar, 872 F.2d 571 (4th Cir. 1989). But that case addressed the removal of suits against federal officers under 28 U.S.C. § 1442, not removal under § 1441. Construction of the two statutes is not parallel. See Sun Buick, Inc. v. Saab Cars USA, Inc., 26 F.3d 1259, 1262 (3d Cir. 1994) ("The force of Kolibash on [this issue] is diminished, however, because removal in Kolibash was based on 28 U.S.C. § 1442(a), the federal officer removal statute, which is broadly construed, as distinguished from section 1441, the removal statute here, which is strictly construed.").

In contrast, the Ninth and Tenth Circuits take a "literal approach" to the removal statute. See Porter Trust v. Rural Water Sewer & Solid Waste Mgmt., Dist. No. 1, 607 F.3d 1251 (10th Cir. 2010) (noting that "[m]ore recent authority has rejected or severely limited the "functional" test in favor of a standard application of the canons of statutory construction"); Oregon Bureau of Labor and Indus. ex rel. Richardson v. U.S. West Comm. Inc., 288 F.3d 414, 419 (9th Cir. 2002). In Richardson, the plaintiff filed an employment discrimination claim with the Oregon Bureau of Labor and Industries, and his employer removed the action to federal district court. The Ninth Circuit considered the approach taken in Floeter, but rejected it in favor of adherence to § 1441's plain language. See Richardson, 288 F.3d at 417 ("The plain language of 28 U.S.C. § 1441(a) limits removal to cases pending before a 'state court.'"). In rejecting Floeter, the Richardson court observed that the functional test "goes beyond the language of the statute, because [it] is a judicially developed analysis that neither appears on, nor is necessarily implied by, the statutory language." Id. at 419. Moreover, the court noted, "the functional test changes the meaning and reach of [§ 1441 by] effectively replac[ing] the statutory term 'state court' with the phrase 'any tribunal that acts as a court' . . . . Because agencies often conduct courtlike adjudications, the result is to dramatically expand federal removal jurisdiction to encompass many administrative agency proceedings. Id. at 419.

The Court finds, as did the magistrate judge, that a literal construction of the statute is the better approach. The issue is one of statutory interpretation. "The starting point in interpreting a statute is its language." Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 409, 113 S. Ct. 2151, 124 L. Ed. 2d 368 (1993). When a "statute's language is plain, 'the sole function of the courts is to enforce it according to its terms.' " United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241, 109 S. Ct. 1026, 103 L. Ed. 2d 290 (1989). As the Ninth Circuit observed, the language of § 1441 is plain. See Richardson, 288 F.3d at 417 ("[T]he plain language of 28 U.S.C. § 1441(a) authorizes removal only if the case is brought in a 'court.'"). MotorCity does not contend that the MAHS is a "court." Rather, it contends that the Court should construe § 1441 to permit removal where its text does not. But that is not the function of this Court. Moreover, with respect to § 1441 specifically, the Supreme Court has directed that it is to be narrowly construed. See Healy v. Ratta, 292 U.S. 263, 270, 54 S. Ct. 700, 78 L. Ed. 1248 (1934); Palkow v. CSX Transp., 431 F.3d 543, 555 (6th Cir. 2005). The functional test is inconsistent with that directive; it permits a broad construction of the statute, bringing within its scope the removal of actions not contemplated in the text. The Court notes that the flexibility of the functional test facilitates avoidance of one potential consequence of adherence to § 1441's text: if actions like Smith's cannot be removed from agency proceedings, a plaintiff bringing a state-law claim that is preempted by the LMRA can prevent removal of the LMRA claim, at least until after the completion of the administrative proceedings, simply by filing his claim in the state administrative system. That outcome runs contrary to a defendant's right of removal, usually applicable to claims preempted by § 301 of the LMRA . See Avco Corp. v. Aero Lodge No. 735, Int'l Ass'n of Machinists & Aerospace Workers, 390 U.S. 557, 560, 88 S. Ct. 1235, 20 L. Ed. 2d 126 (1968) (noting that claims preempted by § 301 arise under federal law and are therefore removable). But the issue is best remedied by Congress, rather than by an expansive interpretation of the removal statute. Indeed, as the magistrate judge noted, § 1441 itself contemplates that solution. See Report at 12 (noting that 1441(a) begins: "Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed . . . ."); see also Erica B. Haggard, Removal to Federal Courts from State Administrative Agencies: Reevaluating the Functional Test, 66 Wash. & Lee L. Rev. 1831, 1878 (2009) (suggesting that Congress amend the LMRA to "provide an explicit removal clause for actions filed in state agencies that are adjudged to be preempted by Section 301(a)").

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