Whether a final federal judgment must be vacated because a diversity case was improperly removed when complete diversity was absent, even though complete diversity existed by the time of trial and judgment.
Holding
No. An erroneous denial of a timely remand motion does not require vacatur when the federal court had subject-matter jurisdiction at the time it entered judgment.
Reasoning
The Court accepted that removal was improper. At the time Caterpillar removed, Whayne Supply remained a defendant because Liberty Mutual's subrogation claim against it had not been settled. Since Lewis and Whayne were both Kentucky citizens, complete diversity did not exist. The District Court therefore erred when it treated Whayne as effectively gone from the case and denied remand.
That removal error did not mean that subject-matter jurisdiction was absent at judgment. Before trial, Liberty Mutual settled its claim against Whayne, Whayne was dismissed, and the operative dispute became one between Lewis, a Kentucky citizen, and Caterpillar, a Delaware corporation with its principal place of business in Illinois. Complete diversity thus existed when the case was tried and judgment was entered.
American Fire & Casualty Co. v. Finn established that a judgment cannot stand when federal jurisdiction is absent at the time of judgment. But Finn did not decide this case, because diversity existed here by the time judgment was entered. Grubbs v. General Electric Credit Corp. likewise supported focusing on whether the federal court could have exercised original jurisdiction over the case as it stood at judgment, although Grubbs involved a party that had not objected to removal before trial.
Lewis did not waive his removal objection. He timely sought remand, and he was not required to pursue a discretionary interlocutory appeal under 28 U.S.C. § 1292(b) merely to preserve the issue for appeal after final judgment. Requiring such appeals would conflict with the ordinary rule that appellate review follows a final judgment.
Still, finality, efficiency, and judicial economy controlled after a full federal trial in a case that had become properly diverse. Requiring the parties to begin again in state court would discard years of litigation and a six-day jury trial even though the federal court possessed jurisdiction at the time of adjudication. The Court drew support from Newman-Green, which favored curing a diversity defect rather than requiring wasteful dismissal after extensive litigation.
The Court rejected the prediction that this rule would invite strategic wrongful removals. Removal requirements remain enforceable through prompt remand motions in district court, and an unjustified removal ordinarily risks swift remand, a nonreviewable remand order, and the district court's displeasure. A defendant also cannot reliably assume that a jurisdictional defect will escape attention and disappear before judgment.