09-3760 Rodas v. Seidlin

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Civil Procedure
Derivative jurisdiction

A federal court has jurisdiction over an action originally filed in state court and removed to federal court, even though the state court lacked subject matter jurisdiction over the initial action.

“Conceiving of derivative jurisdiction as a procedural defect rather than a subject matter jurisdiction ingredient is consonant with Freeman v. Bee Mach. Co., 319 U.S. 448, 449-52 (1943). There, a case was filed in state court for breach of contract. Upon removal, the plaintiff amended its complaint to add a claim for treble damages under the Clayton Act. If the derivative jurisdiction rule truly defined subject matter jurisdiction, then the amendment should not have been allowed: the limits of the federal court’s subject matter jurisdiction should have been derived from the state court’s jurisdiction, and the state court would have lacked jurisdiction over the Clayton Act claim. Instead, the Court allowed the amendment, reasoning that (by statute) once the case was properly in federal court the action could proceed as if it originated there. Id. at 452; see also People of Illinois ex rel. Barra v. Archer Daniels Midland Co., 704 F.2d 935, 939 (7th Cir. 1983) (citing Grubbs and stating that filing an amended complaint in federal court cured any problem with removal brought on by the fact that the original state-court complaint was not removable).”

“The foregoing analysis demonstrates that the doctrine of derivative jurisdiction, notwithstanding its perhaps improvident name, is a procedural bar to the exercise of federal judicial power. It is not an essential ingredient for a court’s subject matter jurisdiction.”

Reversed and Remanded.

09-3760 Rodas v. Seidlin

Appeal from the United States District Court for the Northern District of Illinois, Kapala, J., Flaum, J.

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