Judge Fish recently issued an order in Tran v. Citibank, sending the case back to state court for the second time. The plaintiff, Dr. Tran, originally brought suit in state court claiming that Citibank failed to honor his decision to rescind a transaction associated with his medical practice (Dr. Tran purchased electronic equipment for use in his practice, which, according to Dr. Tran, was defective) and, instead, associated with defendant GC Services, a debt collection agency, to collect the debt from him. Dr. Tran originally brought suit in state court, alleging a violation of, among other things, the Fair Debt Collection Practices Act.
Citibank removed the case to federal court on the basis of federal question jurisdiction. The case, however, was remanded after Dr. Tran dismissed all of his federal claims. Following remand, the state court ordered the parties to mediate. During the mediation, Dr. Tran made an oral demand of more than $87,000 to settle his case. Citibank then removed the case a second time–this time on the basis of diversity jurisdiction.
Dr. Tran filed a motion to remand, arguing that Citibank’s removal was untimely under 28 U.S.C. § 1446(b) (because the removal was filed “more than 1 year after commencement of the action”) and asserting that Citibank was “prohibited from using the oral ‘communication’ relating to the action ‘made by a participant in an alternative dispute resolution procedure’ to prove diversity jurisdiction under the Tex. Civ. Prac. & Rem. Code § 154.073(a)[,]” which provides, with certain exceptions, that “a communication relating to the subject matter of any civil or criminal dispute made by a participant in an alternative dispute resolution procedure . . . is confidential, is not subject to disclosure, and may not be used as evidence against the participant in any judicial or administrative proceeding.”
Judge Fish ultimately found that the one-year time limit of § 1446(b) barred removal, and remanded the case to state court again. Judge Fish’s decision did, however, raise three interesting issues. First, Judge Fish noted, with respect to the oral settlement communication, that it was unclear whether this oral communication could satisfy § 1446(b)’s requirement that the notice of removal be filed within thirty days “after receipt by the defendant . . . of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable[.]” Judge Fish noted that, “[a]lmost without exception, [courts] have held that the paper required in [section] 1446 must be a part of the underlying suit rather than an outside development in removal jurisdiction.”
The second interesting issue raised by the decision (but not decided by Judge Fish) is whether the oral settlement communication made at the parties’ mediation could be used to demonstrate that the case’s amount in controversy was over $75,000, as is necessary for diversity jurisdiction to exist. It seems unclear whether Tex. Civ. Prac. & Rem. Code § 154.073(a) makes such communications inadmissible in federal court. Until the courts have sorted this issue out, it may be best to enter into a separate mediation agreement that specifically provides that no party shall use communications occurring in mediation for any purpose, including to establish diversity jurisdiction.
Third, Judge Fish noted that, in certain instances, the one-year time limit in § 1446(b) may be equitably tolled in cases involving a clear pattern of forum manipulation. In the instant case, however, Judge Fish concluded that Citibank had failed to demonstrate that the one-year time limit should be equitably tolled.
Carl Adams, of The Law Offices of Carl Adams, represents Dr. Tram. Citibank is represented by Evan Moeller, of Hirsch & Westheimer PC, Brian Morris and Leslie Johnson, both of Winstead PC, and Citibank in-house counsel David Winston.