General Investment Co. v. Lake Shore & Michigan Southern Railway Co.

Supreme Court of the United States · 1922 · Federal Courts

Federal CourtsRemovalVenuePersonal JurisdictionState and Federal Jurisdictionfederal questionremovalproper district

Facts

General Investment Co., a stockholder in the New York Central Company and the Lake Shore Company, sued to stop a proposed consolidation of eleven railroad companies. The suit was filed in Ohio state court and attempted service on the New York Central Company through a ticket agent in Ohio, but the evidence showed New York Central was a New York corporation that had no railroad, office, business, or agent in Ohio. Plaintiff argued the suit arose under federal antitrust law and also under state constitutions and laws, and sought injunctions against voting and consummating the consolidation. After removal to federal court, plaintiff also sought remand, special service on absent defendants, and leave to file a supplemental bill changing the theory and object of the suit.

Issue

Whether a federal-question suit filed in state court may be removed to the federal district encompassing that state court even though one removing defendant is not an inhabitant of that federal district, and whether venue rules for original federal suits limit such removal. The case also presented whether removal or later litigation steps waived objections to defective service, whether special service under section 57 was available, and whether the bill stated a maintainable basis for relief.

Rule

Section 24 grants the district courts general original jurisdiction over federal-question suits meeting the amount requirement. Section 51's venue restriction applies only to suits begun in district court, creates merely a personal privilege of the defendant, and does not limit removability under sections 28 and 29; a federal-question suit pending in state court is removable by the defendant or defendants to the federal district embracing the place where the state action is pending. A petition for removal does not constitute a general appearance or waive objections to service, and removal does not cure a want of jurisdiction in the state court. Section 57 special service is limited to local suits directly involving specific property within the district.

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Nora Blakely sued Desert Span Logistics, Inc. in Arizona state court in Phoenix, alleging a claim that arises under a federal statute and seeking more than the jurisdictional amount. Desert Span is incorporated and headquartered in Nevada, and it removed the case to the federal district court covering Phoenix.

Nora moves to remand, arguing removal was improper because Desert Span is not an inhabitant of the federal district where the state action was pending. How should the federal court rule?

Explanation. The majority held that for suits arising under federal law, the removal statutes direct removal to the federal district embracing the place where the state suit is pending. The venue restriction applicable to suits originally begun in federal court creates only a personal privilege and does not limit removal jurisdiction. Thus the out-of-district or out-of-state status of the defendant does not make removal improper.