There are certain requirements for when your lawsuit is entitled to be transferred to federal court, or, if you are already in federal court, remanded back to state court. There are also benefits to being in federal court, explained below.
If your business is filing or defending a lawsuit, an important question to ask is whether you are entitled to bring the case in federal court, rather than state court. Each state has its own court system, which in North Carolina is organized by county.
In federal court, however, the organization is different. In federal court there is one federal jurisdictional district per region, resulting in 94 districts throughout the United States. (The U.S. court system has provided a map and a list of all the federal districts.)
In North Carolina, there are three federal districts, one per region of the state, which are the Western District, the Middle District, and the Eastern District. Each district covers all the counties in the particular region.
You are entitled to have your lawsuit heard in federal court only if your case meets certain requirements. In short, federal courts have jurisdiction where there is a federal “ingredient” in the dispute. Specifically, there is federal jurisdiction over a lawsuit in the following situations.
A dispute between people or business entities that are citizens of different states and in which the amount in controversy is over $75,000; or
The case involves an alleged violation of a federal law (rather than a state law).
If your business has a dispute that involves an out-of-state company and the amount you are demanding is at least $75,000, there is probably federal jurisdiction. Or, if you claim that a federal law is involved in the dispute, there is probably federal jurisdiction.
Assuming that your business’s lawsuit is entitled to be heard in federal court, the next question is what the posture of the dispute is. If you are the one who would be filing the lawsuit (i.e., if your company is the plaintiff), you can simply file the case in federal court rather than state court. The federal courts require that you provide a written statement explaining why the federal courts should hear the case.
On the other hand, if your business has already been sued by another company (i.e., if your business is the defendant) and you are already in state court, you still have the right to “remove” the case to federal court. The most important issue is timing – you only have 30 days to remove the case, measured from the date on which you receive notice of the lawsuit. If you try to remove the case even a day past the 30-day limit, the case will be transferred back to federal court and you might be ordered to pay the other side’s attorney’s fees.
There are downsides to being in state court. In North Carolina state court, the judges rotate and you might be in front of a different judge each time you go back for a hearing. This prevents any judges from establishing fiefdoms in a particular county, but it means that you have to reeducate each judge each time you go to court.
In federal court, though, you are assigned to a specific judge for the life of your case. The same judge handles every court appearance, from motions to trials, and often gains a familiarity with your case. This may be advantageous.
Additionally, the court rules in federal court, the Federal Rules of Civil Procedure, are the same in each court. In state court there are often unspoken differences between how each county, or even each judge, handles cases. Federal court is often faster than state court because of the uniformity of federal courts’ handling of cases.
In fact, in federal court you can file all your documents electronically in PDF format on a system called Case Management/Electronic Case Files (CM/ECF), which saves significant time.
As you can see from the foregoing, if your business is filing or defending a lawsuit, you may well want to handle it in federal court if you meet the legal criteria for doing so. Both federal and state court have advantages and disadvantages, so the most important thing to do at the outset is to consult a competent attorney who can advise you on legal strategy, including whether your case should be brought in federal court.
Dye Culik PC is a Charlotte, North Carolina business law firm that represents clients in all state and federal courts in North Carolina. We have experience litigating against some of the largest corporations in the U.S. in all levels of the trial court system. If your business has a dispute, contact us to see how we can help you bring it to a close.