Thomas E. Reynolds v. Behrman Capital IV L.P.

T
         USCA11 Case: 19-13537   Date Filed: 02/23/2021   Page: 1 of 23



                                                                    [PUBLISH]



              IN THE UNITED STATES COURT OF APPEALS

                      FOR THE ELEVENTH CIRCUIT
                        ________________________

                              No. 19-13537
                        ________________________

                    D.C. Docket No. 2:18-cv-00514-ACA



THOMAS E. REYNOLDS,

                                               Plaintiff - Appellant,

versus

BEHRMAN CAPITAL IV L.P.,
AXA PRIMARY FUND AMERICA IV LP,
AXA PRIVATE CAPITAL I, LP,
CORE AMERICAS/GLOBAL HOLDINGS, LP,
GLOBAL FUND PARTNERS II, LP, et al.,

                                               Defendants - Appellees,

BEHRMAN BROTHERS MANAGEMENT CORPORATION, et al.,

                                               Defendants.

                        ________________________

                 Appeal from the United States District Court
                    for the Northern District of Alabama
                        ________________________

                             (February 23, 2021)
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Before JORDAN, LAGOA, and BRASHER, Circuit Judges.

JORDAN, Circuit Judge:

      Thomas Reynolds, the Chapter 7 trustee for the bankruptcy estates of

Atherotech Inc. and Atherotech Holdings, appeals the dismissal of his complaint for

lack of personal jurisdiction. The district court, following removal of the case from

Alabama state court, applied the doctrine of derivative jurisdiction articulated in

Lambert Run Coal Co. v. Baltimore & O.R. Co., 

258 U.S. 377

, 382 (1922), and ruled

that because the state court did not have personal jurisdiction over the defendants

under Alabama’s long-arm statute, it too lacked personal jurisdiction. In so ruling,

the district court concluded that Mr. Reynolds could not rely on Bankruptcy Rule

7004(d) (which looks to a defendant’s national contacts and permits nationwide

service of process) to establish personal jurisdiction. And it denied as futile Mr.

Reynolds’ motion to transfer the case to the Southern District of New York under

28 U.S.C. § 1406, explaining that under the doctrine of derivative jurisdiction a New

York district court would likewise lack personal jurisdiction over the defendants.

      The Supreme Court has applied the doctrine of derivative jurisdiction only

with respect to subject-matter jurisdiction, so that if a state court lacks subject-matter

jurisdiction over a case when it is initially filed, a federal court also lacks subject-

matter jurisdiction when the case is removed (even if the federal court would have

had jurisdiction had the case originally been filed in a federal forum). The main


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question for us in this appeal is whether the doctrine applies when the state court

from which the case is removed lacks personal jurisdiction over the defendants.

                                           I

      We accept as true, at this stage of the litigation, the facts as alleged in the

complaint filed by Mr. Reynolds in Alabama state court (and later amended in

federal court). See Louis Vuitton Malletier, S.A. v. Mosseri, 

736 F.3d 1339

, 130

(11th Cir. 2013). Given the posture of the appeal, we express no view on the validity

of the allegations or the merits of the claims.

                                           A

      Atherotech operated a laboratory that conducted testing on blood cholesterol

levels. Atherotech was wholly owned by Atherotech Holdings, which was in turn

owned by three shareholders: Behrman Capital IV LP, Behrman Brothers LLC, and

Midcap Financial Investment, LP. Behrman Capital was the majority shareholder

of Atherotech Holdings, owning 94% of its stock and controlling three of five seats

on its board of directors. Behrman Brothers—which was also Behrman Capital’s

general partner—and MidCap owned the remaining shares in Atherotech Holdings.

      As part of its business, Atherotech paid physicians who ordered blood

cholesterol levels a processing and handling fee, known as a P&H fee. Although

Medicare rules and regulations prohibit the payment of P&H fees, Atherotech




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nevertheless submitted claims for those fees to Medicare and other federal healthcare

programs.

      In 2012, the Department of Justice began to investigate Atherotech’s

payments of P&H fees as a potential violation of the False Claims Act, 31 U.S.C. §§

3729–3730, and the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b. Violations of the

False Claims Act can result in a per-claim penalty of between $5,500 and $11,000,

in addition to treble damages. See 31 U.S.C. § 3729(a).

      Despite knowing of the investigation, Atherotech continued to make P&H fee

payments and submit Medicare claims for those payments. From January of 2011

through June of 2013, Medicare reimbursed Atherotech about $35,691,000 for tests

associated with P&H fee payments. The complaint alleges that, by June of 2013,

Atherotech had up to $107,073,000 in contingent liabilities for violations of the False

Claims Act.

      In 2013, as the DOJ investigation was ongoing, Atherotech borrowed $40.5

million under a credit agreement.          Atherotech then executed a dividend

recapitalization under which it paid Atherotech Holdings’ shareholders—Behrman

Capital, Behrman Brothers, and MidCap—dividends totaling $31,872,860.75.

Behrman Capital received $31,433,596.05; Behrman Brothers received $87,374.00;

and MidCap received $351,890.70. Behrman Capital distributed its portion of the

dividend to its limited partners and its general partner, Behrman Brothers. Behrman


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Brothers in turn distributed its share of the dividends to its members, along with the

portion it received from Behrman Capital as its general partner.

      By July of 2014, Atherotech could no longer pay P&H fees, and its revenues

decreased significantly. From July through October of 2015, Behrman Capital

invested $6.9 million in Atherotech to keep the business afloat. Despite the influx

of funds, Atherotech and Atherotech Holdings filed for bankruptcy in March of

2016. The bankruptcy court appointed Mr. Reynolds as the Chapter 7 trustee for

both companies, and he eventually sold Atherotech’s assets for $19.6 million.

                                          B

      In March of 2018, Mr. Reynolds, as trustee for the bankruptcy estates of

Atherotech and Atherotech Holdings, filed a complaint in Alabama state court. The

initial complaint named 30 defendants: Behrman Capital; Behrman Capital’s 15

limited partners; Behrman Brothers; Behrman Brothers’ 12 members; and MidCap.

Mr. Reynolds asserted several federal and state law claims stemming from the

dividend issued by Atherotech Holdings to its shareholders.

      The defendants removed the case to the district court under 28 U.S.C. § 1441,

asserting that the complaint implicated significant federal issues, and alternatively

under 28 U.S.C. § 1452(a), asserting that pursuant to 28 U.S.C. § 1334 the district

court had subject-matter jurisdiction under the Bankruptcy Code. The district court

concluded that the case did not implicate a significant federal issue under § 1441,


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but held that Mr. Reynolds’ claims “arose under” the Bankruptcy Code or were

“related to” the bankruptcy proceedings of Atherotech and Atherotech Holdings. As

a result, it ruled that removal was proper under § 1452(a).

       The defendants moved to dismiss for lack of personal jurisdiction under Rule

12(b)(2). The district court granted their motions. It concluded that Bankruptcy

Rule 7004(d), which allows for nationwide service of process, see, e.g., Double

Eagle Energy Services, L.L.C. v. MarkWest Utica EMG, L.L.C., 

936 F.3d 260

, 264

(5th Cir. 2019), did not apply because its jurisdiction was derivative of the Alabama

state court. Turning to Alabama’s long-arm statute, the district court ruled that the

defendants did not have minimum contacts with Alabama that would permit it to

exercise personal jurisdiction over them. The district court, however, allowed Mr.

Reynolds to file a motion to amend his complaint and explain why doing so would

not be futile.

       In his motion to amend, Mr. Reynolds asserted that the proposed amended

complaint would “remedy the deficiencies cited” by the district court, and would

drop MidCap and the limited partners and members as defendants. See D.E. 109 at

2–3. He further stated that “[t]he only two defendants named in the [a]mended

[c]omplaint” were Behrman Capital and Behrman Brothers. See

id. Consistent with this

representation, Mr. Reynolds’ amended complaint listed Behrman Capital and

Behrman Brothers as the sole defendants.


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      Behrman Capital and Behrman Brothers moved to dismiss the amended

complaint for lack of personal jurisdiction under Rule 12(b)(2). Mr. Reynolds

asserted that there was personal jurisdiction under the Alabama long-arm statute,

and alternatively requested that the district court transfer the case to the Southern

District of New York pursuant to 28 U.S.C. § 1406 if it concluded that it lacked

personal jurisdiction over the defendants. The district court ruled that, under

Alabama’s long-arm statute, it could not exercise personal jurisdiction over

Behrman Capital and Behrman Brothers. It also concluded that transfer would be

futile “because the derivative removal jurisdiction bars any federal court from

acquiring personal jurisdiction over this suit after its removal from a state court that

lacked such personal jurisdiction.” The district court therefore dismissed Mr.

Reynolds’ amended complaint without prejudice.

      On September 9, 2019, Mr. Reynolds filed a notice of appeal in which he

included all the original defendants, including MidCap. In his notice of appeal, Mr.

Reynolds sought to appeal the district court’s dismissal of both his original and

amended complaints.

                                          II

      As noted, Mr. Reynolds dropped MidCap as a defendant in his amended

complaint. MidCap now argues that this constituted a waiver by Mr. Reynolds of




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any argument that the district court erred by initially dismissing it for lack of

personal jurisdiction. We are not persuaded.

       An amended complaint supersedes and replaces the original complaint. See

Hoefling v. City of Miami, 

811 F.3d 1271

, 1277 (11th Cir. 2016); Dresdner Bank AG

v. M/V Olympia Voyager, 

463 F.3d 1210

, 1215 (11th Cir. 2006); Fritz v. Standard

Sec. Life Ins. Co. of N.Y., 

676 F.2d 1356

, 1358 (11th Cir. 1982). We have held,

however, that a plaintiff does not waive his right to appeal the dismissal of a claim

in the original complaint by amending the complaint and omitting the dismissed

claim. “[W]e do not require a party to replead a claim following a dismissal under

Rule 12(b)(6) to preserve objections to the dismissal on appeal” where repleading

“would have been futile and would have resulted in a second dismissal[.]” Dunn v.

Air Line Pilots Ass’n, 

193 F.3d 1185

, 1191 n.5 (11th Cir. 2001). See also Varnes v.

Local 191, Glass Bottle Blowers Ass’n of the United States and Canada, 

674 F.2d 1365

, 1370 (11th Cir. 1982) (“Varnes was not barred, by consenting to the dismissal

and filing the amended complaint, from raising on appeal the correctness of the

dismissal order.”). 1




1
 We had come to a similar conclusion in Wilson v. First Hous. Inv. Corp., 

566 F.2d 1235

, 1238
(5th Cir. 1978), but that decision was vacated by the Supreme Court, see 

444 U.S. 959

(1979), and
as a result it does not have any precedential force. See United States v. Sigma Int’l, Inc., 

300 F.3d 1278

, 1280 (11th Cir. 2002) (en banc).
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      As the Tenth Circuit has explained, “a rule requiring plaintiffs who file

amended complaints to replead claims previously dismissed . . . in order to preserve

those claims merely sets a trap for unsuspecting plaintiffs with no concomitant

benefit to the opposing party.” Davis v. TXO Prod. Corp., 

929 F.2d 1515

, 1518

(10th Cir. 1991). We agree. “Without more, the action of the amending party should

not result in completely denying the right to appeal the court’s ruling.” 6 Arthur R.

Miller, Mary Kay Kane, & Benjamin Spencer, Federal Practice & Procedure § 1476

(3d ed. 2020 update).

      Applying Dunn, we conclude that Mr. Reynolds did not waive his right to

appeal the district court’s dismissal of MidCap for lack of personal jurisdiction by

failing to name MidCap in the amended complaint because amendment would have

been futile.   In dismissing MidCap, the district court rejected Mr. Reynolds’

arguments that MidCap had the requisite minimum contacts under Alabama’s long-

arm statute, and, alternatively, that Bankruptcy Rule 7004(d) could be used to obtain

personal jurisdiction over the defendants. Apparently, Mr. Reynolds had no

additional facts that could establish minimum contacts for MidCap under Alabama’s

long-arm statute, and requesting for a second time that the district court apply

Bankruptcy Rule 7004(d) therefore would have been futile.              Under these

circumstances, Mr. Reynolds did not waive his right to appeal the district court’s




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dismissal of MidCap from the original complaint for lack of personal jurisdiction.

See 

Dunn, 674 F.2d at 1191

n.5.2

                                                III

       “We review de novo the district court’s dismissal for lack of personal

jurisdiction.” Stubbs v. Wyndham Nassau Resort & Crystal Palace Casino, 

447 F.3d 1357

, 1360 (11th Cir. 2006).

                                                A

       The parties dispute whether the doctrine of derivative jurisdiction prevents the

post-removal use of Bankruptcy Rule 7004(d) to establish personal jurisdiction over

the defendants. Mr. Reynolds contends that the doctrine applies only to subject-

matter jurisdiction, and not personal jurisdiction. Behrman Capital and Behrman

Brothers argue that the doctrine applies to both types of jurisdiction, and urge

affirmance. We provide some background on the doctrine of derivative jurisdiction,

and then turn to the parties’ arguments.

       “[W]hen a federal court has jurisdiction, it also has a ‘virtually unflagging

obligation . . . to exercise’ that authority.” Mate v. Lynch, 576 U./s. 143, 150 (2015)

(citation omitted). But almost a century ago, in Lambert Run Coal Co., the Supreme



2
  Given our precedent in Dunn, we need not address MidCap’s reliance on United States ex rel.
Atkinson v. PA. Shipbuilding Co., 

473 F.3d 506

, 516 (3d Cir. 2007) (explaining that “[i]f a party
omits a claim from an amended complaint that it would not have been futile to replead, that party
can still preserve the claim for appellate review by standing on the dismissed claim despite leaving
it out of the amended complaint”).
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Court explained that “[t]he jurisdiction of the federal court on removal is, in a limited

sense, a derivative jurisdiction. If the state court lacks jurisdiction of the subject-

matter or of the parties, the federal court acquires none, although it might in a like

suit originally brought there have had 

jurisdiction.” 258 U.S. at 382

. The complaint

in that case, which was filed in state court and then removed to federal court, sought

to challenge and set aside an order of the Interstate Commerce Commission.

Because federal courts had exclusive jurisdiction over such claims, and because the

United States had not consented to be sued in state courts, the Supreme Court held

that the state court did not have subject-matter jurisdiction to entertain the complaint.

And so, when the case was removed to federal court, that court also lacked subject-

matter jurisdiction. See

id. (“As the state

court was without jurisdiction over either

the subject-matter or the United States, the District Court could not acquire

jurisdiction over them by the removal.”).

      The Supreme Court has kept the doctrine of derivative jurisdiction alive over

the years by sporadically applying it or discussing it. See, e.g., Gen. Inv. Co. v. Lake

Shore & M.S. Ry. Co., 

260 U.S. 261

, 288 (1922) (“When a cause is removed from a

state court into a federal court, the latter takes it as it stood in the former. A want of

jurisdiction in the state court is not cured by the removal, but may be asserted after

it is consummated.”); Minnesota v. United States, 

305 U.S. 382

, 389 (1939)

(applying the doctrine of derivative jurisdiction to dismiss an action because the state


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court lacked subject-matter jurisdiction); Freeman v. Bee Machine Co. Inc., 

319 U.S. 448

, 449–51 (1943) (discussing the doctrine of derivative jurisdiction and refusing

to extend it to bar the post-removal amendment of the complaint); Arizona v.

Manypenny, 

451 U.S. 232

, 242 n.17 (1981) (describing the doctrine of derivative

jurisdiction as well-settled). The doctrine, according to the Supreme Court, applies

“even where the federal court would have had jurisdiction if the suit were brought

there.” 

Freeman, 319 U.S. at 449

. See, e.g., Fed. Nat. Mortg. Ass’n v. LeCrone,

868 F.2d 190

, 192 (6th Cir. 1989); Reid v. United States, 

715 F.2d 1148

, 1153–54

(7th Cir. 1983).

      Over the years, the doctrine has been criticized by some courts and

commentators. See, e.g., Washington v. Am. League of Pro. Baseball Clubs, 

460 F.2d 654

, 658 (9th Cir. 1972) (describing the doctrine as a “kind of legal tour de

force that most laymen cannot understand, particularly in a case where the federal

court not only has subject matter jurisdiction, but has exclusive subject matter

jurisdiction”); 14C Charles Alan Wright, Arthur R. Miller, Edward H. Cooper et al.,

Federal Practice & Procedure § 3722 (Rev. 4th ed. 2020) (collecting cases criticizing

the doctrine of derivative jurisdiction and characterizing the criticism as

“deserved”). In 1985, Congress partially abrogated the doctrine of derivative

jurisdiction by adding a new subsection (e) to 28 U.S.C. § 1441. The amended §

1441(e) provided that a federal court on removal was “not precluded from hearing


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and determining any claim” simply “because the State court from which such civil

action is removed did not have jurisdiction over that claim.” 28 U.S.C. § 1441(e)

(1986). In 2001, we said that the amended § 1441(e) “abrogated the theory of

derivative jurisdiction.” Hollis v. Florida State University, 

259 F.3d 1295

, 1298

(11th Cir. 2001).

       The 1985 amendment to § 1441 resulted in some disagreement as to whether

Congress had abrogated the doctrine of derivative jurisdiction for all removal

statutes or just for § 1441. See generally Palmer v. City Nat. Bank, 

498 F.3d 236

,

245 (4th Cir. 2007) (explaining the different views of the Fourth and Eighth

Circuits). The disagreement proved to be relatively short-lived, for in 2002 Congress

again amended § 1441, “creating a new § 1441(e) and redesignating the prior §

1441(e) as § 1441(f) and slightly changing its language.”

Id. The new (and

current)

§ 1441(f) now reads as follows (emphasis ours): “Derivative removal jurisdiction.--

The court to which a civil action is removed under this section is not precluded from

hearing and determining any claim in such civil action because the [s]tate court from

which such civil action is removed did not have jurisdiction over that claim.” 3

       Following the 2002 amendments to § 1441, several of our sister circuits have

held that the “under this section” language in the new § 1441(f) abrogates the


3
  Congress has also abrogated the doctrine of derivative jurisdiction in “patent, plant variety
protection, and copyright cases.” See 28 U.S.C. § 1454(c). But this is not one of those types of
cases.
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doctrine of derivative jurisdiction only in cases removed to federal court pursuant to

§ 1441. These circuits have therefore continued to apply the doctrine in cases

removed under other federal statutes, such as 28 U.S.C. § 1442. See 

Palmer, 498 F.3d at 244

–46; Rodas v. Seidlin, 

656 F.3d 610

, 615–25 (7th Cir. 2011); Bullock v.

Napolitano, 

666 F.3d 281

, 286 (4th Cir. 2012); Lopez v. Sentrillon Corp., 

749 F.3d 348

, 350–51 (5th Cir. 2014); Conklin v. Kane, 634 F. App’x 69, 73 (3d Cir. 2015).

Accord 14C Federal Practice & Procedure § 3726.             But cf. North Dakota v.

Fredericks, 

940 F.2d 333

, 337 (8th Cir. 1991) (holding, before the 2002

amendments, that the “policy of Congress underlying new § 1441(e) supports the

complete abandonment of the derivative-jurisdiction theory”). These decisions,

however, are of limited value here because they all involved scenarios where the

state court lacked subject-matter (not personal) jurisdiction.

                                           B

      The question for us is whether the doctrine of derivative jurisdiction applies

to removed cases in which the state court lacked personal jurisdiction over the

defendants. Our answer, at least in this case, is that it does not.

      We begin by acknowledging the obvious—though the Supreme Court has

applied the doctrine of derivative jurisdiction only in cases where the state court

lacked subject-matter jurisdiction, it has described the doctrine as encompassing

both subject-matter and personal jurisdiction. See, e.g., 

Manypenny, 451 U.S. at 242

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n.17 (“[I]f the state court lacks jurisdiction over the subject matter or the parties the

federal court acquires none upon removal.”); 

Freeman, 319 U.S. at 449

(“[W]here a

state court lacks jurisdiction of the subject matter or of the parties, the federal District

Court acquires none on removal of the case.”); Lambert Run Coal 

Co., 258 U.S. at 382

(“ If the state court lacks jurisdiction of the subject-matter or of the parties, the

federal court acquires none, although it might in a like suit originally brought there

have had jurisdiction.”). These characterizations are dicta, but Supreme Court dicta

“is not something to be lightly cast aside.” F.E.B. Corp. v. United States, 

818 F.3d 681

, 690 n.10 (11th Cir. 2016) (noting that “there is dicta . . . and then there is

Supreme Court dicta”).

       Moreover, over the years a number of circuits have applied the doctrine of

derivative jurisdiction to require dismissal in cases where the state court, prior to

removal, lacked personal jurisdiction over the defendants (usually due to ineffective

service of process). See Aanestad v. Beech Aircraft Corp., 

521 F.2d 1298

, 1300 (9th

Cir. 1974); Meyer v. Indian Hill Farm, Inc., 

258 F.2d 287

, 290 (2d Cir. 1958);

Garden Homes, Inc. v. Mason, 

238 F.2d 651

, 653 (1st Cir. 1956); Block v. Block,

196 F.2d 930

, 933 (7th Cir. 1952). We can therefore understand why the district

court here applied the doctrine of derivative jurisdiction.

       Giving the Supreme Court’s dicta the respect and consideration it is due, and

acknowledging the cases cited above, we choose to go in a different direction. We


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hold, for several reasons, that the doctrine of derivative jurisdiction does not apply

in cases where the state court lacks personal jurisdiction over the defendants.

      First, having acknowledged the importance of the Supreme Court’s dicta, we

note that there are specific reasons in each of the derivative jurisdiction cases cited

above for the Court to have included the “of the parties” language in its dicta (i.e.,

language that appears to encompass personal jurisdiction). In Lambert Run Coal

Co., for example, the question at issue involved federal sovereignty. Thus, the issue

of jurisdiction in that case largely hinged on who the party was. The same is true in

Manypenny, which was a criminal case between a state and a federal officer. And

in Manypenny, the “of the parties” language was not relevant to the outcome of the

case and appears only in a footnote.

      Second, in Freeman, the Supreme Court acknowledged that Lambert Run

Coal Co. had rejected the idea that jurisdictional defects were cured or waived by

removal, but nonetheless held that district courts have the power to cure or fix

whatever jurisdictional defects 

existed. 319 U.S. at 452

. The Court explained that

the Lambert Run Coal Co. line of cases stands for the proposition that removal, in

and of itself, does not cure any state court jurisdictional defects: “The Lambert Co.

case and those which preceded and followed it merely held that defects in the

jurisdiction of the state court either as respects the subject matter or the parties were

not cured by removal but could thereafter be challenged in the federal court.”

Id. at 16

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451. The Court held that, although removal “does not cure jurisdictional defects

present in the state court action,” federal courts have “the full arsenal of authority

with which they have been endowed.”

Id. at 452.

Accordingly, the Court held that

a plaintiff could add a claim after removal—even though that claim could not have

been added in state court—because the federal rules allow such an amendment.

      Under Freeman, defendants who remove their action to federal court do not

waive their challenge to personal jurisdiction. But Freeman also means that the

district court to which the case is removed has the “full arsenal of authority with

which [it has] been endowed” to establish personal jurisdiction over the defendants.

Id. Part of that

“arsenal of authority,” as relevant here, is Bankruptcy Rule 7004(d),

which looks to a defendant’s national contacts and permits nationwide service of

process to establish personal jurisdiction.

      Third, the Supreme court has consistently held that once a case has been

removed from state court to federal court, federal law “govern[s] the mode of

procedure[.]” Granny Goose Foods, Inc. v. Brotherhood of Teamsters & Auto Truck

Drivers Local No. 70, 

415 U.S. 423

, 438 (1974). See also Willy v. Coastal Corp.,

503 U.S. 131

, 134–35 (1992) (explaining that the Federal Rules of Civil Procedure,

pursuant to the language in Rule 81(c), “govern procedure after removal”); 

Freeman, 319 U.S. at 452

(“The jurisdiction exercised on removal is original not appellate. . .

. The forms and modes of proceeding are governed by federal law.”) (citations


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omitted).   It is therefore difficult to understand why a federal statute or rule

governing personal jurisdiction (including one providing for nationwide service of

process) would not control following the removal of a case from state court.

      Indeed, we have suggested for this reason that the doctrine of derivative

jurisdiction does not apply to defects in personal jurisdiction.          In Aguacate

Consolidated Mines, Inc., of Costa Rica v. Deeprock, Inc., 

566 F.2d 523

(5th Cir.

1978), the plaintiff filed suit in Georgia state court, and the defendant removed the

action to federal court. The Georgia district court, applying the Georgia long-arm

statute, concluded that it lacked personal jurisdiction over the defendant and

dismissed the case. See

id. at 524.

The plaintiff filed a motion for reconsideration,

asking the Georgia district court to transfer the case to an Alabama district court with

personal jurisdiction over the defendant, and the Georgia district court decided that

transfer was appropriate. See

id. The Alabama district

court nevertheless dismissed

the case, concluding that the Georgia district court “could not transfer a case under

28 U.S.C. § 1406(a) without first acquiring personal jurisdiction.”

Id. On appeal, we

reversed and rejected the defendant’s argument based on the doctrine of

derivative jurisdiction: “Although the jurisdiction of a federal court after removal is,

in a limited sense, derivative, removed actions become subject to federal rather than

state rules of procedure.”

Id. at 525.

We therefore allowed the transfer to take place

even though the Georgia district court (and presumably the Georgia state court prior


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to removal) did not have personal jurisdiction over the defendant. See

id. See also Bentz

v. Recile, 

778 F.2d 1026

, 1027 (5th Cir. 1985) (“Precedent of this court

supports transfer of a case pursuant to section 1406(a) or section 1404(a) from a

federal Court lacking personal jurisdiction to one possessing it, even if the case was

removed from a state court that itself lacked personal jurisdiction.”).

      Fourth, we agree with the Third Circuit’s decision in Witherow v. Firestone

Tire & Rubber Co., 

530 F.2d 160

, 168–69 (3d Cir. 1976) (reasoning that the doctrine

of derivative jurisdiction requires dismissal only when the state court lacks subject-

matter jurisdiction over the case, but holding that the plaintiff’s failure to comply

with the applicable state statute of limitations could not be cured or remedied in

federal court after removal). As the Third Circuit explained, a “clear purpose of the

derivative limitation” is that “federal courts not entertain, on removal, actions that

the state court could not entertain in the first instance.”

Id. at 16

8. Cf. Welsh v.

Cunard Lines, Ltd., 

595 F. Supp. 844

, 845–46 (D. Ariz. 1984) (stating that the

doctrine of derivative jurisdiction is “an archaic and unhelpful principle,” and

limiting its application by noting that “while [it is] still the law, [it] should be

carefully confined to cases where precedent unquestionably compels that it be

applied”).

      Fifth, the leading federal court treatises take the position that the doctrine of

derivative jurisdiction is limited to cases in which the state court lacks subject-matter


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jurisdiction. See 14C Federal Practice & Procedure § 3722 (“The derivative-

jurisdiction principle pertains only to subject-matter jurisdiction.”); 16 Daniel

Coquillette et al., Moore’s Federal Practice § 107.23 (3d ed. 2020) (“Prior to the

Judicial Improvements Act of 1985, a case could not be removed to federal court if

the state court in which it had been initiated would not have had subject-matter

jurisdiction over the action.”); 1A Federal Procedure, Lawyers Edition § 1.723 (Oct.

2020 update) (the doctrine of derivative jurisdiction “is properly applied, if to

anything, to cases involving a defect in the state court’s subject-matter jurisdiction

over the case”). Their view is not, of course, dispositive, but it is certainly

informative, and we find it persuasive.

      Sixth, subject-matter jurisdiction and personal jurisdiction differ in an

important respect. The former (which is structural) cannot be waived or conferred

by the parties, while the latter (which is personal) can. Compare Commodity Futures

Trading Comm’n v. Schor, 

478 U.S. 833

, 850–51 (1986), with Ins. Co. of Ireland,

Ltd. v. Compagnie des Bauxites de Guinee, 

456 U.S. 694

, 703 (1982). We realize

that this difference is not a game-breaker, for it does not adequately explain why the

doctrine of derivate jurisdiction would deprive a federal court of jurisdiction in a

case where subject-matter jurisdiction is exclusively federal. But it does provide an

additional reason for not extending the doctrine to the realm of personal jurisdiction.




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       The district court, then, could exercise jurisdiction following removal

notwithstanding the state court’s lack of personal jurisdiction over the defendants

under Alabama’s long-arm statute. And it could look to Bankruptcy Rule 7004(d)

to decide whether personal jurisdiction existed.4

                                                C

       Bankruptcy Rule 7004(d) permits nationwide service of process: “The

summons and complaint and all other process except a subpoena may be served

anywhere in the United States.” In this circuit, when a federal statute or rule

“provides for nationwide service of process, it becomes the . . . basis for federal

jurisdiction.” Republic of Panama v. BCCI Holdings (Luxembourg) S.A., 

119 F.3d 935

, 942 (11th Cir. 1997).

       When the district court applies Bankruptcy Rule 7004(d) on remand, it will

need to ensure that the exercise of jurisdiction over the defendants is “not

unconstitutionally burdensome” under the Fifth Amendment. See

id. at 947.

The

court must “examine a defendant’s aggregate contacts with the nation as a whole

rather than [its] contacts with the forum state in conducting the Fifth Amendment

analysis.”

Id. (citation omitted). Although

a defendant’s contacts with the United

States do “not automatically satisfy the due process requirements of the Fifth


4
 Given our conclusion about the inapplicability of the doctrine of derivative jurisdiction, we need
not address Mr. Reynolds’ argument that there was personal jurisdiction over the defendants under
Alabama’s long-arm statute.
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          USCA11 Case: 19-13537      Date Filed: 02/23/2021    Page: 22 of 23



Amendment,” the burden is on a defendant “to demonstrate that the assertion of

jurisdiction in the forum will make litigation so gravely difficult and inconvenient

that [it] unfairly is at a severe disadvantage in comparison to [its] opponent.”

Id. at 947–48

(citations and internal quotation marks omitted). If a defendant “makes a

showing of constitutionally significant inconvenience, jurisdiction will comport with

due process only if the federal interest in litigating the dispute in the chosen forum

outweighs the burden imposed on the defendant.”

Id. at 948

(describing the factors

a court should consider). See also Managed Care Advisory Group, LLC v. Cigna

Healthcare, Inc., 

939 F.3d 1145

, 1158 (11th Cir. 2019) (articulating the same

standard).

      There is one final matter. Our decision in Aguacate Consolidated 

Mines, 566 F.2d at 525

, makes it clear that the district court could consider Mr. Reynolds’

alternative request for a transfer to the Southern District of New York pursuant to

28 U.S.C. § 1406 even if there was no personal jurisdiction over the defendants under

Alabama’s long-arm statute. So, if the district court on remand decides that the

exercise of personal jurisdiction under Bankruptcy Rule 7004(d) would violate the

Fifth Amendment as to some or all of the defendants, it will need to turn to the §

1406 motion to transfer. The defendants are correct that Aguacate Consolidated

Mines does not mandate a transfer, but it does require consideration of Mr. Reynolds’

motion.


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                                         IV

      The district court’s dismissal of Mr. Reynolds’ complaint pursuant to the

doctrine of derivative jurisdiction is reversed, and the case is remanded for further

proceedings consistent with this opinion.

      REVERSED AND REMANDED.




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