Stephanos Bibas, newly confirmed to the U.S. Court of Appeals for the Third Circuit.

In a case of first impression, the U.S. Court of Appeals for the Third Circuit, tossing out a fight over millions in attorney fees between two law firms from Texas and Ohio, has held that a defendant's removal of a case to federal court does not equal consent to jurisdiction.

The Third Circuit on Wednesday affirmed a ruling by the U.S. District Court for the Eastern District of Pennsylvania that dismissed Texas law firm Danziger & De Llano's suit against Ohio firm Morgan Verkamp for lack of personal jurisdiction.

The dispute arose over a referral fee stemming from an unspecified multimillion-dollar settlement of a False Claims Act case Danziger referred to Morgan Verkamp, according to Third Circuit Judge Stephanos Bibas' precedential Jan. 15 opinion. Danziger claimed the two firms had an oral agreement that Danziger would receive a percentage of Morgan Verkamp's attorney fees.

The parties engaged in pre-complaint discovery for a year and a half in Pennsylvania state court before Danziger was ordered to file a complaint, according to Bibas. When that happened, the defendants removed the case to federal court in the Eastern District of Pennsylvania.

In that court, Morgan Verkamp argued that Pennsylvania courts lacked jurisdiction in the matter. The district court agreed and dismissed Danziger's complaint.

On appeal, Danziger argued that Morgan Verkamp waived its personal jurisdiction defense by failing to raise it in state court and then removing the case to federal court, but Bibas disagreed.

"Here, Pennsylvania courts have neither general nor specific jurisdiction. Danziger concedes that Pennsylvania courts lack general jurisdiction. They also lack specific jurisdiction because Danziger's claims do not arise out of or relate to Morgan Verkamp's activities in Pennsylvania. Nor did Morgan Verkamp waive its personal-jurisdiction defense," Bibas said.

"In Pennsylvania, a defendant need not challenge personal jurisdiction until after a plaintiff files a complaint," Bibas continued. "When Danziger did so, Morgan Verkamp removed the case to federal court. And removal alone does not waive defenses. So Morgan Verkamp carried that defense with it to federal court and properly raised it there by moving to dismiss. Pennsylvania courts thus lack personal jurisdiction."

Danziger also argued that removing a case to federal court means consent to jurisdiction, an issue of first impression in the Third Circuit, according to Bibas.

"We hold today that removal to federal court does not waive defenses that a defendant would otherwise have in state court," Bibas said. "Our sister circuits have long held that '[r]emoval, in itself, does not constitute a waiver of any right to object to lack of personal jurisdiction, but after removal, the federal court takes up the case where the state court left off.'"

Danziger is represented by Gavin Lentz of Bochetto & Lentz in Philadelphia.

"In accordance with the appellate court's decision, we have filed our lawsuit in Texas today and we intend to fully litigate the case there," Lentz said.

Morgan Verkamp's attorney, George Johnson of Montgomery Rennie & Jonson in Cincinnati, did not respond to a request for comment.