This post does not announce late-breaking news. Given the speed at which information travels on the web, an opinion decided in May is ancient history. But the world seems to have overlooked the implications of Thomson v. Novartis Pharmaceuticals Corp., No. 06-6280 (JBS), 2007 WL 1521138 (D.N.J. May 22, 2007), so we’re here to spread the word. (And, for your convenience, here’s a link to the slip opinion.)
Here’s the backstory: Removal jurisdiction based on diversity of citizenship is in some ways narrower than diversity jurisdiction itself. For example, suppose plaintiffs are citizens of Georgia and defendants are citizens of Delaware, New Jersey, New York, and two foreign countries. Diversity of citizenship exists — all defendants are citizens of states other than Georgia — so (assuming the amount in controversy is satisfied) plaintiffs can sue in any federal court in which venue is proper. If plaintiffs cared to, they could sue in federal court in New Jersey.
But, as we said, removal jurisdiction based on diversity of citizenship is narrower in some ways than diversity jurisdiction itself. Under the removal statute, if a plaintiff sues in state court, then a case is not removable — even if diversity exists — if a party “properly joined and served as [a] defendant is a citizen of the State in which” the action is brought. 28 U.S.C. Sec. 1441(b).
People refer to that as the “resident defendant” exception; if you’re sued in your home state court, you can’t remove. There’s a certain logic to that. One reason for permitting removal is to avoid having defendants get home-towned. If a plaintiff sued BigCo in the plaintiff’s parochial state court, local judges or juries might favor the local plaintiff over the foreign defendant. To protect foreign defendants from local prejudice, Congress authorized removal.
But, if plaintiff sues BigCo in BigCo’s home state court, there’s no danger of local prejudice against the defendant. So Congress prohibited removal.
Thus, if our hypothetical Georgia plaintiffs chose to sue their Delaware, New Jersey, New York, and foreign defendants in New Jersey state court, the defendants could not remove the case. Even though diversity exists, a New Jersey defendant cannot remove a New Jersey state court case.
But what’s that “properly joined and served” stuff in the removal statute? One might think that it exists to prevent plaintiffs from gaming the system. Our Georgia plaintiffs might have no possible claim against the supposed New Jersey defendant, and might name that defendant — with no intention of ever serving it with the complaint or pursuing a case against it — solely to prevent the other defendants from removing. The statutory language requiring proper joinder and service makes good sense in that context: If the resident defendant has been fraudulently joined, or if the plaintiff has no intention of serving it, then the mere naming of the defendant in the complaint should not bar removal. Only the presence of a resident defendant “properly joined and served” should leave the defendants in state court.
The statutory language, however, reaches further than that situation, as Thomson v. Novartis shows. In Thomson — you guessed it — Georgia plaintiffs sued defendants from Delaware, New Jersey, New York, and two foreign countries in New Jersey state court. And the New Jersey defendants did not appear to be sham: They were Novartis Pharmaceuticals Corporation and Novartis Corporation, which presumably played a significant role in manufacturing or selling the drug that allegedly killed the plaintiffs’ child.
And the plaintiffs seemingly made good faith efforts to serve the complaint on Novartis Pharmaceuticals Corporation. Plaintiffs tried to serve the company on December 22, 26, 27, 28, and 29, 2006, but were told that nobody was present to accept service; only security personnel were on the premises. (Given the time of the attempted service — the holiday season — that seems entirely plausible.) On January 2, 2007, the first day Novartis reopened after the holidays, the company accepted service.
Here’s the good part: Defendants removed the case to federal court on December 29 — at a time when no defendant (yet) “properly joined and served” was a citizen of New Jersey. Under the express statutory language, the case was removable. (Judge Simandle noted the policy arguments in favor of remand in cases such as this, but found these arguments insufficient to overcome “the plain language of the statute.”) Motion to remand denied.
Remember that the removal here would be permanent. Everyone agrees that diversity jurisdiction existed in the case; serving Novartis Pharmaceuticals would not destroy diversity. Nor does the removal statute require (or, indeed, permit) remand simply because the resident defendant is later served; the law doesn’t mention that situation. So, after Novartis Pharmaceuticals removed the case, the case would stay in federal court through final judgment.
We’re not mentioning this case only because it’s curious. It also has practical implications for drug companies. If your company is facing mass tort litigation — and non-resident plaintiffs are running to sue you in your home state court, to prevent removal — monitor your state court dockets. Remove diverse (but otherwise non-removable) cases before the plaintiffs serve the company. Presto! Federal jurisdiction in seemingly nonremovable cases.
Do be careful. Judge Simandle notes that the law on this point is not uniform, and one never knows how judges will react when a defendant insists on a very literal interpretation of the law.
On the other hand, also be smart. In the right situation, this new wrinkle in removal law may be just what a situation calls for.
We’ll be curious to see how the law on this issue plays out over time.