By now, everyone but the newest of our readers knows this drill.  The client gets sued in state court.  The action would be removable, because there’s diversity of citizenship between plaintiff and defendants (that is, they live in different states) except there’s an “in-state” defendant that prevents removal because the plaintiff sued that defendant in that defendant’s own state’s courts.  The in-state defendant (which may or may not be the client) hasn’t been served yet.
Remove to federal court before the in-state defendant is served, and what happens?
You may or may not get remanded, depending primarily on who the assigned federal judge is.  We’ve posted about this a lot, most comprehensively here.
The latest entry is Wallace v. Tindall, 2009 WL 4432030 (W.D. Mo. Nov. 30, 2009), which denied remand.  So what are the quirks in Wallace?  For one thing, it was an amended complaint – and the in-state defendant was actually served, but only the first time around.
What happened is this.  There was an auto accident; out of state plaintiff sues in-state defendant, the other driver in that driver’s home (Missouri) court.  And served him right – literally.  Proper service on the in-state defendant under Missouri law.  Wallace, 2009 WL 4432030, at *1.
But, oops….  What if the other driver doesn’t have deep enough pockets?
Thus, a couple of weeks after completing service, the plaintiff files an amended complaint naming two additional out-of-state defendants:  the other driver’s employer and an insurance company.  There’s still diversity between the plaintiff (not sure where he’s from, but not Missouri). Id.
But while plaintiff serves the new defendants with the amended complaint, he doesn’t serve the original, in-state defendant.  Id.
Double oops.
The additional defendants remove the case to federal court.  Not only that, but the original defendant (the one not served with the amended complaint) didn’t consent to the removal.
Thus the question presented:  Is removal before service proper under the “properly joined and served” language of 28 U.S.C. §1441(b) where the in-state defendant was properly served with the original complaint that didn’t name the removing defendants, but not with the amended complaint that did name those defendants.  (There’s also a secondary question about consent to removal, but that turns on the same issue.)
Answer, according to Wallace:  Yes!
Here’s why.  Missouri state practice requires that, “Each affected party shall be served with. . .[e]very pleading subsequent to the original petition.”  Missouri Rule 43.01(1)(1).  But that rule doesn’t apply to defendants “in default.”  Id. 43.01(a)(3) (inapplicable exception omitted).
Plaintiff might have gotten away with the amendment, but didn’t wait long enough.  For a defendant to be “in default” under Missouri law, 30 days had to pass without the defendant answering (or otherwise pleading to) the complaint.  Because the amended complaint came only a couple of weeks after service of the first complaint, the defendant wasn’t in default when the second one was served.  Thus, under Missouri rules, plaintiff was obligated to serve him.  Wallace, 2009 WL 4432030, at *3.
A couple of things might be going on here.  It could just be a sloppy plaintiff’s counsel.  That would follow Occam’s Razor, which in this context means “don’t ascribe to malevolence, what can be explained by incompetence.”  Or it could be that the original defendant was just a sham to keep the case in state court (and the first service was to prevent resort to §1441(b)).  Or it could be that the plaintiff, regardless of intent, couldn’t wait any longer – maybe plaintiff simply couldn’t wait any longer to sue the additional defendants.  The opinion doesn’t give the accident date, so there could be a statute of limitations looming out there.
In any event, the original, in-state defendant wasn’t properly served with the amended complaint when the new defendants removed it.  That also did away with the plaintiff’s “consent to removal” argument, since the need to obtain consent likewise applied only to “properly served” defendants.  Wallace, 2009 WL 4432030, at *4.
So on the main question, whether removal before service of an in-state defendant is proper, the court came down squarely on the side of those courts interpreting §1441(b) as meaning what it says:

The issue of service however is the pivotal issue in this case. Courts have held that even though a Missouri defendant is named in a Complaint, if that defendant is not served at the time of removal, the forum defendant rule does not apply. . . .  As held by the ‘majority’ of federal courts, this Court must apply the statute as written and determine that Defendants properly removed this action.

Wallace, 2009 WL 4432030, at *3.  The court followed two previous Missouri district court cases, Brake and Taylor – both of which we’re glad to see were included in our prior attempt at comprehensively addressing (our side of) this issue.
So chalk up another one for the side of truth, justice, and an infinite number of peculiar fact patterns.
Thanks to reader Roshan D. Shah at Baker, Sterchi for the tip….