On August 17, 2018, we observed in our latest comprehensive post on pre-service removal, that “[w]ith Court of Appeals decisions now breaking in our favor, we can start trying to change the minds of district courts that have previously gone the other way.”
On August 22 – less than a week after that post (and while Bexis was on vacation) – the Third Circuit came down strongly on the “plain meaning” side of the ledger in a removal-before-service case and flatly rejected the “absurd result” rationale that some district courts in that circuit had developed. See Encompass Insurance Co. v. Stone Mansion Restaurant, Inc., ___ F.3d ___, 2018 WL 3999885 (3d Cir. Aug. 22, 2018). The court first examined the purpose of the “forum defendant” exception to removability of diverse cases and Congress’ amendment adding the “properly joined and served” language that supports pre-service removal:
We therefore turn to section 1441, which contains the forum defendant rule. Section 1441 exists in part to prevent favoritism for in-state litigants, and discrimination against out-of-state litigants. The specific purpose of the “properly joined and served” language in the forum defendant rule is less obvious. The legislative history provides no guidance; however, courts and commentators have determined that Congress enacted the rule to prevent a plaintiff from blocking removal by joining as a defendant a resident party against whom it does not intend to proceed, and whom it does not even serve.
Id. at *4 (citations and quotation marks omitted).
Next, the court examined the competing arguments – “plain meaning” on the defense side, and “absurd result” on the plaintiff side. The facts were rather stark – after initially unconditionally agreeing to accept service, defense counsel notified plaintiff that he would not do so until after he had first removed the case to federal court. Id. at *1-2. Although “not condon[ing] this conduct between and among legal practitioners,” the district court denied remand given the express language of 21 U.S.C. §1441(b). See Encompass Insurance Co. v. Stone Mansion Restaurant, 2017 WL 528255, at *2 & n.1 (W.D. Pa. Feb. 9, 2017). The Third Circuit affirmed:
Citing this fraudulent-joinder rationale, [plaintiff] argues that it is “inconceivable” that Congress intended the “properly joined and served” language to permit an in-state defendant to remove an action by delaying formal service of process. This argument is unavailing. Congress’ inclusion of the phrase “properly joined and served” addresses a specific problem − fraudulent joinder by a plaintiff − with a bright-line rule. Permitting removal on the facts of this case does not contravene the apparent purpose to prohibit that particular tactic. Our interpretation does not defy rationality or render the statute nonsensical or superfluous, because: (1) it abides by the plain meaning of the text; (2) it envisions a broader right of removal only in the narrow circumstances where a defendant is aware of an action prior to service of process with sufficient time to initiate removal; and (3) it protects the statute’s goal without rendering any of the language unnecessary. Thus, this result may be peculiar in that it allows [defendants] to use pre-service machinations to remove a case that it otherwise could not; however, the outcome is not so outlandish as to constitute an absurd or bizarre result.
2018 WL 3999885, *4 (footnotes omitted) (emphasis added).
The omitted footnotes are also significant. First, the “general rule” that “by interpretation we should not defeat Congress’ purpose of abridging the right of removal” was “not sufficient to displace the plain meaning of the statute.” Id. at *4 n.3 (citing and quoting Delalla v. Hanover Insurance Co., 660 F.3d 180, 189 (3d Cir. 2011)). Second, the argument that advanced technology allowing improved docket monitoring was more properly directed to Congress than to the courts:
We are aware of the concern that technological advances since enactment of the forum defendant rule now permit litigants to monitor dockets electronically, potentially giving defendants an advantage in a race-to-the-courthouse removal scenario. . . . If a significant number of potential defendants (1) electronically monitor dockets; (2) possess the ability to quickly determine whether to remove the matter before a would-be state court plaintiff can serve process; and (3) remove the matter contrary to Congress’ intent, the legislature is well-suited to address the issue.
Id. at *4 n.4.
The Encompass Insurance court therefore unanimously concluded that §1441(b) said what it said when it predicated the forum defendant exception on such defendants being “properly joined and served” and that courts must respect what Congress enacted:
In short, [defendant] has availed itself of the plain meaning of the statute, for which there is precedential support. [Plaintiff] has not provided, nor have we otherwise uncovered, an extraordinary showing of contrary legislative intent. Furthermore, we do not perceive that the result in this case rises to the level of the absurd or bizarre. There are simply no grounds upon which we could substitute [plaintiff’s] interpretation for the literal interpretation. Reasonable minds might conclude that the procedural result demonstrates a need for a change in the law; however, if such change is required, it is Congress − not the Judiciary − that must act.
Id. at *5. Finally, the defendant’s previous agreement to accept service did not preclude it from delaying such acceptance until after it removed the case to federal court. “[W]e are unconvinced that [defendant’s] conduct − even if unsavory − precludes it from arguing that incomplete service permits removal.” Id.
Thus, the debate is over in the Third Circuit, notwithstanding the prior decisions of some district judges in Pennsylvania, New Jersey, and Delaware to the contrary, and it is perfectly proper for defendants, whether “forum defendants” or otherwise, to monitor state-court dockets electronically for new lawsuits, and to remove diverse cases preemptively to federal court before the plaintiffs (often litigation tourists) can serve in-state defendants whose presence would otherwise preclude removal under §1441(b)(2).
The sound you hear is one more nail being driven in the coffin of litigation tourism.
One last thought. Query whether, if a defendant in a case in the Third Circuit were unfortunate enough to have removed before service and suffered remand under the “absurd result” rationale rejected in Encompass Insurance, the Third Circuit’s opinion constitutes an “other paper” creating grounds for removal that would support a second removal. While we don’t know the answer off-hand, it is a question that attorneys representing clients in that situation may want to address.