As we’ve gleefully chronicled, recently the tide has been running distinctly in our favor on defendants being permitted to remove cases to federal court before plaintiffs – every one of them a non-resident litigation tourist – can serve a so-called “forum defendant” – that is, a completely diverse defendant that is also a resident of the jurisdiction where the action is originally filed. A resident (that is, not a litigation tourist) plaintiff suing a forum defendant would not be diverse, and thus the case would not be removable at all.
This “forum defendant rule” limits removal of diverse cases to federal court when any (also diverse) defendant residing in the state is sued, no matter how many out-of-state defendants there are, and no matter how relatively unimportant the forum defendant is to the overall lawsuit. Think of it this way: the rule would trap six diverse, non-resident multinational corporations in state court whenever a diverse litigation tourist plaintiff also sues a single in-state mom-and-pop drugstore.
Removal before service lets those six target defendants remove the action to federal court – away from the friendly jurisdiction the litigation tourist selected − as long as they do so before the litigation tourist serves mom-and-pop with initial process (usually, but not necessarily, the complaint). Removal before service has no effect on any plaintiff from suing anybody in the courts of that plaintiff’s home state. Only litigation tourists would benefit from elimination of removal before service.
Two courts of appeals, the second and third, with jurisdiction over mass tort fleshpots in New York, Pennsylvania and New Jersey (as well the increasingly important personal jurisdictional haven, Delaware), have upheld the language of the statute, 28 U.S.C. §1441(b)(2), against plaintiffs’ claims that Congress couldn’t have meant what it rather clearly said. See Gibbons v. Bristol-Myers Squibb Co., 919 F.3d 699, 705-07 (2d Cir. 2019); Encompass Insurance Co. v. Stone Mansion Restaurant, Inc., 902 F.3d 147, 152 (3d Cir. 2018). As discussed in our most recent general post about this subject, these appellate rulings also appear to be moving district courts nationwide, particularly in California, in our direction.
So what have the plaintiffs done? What they always do – forum shop. Having first lost in the courts, and then having a rules proposal bounced by the Advisory Committee on the Civil Rules just before Halloween, they have now turned to Congress. The Courts (and other things) Subcommittee of the House Judiciary Committee recently took time out from more important business to hold a brief hearing on removal before service (also called “snap” or “wrinkle” removal). Two practicing attorneys – Ellen Relkin of Weitz & Luxenberg, and Kaspar Stoffelmayr of Bartlit Beck – testified, for plaintiffs and defendants, respectively.
Fair enough, but then two law professors also testified, both of whom offered schemes for precluding removal before service. Thus, the final witness tally was an unbalanced one for our side of the “v.” and three for the other. Law professors almost always favor more litigation, since that increases demand for lawyers, and thus the demand for professors to teach would-be lawyers.
Here’s a link to a video of the entire hearing. Note, that for some unknown reason the video plays for over half an hour (30:22, to be precise) before anything at all happens. Skip to that point to save yourself time.
We learn from the subcommittee chairman’s opening statement (30:39-34:58) that the aforementioned “forum defendant rule” has been around since 1789. Also that removal before service is a “problem” because it “circumvents” that rule. Shockingly, modern technology allows “well resourced” defendants to remove cases as little as “ten minutes” after filing. Removal before service is “machination,” “bizarre,” “gamesmanship.” “manipulation,” “ironic absurdity,” “inherently unfair,” and so on and so forth. Suffice it to say that the chairman does not like this removal tactic that our blog helped popularize, starting with this post back in 2007 (see also, here, here, here, and here). Removal before service “eviscerates” the forum defendant rule.
The ranking member (who is retiring) expressed concerns in her opening statement (35:08-37:43) over “negative impact on fairness in litigation by giving one party a clear advantage over the other.” She recognized that what is going on here is forum shopping, and that forum defendants are being joined “only included to keep a case in a state court that may be seen favorable to the plaintiffs.” Removal before service “has served to return some balance” in determining where litigation is venued. Suffice it to say that the ranking member is more favorable to removal before service than the subcommittee chair.
The chairman of the full Judiciary Committee also stopped by to speak (37:50-40:54). He declared that removal before service is “the latest effort to game the system to favor the wealthy and the powerful” – and so on. You get the drift. We agree with him on a number of issues (Bexis recently met him at a White Plains memorial service for a friend), but not this one. He did made the point that Congress created the forum defendant rule because the “bias” that led the framers to create diversity jurisdiction, “no longer exists” when a forum defendant is sued in that defendant’s home court.
Each witness had five minutes to testify and then answered questions.
Witness Relkin (45:26-50:40) had the usual complaints that defendants were using modern technology to prevent plaintiffs from keeping cases in whatever court they originally chose. Removal before service was the most “dramatic” procedural “alteration of the landscape of civil litigation” that she has seen in 35 years of practice. So our side must be doing something right, and she can’t stand it. It’s a “perfect storm” combining increasing electronic dockets in state court and appellate courts following the plain language of the removal statute. She dates the “problem” with removal before service to after 2011, when Congress last amended the statute. (However, by 2010, the Blog already had ten posts on removal before service, which we detailed here, and we knew of 31 favorable cases from 14 states). She seemed more upset about “hide and seek” with physical acceptance of service, than with removal before service itself. She also blamed defendants for removing non-diverse cases – a limited point on which we agree (nondiverse cases can’t be removed), but one not germane to removal before service. Her last point, that suing in the defendant’s home state was the “only state court option for out-of-state plaintiffs,” only underscores (albeit without her saying so) that removal before service only benefits litigation tourists.
Witness Stoffelmayr (50:49-55:57) (whose firm name, we noticed, was misspelled) addressed the forum defendant rule “in practice.” Litigation tourists are seeking “some special benefit” from their choice of forum. Removal before service is only effective where “there is proper federal diversity jurisdiction.” Plaintiffs usually ignore the forum defendant, whose usefulness ends with successful assertion of state-court jurisdiction. Thus, non-resident defendants are trapped in hostile state courts, notwithstanding full diversity. The service requirement is “an important limit” on the forum defendant rule. Amending the statute to eliminate removal before service could have “unintended consequences” that create “gamesmanship of a different kind.” Empirical data shows that removal before service is “infrequent” (50 times a year) and thus not worth unknown possible consequences. In any event “a plaintiff who wants to sue in their local home court” is never disadvantaged by removal before service; we are only here because of litigation tourism. Such plaintiffs really don’t have anything to complain about.
The first of the two law professors, Arthur Hellman (56:04-1:01:16) testified that Congress intended a defendant sued in its “home state” should not be able to remove. He was mostly interested in a technical fix to “restore symmetry.” His recommended change would create a fixed “snap back” period during which a forum defendant could be served, even following removal, that would restore state-court jurisdiction under a modified forum defendant rule and require remand This minimal change would, he testified, reduce the likelihood of unintended consequences and not open any new “loopholes.”
The second law professor, James Pfander (1:01:24-1:05:50) advanced four points. First, one lesson from removal before service is that forum-shopping matters, so the best we can do is establish rules within which both sides can jockey for position. Second, removal techniques are good candidates for legislation, since they do not involve any substantive policy. Courts allow removal before service because of the text of the current statute. “If Congress chooses to preserve the forum defendant rule,” removal before service should be eliminated. Third, such removal should be prohibited rather than subject to an after-the-fact snap back. “Ounce of prevention….” Fourth, a solution to removal before service might be part of a larger legislative overhaul of removal procedures generally – possibly by delegating everything to a judicial rules committee. We don’t know if Prof. Pfander was aware that the plaintiffs’ side had already unsuccessfully peddled a rules-based proposal to the existing Civil Rules Committee.
We found the following responses to questions (1:06:04-1:24:02, 1:24:45-1:30:03) interesting, or occasionally, incredible:
Hellman − The forum defendant rule rests on the assumption that as long as there is one resident defendant, no defendant needs protection from local bias.
Stoffelmayr – The forum defendant rule, when not “too quick, does have plenty of justification,” but becomes questionable when non-resident defendants are also involved. Large non-resident defendants derive “cold comfort” from a small resident co-defendant.
Relkin – removal before service has become “an epidemic” recently.
Relkin – BMS is making fraudulent joinders “go away.”
Stoffelmayr – There are always five or ten “state court hotspots” that litigation tourists like. Plaintiffs have “asymmetric” ability to file in federal court, whenever they want, but can prevent defendants from having that same forum.
Relkin – Defendants can rely on fraudulent joinder to solve forum shopping. Even resident defendants use removal before service. Defendants like unanimous juries. [Note: defendants like preemption, Daubert, and TwIqbal even more.]
Stoffelmayr – Fraudulent joinder is of little use because the standard is “incredibly high.”
Stoffelmayr – Both removal and service of process have been speeded up by technology.
Hellman – Once in effect, snap back, would have a preventative, or at least deterrent, effect on rapid removal.
Relkin – unless removal before service is banned, “state court jurisdiction will go away.” Only federal courts will be able to decide what should be state-law issues, unless they certify questions.
Relkin – “Plaintiffs are not going to have the opportunity to have their cases heard where the very defendant who committed the alleged tort . . . performed it.” [Note: this is the incredible one, since litigation tourists almost always are fleeing the state where they were the were allegedly injured.]
Relkin – is OK with snap back as a fix.
Relkin – An example of fraudulent joinder was Missouri allowing joinder of 99 plaintiffs, with only one resident plaintiff, which has been changed by that state’s supreme court.
Stoffelmayr – Missouri situation wasn’t an issue of federal fraudulent joinder at all, but a different state-law question involving personal jurisdiction, not removal. Real problem is state mass torts with 5,000 plaintiffs, 4500 of which are non-residents, with local distributors not serious defendants but surviving a fraudulent joinder analysis.
Relkin – That example was fixed by BMS. No problem anymore except for removal before service.
What do we think? We think that everybody pretty much missed the point – except for fleeting references to “preserving” the forum defendant rule, and witness Stoffelmayr’s point that only litigation tourists currently benefit from that rule.
The problem as we see it is not removal before service. That’s only a symptom. The real problem is the explosion of litigation tourism – particularly in the mass torts that witness Relkin specializes in (she is W&L’s drug/device practice co-chair). Litigation tourism is enabled by the forum defendant rule, which as the chairman noted has been more or less unchanged since 1789. Think about that. Had they lived back then, it is doubtful that either the subcommittee chair, or the ranking member, could even have voted in their home states. More to the point, 1789 was long before widespread litigation tourism ever existed. In 1789, litigation tourism would have meant weeks on horseback, travelling over unpaved roads, just to get to the courthouse. Moreover, modern-style litigation tourism wouldn’t have worked once the plaintiff got there, because of the territorial limitations on personal jurisdiction exemplified by Pennoyer v. Neff, 95 U.S. 714 (1877) – but existing long before Pennoyer itself:
The authority of every tribunal is necessarily restricted by the territorial limits of the State in which it is established. Any attempt to exercise authority beyond those limits would be deemed in every other forum, as has been said by this court, in illegitimate assumption of power, and be resisted as mere abuse.
Id. at 720, citing D’Arcy v. Ketchum, 52 U.S. 165, 172 (1850) (New York judgment could not be enforced against non-resident under a 1790 statute). A plaintiff in 1789 could not trap a non-resident in state court by also joining a forum defendant because s/he could not obtain personal jurisdiction over the non-resident (unless lucky enough to make actual personal service by ambush). Back when the forum defendant rule was created, a corporation was amenable to suit only in its State of incorporation. Bank of Augusta v. Earle, 38 U.S. (13 Pet.) 519, 589 (1839). That’s why states eventually enacted statutes requiring foreign corporations to register to do business.
The forum defendant rule itself, therefore, now operates in ways totally unintended when it was originally enacted. It serves only to require that state courts adjudicate cases involving non-resident litigation tourist plaintiffs, injured elsewhere, as to which the states being imposed upon have no significant legal interest.
We believe that modern litigation tourism has rendered the entire concept of the forum defendant rule obsolete and archaic. The mere presence of one “forum defendant” – in whom the plaintiff often (if not invariably) has only a nominal interest – does not prevent other, non-resident, defendants from suffering from the “home cooking” of a state court specifically selected for that purpose by the plaintiff. That is particularly true when hundreds, or thousands, of other plaintiffs likewise lie in wait in the same place. Removal before service is simply a tool that modern technology has handed defendants to combat the phenomenon of litigation tourism, something that the Congressional contemporaries of the Founding Fathers never contemplated, and would not have countenanced if they had.
So Congress should address the disease, not the symptom. Removal before service is an imperfect way of combating injustices that flourish under the forum defendant rule as currently applied. That rule should not be “preserved” or “maintained” in anything resembling its current scope. We would happily trade a ban on removal before service for the abolition of the forum defendant rule – or the rule’s limitation to actions brought by a plaintiff who, for some reason (usually jurisdictional), is not able to sue a defendant in the plaintiff’s home state. The forum defendant rule operates contrary to its reason for being, and thus has no place, whenever other, non-resident defendants are joined. Until Congress is willing to put litigation tourism itself on the table, though, we believe that removal before service serves a valuable ameliorative function and should be maintained.