[This post is not from the Reed Smith side of the blog.]
Litigation is a game. It is a game with real stakes and broad implications, but it is nonetheless a game played according to certain rules. As in all games, the participants—plaintiffs and defendants alike—try to maximize their advantage within those rules.
In litigation, the rules governing jurisdiction—i.e., the rules that determine which court has the authority to resolve a dispute—are the most important foundational rules. Sometimes those rules, such as the rules controlling personal jurisdiction, allocate cases between courts in different states. Other times, those rules, such as the rules controlling subject-matter jurisdiction, allocate cases between federal and state courts within a single state.
Rules allocating cases between federal and state courts have a significant impact on the course of litigation. Federal rules of procedure and evidence are different, sometimes in material ways. But more than that, federal courts are different from state courts.
Although state-court judges have substantially larger dockets than their federal counterparts, they typically have fewer clerks to assist them (and the clerks that they do have are on average less academically accomplished than federal clerks). As a result, state-court judges often lack the resources that federal judges can devote to individual cases. In our experience, this means that motions to dismiss and motions for summary judgment are more likely to be denied in state court than in federal court because state-court judges, desperate to manage their overloaded dockets, would rather not spend time addressing difficult legal and factual questions when the cases presenting those questions might simply disappear, whether through settlement or otherwise.
Of course, there is yet another significant difference between state and federal courts. Federal judges are appointed for life while many state judges are elected. Dependent on campaign donations and electoral favor, state-court judges are far more susceptible to political influence than federal judges. Given a generous plaintiffs’ bar and the rule of numbers, in many jurisdictions this translates into a pro-plaintiff tendency.
Given those realities, corporate defendants generally do better in federal court than state court. It is for this very reason that plaintiffs, seeking to maximize their litigation advantage, tend to file cases in state rather than federal court. Conversely, it is why defendants often try removing those cases to federal court under 28 U.S.C. § 1441, which allows a defendant sued in state court to have the case adjudicated in federal court so long as the case could originally have been brought in federal court.
That brings us to today’s case, Wood v. Dexcom, Inc., 2023 WL 6064690 (S.D. Cal. 2023). Asserting product-liability claims against the defendant device-manufacturer, the plaintiff initiated suit in California state court. Invoking § 1441, the defendant removed the case to federal court even before the complaint was served, contending that the court had original jurisdiction over the matter under U.S. Const. art. III, § 2, cl. 1 because the parties were citizens of different states. The plaintiff moved to remand the case to state court, arguing that the “forum defendant” rule codified at 28 U.S.C. § 1441(b)(2) barred removal even though there was complete diversity of citizenship between the parties. The court agreed with the plaintiff and remanded the case to state court.
At the heart of the dispute is the validity of so-called “snap” removals—notices of removal that are filed before service on all defendants has been completed.
Under § 1441(b)(2), a case that could otherwise be removed to federal court based on the basis of diversity jurisdiction “may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.” Known as the “forum defendant” rule, this generally prevents removal when any defendant is a citizen of the state in which the suit was brought.
“Generally” is the operative word because, as in Wood, defendants will sometimes try to remove cases even if one defendant is a citizen of the forum state. Relying on the “properly joined and served” provision, defendants maintain that removal is proper despite the forum defendant so long as the forum defendant has yet to be properly served.
As we’ve discussed before here and here (but the Wood court failed to acknowledge), courts are divided on the question of snap removals. Courts such as the Third Circuit apply the statute’s “plain meaning,” holding that § 1441(b)(2) unambiguously allows removal so long as no already-served defendant is a citizen of the forum state. Encompass Ins. Co. v. Stone Mansion Rest. Inc., 902 F.3d 147, 152 (3d Cir. 2018). Other courts disregard the statutory text, finding removal-before-service a non-sensical result that fosters gamesmanship.
According to the courts who reject snap removals, the forum-defendant rule embodied in § 1441(b)(2) recognizes that the purpose of diversity jurisdiction—avoiding bias against out-of-state defendants in state courts—has no role to play when a defendant is a citizen of the forum state.
Question whether the presence of a lone in-state defendant is sufficient safeguard against local favoritism. But even if it is, that does not change the fact that state courts are, for the reasons explained above, often tilted against corporate defendants sued by individuals, whether or not those corporations are citizens of the forum state. Nor does it change the fact that plaintiffs bring actions in state court for that very reason. Thus, it blinkers reality to suggest that there is no reason to anticipate disparate treatment when a corporate defendant is forced to defend itself in state court.
Whatever the empirical reality, § 1441(b)(2) says what it says. Once a forum defendant has been properly served, removal cannot be based on diversity of citizenship. But that prohibition applies only after a forum defendant has been properly served. Because they can decide in which forum to file suit, plaintiffs have a built-in procedural advantage that allows them to steer cases to state courts where—because of limited judicial resources and electoral politics—plaintiffs enjoy certain substantive advantages. Courts should not enhance plaintiffs’ advantage by ignoring § 1441(b)(2)’s “unambiguous” text. Encompass Ins., 902 F.3d at 152.