We have always puzzled over why pre-service removals are the least bit controversial.  We are referring to what are known as “snap removals,” or removals to federal court before any forum defendant has been served.  They are one way to comply with the removal statute’s forum defendant rule.  It’s pretty simple:  Even when you have complete diversity of citizenship and the amount in controversy exceeds the jurisdictional minimum, you still cannot remove a case to federal court “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.”  28 U.S.C. § 1441(b)(2).

“Properly joined and served.”  That is the key language, and as far as we are concerned, it is pretty clear that the presence of a forum defendant will not preclude removal jurisdiction so long as the case is removed before any forum defendants has been “properly served.”

A district court in Indiana recently agreed with us.  In Whipkey v. Eli Lilly &Co., No. 1:20-cv-00450, 2020 WL 3248472 (S.D. Ind. June 16, 2020), the plaintiff sued a citizen of Indiana in Indiana state court, but the defendant removed the case to federal court before the plaintiff served the complaint.  The district court denied the plaintiff’s motion to remand and ruled that “the language of § 1441(b)(2) is unambiguous and must control.”  Id. at *2.

This district court joins multiple others who have similarly applied the forum defendant rule exactly as it was written (another recent example is this case), and there are a couple of noteworthy thing about Whipkey.

First, the district court rejected a so-called “purpose-driven” interpretation of section 1441(b)(2).  As the “interpretation” goes, the purpose of the forum defendant rule is to preserve the plaintiff’s choice of forum where the defendant is local, and allowing removal before service would undermine that objective.  Id.  Whether you like the forum defendant rule or not—and we are on record as not being fans—we have extreme difficulty with allowing a statute’s purported “purpose” to override its unambiguous statutory language.  The district court in Whipkey experienced that same difficulty and held that the “statutory text must control.”  Id. at *3.

Second, the district court declined to create an exception for cases in which the sole defendant is a forum defendant.  To be honest, we had never heard this argument before.  But regardless, the district court ruled that prohibiting snap removals where the sole defendant is a forum defendant “is not a natural reading of the text [of section 1441(b)(2)].”  Id. at 4.  Again, the plain text controlled:  “[W]e are not in a position to ignore the plain meaning of the statute.  [¶]  Accordingly, we now join our sister district courts in the Seventh Circuit as well as the Second, Third, and Fifth Circuit Courts of Appeals that have concluded that § 1441(b)(2) permits a forum defendant to remove before service of process.”  Id. at *4 (citing Texas Brine Co. v. American Arbitration Ass’n, Inc., 955 F.3d 482, 485-87 (5th Cir. 2020); Gibbons v. Bristol-Myers Squibb Co., 919 F.3d 699, 706-07 (2d Cir. 2019); Encompass Ins. Co. v. Stone Mansion Rest. Inc., 902 F.3d 147, 153-54 (3d Cir. 2018)).

Many thanks to Barry Boise at Pepper Hamilton for sending this order our way.  It’s a good one to file away.

 

The DDL blog is no friend of the forum defendant rule – the exception to removability of diverse cases.  You wouldn’t find us lamenting if it suddenly disappeared because it would take with it busloads of litigation tourists who would no longer have any incentive to sue a forum defendant – often a nominal defendant – just to force out-of-state defendants to endure litigation in a state court handpicked by plaintiff.  However, as we noted in our most recent post on the issue of snap or wrinkle removal, if the forum defendant rule is sticking around, so too must removal before service.  Fortunately, the Fifth Circuit becomes the third appellate court to adopt the defense “plain language” approach which is quickly becoming the overwhelming majority view.

The “forum defendant rule” provides that

[a] civil action otherwise removable solely on the basis of [diversity] 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.

28 U.S.C. § 1441(b)(2)(emphasis added).  So, by way of example assume a Kansas plaintiff files suit in Pennsylvania against an Indiana drug manufacturer and a distributor who has a principal place of business in Pennsylvania.  There is complete diversity but the case stays in state court thanks to the forum defendant despite its almost assuredly minimal ties to events that give rise to the suit.  That is unless the Indiana defendant can remove the case before the Pennsylvania defendant is served.  That’s what the statute says and that’s how the Second, Third and now the Fifth Circuit read and apply it.

Texas Brine Company, L.L.C. v. American Arbitration Association, Inc., — F.3d –, 2020 WL 1682777 (5th Cir. Apr. 7, 2020) is not a drug/device case, but it did involve a Texas plaintiff, a New York defendant, and two Louisiana defendants sued in state court in Louisiana.  Before the Louisiana defendants were served, the New York defendant removed the case to federal court.  When plaintiff challenged the removal, the court was asked to decide whether the “plain language” of the statute was unambiguous and whether it would lead to an “absurd result.”  Id. at *3.

The language of the forum defendant rule is pretty plain and unambiguous, so plaintiff argued that snap removal was an absurd result.  Id.  Plaintiff contended that Congress’s intent in adding the “properly served” language was to prevent plaintiffs from naming forum defendants simply to defeat diversity.  Plaintiff’s solution was that the language should be ignored when a plaintiff really and truly intends to pursue its case against the forum defendants.  Gee, do you really promise, pinky swear, cross your heart?  We’re sure that’s a standard courts want to enforce.

As the Fifth Circuit explained, however, “absurdity is not mere oddity.  The absurdity bar is high, as it should be.  The result must be preposterous, one that ‘no reasonable person could intend.’”  Id. (quoting Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 237 (2012)).  We’re sure McConnell would have some wonderfully humorous examples of absurdities versus oddities if this was his post, but given that we are living in a worldwide pandemic that is shutting down nations which in part has led to Tiger King becoming an international phenomenon the bar for absurdity has risen significantly this year.

Under any circumstance though, snap removal doesn’t rise to that level.  The Fifth Circuit found that removal before service “is at least rational.”  Even if Congress failed to appreciate the effect the “proper service” provision would have, that does not make it absurd.  Id.  Like both the Second and Third Circuits, the Fifth Circuit concluded that “a reasonable person could intend the results of the plain language.”  Id.  Such reasons include limiting gamesmanship, providing a bright-line rule (service v. plaintiff’s intent), and “to protect out-of-state defendant from in-state prejudices.”  Id.  This takes us back to our prior point – if you are going to have the forum defendant rule which in modern practice has led to litigation tourism, out-of-state defendants need a bright-line rule to counter plaintiffs’ forum-shopping games.

The unambiguous language of the statute, and giving meaning to each word, means that the forum defendant rule “is inapplicable until a home-state defendant has been served” and “until then, a state court lawsuit is removable” where complete diversity exists.  Id.   And, the court found no “exceptional circumstances” that warranted creating an exception to the exception that would require reading into the statute a “reasonable” time to effect service on the forum defendant.  Id. 

With the growing body of authority on the defense side which may even sway districts with prior not so favorable interpretations – by all means, snap remove.

Earlier this month we explained that a “wrinkle removal,” was one that capitalized on a “wrinkle” in the language of 28 U.S.C. § 1441(b)(2), which provides that a case cannot be removed on the basis of diversity if any “properly joined and served” defendant is a citizen of the forum state.  But if the forum defendant has not yet been served, that “wrinkle” doesn’t apply.  Defendants, in our never-ending quest to get cases into federal court, argue that such pre-service removal is consistent with the plain language of the statute.  Plaintiffs counter that this interpretation leads to an “absurd result” that refutes the plain language rule.  Just last year, the Third Circuit held that in this battle of “plain meaning” versus “absurd result” – plain meaning wins.  Encompass Ins. Co. v. Stone Mansion Rest. Inc., 902 F.3d 147 (3d Cir. 2018).

That was in important decision because since remand is unappealable (28 U.S.C. §1447(d)), appellate review is rare in remand situations.  It also meant that it was a foregone conclusion that Encompass Ins. would be applied in the District of New Jersey cases we discussed a few weeks ago.  When we see it cited and relied upon in the Central District of California, we think that’s important enough to warrant another pre-service removal post this month.

The case is Dechow v. Gilead Sciences, Inc., 2019 WL 517624 (C.D. Cal. Feb. 8, 2019).  Plaintiffs from four different states sued defendant, a resident of California and Delaware, in state court.  Two weeks after the complaint was filed, but before it was served, defendant removed the case to federal court.  Id. at *1.  As the court noted, the issue is “primarily an exercise in statutory interpretation.”  Id. at *2.  And in this instance, the statutory text is “unambiguous. Its plain meaning precludes removal on the basis of in-state citizenship only when the defendant has been properly joined and served.”  Id. at *3.  With no Ninth Circuit decision on point, the court looked to Encompass Ins.

Plaintiffs did try to argue that this literal interpretation of the statute should be rejected because it would lead to absurd results.  For this, they relied on a single case – Vallejo v. Amgen, Inc., 2013 WL 12147584 (C.D. Cal. Aug. 30, 2013).  But Vallejo involved a situation where defendants removed the case before the state court issued the summons to plaintiff.  In other words, removal occurred before it was possible for plaintiff to effectuate service.  Allowing removal in that situation, “would effectively circumvent Congress’s entire statutory scheme and render § 1441(b)(2) superfluous. Such an application could not have been intended by Congress.”  Id. That was not the situation in Dechow where service could have been made but was not.

The district court found additional support in the Ninth Circuit’s interpretation of 28 U.S.C. § 1446(b)(2)(A) which provides that “all defendants who have been properly joined and served must join in or consent to the removal of the action.”  Another removal provision with the same “properly served and joined” language.  To this provision the Ninth Circuit has applied the plain meaning interpretation.  Id. at *4.  What’s good for one, is good for the other.  And plain meaning interpretation is good for the defendants.

In the early days of the Blog, in 2009, when Bexis and Mark Herrmann were operating in relative obscurity, we posed the question whether it was ethical to remove to federal court a case that may well be non-removable and hope that opposing counsel is “asleep at the switch”:

“Heck, I’ll remove it anyway.  Opposing counsel may be asleep at the switch and not file a motion to remand within 30 days.  If plaintiff doesn’t timely move to remand, the objection to removal is waived, and my case can be tried to judgment in federal court.”

Is that ethical?

We received one response, which we discussed, that an:

attorneys’ first obligation should be to the integrity of the legal system, and not to their clients’ interests.  Even so, I’m not sure I’d say ‘no’ to either question, given that a yes answer means that incompetent attorneys who don’t realize they are violating the rules would have an advantage over competent attorneys.

With that the issue dropped off the radar.

That question returned to our minds when we researched our recent post on removal before service.  We came up with case after case holding that the so-called “forum defendant” rule was waivable, not jurisdictional, and thus that failure to move for remand in a case that featured complete diversity of the parties – but a defendant located in the forum state – was waiver so that the case stayed in federal court.  That means if a defendant is savvy enough to remove before service in accordance with the express terms of 28 U.S.C. §1441(b)(2), and opposing counsel is, as we said before, “asleep at the switch,” the removal succeeds regardless of a court’s substantive views on removal before service.

For example, in one of our removal before service cases, Selective Insurance Co. v. Target Corp., 2013 WL 12205696 (N.D. Ill. Dec. 13, 2013), the court held:

Plaintiff asserts §1441(b) (2) − the “forum defendant rule” − as a basis for remand, arguing that because defendant . . . is an Illinois citizen, removal was improper.  This rule is statutory, not jurisdictional, and thus may be waived or forfeited.

Id. at 1 (citing Hurley v. Motor Coach Industries, Inc., 222 F.3d 377, 379 (7th Cir. 2000)).  The cited Hurley decision held just that:

We must decide, therefore, whether the forum defendant rule is jurisdictional, in the sense we have been using the term, or if it is of a lesser status.  That question has been bouncing around the federal courts of appeals for more than 75 years, yet oddly enough it remains unresolved in this circuit.  The overwhelming weight of authority, however, is on the “nonjurisdictional” side of the debate.

Id. at 379. Hurley cited the following “overwhelming” precedent supporting the waivability of the forum defendant rule.  Snapper, Inc. v. Redan, 171 F.3d 1249, 1258 (11th Cir. 1999); Korea Exchange Bank v. Trackwise Sales Corp., 66 F.3d 46, 50 (3d Cir. 1995); In re Shell Oil Co., 932 F.2d 1518, 1522 (5th Cir. 1991); Farm Construction Services, Inc. v. Fudge, 831 F.2d 18, 21-22 (1st Cir. 1987); Woodward v. D. H. Overmyer Co., 428 F.2d 880, 882 (2d Cir. 1970); Handley-Mack Co. v. Godchaux Sugar Co., 2 F.2d 435, 437 (6th Cir. 1924), with only Hurt v. Dow Chemical Co., 963 F.2d 1142, 1145-46 (8th Cir. 1992), going the other way.

Another pre-service removal case reached the same conclusion.  The court in Almutairi v. Johns Hopkins Health System Corp., 2016 WL 97835 (D. Md. Jan. 8, 2016), stated:

I am unaware of any specific guidance from the Supreme Court or the Fourth Circuit concerning whether a motion to remand based on the “forum defendant rule” constitutes a procedural or a jurisdictional challenge to removal.  See Councell v. Homer Laughlin China Co., 823 F. Supp. 2d 370, 378 (N.D.W. Va. 2011) (recognizing that the Fourth Circuit “has yet to rule on this question…”).  However, “[o]f the ten circuits that have spoken on the issue, nine have found that removal by a forum defendant is a procedural defect, and thus waivable.”  Id.

Almutairi, 2016 WL 97835, at *5.  In addition to the cases previously cited by Hurley, Almutiari added:  Lively v. Wild Oats Markets, Inc., 456 F.3d 933, 939-40 (9th Cir. 2006), Handelsman v. Bedford Village Assocs. Ltd. Partnership, 213 F.3d 48, 50 n.2 (2d Cir. 2000), Blackburn v. United Parcel Service, Inc., 179 F.3d 81, 90 n.3 (3d Cir. 1999), and Pacheco de Perez v. AT & T Co., 139 F.3d 1368, 1372 n.4 (11th Cir. 1998).

So at least in the context of removal before service, we now unhesitatingly answer our question from 2009 in the affirmative.  By all means remove before service, even in the face of adverse precedent in some district courts.  At best, the plaintiff will miss the issue entirely and will waive any reliance on the forum defendant rule (which is waivable everywhere but in the Eighth Circuit).  At worst, (1) the case is randomly assigned to a federal who has already ruled adversely, and (2) the plaintiff seeks remand in a timely fashion.  In that situation, as our recent removal-before-service posts demonstrate, the defense side has both the upper hand in the argument, and significant appellate support.  See, e.g., Encompass Insurance Co. v. Stone Mansion Restaurant, Inc., ___ F.3d ___, 2018 WL 3999885, at *4-5 (3d Cir. Aug. 22, 2018); Novak v. Bank of N.Y. Mellon Trust Co., 783 F.3d 910, 912, 914 (1st Cir. 2015); La Russo v. St. George’s University School, 747 F.3d 90, 97 (2d Cir. 2014).  A combination of persuasive argument and recent arguments might get a fair-minded judge to change his/her mind.  Even the worst possible result – remand accompanied by an order to pay counsel fees – isn’t all bad, since the sanctions order would be immediately appealable.

But we want to make one thing perfectly clear.  Pre-service removal involves only statutory language relating to diverse “forum defendants.”  There is nothing in the statute, or in the case law, that allows the presence of a non-diverse defendant to be avoided by pre-service removal.  Pre-service removal does not make non-diverse cases diverse.  Any counsel who screws up this fundamental distinction deserves whatever sanctions a court hands out.

 

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.”

And how.

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.

It’s been a while since we’ve discussed pre-service removal, other than to mention a recent case.  Our last major post was “What’s up with Removal Before Service,” back in May 2011.

Since then, we pointed out an important statutory development – that when Congress rewrote other parts of the removal statute (28 U.S.C. §1441(b)) in 2011, it left intact the language that, read according to its terms (often referred to as “plain meaning” in the cases), allows pre-service removal.  That’s important, because the major argument against pre-service removal is that it’s “gamesmanship” (as if joining 99 disparate plaintiffs in a single complaint isn’t) that leads to “absurd” results that Congress could not have intended.  “However, one person’s ‘gamesmanship’ is strategy to another.” Francis v. Great West Casualty Co., 2018 WL 999679, at *2 (M.D. Ga. Feb. 21, 2018).

[F]rom a policy perspective, §1441(b) protects non-forum defendants from plaintiffs’ procedural maneuvering to deprive these defendants of their statutory right to litigate in a federal forum. . . . This protection . . . is particularly important because the forum defendant rule creates an opportunity for procedural gamesmanship on the part of plaintiffs attempting to keep an action in state court, and thus blocking removal, by either improperly joining a forum defendant, or not serving the forum defendant that they have no intention of pursuing.

In Re Plavix Products Liability & Marketing Litigation, 2014 WL 4954654, at *6 (D.N.J. Oct. 1, 2014) (citations omitted).

That Congress, knowing full well that pre-service removal was being routinely practiced, elected to leave intact the statutory language enabling pre-service removal, makes the “absurdity” argument a much harder sell.  After all, if the statute’s language permits too much “gamesmanship,” the proper response is for Congress to amend the statute, as it did back in 1948 when the “properly joined and served” language was first added.  See Goodwin v. Reynolds, 757 F.3d 1216, 1220-21 (11th Cir. 2014) (discussing 1948 amendment).  It is not the courts’ role to usurp Congress by making ad hoc modifications of statutory language, whenever judges feel like it, particularly when Congress had the opportunity to amend the statute again in 2011, but declined to do so.

[U]nder the plain meaning of §1441(b) an out-of-state defendant, by monitoring state court dockets electronically or otherwise, can dash to the federal courthouse almost immediately with a notice of removal before the complaint is served on it and on an in-state defendant.  As a consequence of advances in technology, there may well be fewer diversity actions precluded from removal under §1441(b) than heretofore.  If this result is deemed to be bad public policy, the remedy lies with Congress which, subject to constitutional limitations, controls the scope of this court’s subject matter jurisdiction and any right of removal.

Valido-Shade v. Wyeth, LLC, 875 F. Supp.2d 474, 478 (E.D. Pa. 2012), summarily aff’d, No. 14-4608 (3d Cir. April 29, 2015).

Enough ranting (for now).  In any event, since our “What’s up” post, we’ve also written several individual posts about:

Christison v. Biogen Idec, Inc., 2011 WL 13153242 (N.D. Cal. Nov. 14, 2011)

Poznanovich v. AstraZeneca Pharmaceuticals LP, 2011 WL 6180026 (D.N.J. Dec. 12, 2011)

Boyer v. Wyeth Pharmaceuticals, Inc., 2012 WL 1449246 (E.D. Pa. April 26, 2011)

Davis v. Hoffmann-La Roche, 2014 WL 12647769 (Mag. N.D. Cal. Jan. 14, 2014), adopted, 2014 WL 12647768 (N.D. Cal. Jan. 31, 2014)

Young v. Bristol-Myers Squibb Co., 2017 WL 2774735 (D. Del. June 27, 2017)

Cheung v. Bristol-Myers Squibb Co., 282 F. Supp.3d 638 (S.D.N.Y. 2017)

So, that’s six additional pre-service removal cases from five states since our last comprehensive post in 2011.  Let’s see how many more there are out there that we’ve missed.

The first thing we note is that some appellate authority now exists.  Since remand is unappealable (28 U.S.C. §1447(d)), appellate review is rare in remand situations.  Most recently, in Bank of New York Mellon v. Mazza, ___ F. Appx. ___, 2018 WL 3524899 (3d Cir. July 23, 2018), the court observed (albeit refraining from deciding the issue) “that every Court of Appeals to have addressed the issue has concluded that defendants in state-court actions may indeed remove them before being served with process.”  Id. at *2.  Mazza cited Novak v. Bank of N.Y. Mellon Trust Co., 783 F.3d 910, 914 (1st Cir. 2015); La Russo v. St. George’s University School, 747 F.3d 90, 97 (2d Cir. 2014), and Delgado v. Shell Oil Co., 231 F.3d 165, 177 (5th Cir. 2000).

Delgado, of course, is from the antediluvian period before modern, technologically-aided pre-service removal, but the Fifth Circuit did state unequivocally that “service of process is not an absolute prerequisite to removal.”  231 F.3d at 177.  Rather, the language of §1441(b) “consciously reflect[s] a desire on the part of Congress to require than an action be commenced against a defendant before removal, but not that the defendant have been served.”  Id.  See also McCall v. Scott, 239 F.3d 808, 813 n.2 (6th Cir. 2001) (“Where there is complete diversity of citizenship . . . inclusion of an unserved resident defendant in the action does not defeat removal under 28 U.S.C. §1441(b).”).

Delgado was also cited in La Russo, where the Second Circuit held:

The argument lacks merit.  Nothing in sections 1441 or 1446 requires a removing defendant to have appeared in the state court proceeding prior to removal.  Nor is there merit in [plaintiff’s] claim that removal was improper because [a defendant] was not served.  Service of process upon a removing defendant is not a prerequisite to removal.

747 F.3d at 97 (citing not only Delgado, but also City of Ann Arbor Employees’ Retirement System v. Gecht, 2007 WL 760568, at *9 (N.D. Cal. March 9, 2007) – a modern pre-service removal case rejecting the “absurd results” argument).

Delgado was also cited in Novak, which is an even more powerful embrace of pre-service removal.  First, the First Circuit stated:

[W]e think it is clear that a defendant generally need not wait until formal receipt of service to remove.  There is no indication that . . . Congress intended to prohibit a defendant from filing a notice of removal before having been formally served

7893 F.3d at 912. A few pages later, Novak held:

[We find] no indication that a defendant was also prohibited from filing a notice of removal before service. We read the statute to contemplate otherwise.  Our interpretation thus aligns with the decisions of other federal courts that have considered this question. . . .  As far as we can tell, every one has concluded that formal service is not generally required before a defendant may file a notice of removal.  And, because Congress is presumed to be aware of an administrative or judicial interpretation of a statute and to adopt that interpretation when it re-enacts a statute without change, we find it informative that Congress made no effort to cast aside this clear consensus among federal courts when it amended §1446 in 2011 without making any substantive change to subsection (b)(1)

Id. at 914 (citations and quotation marks omitted).  In addition to Delgado and LaRusso, Novak added Whitehurst v. Wal-Mart, 306 F. Appx. 446, 448 (11th Cir. 2008) (“nothing in the removal statute, or any other legal provision, requires that a defendant be served with the complaint before filing a notice of removal”), and Sutler v. Redland Insurance Co., 2012 WL 5240124, at *2 (D. Mass. Oct. 24, 2012), another district court case recognizing pre-service removal.  With 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.

Also, since our 2011 post − although not in a pre-service removal situation − the Seventh Circuit in Morris v. Nuzzo, 718 F.3d 660 (7th Cir. 2013), helpfully noted that the “properly joined and served” language in §1446(b) creates “a service-based exception to the forum defendant rule, meaning that a properly served out-of-state defendant will not be prevented from removing a case when the plaintiff has named but not yet served a resident defendant.”  Id. at 670 n. 3.

As far as the district courts go, here is what we now have – in addition to what we found back in our 2011 post (we did miss some back then, which we’re backfilling now).  As always, we do not do the other side’s research for them, so what follows are all cases allowing pre-service removal – except for those cases we listed back in 2011:

Alabama

Seong Ho Hwang v. Gladden, 2016 WL 9334726, at *5-7 (M.D. Ala. Dec. 21, 2016); Sasser v. Florida Pond Trucking, L.L.C., 2016 WL 3774125, at *4-5 (Mag. M.D. Ala. June 24, 2016), adopted, 2016 WL 3769754 (M.D. Ala. July 14, 2016); Pathmanathan v. Jackson National Life Insurance Co., 2015 WL 4605757, at *3-5 (M.D. Ala. July 30, 2015); Goodwin v. Reynolds, 2012 WL 4732215, at *3-6 (N.D. Ala. Sept. 28, 2012), aff’d on other grounds, 757 F.3d 1216 (11th Cir. 2014); Lemley v. Midwest Automation, Inc., 2009 WL 1211382, at *1 & n.2 (S.D. Ala. May 1, 2009).

Alaska

Seeds v. ERA Alaska, 2013 WL 11311389, at *3 (D. Alaska Nov. 4, 2013).

California

Saratoga Advantage Trust Technology & Communications Portfolio v. Marvell Technology Group, Ltd., 2015 WL 9269166, at *2 (N.D. Cal. Dec. 21, 2015); Sherman v. Haynes & Boone, 2014 WL 4211118, at *1 (N.D. Cal. Aug. 22, 2014); Wilder v. Bank of America, N.A., 2014 WL 12591934, at *4 (C.D. Cal. June 30, 2014); Davis v. Hoffmann-La Roche, 2014 WL 12647769, at *2 (Mag. N.D. Cal. Jan. 14, 2014), adopted, 2014 WL 12647768 (N.D. Cal. Jan. 31, 2014); Fontalvo v. Sikorsky Aircraft Corp., 2013 WL 3197071, at *9-10 (S.D. Cal. June 20, 2013); Regal Stone Ltd. v. Longs Drug Stores California, L.L.C., 881 F. Supp.2d 1123, 1127-29 (N.D. Cal. 2012); May v. Haas, 2012 WL 4961235, at *2-2 (E.D. Cal. Oct. 16, 2012); Christison v. Biogen Idec, Inc., 2011 WL 13153242, at *1 (N.D. Cal. Nov. 14, 2011); Cucci v. Edwards, 510 F. Supp.2d 479, 482-84 (C.D. Cal. 2007); Waldon v. Novartis Pharmaceuticals Corp., 2007 WL 1747128, at *2-3 (N.D. Cal. June 18, 2007); City of Ann Arbor Employee’s Retirement System v. Gecht, 2007 WL 760568, at *8-9 (N.D. Cal. March 9, 2007).

Delaware

Young v. Bristol-Myers Squibb Co., 2017 WL 2774735, at *2 (D. Del. June 27, 2017); Munchel v. Wyeth LLC, 2012 WL 4050072, at *3-4 (D. Del. Sept. 11, 2012); Hutchins v. Bayer Corp., 2009 WL 192468, at *10-11 (Mag. D. Del. Jan. 23, 2009).

District of Columbia

Middlebrooks v. Godwin Corp., 279 F.R.D. 8, 11-12 (D.D.C. 2011).

Florida

Bergmann v. State Farm Mutual Automobile Insurance Co., 2016 WL 9414108, at *2 (N.D. Fla. Dec. 28, 2016); ViSalus, Inc. v. Then, 2013 WL 3682239, at *3 (M.D. Fla. July 12, 2013); Visalus, Inc. v. Knox, 2013 WL 3462176, at *1-2 (M.D. Fla. July 9, 2013); North v. Precision Airmotive Corp., 600 F. Supp.2d 1263, 1268-70 (M.D. Fla. 2009); Valerio v. SmithKline Beecham Corp., 2008 WL 3286976, at *2 (S.D. Fla. Aug. 7, 2008); Bolin v. SmithKline Beecham Corp., 2008 WL 3286973, at *2 (S.D. Fla. Aug. 7, 2008); Masterson v. Apotex, Corp., 2008 WL 2047979, at *2 (S.D. Fla. May 13, 2008).

Georgia

Francis v. Great West Casualty Co., 2018 WL 999679, at *2 (M.D. Ga. Feb. 21, 2018); McClain v. Bank of America Corp., 2013 WL 1399309, at *3 (S.D. Ga. April 5, 2013).

Illinois

D.C. v. Abbott Laboratories Inc., 2018 WL 4095093, at *3-5 (N.D. Ill. Aug. 28, 2018); Graff v. Leslie Hindman Auctioneers, Inc., 299 F. Supp.3d 928, 934-37 (N.D. Ill. 2017); Selective Insurance Co. v. Target Corp., 2013 WL 12205696, at *1 (N.D. Ill. Dec. 13, 2013); In re Pradaxa (Dabigatran Etexilate) Products Liability Litigation, 2013 WL 656822, at *3-4 (S.D. Ill. Feb. 22, 2013); Massey v. Cassens & Sons, Inc., 2006 WL 381943, at *2-3 (S.D. Ill. Feb. 16, 2006).

Indiana

In re Bridgestone/Firestone, Inc., 184 F. Supp.2d 826, 828 (S.D. Ind. 2002).

Kentucky

United Steel Supply, LLC v. Buller, 2013 WL 3790913, at 1-2 (W.D. Ky. July 19, 2013); Darsie v. Cone, 2010 WL 2923285, at *5 (E.D. Ky. July 22, 2010); Stanley v. Insights Training Group, LLC, 2009 WL 3514590, at *1-2 (W.D. Ky. Oct. 29, 2009).

Louisiana

Lewis-Wallace v. Johnson, 2018 WL 1531921, at *2 (E.D. La. March 29, 2018); Leech v. 3M Co., 278 F. Supp.3d 933, 941-43 (E.D. La. 2017); Sexton v. Exxon Mobil Corp., 2017 WL 6803443, at *2 (Mag. M.D. La. Sept. 15, 2017), adopted, 2018 WL 283259 (M.D. La. Jan. 3, 2018); Mendoza v. JLG Industries, Inc., 2016 WL 6872107, at *2 (E.D. La. Nov. 22, 2016); Gorman v. Schiele, 2016 WL 3583645, at *2-3 (Mag. M.D. La. June 8, 2016), adopted, 2016 WL 3580669 (M.D. La. June 28, 2016); Gorman v. Schiele, 2016 WL 3583640, at *5-6 (Mag. M.D. La. May 20, 2016), adopted, 2016 WL 3580669 (M.D. La. June 28, 2016); Colletti v. Bendix, 2016 WL 770646, at *2 (E.D. La. Feb. 29, 2016); Williams v. Boyd Racing LLC, 2016 WL 236993, at *3 (W.D. La. Jan. 19, 2016); Groves v. Farthing, 2015 WL 3646724, at *4-5 (E.D. La. June 10, 2015); Harvey v. Shelter Insurance Co., 2013 WL 1768658, at *2 (E.D. La. April 24, 2013).

Maryland

Al-Ameri v. Johns Hopkins Hospital, 2015 WL 13738588, at *1-2 (D. Md. June 24, 2015); Moore v. Svehlak, 2013 WL 3683838, at *15 (D. Md. July 11, 2013); Clawson v. FedEx Ground Package System, Inc., 451 F. Supp.2d 731, 736 (D. Md. 2006).

Massachusetts

Sutler v. Redland Insurance Co., 2012 WL 5240124, at *2 (D. Mass. Oct. 24, 2012).

Michigan

Gordon v. Home Loan Center, LLC, 2011 WL 1261179, at *7 (E.D. Mich. March 31, 2011); Revere v. MERS, 2010 WL 1541506, at *2 (E.D. Mich. April 19, 2010).

Mississippi

Holmes v. Lafayette, , 2013 WL 654449, at *1 (N.D. Miss. Feb. 21, 2013); Ott v. Consolidated Freightways Corp., 213 F. Supp.2d 662, 665-66 (S.D. Miss. 2002).

Missouri

Gray v. Monsanto Co., 2018 WL 488935, at *2 (E.D. Mo. Jan. 19, 2018); Travers v. Five Below, Inc., 2017 WL 2813320, at *2-3 (E.D. Mo. June 29, 2017); Johnson v. Emerson Electric Co., 2013 WL 5442752, at *4 (E.D. Mo. Sept. 30, 2013); Taylor v. Cottrell, Inc., 2009 WL 1657427, at *2 (E.D. Mo. June 10, 2009); Brake v. Reser’s Fine Foods, Inc., 2009 WL 213013, at *2-3 (E.D. Mo. Jan. 28, 2009); Johnson v. Precision Airmotive, LLC, 2007 WL 4289656 at *6 (E.D. Mo. Dec. 4, 2007).

Montana

Mahana v. Enerplus Resources U.S.A. Corp., 2012 WL 1947101, at *2-3 (Mag. D. Mont. May 30, 2012), adopted, 2012 WL 4748178, at *1 (D. Mont. Oct. 4, 2012).

New Jersey

In Re Plavix Products Liability & Marketing Litigation, 2014 WL 4954654, at *4-6 (D.N.J. Oct. 1, 2014); Westfield Insurance Co. v. Interline Brands, Inc., 2013 WL 1288194, at *2-4 (D.N.J. March 25, 2013) Poznanovich v. AstraZeneca Pharmaceuticals LP, 2011 WL 6180026, at *3-5 (D.N.J. Dec. 12, 2011); Jaeger v. Schering Corp., 2007 WL 3170125, at *2 (D.N.J. Oct. 25, 2007); Yocham v. Novartis Pharmaceuticals Corp., 2007 WL 2318493 at *3 (D.N.J. Aug. 13, 2007); Frick v. Novartis Pharmaceuticals Corp., 2006 WL 454360, at *3 (D.N.J. Feb. 23, 2006).

New York

Cheung v. Bristol-Myers Squibb Co., 282 F. Supp.3d 638, 643-44 (S.D.N.Y. 2017); Petit v. Bristol-Myers Squibb Co., 2012 WL 11893525, at *1-2 (S.D.N.Y. March 23, 2012); Stop & Shop Supermarket Company LLC v. Goldsmith, 2011 WL 1236121, at *6 (S.D.N.Y. March 31, 2011); Deveer v. Gov’t Employees Insurance Co., 2008 WL 4443260, at *4 (E.D.N.Y. Sept. 26, 2008); In re Fosamax Products Liability Litigation, 2008 WL 2940560, at *2, 5 (S.D.N.Y. July 29, 2008).

Oklahoma

Howard v. Crossland Construction Co., 2018 WL 2463099, at *2 (N.D. Okla. June 1, 2018); Magallan v. Zurich American Insurance Co., 228 F. Supp.3d 1257, 1260-62 (N.D. Okla. 2017).

Pennsylvania

Rehmeyer v. Peake Plastics Corp., 2016 WL 7375027, at *3 (E.D. Pa. Dec. 20, 2016); Figured v. Davies, 2016 WL 3148392, at *3 (M.D. Pa. June 2, 2016); Parker Hannifin Corp. v. Federal Insurance Co., 23 F. Supp. 3d 588, 594 (W.D. Pa. 2014); Hutton v. KDM Transport, Inc., 2014 WL 3353237, at *4 (E.D. Pa. July 9, 2014); Valido-Shade v. Wyeth, LLC,, 875 F. Supp.2d 474, 477-78 (E.D. Pa. 2012), summarily aff’d, No. 14-4608 (3d Cir. April 29, 2015); Zokaites Properties, LP v. La Mesa Racing, LLC, 2012 WL 3144127, at *17 (W.D. Pa. Aug. 1, 2012); Banks v. Kmart Corp., 2012 WL 707025, at *2 (E.D. Pa. March 6, 2012); Boyer v. Wyeth Pharmaceuticals, Inc., 2012 WL 1449246, at *2 (E.D. Pa. April 26, 2011); Copley v. Wyeth, Inc., 2009 WL 1089663, at *3 (E.D. Pa. April 22, 2009); Vanderwerf v. Glaxosmithkline, PLC, 2005 WL 6151369, at *1 (E.D. Pa. May 5, 2005).

South Carolina

Fisher v. Pelstring, 2009 WL 10664813, at *2-4 (D.S.C. Sept. 29, 2009).

Tennessee

Linder v. Medtronic, Inc., 2013 WL 5486770, at *1-2 (W.D. Tenn. Sept. 30, 2013).

Texas

Cadena v. ASI Lloyds, 2018 WL 1904839, at *3 (Mag. W.D. Tex. Jan. 5, 2018), adopted, 2018 WL 1899750 (W.D. Tex. Feb. 13, 2018); Doe v. Geo Group, Inc., 2016 WL 3004675, at *3 (W.D. Tex. May 24, 2016); Reynolds v. Personal Representative of the Estate of Johnson, 139 F. Supp.3d 838, 841-43 (W.D. Tex. 2015); Breitweiser v. Chesapeake Energy Corp., 2015 WL 6322625, at *4-7 (N.D. Tex. Oct. 20, 2015); Rios v. Cooper Tire & Rubber Co., 2014 WL 12613385, at *3 (E.D. Tex. March 26, 2014); Carrs v. AVCO Corp., 2012 WL 1945629, at *1-3 (N.D. Tex. May 30, 2012).

West Virginia

Bloom v. Library Corp., 112 F. Supp.3d 498, 506 (N.D.W. Va. 2015); Konikowski v. Wheeling Island Gaming, Inc., 2012 WL 5378252, at *4 (N.D.W. Va. Oct. 31, 2012); Vitatoe v. Mylan Pharmaceuticals, Inc., 2008 WL 3540462, at *2-5 (N.D.W. Va. Aug. 13, 2008).

*          *          *          *

Finally, while not doing the plaintiffs’ research for them, we can safely state, after reading the “absurd result” cases, that the most dangerous form of pre-service removal is by a forum defendant alone, or equivalently, in a case where only forum defendants are sued.  That’s widely seen as a direct slap at the forum defendant rule.  The next most dangerous removals are those taken by forum defendants in cases where there are also non-resident defendants.  The most sympathetic pre-service removal scenario is when the removal is initiated by a non-resident defendant – the type of party that diversity jurisdiction was originally intended to protect.  When defendants have a choice, therefore, it would be best to let the non-resident defendant carry the flag in pre-service removal cases.

One can also hope that current trends in personal jurisdiction might result in dismissal in cases where defendants previously sought to rely upon pre-service removal, since jurisdiction over one affiliated, but separate, “forum defendant” corporation no longer translates into jurisdiction over other corporate defendants.  If, as occurs often in mass tort cases, the plaintiff is also a non-resident of the jurisdiction where suit is brought, then the plaintiff may well not be able to obtain jurisdiction over the non-resident corporate defendant.

Recently, in downsizing our elderly father to a smaller residence and cleaning out his house, we came upon a cassette recording of our too-many-decades-ago Bat Mitzvah. We dug an old boom box out of the basement, listened to our sweet 13-year-old voice, and allowed the waves of nostalgia to wash over us.  We remembered the dress we wore (pink and white) and the upturned faces of our proud relatives (including all four grandparents, the first of whom would depart the very next year).  We recalled the home-cooked food at the “open house” at our home that evening (this was a different era – and tax bracket – than those occupied by cousins who have recently thrown six-figure extravaganzas for their children’s events) and the elusive (for us) sense of religious affiliation. For the thirty minutes of that cassette tape, we were transported.

Our love of nostalgia is neither new nor news. Readers of this blog know how much we love revivals of old Broadway musicals (recent:  South Pacific, Pippin, Finian’s Rainbow, Hello, Dolly; upcoming:  Carousel, My Fair Lady), and we will wax nostalgic in Connecticut this weekend at our 30th law school reunion (Guido’s torts class anecdotes, anyone?).   And we had a wistful flash when we read today’s case.  A decade ago, we were enmeshed in the earliest stages of a mass tort MDL.  Plaintiffs routinely filed in state court and, seeking to evade federal jurisdiction, sued a distributor domiciled in the state of filing (a “forum defendant”) along with our client, the manufacturer.  Trajectory permitting, we would sweep in and remove those cases before the forum defendant was served.  We called these “wrinkle removals,” because a “wrinkle” in the removal statute opened this window for us.

As one of our co-bloggers recently explained, this blog has been posting about “removal before service” since Bexis brought it to the attention of the legal community in 2007.  It’s a procedural tactic that enables defendants to remove cases to federal court despite the “forum defendant rule,” which ordinarily prohibits a defendant from removing to a case that, while it meets the requirements of diversity jurisdiction under 21 U.S.C. § 1332(a), is also pending in the home state of the defendant. Here’s the rule as codified in 21 U.S.C. § 1441(b) (2):  “A civil action otherwise removable solely on the basis of the jurisdiction under section 1332(a) of this title 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.” (Emphasis added).

A review of our long chain of posts on this subject reveals dramatic splits among, and even within, district courts (notably, the Eastern District of Pennsylvania) on this issue. Some courts acknowledge the plain language of the statute and deny remand, while others remand in the supposed “spirit” of diversity jurisdiction.  Last week’s Southern District of New York decision in Cheung v. Bristol-Myers Squibb Co., et al., 2017 WL 4570792 (S.D.N.Y. Oct. 12. 2017), one of the best opinions we have read on this issue, falls resoundingly in the former category.  In Cheung, the court explained that, in response to the Eliquis MDL court’s dismissal, on preemption grounds, of the first case subject to a 12(b)(6) motion, plaintiffs’ counsel voluntarily dismissed thirty-three cases and re-filed them in Delaware state court.   The defendants removed them to the United States District Court for the District of Delaware, and the judge there denied motions to remand all thirty-three cases, holding that removal was proper despite the presence of a defendant domiciled in Delaware.  The same plaintiffs’ firm filed four more actions in Delaware state court, and the defendants removed those, too, and tagged them for transfer to the MDL in the Southern District of New York.  The plaintiffs waited to move for remand until the cases were transferred to the MDL, then moved to remand all four.

Denying the motions to remand, the court emphasized that “the [removal] statute prohibits removal when there are in-state defendants only when those defendants have been ‘properly joined and served.’ The specific purpose of the ‘joined and served’ requirement has been read to prevent a plaintiff from blocking removal by joining as a defendant against whom it does not intend to proceed and who it does not even serve,” Cheung, 2017 WL 4570792 at * 3 (internal punctuation and citations omitted), precisely the description of the distributor defendant in our long-ago MDL.  Noting that it was “undisputed that the defendants removed the cases before they were properly served,” id., the Court held that “a plain reading of the forum defendant rule” permitted removal. Id.

The plaintiffs “urge[d] the Court to ignore the plain reading of the statute to discourage what they term[ed] ‘gamesmanship’ by the defendants,” id., suggesting that the statute “should only be enforced when a removal occurs after a plaintiff has had a ‘meaningful chance’ to serve the [forum] defendant.” Id. They argued that upholding the removals, “which they contend[ed were] strategically done in order to evade the forum defendant rule, would be to frustrate the purpose of both diversity jurisdiction and the forum defendant rule.” Id.

But the court refused to bite. As the court emphasized, “It is well and long established that courts apply the plain meaning of unambiguous statutory language. . . . The plain language of Section 1441(b) makes clear that its ‘prohibition’ on removal applies only where a defendant who has been ‘properly joined and served’ is a resident of the forum state.” Id. at *4 (citations omitted, emphasis in original).   The court continued, “Ignoring the plain terms of the statute to determine in an individual case when a plaintiff has had meaningful opportunity to serve each defendant and to investigate the parties’ motives . . . would add expense, delay, and uncertainty to the litigation.  In cases like the ones at issue here, the investigation is complicated and points in several directions.  While the defendants no doubt removed the actions swiftly [before the forum defendant rule would prohibit removal], a ruling in favor of the plaintiffs on the issue of removal would reward a different type of gamesmanship altogether.  Instead of promptly moving before [the District of Delaware] for remand of [these] four cases, . . . [the plaintiffs] waited until the JPML had ordered the transfer to move for their remand, . . . hop[ing] for a different result.”  Id.  The court concluded, “If the plaintiffs, then, urge an interpretation of the removal statute that takes the litigants’ strategies into account, theirs may not be ignored.” Id. Remand denied, and all four cases dismissed under the same preemption arguments that had previously prevailed.

We just love this stuff. It combines all the elements that, on a good day, make this a fun job – hornbook statutory construction, chutzpah, a confident judge, and questionable opponents.  We will continue to follow the trail of this doctrine and will hope that more judges veer down this fork in the jurisprudential road.

We’re pretty familiar with most diversity-based removal techniques, so when we see something unusual, we sit up and take notice (as we did with removal before service) – then we blog about it.  Today’s case is Bahalim v. Ferring Pharmaceuticals, Inc., 2017 WL 118418 (N.D. Ill. Jan. 12, 2017).  The unusual aspect of Bahalim is the target of the defendant’s successful fraudulent joinder argument.  As discussed in the opinion, the parties in Bahalim are completely diverse.  Id. at *1.  However, the case would ordinarily be stuck in state court due to the “forum defendant” rule – that even a diverse case isn’t removable where the plaintiff sues the defendant in the defendant’s home state court. Id. at *2.

[T]he forum defendant rule disallows federal removal premised on diversity in cases where the primary rationale for diversity jurisdiction − to protect defendants against presumed bias of local courts − is not a concern because at least one defendant is a citizen of the forum state.

Id. (quoting Morris v. Nuzzo, 718 F.3d 660, 665 (7th Cir. 2013)).

The manufacturer defendant removed anyway, and asserted that the so-called “forum defendant” was fraudulently joined.  Predictably, the plaintiffs claimed that fraudulent joinder couldn’t be used to dismiss a forum defendant.  The defendant responded that it was proper to use fraudulent joinder against a forum defendant because the purposes of the forum defendant rule were not served where a sham forum defendant was sued to keep an out-of-state defendant in state court.

The Seventh Circuit had punted on this question in Morris, but had identified the relevant “policy interests for courts to balance.” Bahalim, 2017 WL 118418, at *3.  They are:

(1) the plaintiff’s right to select the forum and the general interest in confining federal jurisdiction to its appropriate limits, versus (2) the defendant’s statutory right of removal and guarding against abusive pleading practices.

Id.  As to the first, Bahalim held, “improperly joining a forum defendant also lessens a plaintiff’s choice of forum.”  Id.  Any “deference” to the plaintiffs’ choice of forum here was further “weakened” by their being litigation tourists looking for a friendly venue.  Id. (“neither Plaintiff is an Illinois citizen”).  As to the second, the court held that a fraudulently joined forum defendant wasn’t “properly joined” as the removal statute required:

[B]y its own terms, the forum defendant rule precludes removal only when there is a “properly joined and served” resident defendant.  Based on this statutory language, Defendant argues that a fraudulently joined forum defendant is an improperly joined defendant.  The Court agrees.

Id. (citations omitted).  Thus, “the general interest in confining federal jurisdiction to its appropriate statutory limits weighs in favor of Defendants.”  Id.

Continue Reading Unusual Removal Situation Yields Favorable Result

Here’s some more inside baseball on grounds for removing cases from state to federal court.  In brief, the issue is this: does the “bad faith” standard added to the removal statute (28 U.S.C. §1446(c)(1)) in 2011 approximate the fraudulent joinder standard so that fraudulent joinder becomes a form of “bad faith” not subject to the one-year limit otherwise imposed on removals by reason of diversity of citizenship?  Fraudulent joinder is also an exception the “voluntary/involuntary” rule.  E.g., Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d 529, 532 (5th Cir. 2006); Mayes v. Rapoport, 198 F.3d 457, 461 n.8 (4th Cir. 1999); Insinga v. LaBella, 845 F.2d 249, 254 (11th Cir. 1988).

We wish to acknowledge the assistance of Emily Kimmelman, a Reed Smith 2016 summer associate, in compiling the research for this post.

In 2011 (effective January 6, 2012), Congress passed the Federal Courts Jurisdiction & Venue Clarification Act (the “JVCA”).  The JVCA did a number of things, which we discussed here (back then (in 2011), we were most interested in Congress having left intact the statutory language that allows removal before service).  What we’re discussing today is the JVCA’s creation of a “bad faith” exception in 28 U.S.C. §1446(c)(1).  Specifically, §1446(c)(1) provides for diversity jurisdiction removal, even after one year if “the district court finds that the plaintiff has acted in bad faith in order to prevent a defendant from removing the action.”

Nothing is certain, except the controversy over how the bad faith exception interacts with the fraudulent joinder exception to the voluntary-involuntary rule.  Everybody knows the standard for fraudulent joinder.  It exists where “there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendants or seek a joint judgment.”  In re Briscoe, 448 F.3d 201, 217 (3d Cir. 2006).

Continue Reading Fraudulent Joinder & Bad Faith – Explaining Another Removal Muddle

You know we love removal – 63 posts and counting.  But, before you cast this post aside as another discussion of fraudulent joinder, removal before service, or principal place of business, we chose to blog about Franklin v. Codman & Shurtleff Inc., 2013 U.S. Dist. LEXIS 61307 (N.D. Tex. Apr. 30, 2013) because it deals with some of the less often explored aspects of removal; at least less often explored by us.  First – the one year time limit for removal.  Second – the amount in controversy.

But, before we get to the opinion, we have a caveat.  The case was decided based on 28 U.S.C. §1446 before it was amended in December 2011.  The amendments apply to cases filed after January 6, 2012 and Franklin was originally filed in May 2011.  As to these two issues, we believe the result would be the same regardless, so the court’s analysis is still useful (for a discussion of the 2011 amendments see our post here).

When plaintiffs first filed their lawsuit in state court in Texas, they sued only diverse, non-Texas resident defendants.  So, defendants removed the case.  A year later, plaintiffs amended their complaint to add the local hospital where Mr. Franklin’s surgery took place.  The hospital’s motion to remand was granted.  Once back in state court and faced with multiple dispositive motions by the hospital, plaintiffs dismissed the hospital with prejudice.  Complete diversity being restored, defendants removed the case for a second time.  Id. at *2-3.  Wanting to keep this ping-pong match going, plaintiffs moved to remand.

Argument number 1 – defendants are out of time.  Both the former and current §1446(b) provide that a case many not be removed “more than 1 year after commencement of the action.”  But, plaintiffs didn’t read the statute carefully enough.  The one year time limit only applies “if the case stated by the initial pleading is not removable.”  28 U.S.C. §1446(b)(3); §1446(c)(1) (emphasis added).   There is no dispute that the initial pleading in this case allowed for removal – there was complete diversity.  It wasn’t until plaintiff started adding and dismissing the hospital, that diversity even became an issue.  So, the one year limitation didn’t apply and defendants’ removal, following the dismissal of the non-diverse defendant, was timely.

While this result is the same under both statutes, there is a new aspect to the one year time limit.  Let’s flip the situation around.  What if plaintiffs had named the hospital in their original complaint?  The case could not have been removed (putting aside fraudulent joinder, removal before service, etc.) because it would lack complete diversity.  Then assume more than one year later plaintiffs dismissed the hospital.  Under the old statute, presumably, the one year limitation would apply and defendants could not remove the case.  The new statute provides an escape.  If the court finds that the plaintiff acted in “bad faith” in any way to prevent removal, the one-year limit doesn’t apply.  See 28 U.S.C. §1446(c)(1).  Were plaintiffs acting in bad faith when they add a non-diverse defendant exactly one year after filing suit and then dismissing them a few months later?  We don’t know enough from the opinion to answer that question.  We raise it simply so that you know the bad faith clause is there if you are faced with a plaintiff who is somewhat fickle about whom they want to sue.

Argument number 2 – the amount in controversy is less than $75,000.  Usually, such a proclamation by plaintiffs is music to the defendants’ ears.  Not true when it is an empty statement being use to defeat federal jurisdiction and plaintiffs have no intention of actually limiting the damages they are seeking.  Under both the new and old statutes, where the complaint doesn’t specify the amount of damages sought, the court is allowed to look beyond the pleadings to establish the amount in controversy.  And, as Franklin points out, the amount in controversy is determined “at the time of removal.”  Franklin, at *8-9.  (citation omitted).  So, the court looked at the evidence that existed prior to removal – initial disclosures claiming $1.9 and $1.5 million in damages by plaintiff and his spouse respectively; a demand for $300,000; lost wages of $105,000; and the allegation in the complaint itself stating plaintiffs “suffered damages in an amount in excess of the minimum jurisdictional requirements of this court.”  Id. at *9-10 (emphasis in original).  Looks like a preponderance of evidence to us.

Plaintiffs argued that prior to removal, they had made a new settlement demand of $30,000 which proves that the amount in controversy is less than $75,000. But the court found that a settlement demand “is not the same as informing defendants that the amount in controversy has been unalterably reduced.”  Id. at *11.  In fact, the court points out that in the letter memorializing the demand, plaintiffs were clear that $30,000 would only “partially compensate” them and that defendants’ position on damages did not sufficiently cover mental anguish damages or economic damages for medical expenses and lost wages.  Id. at *12.  Hence, prior to removal, “there was no explicit indication that the Franklins were reducing the amount they sought to recover.”  Id. at *12.

What about post-removal?  Post-removal, plaintiffs amended their initial disclosures to state that plaintiffs were seeking $68,000 and $7,000 in damages respectively.  Is it just a coincidence that those figures add up to exactly $75,000? (by the way, damages typically aren’t aggregated for determining the jurisdictional threshold anyway).  But, post-removal doesn’t count.  “Post-removal affidavits, stipulations, and amendments reducing the amount do not deprive the district court of jurisdiction.”  Id. at *9.  So, it doesn’t matter what plaintiffs said or did after removal.  Defendants proved by a preponderance of the evidence that the amount in controversy at the time of removal met the jurisdictional threshold.  Id. at *13.

Finally, another quick note about the new statute – the “bad faith” escape clause also applies when plaintiffs deliberately withhold the actual amount in controversy in order to prevent removal.  28 U.S.C. §1446(c)(3)(B).  Again, the court didn’t need to address issue of bad faith because it wasn’t applying the new statute, but we wanted you to know it was there if you need it.