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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…
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.…
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…
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…
There hasn’t been a lot of talk about this, but Congress just passed, and the President signed, something called the” Federal Courts Jurisdiction and Venue Clarification Act of 2011,” H. R. 394, P.L 112-63, copy here. As far as we’re concerned, this new act (we’ll call it, creatively, “the Act”) is as significant for what it didn’t do as for what it did.
The Act completely rewrote 28 U.S.C. §1441(b). Why’s that important? Because the literal language of §1441(b) – “removable only if none of the parties in interest properly joined and served is a citizen of the State in which such action is brought” – is what allows removal prior to service to trump the so-called “forum defendant” loophole. As we’ve pointed out in many posts (most of which you can access from here), the “and served” qualifier to the forum defendant loophole means that, if an otherwise diverse action is removed before an in-state defendant is served, then that defendant’s citizenship, according to the statute, must be ignored and the action is properly in federal court.
That’s the express language of the statute. The plaintiffs have responded with a mushy, result-oriented counter-argument that surely Congress didn’t mean what it said; that result would be absurd. As we’ve mentioned, some benighted courts have bought that rationale.
Well, that argument just went out the window. Why? Because in the Act (the 2011 one mentioned above), Congress had the opportunity to change §1441(b) if it was uncomfortable with the result dictated by that section’s express terms. It didn’t. Quite the contrary, while Congress completely rewrote §1441(b) in the Act, it retained (and arguably improved, see this law review article, pp. 162-63) the “properly filed and served” language verbatim in the new version. After the Act, here’s how §1441(b) now reads:
(b) REMOVAL BASED ON DIVERSITY OF CITIZENSHIP. – (1) In determining whether a civil action is removable on the basis of the jurisdiction under section 1332(a) of this title, the citizenship of defendants sued under fictitious names shall be disregarded.
(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.
Act §103(a)(3) (emphasis added).Continue Reading Removal News
Faithful readers of this blog may avert their eyes when they see a new post about removal, one of our favorite topics (36 posts and counting). Not another post about fraudulent joinder of in-state defendants or, worse yet, pre-service removal! We can understand that some of you may want to say to us about removal…
We’ve done so many posts on removal – for you non-lawyers that means moving cases that were originally filed in state court into federal court – that even we have a hard time keeping track. Most of our posts have reviewed individual cases that, one way or another, we’ve learned about. There are 29 posts…
We’re running out of headlines for these posts: We’ve already used “Pre-Service Removals — For The Umpteenth Time” and “Pre-Service Removals: They Keep On Coming.”
What’s a blogger to do?
Even if we’ve run out of ideas for creative headlines, we can at least do the non-creative piece of this blogging…