Jul
12

Courts of Appeals are Affirming Snap Removal

Posted in Appellate

To keep cases in a favorable state court forum, Plaintiffs often include a defendant who is a resident of that forum in the lawsuit to preclude removal to federal court. Section 1441(b)(2) prevents removal of on action on the basis of diversity jurisdiction if any of the “properly joined and served” defendants is a citizen of the state in which the action is brought. 28 U.S.C. §1441(b)(2).  This limitation on removal is often referred to as the forum-defendant or resident-defendant rule. The theory behind the rule is that “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.” Morris v. Nuzzo, 718 F.3d 660, 665 (7th Cir. 2013).  However, some district courts have interpreted Section 1441(b)(2) to require the resident-defendant be both joined and served to prevent removal.  This interpretation provides an opportunity for defendants wishing to evade the forum-defendant rule to remove the action to federal court before the resident-defendant is properly served.  With the advent of electronic docket monitoring, a defendant can remove a case to federal court before the plaintiff has an opportunity to serve them.  This procedure has come to be known as “snap removal.”

The Seventh Circuit has not yet addressed the question of whether the phrase “properly joined and served” requires service on the resident defendant for the forum defendant rule to preclude removal to federal court.  Around the country, district courts are divided on whether the forum defendant rule bars pre-service removal to federal court based on diversity jurisdiction.  In ruling on this issue, the analysis typically addresses the apparent divergence between the purpose behind the forum-defendant rule and the plain meaning of the statute.  In this regard, some district courts have prohibited pre-service removal when a forum-defendant is named in the complaint because they believe this conforms with the Congressional intent behind the statute.  See, e.g., Little v. Wyndham Worldwide Operations, Inc., 251 F. Supp. 3d 1215, *4 (M.D. Tenn. 2017) (“[T]he Court concludes that snap removal thwarts the purpose of the forum defendant rule.”); Snider v. Chrysler Grp., LLC, 2015 U.S. Dist. LEXIS 191449, 2015 WL 12834237, *3 (N.D. Ill. 2015) (holding that a plaintiff’s failure to serve a forum-state defendant prior to a defendant’s removal does not permit a court to ignore the forum-state defendant in determining the propriety of removal under section 1441(b)(2)); Swindell—Filiaggi v. CSX Corp., 922 F. Supp. 2d 514, 521 (E.D. Pa. 2013) (“The Court declines to enforce the plain meaning of 28 U.S.C. § 1441(b)(2) because doing so produces a result that is at clear odds with congressional intent. Congress intended the removal statute to abridge the right of removal.”)

However, it appears the majority of district courts have instead looked to the plain meaning of the statute, resulting in the interpretation that a literal reading of the statute permits removal before service on the in-forum defendant is achieved. See, e.g., Rogers v. Boeing Aerospace Operations, Inc., 13 F.Supp.3d 972, 978 (E.D. Mo. 2014) (“Under the plain, unambiguous language of Section 1441(b)(2), an out-of-state defendant may remove a diversity case if at least one defendant—and no forum defendant—has been served.”); Selective Ins. Co. of S.C. v. Target Corp., 2013 U.S. Dist. LEXIS 201154, 2013 WL 12205696, *1 (N.D. Ill. 2013) (noting that despite the existence of a forum defendant, “[r]ead literally, the forum defendant rule only precludes removal when a forum defendant has been ‘properly joined and served.’…’As many courts have recognized, therefore, an unserved forum defendant will generally not defeat removal.'”) (citations omitted); Maple Leaf Bakery v. Raychem Corp., 1999 U.S. Dist. LEXIS 18744, 1999 WL 1101326, *2 (N.D. Ill. 1999) (“The plain language of § 1441(b)…precludes removal on the basis of the presence of resident defendants only when those defendants were properly joined and served at the time of removal. …Here [the forum defendants] were not served at the time of removal, so their status as resident defendants cannot be construed to defeat removal.”). Graff v. Leslie Hindman Auctioneers, Inc., 299 F. Supp. 3d 928, 936-37 (N.D. Ill. 2017)(agreeing with the reasoning of the courts applying the plain language of the statute, and finding removal was proper where the notice of removal was filed before the forum-defendant was served.).

Importantly, the plain language of the statute also supports snap removal by the forum-defendant prior to service even when it is the sole defendant in the case. In D.C. v. Abbott Labs, the plaintiff, a Louisiana resident filed suit against Abbott Labs, a resident of Illinois and Delaware, in the Circuit Court of Cook County.  Prior to being served with the complaint, defendant removed the case to federal court on the basis of diversity jurisdiction. In August 2018, the Northern District denied plaintiff’s motion to remand on the basis of the plain reading of the statute. The court reasoned, “having learned of this action soon after it was filed, Defendant filed a notice of removal before it became a forum defendant that was both properly joined and properly served.”  The court further noted that whether this circumstance should be “viewed as ‘gamesmanship’ (as Plaintiff sees it) or ‘diligence’ (from Defendant’s perspective),” is ultimately for Congress to decide. D.C. v. Abbott Labs., Inc., 323 F. Supp. 3d 991 (N.D. Ill. 2018).

That same month, the Third Circuit Court of Appeals affirmed the practice of snap removal in Encompass Ins. Co. v. Stone Mansion Rest. Inc., becoming the first appellate court to do so.  902 F.3d 147, 153 (3d Cir. 2018).  In that case, the plaintiff, a citizen of Illinois, sued the defendant, a citizen of Pennsylvania, in its home county.  Before Plaintiff had an opportunity to serve the defendant, the defendant filed a notice of removal to federal court, and the district court denied plaintiff’s motion to remand. On appeal, the plaintiff argued that by applying the plain meaning of the statute, the district court ignored the statutory purpose and construed the forum-defendant rule “in a manner that necessarily would create a nonsensical result that Congress could not have intended.” However, the Third Circuit concluded the “the language of the forum defendant rule in Section 1441(b)(2) is unambiguous,” and held its plain meaning precludes removal on the basis of in-state citizenship only when the defendant has been properly joined and served.  The Third Circuit acknowledged its literal interpretation creates a “broader right of removal” in the narrow circumstances “where a defendant is aware of an action prior to service of process with sufficient time to initiate removal,” and concluded a change in this result would require action by Congress.

More recently, in March 2019, the Second Circuit Court of Appeals came to the same conclusion in Gibbons v. Bristol-Myers Squibb Co., finding that a plain reading of Section 1441(b)(2) authorizes a forum-defendant to remove actions filed in state court on the basis of diversity of citizenship prior to service, and found that result is “neither absurd nor fundamentally unfair.” 919 F.3d 699, 707 (2d Cir. 2019).

Accordingly, based on these decisions in sister circuits and the recent decisions that of come out of the Northern District of Illinois in Graff v. Leslie Hindman Auctioneers, Inc. and D.C. v. Abbott Labs, it seems increasingly likely that the Seventh Circuit will likewise affirm snap removal procedures as consistent with the plain reading of Section 1441(b)(2).  Thus, from a defense perspective, diligent electronic docket monitoring and prompt removal of actions prior to service can be of value to clients who have an interest in litigating in federal court.

Lynsey A. Stewart

Lynsey A. Stewart

Lynsey Stewart is an associate in the firm’s Chicago office. Lynsey concentrates her practice in civil litigation with an emphasis on medical malpractice, auto, and general liability actions.

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