Last week, the Fifth Circuit Court of Appeals ruled that the “forum defendant rule” does not stop a non-forum defendant from removing a case to federal court, as long as it is removed before a forum defendant is served.[1] This is the first time the Fifth Circuit has expressly approved of the procedural practice – often called “snap” removal. The Second, Third, and Sixth Circuits have recently issued similar rulings.[2]
The Fifth Circuit Decision: Texas Brine v. AAA, et al.
Texas Brine filed a $12 million+ lawsuit on July 6, 2018 against the American Arbitration Association (a New York corporation), arbitrator Anthony DiLeo (a Louisiana resident) and arbitrator Charles Minyard (also a Louisiana resident) in Louisiana state court.[3] Just five days later, and before Plaintiff served the two in-state defendants, AAA removed the case to the U.S. District Court for the Eastern District of Louisiana.[4] All defendants then filed answers and a Rule 12(c) Motion to Dismiss.[5]
Texas Brine moved to remand, arguing AAA’s removal was improper based on 28 U.S.C. § 1441(b)(2), the “forum defendant rule”:
A civil action otherwise removable solely on the basis of [diversity jurisdiction under 28 U.S.C. § 1332(a)] 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.
Removal based on diversity jurisdiction “protect[s] out-of-state defendants from possible prejudices in state court.” Gorman v. Schiele, 2016 WL 3583645, at *2 (M.D. La. June 8, 2016). The theory of the forum defendant rule is that a defendant sued in his own state will not be disadvantaged by in-state prejudices; after all, it’s the defendant’s home turf.[6] Thus, the rule prevents in-state defendants from removing where: (1) the lawsuit is removable solely on the basis of diversity (i.e. there is no plaintiff from the same state as any defendant and the amount in controversy exceed $75,000) and (2) any defendant “properly joined and served” is a resident of the state where the lawsuit was filed.
The question arises, then: before a resident defendant is “properly joined and served,” can a non-resident defendant remove?
In Texas Brine, the Fifth Circuit said, “Yes.” The court applied a plain language interpretation to the forum defendant rule, finding the statute unambiguous: “By its text … Section1441(b)(2) is inapplicable until a home-state defendant has been served in accordance with state law; until then, a state court lawsuit is removable under Section 1441(a) so long as a federal district court can assume jurisdiction over the action.”[7] The court also considered – but rejected – the plaintiff’s arguments on legislative intent and found that a plain reading of the statute did not amount to an absurd result (as required to go beyond the plain reading of an unambiguous statute).[8]
The court did not squarely decide a closely-related issue, which is whether it is acceptable for a forum defendant to remove before being served: “Of some importance, the removing party is not a forum defendant. Diversity jurisdiction and removal exist to protect out-of-state defendants from in-state prejudices.”[9]
Snap Removal: Practice Pointers
Plaintiffs have long-relied on the forum defendant rule by suing one or more – often tangentially related – resident defendants, in addition to non-resident defendants, in an attempt to anchor actions in state court. Snap removal provides a potential avenue to federal court even where resident defendants are named. Litigants considering snap removal should be mindful of the following considerations.
Know the law in your circuit or district court. Counsel considering snap removal must first determine the law in the subject jurisdiction. Courts allowing pre-service removal have applied a plain-language reading of the statute.[10] Courts rejecting snap removal have generally concluded the practice is the result of an unintended “loophole,” and is inconsistent with the legislative purpose of the forum defendant rule.[11] Also note whether case law addresses the sub-issue of whether snap removals are allowed by any defendant, or only by a non-resident defendant.
Be prepared. Snap removal is a race to remove prior to service on the in-state defendant, and requires early and organized coordination. Close attention must be given to the removal procedure outlined in 28 U.S.C. § 1441 et seq. Generally, the removing party must file a notice of removal, along with a copy of everything served upon the removing party in the action,[12] and must provide notice to the adverse parties and the state court.[13] In at least some courts, removal is not procedurally complete until the state court receives notice of the removal.[14] Thus, the state court notice should be filed immediately upon the federal notice of removal to ensure the forum defendant is not served in the interim.
Get all co-defendants on board. Pursuant to 28 U.S.C. § 1446(b)(2)(A), all “properly joined and served” defendants must either join in or consent to removal. While a snap removal obviously concerns circumstances where at least one defendant has not yet been served, it is a good “belt and suspenders” strategy to obtain all defendants’ consent to or joinder in the removal.
File a responsive pleading ASAP. The removing party should also consider immediately (or better yet, concurrently) filing an answer or dispositive motion upon removal. Under FRCP 41(a)(1)(A)(i), a plaintiff may voluntarily dismiss an action before the opposing party serves an answer or motion for summary judgment. Thus, if a defendant removes, but does not file a responsive pleading, a plaintiff may voluntarily dismiss under Rule 41 and refile, affording the plaintiff another shot to litigate in state court.[15]
[1] See Texas Brine Co., L.L.C. v. Am. Arbitration Ass’n, — F.3d —-, 2020 WL 1682777 (5th Cir. 2020).
[2] See id. at *2 (citing Gibbons v. Bristol-Myers Squibb Co., 919 F.3d 699 (2d Cir. 2019); Encompass Ins. Co. v. Stone Mansion Rest. Inc., 902 F.3d 147 (3d Cir. 2018). The Sixth Circuit opinion notes approval of the practice in a footnote: McCall v. Scott, 239 F.3d 808, 813 n.2 (6th Cir. 2001).
[3] See Texas Brine, 2020 WL 1682777, at *1-2.
[4] Id. at *2.
[5] Id.
[6] Gorman cites Lively v. Wild Oats Mkts., Inc., 456 F.3d 933, 940 (9th Cir. 2006) (“The purpose of diversity jurisdiction is to provide a federal forum for out-of-state litigants where they are free from prejudice in favor of a local litigant. […] The need for such protection is absent, however, in cases where the defendant is a citizen of the state in which the case is brought.”) (internal quotations and citations omitted).
[7] Id. at *3 (quoting Gibbons, 919 F.3d at 705).
[8] Id.
[9] Id. But some courts have approved of snap removals by forum defendants. See n. 10.
[10] See, i.e., Taylor v. Cottrell, Inc., No. 4:09CV536 HEA, 2009 WL 1657427 at *2 (E.D. Mo. June 10, 2009) (holding removal by forum defendant proper where defendant was not served at time of removal and “[t]hus, the limitation on removal in section 1441(b) does not apply”); Taylor, Vitatoe v. Mylan Pharms., Inc., 2008 WL 3540462, (N.D. W.Va. Aug.13, 2008) (denying motion to remand because plaintiff’s “construction of § 1441(b) would require this Court to ignore the ‘and served’ language of the statute”); Waldon v. Novartis Pharms. Corp., No. C07-01988 MJJ, 2007 WL 1747128 (N.D. Cal. June 14, 2007) (finding “no compelling reason to depart from the plain text of section 1441(b)”); Massey v. Cassens & Sons, Inc., No. 05-CV-598-DRH, 2006 WL 381943 (S.D. Ill. Feb. 16, 2006) (noting that federal courts have decided “virtually uniformly” that the forum defendant rule applies only if a resident defendant is joined and served at the time of removal); Yocham v. Novartis Pharmaceuticals Corp., No. 07-1810 JBS, 2007 WL 2318493 at *1-2 (D. N.J. Aug. 13, 2007) (holding case properly removed where forum defendant not yet served).
[11] See generally Valerie M. Nannery, Closing the Snap Removal Loophole, 86 U. Cin. L. Rev. 541 (2018); see also Removal – Removal Before Service on Forum Defendant, 32 No. 7 Fed. Litigator NL 4 (July 2017) (providing five reasons for remand after snap removal including (1) the “properly joined and served” language intends to prevent plaintiffs from fraudulently joining forum defendants with no intent to ultimately serve such defendants in order to keep cases in state court, (2) snap removal allows forum shopping by defendants by means of monitoring electronic dockets, (3) allowing snap removals may essentially eliminate the forum defendant rule, (4) snap removals preempt § 1441(a)(2)’s provision that allows removal only of “pending” cases, as cases are not “pending” prior to service according to some courts’ interpretations, and (5) removal statutes are to be strictly construed, and any doubt is to be resolved in favor of remand).
[12] 28 U.S.C. § 1446(a) (notice of removal must contain a “a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders served upon such defendant or defendants in such action”).
[13] 28 U.S.C. § 1446(d).
[14] See, i.e. Davis v. Estate of Harrison, 214 F. Supp.2d 695, 699 (S.D. Miss. 2002) (state court continues to have jurisdiction until that court receives actual or constructive notice of the removal).
[15] Notably, the Texas Brine defendants apparently employed this strategy, filing a Rule 12(c) Motion to Dismiss upon removal; the plaintiff’s claims were dismissed with prejudice by the Louisiana district court.
