Parties, Start Your Engines: Snap Removals And Defeating Incomplete Diversity

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 In what is known as a “snap” removal, a non-resident defendant may be able to remove a state court case to federal court based on diversity jurisdiction, despite resident defendant(s) being named in the suit. To effect a snap removal, the non-resident defendant must file removal papers before the plaintiff can effect service on any resident or forum defendants. Although this procedure is not available to defendants in every state, a recent Fifth Circuit opinion makes clear that snap removals are fair game in Louisiana, Texas, and Mississippi. See Texas Brine Co. v. American Arbitration Ass’n, 955 F.3d 482 (5th Cir. 2020).

Federal courts exercise diversity jurisdiction over civil claims that “exceed[] the sum or value of $75,000” that are “between citizens of different states.” 28 U.S.C. § 1332(a)(1). Diversity jurisdiction provides a means by which a non-resident and/or out-of-state defendant may avoid litigating in state court. Generally, a defendant may remove a case filed in state court to federal court under 28 U.S.C. § 1441(b)(1) within 30 days after being served with initial pleadings. According to 28 U.S.C. § 1441(b), “a civil action otherwise removable solely 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.” Therefore, because the statute specifically prohibits the action being removed if a served defendant is a citizen of the state in which an action is brought, courts have held that removal is proper if it occurs prior to service on a resident defendant, and the value of the claim exceeds $75,000.

In a recent appellate court decision, the Fifth Circuit issued an opinion agreeing with the Second, Third, and Sixth Circuits approving snap removal.  In Texas Brine Co. v. American Arbitration Ass’n, 955 F.3d 482 (5th Cir. 2020), a Louisiana plaintiff filed suit against two Louisiana defendants and a New York defendant in Louisiana state court. The New York defendant filed a snap removal from state court to fed­eral court prior to service on the Louisiana defendants. The Fifth Circuit held that the existence of a resident defendant did not present a procedural barrier to removal because the only “properly joined and served” defendant at the time of removal was the New York defendant.

District courts in the Fourth, Seventh, Eighth, Ninth, and Eleventh Circuits remain divided on the issue of snap removal. However, for non-resident defendants sued in state courts in the Second, Third, Fifth, and Sixth Circuits, racing to the federal courthouse to remove an action before plaintiff can serve resident defendants is worth the effort of the hustle.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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