Removal
Subject-Matter Jurisdiction and Removal
Often, mass torts will proceed piecemeal across multiple jurisdictions at both the state and federal level. Counsel may determine that it is in their clients’ best interests to stay out of federal multidistrict proceedings entirely, or to pursue a strategy of parallel litigation in both state and federal courts. Naturally, either strategy is dependent on the ability to stay out of federal court. Generally, a defendant may remove a state suit over which a federal district court would have original jurisdiction.[1]
Diversity Jurisdiction
Most often, the subject-matter jurisdiction hook a defendant will use to remove a state court action is diversity. Federal courts have original subject-matter jurisdiction over civil suits with an amount in controversy in excess of $75,000 that is between citizens of different states, as well as citizens of a state and citizens (or subjects) of a foreign state, although not if the latter is a lawful permanent U.S. residence domiciled in the same state of the other party to the dispute.[2]
What happens when there are multiple plaintiffs or multiple defendants that are citizens of multiple state, and at least one plaintiff and one defendant is a citizen of the same state? Must the parties be only minimally diverse—with at least one plaintiff being a citizen of a different state than at least one defendant—or must the parties be completely diverse, meaning none of the plaintiffs is a citizen of the same state as any of the defendants?[3]
Snap Removal
Federal statutes have authorized removal of state actions to federal courts since the Federal Judiciary Act of 1789.[4] The Act, which allowed removal of actions brought by an in-state plaintiff in state court presumably for the purpose of obtaining a home-court advantage. The Act attempted to level the playing field by allowing removal to federal court, which were seen as less susceptible to local pressures and bias in favor of the local party.[4] As we will see in this part, however, this presumption has been turned on its head. In some circumstances, an in-state defendant can remove an action brought in state court by an out-of-state plaintiff, which is precisely the converse of the situation envisioned by the original removal statute.
The federal removal statute, 28 U.S.C. 1441, prohibits removal based on diversity of citizenship, even if there is otherwise complete diversity, “if any of the parties in interest properly joined and served as defendants is a citizen of the State” where the suit was filed.[5] This provision is known as the forum-state defendant rule. Recently, however, defendants been able to convince some courts to focus on the “properly joined and served” portion of the statute to allow removal of suits that otherwise would not be removable because one of the defendants is a citizen of the forum state, a process that has come to be known as “snap removal.”
Suppose a Texas plaintiff sues Company A and Company B in California. Company A is a citizen of California, and Company B is a citizen of Illinois. Company B, which monitors docket filings, sees that it has been sued in California state court, and before even being served with process, it files its notice of removal. At the remand hearing in federal court, Company B’s argument is that the plain language of the forum-defendant rule requires that the defendant that is a citizen of the forum state be “properly joined and served.” Until the forum-state defendant is actually served with process, the argument goes, the non-forum-state defendant is free to remove the case.
Defendants have taken the charade even further, though. Even forum-state defendants themselves will snap remove suits before they are served, since the plain language requires them to be served before the forum-state defendant rule prohibits removal.
Encompass Insurance Co. v. Stone Mansion Restaurant Inc., 902 F.3d 147 (3d Cir. 2018)
In this suit, an out-of-state insurer standing in the shoes of its insured brought a dram shop action against an in-state defendant. Encompass’s counsel had emailed with counsel for the restaurant and reached an agreement that the latter would accept service of process by email rather than requiring formal service. After Encompass sued and its counsel emailed process to the restaurant’s counsel, that attorney responded by email: “I fully acknowledge having agreed prior to your filing suit that we will accept service. I maintain that agreement, but because it may affect our client’s procedural ability to remove the case, I have to hold off doing so until after the Notice of Removal is filed.”[6]
The court listed several purposes of the forum-state defendant rule, including preventing favoritism for in-state parties, conversely, discrimination against out-of-state parties.[7] However, the court observed that:
[t]he 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.”[8]
Rather than adopting the purposivist approach urged by the plaintiff, however, the court instead took an a-contextual, textualist approach, explaining that Congress had “addresse[d] a specific problem—fraudulent joinder by a plaintiff—with a bright-line rule.”[9] Additionally, in an act that proves the elasticity of even seemingly transparent concepts, the court held that the circumstances of allowing an in-state defendant, who had agreed to accept service electronically rather than requiring formal service of process and had in fact been sent that service, to snap remove did not rise to the level of “absurd or bizarre,” even while acknowledging in the same breath that “this result may be peculiar in that it allows Stone Mansion to use pre-service machinations to remove a case that it otherwise could not.”[10]
Attorneys tell stories of having process servers parked at companies’ headquarters with portable printers, ready to serve defendants the moment the clerk’s office file stamps the initial pleading. One issue, however, is that many clerk’s offices do not issue citations contemporaneous with acceptance of the initial filing, so there is only so much savvy plaintiffs can do.
[1] 28 U.S.C. § 1332(a).
[2] 28 U.S.C. § 1441(a).
[3] Strawbridge v. Curtiss, 7 U.S. 267, 267 (1806). The U.S. Supreme Court ruled in 1967 that the U.S. Constitution requires only minimal diversity, whereas 28 U.S.C. § 1332 requires complete diversity. See State Farm Fire & Casualty Co. v. Tashire, 386 U.S. 523, 531 (1967).
[4] 1 Stat. 73 (Sept. 24, 1789) (“[I]f a suit be commenced in any state court . . . by a citizen of the state in which the suit is brought against a citizen of another state, and the matter in dispute exceeds the aforesaid sum or value of five hundred dollars . . . and the defendant shall . . . file a petition for removal of the cause for trial into the next circuit court, to be held in the district where the suit is pending . . . the cause shall proceed in the same manner as if it had been brought there by original process.”) (Sess. I, Ch. 20, Sec. 12).
[5] 28 U.S.C. § 1441(b)(2).
[6] Encompass Insurance Co., 902 F.3d 147, 150 (3d Cir. 2018).
[7] Encompass Insurance Co. v. Stone Mansion Restaurant Inc., 902 F.3d 147, 153 (3d Cir. 2018) (citing Dresser Indus., Inc. v. Underwriters at Lloyd’s of London, 106 F.3d 494, 499 (3d Cir. 1997), and McSparran v. Weist, 402 F.2d 867, 876 (3d Cir. 1968)).
[8] Encompass Insurance Co., 902 F.3d at 153 (citing Arthur Hellman, et al., Neutralizing the Strategem of “Snap Removal”: A Proposed Amendment to the Judicial Code, 9 Fed. Cts. L. Rev. 103, 108 (2016)).
[9] Id.
[10] Id. at 150, 152–53. One of the foundational principles of statutory interpretation is that texts will be interpreted “‘to avoid absurd or bizarre results.’” Id. at 152 (quoting In re Kaiser Aluminum Corp., 456 F.3d 328, 338 (3d Cir. 2006)).