The Rules on Removal in Multiple-Party Cases: A RepriseBy Marie E. Chafe and Peter M. Durney – August 16, 2012
There has been a dramatic shift in the landscape since we last explored the conflicting rules governing removal in diversity cases across the federal-court circuits. With the passage of the Federal Courts Jurisdiction and Venue Clarification Act of 2011 [PDF], H.R. 394, P.L. 112–63 on December 7, 2012, Congress made a number of significant changes to federal jurisdictional statutes that govern diversity jurisdiction, venue, and removal. It should be noted that practitioners currently involved in state-court actions filed before the effective date of January 6, 2012, will not be able to take advantage of the new statute. See Richardson v. Airserve, 2012 WL 1144021, *2 n.2 (D.Idaho, April 4, 2012).
Prior to the 2011 Act, the process of removal in multiple-defendant cases had been the subject of a split of opinions in the courts of appeals and among federal district courts, even within the same district, as we discussed at some length in “Understanding Time Limits on Removing Multiparty Cases to Federal Court,” Mass Torts, Vol. 7, No. 3, Summer 2009.
The 2011 Act
The 2011 act explicitly states that each defendant will have 30 days from his or her own date of service or receipt of initial pleading to file a notice of removal. This is in contrast to the prior requirement to file “within thirty days after receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action is based,” (emphasis added). The 2011 act also states that an earlier-served defendant may consent to a later-served defendant’s notice of removal, even if it took no action to initiate or consent to removal during its own 30-day window. See 28 U.S.C. § 1446(b)(2)(B)-(C). The 2011 act thereby effectively codified what is known as the later-served-defendant rule and unified the varied approaches developed by the federal courts of appeals when ruling on removal in multiple-defendant cases.
The Differing Approaches
Back in 2009, we outlined the differing approaches the various courts of appeals had taken in interpreting parties’ rights to removal. Prior to the 2011 act, the statute provided that a petition for removal must be filed “within thirty days after receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action is based.” See 28 U.S.C. § 1446(b) (1996). The wording of the statute was considered confusing because it did not contemplate removal processes in cases with multiple defendants, or, at the very least, its ambiguity gave rise to differing judicial interpretations. As a result, various courts of appeals had adopted three different basic approaches: The first-served-defendant rule, the middle-ground rule (AKA the McKinney intermediate rule), and the later-served-defendant rule.
The Fifth Circuit Court of Appeals in Brown v. Demco, 792 F.2d 478, 482 (5th Cir. 1986), applied a pure first-served-defendant rule. See also Getty Oil Corp. v. Ins. Co. of N. Am., 841 F.2d 1254, 1262–63 (5th Cir. 1988). This approach required that a proper notice of removal must be filed within 30 days of service upon the first-served defendant. The 30-day removal period for all defendants would start to run as soon as the first defendant was served. Moreover, any later-served defendants would be precluded from filing a notice of removal outside of the initial 30-day removal window. Essentially, any defendant served more than 30 days after the first-served defendant would be unable to file a notice of removal. That later-served defendant was bound by a first-served defendant’s tactical choice, inaction, or oversight.
The Fourth Circuit developed a variant of the first-served-defendant rule known as the middle-ground or McKinney intermediate rule. See McKinney v. Board of Trustees of Maryland Community College, 955 F.2d 924, 928 (4th Cir. 1992). Like the first-served defendant rule, a valid petition for removal had to be filed by the first-served defendant within 30 days. Each later-served defendant, however, was granted 30 days from its own date of service to join in a previously filed petition for removal. A notice of removal that was not filed within the first 30 days from when service was made on the first-served defendant would be improper and could not proceed.
Finally, there was the later-served-defendant rule employed by a majority of the courts of appeals. This approach allowed each later-served defendant its own 30-day period from the date it was served to remove a case with the consent of the other defendants. This rule allowed the earlier-served defendants, who may not have filed a timely notice of removal, to join in a later-served defendant’s removal petition. As of our review of the circuits in 2009, the later-served-defendant rule was employed by the Sixth, Eighth, and Eleventh Circuits. See Brierly v. Alusuisse Flexible Packaging, Inc., 184 F.3d 527, 533 (6th Cir. 1999); Marano Enterprises v. Z-Teca Restaurants L.P., 254 F.3d 753, 756–57 (8th Cir. 2001), and Bailey v. Janssen Pharmaceutical, Inc., 536 F.3d 1202, 1209 (11th Cir. 2008).
New Decisions in 2011: The Third, Fourth, and Ninth Circuits
Since our article in 2009, the later-served-defendant rule gained further traction with the Third and Ninth Circuit Courts of Appeals also adopting the rule. The Ninth Circuit Court of Appeals adopted the later-served-defendant rule in January 2011 in Destfino v. Reiswig, 630 F.3d 952, 956 (9th Cir. 2011), finding it to be a “wiser and more equitable approach.” Later in the year, the Third Circuit Court of Appeals in Delalla v. Hanover Ins., 660 F.3d 180, 185 (3rd Cir. 2011) followed suit, “agree[ing] with the Sixth, Eighth, Ninth and Eleventh Circuits that the later-served rule represents the best reading of § 1446(b) ‘for reasons grounded in statutory construction, equity and common sense.’”
However, as recently as January 2011, the Fourth Circuit reaffirmed its commitment to the “McKinney Intermediate Rule” in Barbour v. Intern. Union, 640 F.3d 599, 610 (4th Cir. 2011), “[as] the most logical and faithful interpretation of the operation of § 1446(b).”
With five courts of appeals firmly aligned with the later-served-defendant rule and one circuit employing a pure first-served rule, the 2011 act moved to adopt a standard practice with the acceptance of the later-served-defendant rule.
Why the Change?
The committee report on the 2011 act notes that while the old removal statute gave “the defendant” a 30-day period to remove an action to federal court, “it [did] not address situations with multiple defendants, particularly where they [were] served over an extended period of time during and after expiration of the first-served defendant’s 30-day period for removal.” See Committee Report, 112th Congress (2011–2012), House Report 112-010, Federal Courts Jurisdiction and Venue Clarification Act of 2011, at Sec. 103, Removal and Remand Procedures, Proposed Amendments to Section 1446 and Addition of New Section 1454, at Removal in multiple-defendant cases.
The 2011 act was specifically designed “to eliminate the confusion surrounding the timing of removal when defendants are served at different times.” Id. Confusion aside, passage of the 2011 act was also prompted by equitable considerations, including the perceived unfairness to later-served defendants:
Fairness to later-served defendants, whether they are brought in by the initial complaint or an amended complaint, necessitates that they be given their own opportunity to remove, even if the earlier-served defendants chose not to remove initially.
Id. The 2011 act therefore endorsed the equitable concerns of the courts of appeals that rejected the first-served-defendant approach. Indeed, even district courts in the Fifth Circuit, while applying the first-served rule, nonetheless noted its harsh results. See John M. Floyd & Associates, Inc. v. Fiserv Solutions, Inc., 2011 WL 7169216 (E.D.Tex. Nov. 11, 2011), quoting Brown, 792 F.2d at 482 (“the first served rule can be harsh” even though it is consistent “with the axiom that the removal statutes are to be strictly construed against removal”).
What the Change Means
The 2011 act may be seen, generally, as friendly to defendants. No longer will a later-served defendant be bound by the choices or oversights of an earlier-served defendant that failed to file a timely notice of removal. Likewise, an earlier-served defendant that did not remove a case within its 30-day window, either as a tactical decision or by mistake, has the ability to join in or consent to a later-served defendant’s removal petition.
Prior to the 2011 act, plaintiffs in jurisdictions applying the first-served-defendant rule, such as the Fifth Circuit, could deliberately stagger service to obstruct removal. Under such a scenario, a plaintiff could serve only one specially selected defendant and then, after a 30-day period lapsed, commence service against other defendants. The 2011 act prevents such intentional inhibition of removal and encourages plaintiffs to serve all known defendants simultaneously. Now, the opposite tactics are true. The recently enacted rule encourages a plaintiff to serve all known defendants at the same time to keep the removal window as short as possible. As the Judiciary Committee’s report notes, the 2011 act “does not allow an indefinite period for removal; plaintiffs could still choose to serve all defendants at the outset of the case, thereby requiring all defendants to act within the initial 30-day period.” See Committee Report at Sec. 103, Removal and Remand Procedures, Proposed Amendments to Section 1446 and Addition of New Section 1454, at Removal in multiple-defendant cases.
Defendants added later in the litigation with an amendment to the complaint that would continue to have the opportunity to remove the case, assuming there was no statutory bar to the amendment and that the earlier-served defendants joined in or consented to the notice of removal.
What the 2011 Act Does Not Change
While the 2011 act makes clear that an earlier-served defendant may consent to removal despite its own prior inaction, there is no provision that would enable the earlier-served defendant to initiate the removal process after its own 30-day window closed. As was true in all jurisdictions operating under the later-served-defendant rule, any defendant that fails to take action within its own 30-day window will still run the risk that later-served defendants may elect not to remove the case, therefore eliminating any opportunity for that earlier-served party to join a notice of removal. Just as the Ninth Circuit court stated in Destfino, the later-served-defendant rule never gave an already-served defendant “a new thirty day period to remove whenever a new defendant is served, as that could give a defendant more than the statutorily prescribed thirty days to remove.” See Destfino, 630 F.3d at 956. A defendant with a change of heart on whether to remove after its 30-day window expires continues to be at the mercy of the later-served defendants’ preference.
There is an argument to be made that the 2011 act did not change the applications of the forum defendant clause. This issue is particularly important for litigators representing the interests of out-of-state defendants in cases in which a local-resident defendant is named and requires a close examination of the pertinent language. Specifically, Section 1441(b) provides that 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.” See 28 U.S.C. § 1441(b) (emphasis added). Thus, removal is prohibited if a forum defendant has been joined and served in the action.
This procedural point becomes compelling when you consider the reverse scenario. Would the removal of an action be permitted where a named forum defendant has not yet been served? The ability of an out-of-state defendant to remove the case before service is affected on a local defendant was litigated in numerous cases prior to implementation of the 2011 act (See, e.g., In re Pharm. Indus. Average Wholesale Price Litig., 431 F.Supp. 2d 109, 120–21 (D.Mass. 2006); Frick v. Novartis Pharmaceuticals Corp., 2006 WL 454360 (D.N.J. Feb. 23, 2006); Ripley v. Eon Labs Inc., 622 F. Supp. 2d 137 (D.N.J. 2007); Fields v. Organon USA Inc., 2007 WL 4365312 (D.N.J. Dec. 12, 2007)), with some courts making a specific call for statutory reform of this subsection. See e.g., Carreon v. Alza Corp., 2009 WL 539392 (N.D. Cal. Feb. 9, 2010).
When Congress took the opportunity to rewrite the rules on removal in the 2011 act, what did it do about this pre-service removal issue? The answer is nothing. The same “joined and served as defendants” language found in the provisions of the preceding statute remains in the 2011 act. As one online commentator has noted, “the  Act, by re-enacting verbatim the ‘and served’ caveat to the forum defendant rule, has effectively ratified the validity of pre-service removal as a means of escaping hellhole jurisdictions where diversity is otherwise present.” See Jim Beck Removal News, Drug and Device Law (December 23, 2011).
Rule of Unanimity
The 2011 act also codifies the century-old rule of unanimity for cases involving multiple defendants adopted in Chicago, Rock Island & Pac. Ry. v. Martin, 178 U.S. 245 (1900), in the provisions found at Section 1446(b)(2)(A) as follows:
When a civil action is removed solely under section 1441(a), all defendants who have been properly joined and served must join in or consent to the removal of the action.
By these provisions, all defendants must still join in or consent to the notice of removal. The rule of unanimity only applies to cases with multiple defendants brought under Section 1446 and does not apply to removal under other sections, such as removal of class actions pursuant to Section 1453.
How to Consent to Removal
Practitioners must be wary of how they consent to another defendant’s notice of removal. District courts have remanded cases based on a defendant’s procedurally defective method of consenting to a co-defendant’s notice of removal. Accordingly, even if your client is not a party joining in the notice of removal, it is important to know what amounts to “consent to removal” in your jurisdiction. Courts have held that a defendant’s filing of a notice of removal that merely notes that a co-defendant consents to removal, without more, is insufficient to show consent. See Berrios v. Our Lady of Mercy Med. Ctr., 1999 WL 92269, at *3 (S.D.N.Y. Feb. 19, 1999) (“In this case, since it is uncontested that no one communicated to the court prior to the expiration of the thirty day period that [the defendant] had consented to the removal, removal is defective.”); see also DiChiara v. RDM, 2009 WL 1351640, at *4 (D.Mass. Jan. 13, 2009) (remanding action for failure of a defendant to “independently notify the court of its consent” where notice of removal merely “indicated that the [co-defendant] consented”); see also Owczarek v. The Austin Co., 2004 WL 625273, at *1 (W.D.N.Y. Feb. 11, 2004) (“[A] majority of courts have held that a representation by one defendant in the notice of removal that all defendants have consented [is] insufficient, requiring instead that each defendant independently notify the court of its consent.”) (internal quotations and citation omitted); see also Ricciardi v. Kone, Inc., 215 F.R.D. 455, 458 (E.D.N.Y. May 13, 2003) (recognizing that “[t]he rule of unanimity requires that all named defendants file with [the] court some form of unambiguous written evidence of consent to removal”); see also West v. 3M Co., 2006 WL 287973 (S.D.Tex. Feb. 6, 2006) (“[T]here must be some timely filed written document from each served Defendant, or its authorized representative, indicating that the Defendant has consented to removal.”); see also Edelman v. Page, 535 F.Supp.2d 290, 292 (D.Conn. Jan. 31, 2008) (“It is insufficient for a defendant who has not signed the removal petition to merely advise the removing defendant that it consents to removal and that the removing defendant may represent such consent to the Court on its behalf” (internal quotation marks and citation omitted)).
If your client elects not to join in the filing of a notice of removal, best practice dictates that you independently file a consent to removal with the court, which incorporates by reference the other parties’ removal papers.
The Exception: A One-Year Bar to Removal
One final change worth noting is the addition of limited exceptions to the one-year bar on removing diversity actions. These appear in Section 1146(c) of the 2011 act. The first exception allows a district court to permit removal if the plaintiff has acted in bad faith to prevent removal. As the provision states, a “case may not be removed under subsection (b)(3) on the basis of jurisdiction conferred by section 1332 more than 1 year after commencement of the action, unless the district court finds that the plaintiff has acted in bad faith in order to prevent a defendant from removing the action.” See 28 U.S.C. § 1446(c)(1). Second, a district court will permit removal after the one-year limitation if the plaintiff deliberately failed to disclose the true amount of damages claimed. See 28 U.S.C. § 1446(c)(3)(b). What constitutes bad faith in either of these circumstances is sure to be ripe for litigation.
The committee report goes further in its explanation that the one-year limitation on removal in diversity actions introduced by amendment in 1988, while intended to establish prompt resolution of removal issues, “led some plaintiffs to adopt removal defeating strategies designed to keep the case in state court until the 1-year deadline passed.” See Committee Report, at Sec. 103, Removal and Remand Procedures, Proposed Amendments to Section 1446 and Addition of New Section 1454, at Authorizing removal after one year. Such tactics persuaded some courts to interpret the one-year limit as merely procedural and thus subject to equitable tolling. Other courts, however, viewed the one-year limit as jurisdictional and thus strictly enforceable. That jurisdictional rift has been resolved, and the potential inequity remedied. The one-year limit now has some codified relief for a defendant victimized by procedural maneuverings.
The 2011 act should be welcomed by the defense bar. It clarifies removal in cases with multiple defendants, and its adoption of the more liberal later-served-defendant rule increases the odds that a defendant may be able to remove in cases with multiple defendants.
Keywords: litigation, mass torts, Federal Courts Jurisdiction and Venue Clarification Act, removal, defendants, service