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Resident Defendant Exception for Removal: A Clever Move or Legal Gamesmanship?

By Robert E. Sumner, IV, and Jennifer Braccia – April 11, 2016

An obscure wrinkle found in 28 U.S.C. § 1441(b) provides the opportunity for resident defendants to remove to federal court before being served with the complaint. Litigators are familiar with the general rule that even where diversity of citizenship exists, a defendant cannot remove a case to federal court if one of the parties “properly joined and served” as a defendant is a citizen of the state in which the case was filed. 28 U.S.C. § 1441(b). This limitation on removal is generally referred to as the resident defendant rule or forum defendant rule. The theory behind the rule is that “[r]emoval based on diversity is intended to protect out-of-state defendants from possible prejudices in state court.” Lively v. Wild Oats Mkts., Inc., 456 F.3d 933, 940 (9th Cir. 2006). “The need for such protection is absent . . . in cases where the defendant is a citizen of the state in which the case is brought.” Id.

Discussions over the resident defendant rule often focus on the phrase “properly joined and served.” Many argue that this phrase provides resident defendants the opportunity to remove a case to federal court if the resident defendant has not yet been “properly joined and served.” This issue has been considered by district courts across the country, and while most agree that the plain meaning of section 1441(b)(2) permits pre-service removal by a resident defendant, the results are guided by two distinct approaches. The first approach strictly applies the plain meaning of the statute and permits a resident defendant to remove a case to federal court if that defendant has not yet been properly joined and served. The second approach is guided by the premise that a literal application of the plain meaning is contrary to congressional intent and creates “absurd results.” Phillips Constr., LLC v. Daniels Law Firm, PLLC, 93 F. Supp. 3d 544, 548 (S.D. W.Va. 2015) (subscription required).

Judge Thomas E. Johnston, of the Southern District of West Virginia, engaged in a lengthy discussion of the meaning of the phrase “properly joined and served.” Judge Johnston surveyed existing law and examined the two approaches courts have used to resolve the issue. Id. at 549–52. Under the first approach, also referred to as the plain meaning approach, courts strictly construe the plain meaning of the phrase “properly joined and served” to allow an unserved resident defendant to remove a case to federal court based on diversity of citizenship. See, e.g., Munchel v. Wyeth LLC, Civ. A. No. 12-906, 2012 U.S. Dist. LEXIS 128971, at *4 (D. Del. Sept. 11, 2012) (“nothing in the statute limits the opportunity to remove only to non-forum defendants”); Robertson v. Iuliano, Civ. A. No. 10-1319, 2011 U.S. Dist. LEXIS 11123, at *9 (D. Md. Feb. 4, 2011) (“Section 1441(b) does not bar removal because the [resident] defendants . . . were not properly joined and served at the time of removal.”); Terry v. J.D. Streett & Co., No. 4:09CV01471, 2010 U.S. Dist. LEXIS 100251, at *5–6 (E.D. Mo. Sept. 23, 2010) (“[t]he text of § 1441(b), however is clear, and this Court must apply the statute as it is written”); Thomson v. Novartis Pharm. Corp., Civ. No. 06-6280, 2007 U.S. Dist. LEXIS 37990, at *4 (D.N.J. May 22, 2007) (concluding that the statutory language was unambiguous and that Congress clearly intended to require service of the complaint for the resident defendant rule to apply).

Courts advancing the plain meaning approach generally agree that this approach could allow for gamesmanship on the part of the defendants, but these courts nevertheless hold that the plain meaning approach prevails. See, e.g., Harvey v. Shelter Ins. Co., Civ. A. No. 13-392, 2013 U.S. Dist. LEXIS 60840, at *7 (E.D. La. Apr. 24, 2013) (“[T]he plain language of the statute must prevail over the plaintiff’s policy arguments to the contrary. The statutory forum defendant rule simply does not support plaintiff’s position.”); Poznanovich v. AstraZeneca Pharm. LP, Civ. A. No. 11-4001, 2011 U.S. Dist. LEXIS 142967, at *10 (D.N.J. Dec. 12, 2011) (“courts following the plain meaning approach ‘acknowledge in some way the colorable policy arguments that it is unjust that a properly joined defendant could monitor state court dockets and remove cases prior to being served, and that it makes little sense to provide a federal forum to an in-state defendant upon removal of a diversity case, [but] these decisions found such arguments to be insufficient to overcome the requirement that a court give meaning to the plain language of the statute’”); City of Ann Arbor Emps. Ret. Sys. v. Gecht, No. C-06-7453, 2007 U.S. Dist. LEXIS 21928, at *24, *28 (N.D. Cal. Mar. 9, 2007) (holding that the court was “constrained by the plain language of § 1441(b)” but acknowledging that plaintiff’s argument that the resident defendant engaged in gamesmanship “is not without merit—indeed, has a great deal of appeal”).

Under the second approach to analyzing these cases, courts acknowledge the plain meaning of the statute; however, these courts look past the plain language in order to effectuate presumed congressional intent. See, e.g., Phillips Constr., 93 F. Supp. 3d at 556 (holding that “in cases only involving resident defendants, the forum defendant rule bars resident defendants from removing an action pursuant to diversity jurisdiction before effectuation of service”). Courts following the congressional intent approach warn that “blindly applying” the rule would improperly allow defendants to “effectively always prevent imposition of the [resident defendant rule] by monitoring state dockets and removing an action prior to service.” Standing v. Watson Pharm., Inc., No. CV09-0527, 2009 U.S. Dist. LEXIS 30829, at *4 (C.D. Ca. Mar. 26, 2009). According to Judge Johnston, the concern that defendants will monitor court dockets to remove cases before service is “far from academic.” Phillips Constr., LLC, 93 F. Supp. 3d at 554. Indeed, in Sullivan v. Novartis Pharmaceuticals Corp., 575 F. Supp. 2d 640, 645 (D.N.J. 2008), the court remarked that “Congress could not possibly have anticipated the tremendous loophole that would one day manifest from technology enabling forum defendants to circumvent the forum defendant rule by electronically monitoring state court dockets.” See also Perez v. Forest Labs., Inc., 902 F. Supp. 2d 1238, 1243 (E.D. Mo. 2012).

The courts also point to the inequities involving the procedure and timing of service of process in different jurisdictions. In the case of In re Testosterone Replacement Therapy Products Liability Litigation, 67 F. Supp. 3d 952, 961–62 (N.D. Ill. 2014), the court expressed concern regarding the “technological disparity between the means of access to public records and the procedure for service of summons. . . .” A district court in Delaware cautioned that strictly construing the statute “would promote inequitable application of the removal statute across the country due to the varying rules on in-state service, and would wreak havoc in many jurisdictions where immediate service is improper. . . .” Laugelle v. Bell Helicopter Textron Inc., Civ. A. No. 10-1080, 2012 U.S. Dist. LEXIS 12907, at *11–12 (D. Del. Feb 2, 2012). A Northern District of Ohio court pointed out that “rigidly applying the plain meaning of the forum defendant rule’s text would be especially inequitable in states such as New Jersey which do not even allow for perfecting service until the clerk’s office has processed the complaint and issued a TAN number (or its equivalent in states other than New Jersey).” Ethington v. Gen. Elec. Co., 575 F. Supp. 2d 855, 863 (N.D. Ohio 2008).

In Deutsche Bank National Trust Co. v. Hagen, Civ. No. 15-00376, 2015 U.S. Dist. LEXIS 159756, at *12 (D. Haw. Nov. 27, 2015), the district court acknowledged that “federal district courts are divided as to whether the forum defendant rule bars pre-service removal based on diversity jurisdiction,” but the court agreed with “the growing trend among district courts” that although “the plain meaning of 1441(b)(2) permits pre-service removal by a resident defendant, . . . a literal application of this plain meaning is contrary to congressional intent and creates absurd results.” Id. The district court ultimately held that “whether or not Defendant was served with the Complaint, the forum defendant rule precludes removal based solely on diversity jurisdiction.” Id.

Likewise, in Reimold v. Gokaslan, 110 F. Supp. 3d 641 (D. Md. 2015), the court held that where every defendant is a citizen of the forum state, “application of the ‘properly joined and served’ exception to the forum defendant rule would serve neither the general purpose of diversity jurisdiction nor the specific purpose of that exception.” Id. at 643. See Mass. Mutual Life Ins. Co. v. Mozilo, No. 2:12-cv-03613, 2012 U.S. Dist. LEXIS 91478, at *4 (C.D. Cal. June 28, 2012) (“Such a reading would eviscerate the purpose of the forum defendant rule.”); Oxendine v. Merck & Co., 236 F. Supp. 2d 517, 526 (D. Md. 2002) (concluding that “removability can not [sic] rationally turn on the timing or sequence of service of process.”).

Most recently in Marsh v. Monster Beverage Corp., No. ED CV 15-2205, 2016 U.S. Dist. LEXIS 771 (C.D. Cal. Jan. 4, 2016), resident defendants removed an action to federal court prior to being served. The court remanded the matter, concluding that the resident defendant rule bars defendants from removing the action. The court explained that the purpose of the resident defendant rule is to “prevent procedural gamesmanship by plaintiffs through improper joinder”; therefore, the rule “should not allow for a similar gamesmanship by defendants.” Id. at *6.

There is small minority of cases that require at least one defendant to be served before any defendant may remove to federal court. See, e.g., Howard v. Genentech, Inc., Civ. A. No. 12-11153, 2013 U.S. Dist. LEXIS 185810, at *10 (D. Mass. Feb. 21, 2013) (“[C]onclud[ing] that the plain language of section 1441(b) requires at least one defendant to have been served before removal can be effected.”); Hawkins v. Cottrell, Inc., 785 F. Supp. 2d 1361 (N.D. Ga. 2011) (holding statute conditions removal on some defendants having been served). Courts applying this approach hold that a resident defendant in a single defendant case cannot remove a case to federal court prior to being served. See, e.g., FTS Int’l Servs., LLC v. Caldwell-Baker Co., No. 13-2039, 2013 U.S. Dist. LEXIS 43236 (D. Kan. Mar. 27, 2013); R & N Check Corp. v. Bottomline Techs., Inc., No. 13-cv-118, 2013 U.S. Dist. LEXIS 162980 (D.N.H. Nov. 15, 2013).

If you represent a resident defendant who has been sued in state court but has not yet been served, removal to federal court is an option worthy of consideration when your client prefers a federal venue. Whether removal survives a motion to remand depends on your jurisdiction and the predispositions of the judge to whom your case is assigned. And there is also the chance that your adversary decides not to challenge removal with a motion to remand. Whether you are successful in the removal or if the case is remanded, you just might win the admiration of the judge and opposing counsel for a well-played move in the procedural chess match created by 28 U.S.C. § 1441(b).

Keywords: litigation, trial practice, removal, resident defendant exception, forum defendant rule

Robert E. Sumner, IV, is a member at Moore & Van Allen in Charleston, South Carolina. Jennifer Braccia is an attorney in the firm’s Charlotte, North Carolina, office.

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