Federal District Courts: Deeply Divided
The question of whether an unserved forum defendant may remove to federal court has been the subject of numerous federal district court decisions across the country and has resulted in deep divisions both between and within individual districts.
Courts upholding removal have relied primarily on the removal statute’s plain language. They have reasoned that the statute is clear and unambiguous: removal is proper if the requirements for diversity jurisdiction are satisfied except when a forum defendant has been properly joined and served. Thus, if service has not yet occurred, the statute does not bar removal. These courts have reasoned that permitting removal by unserved forum defendants gives effect to every word in the statute, including the phrase “and served.” These courts adhere to the principle that when a statute is unambiguous, courts should honor its express language unless literal interpretation would thwart the purpose of the overall statutory scheme or otherwise lead to absurd results. These courts do not view a race to remove before service as rising to the level of absurdity, and they believe that concerns about gamesmanship are for Congress, not the courts, to fix.
Courts holding that unserved forum defendants may not remove to federal court see the situation quite differently. These courts have held that the “properly joined and served” requirement was intended to prevent fraudulent joinder of defendants to defeat complete diversity, not to create an exception to the forum defendant rule. Further, they conclude that the literal interpretation of the statute creates the absurd result of encouraging a race to the courthouse to remove before service—and that this age of electronic filing and court docket monitoring only encourages such forum shopping. These courts also are persuaded that permitting removal by a forum defendant is inconsistent with the purpose of the removal statute and diversity jurisdiction, namely, protecting out-of-state defendants from bias. Finally, these courts reason that states have inconsistent service requirements, so allowing removal before service creates inconsistencies in the application of a statute that is intended to be uniform in application.
Three Circuit Courts: Literal Interpretation
While Congress enacted the forum defendant rule more than 70 years ago, no federal appellate court had definitively weighed in on this split until recently. (In 2001, the Sixth Circuit appeared to adopt the view that an unserved forum defendant could remove; however, it did so with little reasoning, and its statement arguably was dicta. McCall v. Scott, 239 F.3d 808, 813 n.2 (6th Cir. 2001).) Since 2018, though, three federal circuit courts have adopted the plain-language interpretation of the removal statute, and a fourth may soon follow suit.
In Encompass Insurance Co. v. Stone Mansion Restaurant Inc. and Gibbons v. Bristol-Myers Squibb Co., the Third and Second Circuits affirmed decisions denying remand following removal by unserved forum defendants. Stone Mansion, 902 F.3d 147 (3d Cir. 2018); Gibbons, 919 F.3d 699 (2d Cir. 2019). Both courts held that the forum defendant rule is unambiguous and prohibits removal only in situations in which the home-state defendant has been served in accordance with state law. They explained that to the extent that the “properly joined and served” language was intended to prevent fraudulent joinder, Congress did so with an easily administered rule that by its terms requires service. Furthermore, the courts both rejected the argument that applying the literal interpretation of the removal statute created “absurd” results. The Second Circuit also rejected concerns about the nonuniform application of the statute due to differences in state service laws, noting that state-by-state variation is not unusual in federal courts. As the Third Circuit noted, if the statute needed revision, “it is Congress—not the Judiciary—that must act.” Stone Mansion, 902 F.3d at 154.
The Fifth Circuit recently joined the Second and Third Circuits in Texas Brine Co. v. American Arbitration Ass’n. 955 F.3d 482 (5th Cir. Apr. 7, 2020). In that case, there were three defendants: two forum defendants and one citizen of another state. As an added twist, unlike the Second and Third Circuit cases, in Texas Brine the nonforum defendant (not the forum defendants) removed the case to federal court two days after the case was filed, during a period when, under state law, service could be accomplished only by the sheriff and before the forum defendants were served. The Fifth Circuit approved this “snap removal”—defined by the court as “removal prior to service on all defendants”— considering “both plain meaning and absurdity.” Id. at 485–86. Specifically, the court concluded that “[t]he forum-defendant rule’s procedural barrier to removal was irrelevant because the only defendant ‘properly joined and served,’ . . . , was not a citizen of Louisiana, the forum state.” Id. at 486. The court also rejected the plaintiff’s absurdity argument because “snap removal is at least rational.” Id. The court further found the rule of strictly construing the removal statute inapplicable because “the text is unambiguous.” Id. at 487.
The Tenth Circuit also currently is considering the forum defendant rule in Woods v. Ross Dress for Less. In that case, the district court denied a motion to remand where the nonforum defendant (who had been served) removed the case to federal court before the forum defendant could be served. The defendant there argues that the term “snap removal” is entirely inapplicable to the case because it had been served when it removed and, further, that removal was appropriate because the forum defendant was not—and never has been—“properly joined and served.” The Tenth Circuit heard argument in early May 2020, so a decision is expected in the coming months, though an appellate jurisdiction challenge may stand in the way of a ruling on removal.
Congressional Consideration of Snap Removal
In the wake of recent court decisions upholding the practice of snap removal, Congress now is paying attention.
On November 14, 2019, the House Subcommittee on Courts, Intellectual Property, and the Internet conducted a hearing on snap removal, during which House Judiciary Chairman Jerry Nadler decried the practice as “gamesmanship” that violates “the spirit and the intent of the federal removal statute,” “tilt[s] the legal playing field in favor of large corporations,” and drains judicial resources. Examining the Use of ‘Snap’ Removals to Circumvent the Forum Defendant Rule: Hearing Before the Subcomm. on Courts, Intellectual Property, and the Internet, 116th Cong. (statement of Rep. Jerrold Nadler).
Then, in February 2020, Representative Nadler cosponsored legislation to amend the removal statute to prevent snap removal. The proposed legislation would require federal courts to grant motions to remand in diversity cases that were removed before service on a forum defendant provided that the home-state defendant was served within the shorter of (a) the time for service under state law or (b) 30 days from removal. See H.R. 5801, 116th Cong. (2d Sess. 2020). The bill remains in subcommittee, so whether Congress will overrule the circuit courts by amending the removal statute is yet to be seen.
There is better support than ever for defendants considering snap removal—at least for now. Whether representing a plaintiff or a defendant, attorneys must consider the possibility of removal from state court before service on the forum defendant.
To preserve an element of surprise, plaintiffs who wish to protect their chosen forum and remain in state court may want to consider guarding their intention to file suit rather than threatening litigation through presuit settlement demands. Additionally, plaintiffs should plan a service strategy before filing and effect service as quickly as state law permits. If a home-state defendant nonetheless is able to remove before service, there is ample authority in most districts—unless the case was filed within the Second, Third, or Fifth Circuit—to marshal in support of a motion to remand.
From a defendant perspective, individuals or businesses on notice that a lawsuit is imminent likewise should consider whether, assuming that diversity requirements are met, a federal forum is preferable. If so, they should monitor dockets and have counsel ready to act when a complaint is filed.
While some federal judges have found such snap removals distasteful, the recent appellate authority provides new affirmation of the practice’s legitimacy. At least until a competing appellate decision arrives—or until Congress amends the removal statute—the literal interpretation of the forum defendant rule is likely to emerge as the majority view in district courts, and U.S. Supreme Court review is unlikely without a circuit split.
Allison W. Reimann is a shareholder and Deborah Machalow is an associate at Godfrey & Kahn, S.C., in Madison, Wisconsin.
This article is updated from an article that originally appeared in Wisconsin Lawyer, the official publication of the State Bar of Wisconsin: Allison W. Reimann, “Removal to Federal Court by Home-State Defendants,” 93 Wis. Law. 32 (Jan. 2020).