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July 31, 2020 Articles

Before COVID-19 Discouraged Litigation Tourism, There Were Snap Removals

Now that the practice of snap removals has been cemented in three circuits and continues to gain acceptance, congressional amendment of the statute may be the only action to stem the tide.

By Monee Takla Hanna and Dustin B. Rawlin

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Let’s start with a simple civil procedure hypothetical: A Texas plaintiff sues a New Jersey corporation and a California corporation in a California state court claiming $80,000 in damages. The New Jersey defendant, knowing that it is the intended target of the lawsuit and that the California defendant is only tangentially relevant to the plaintiff’s claims, confirms that no defendant has been served and removes the action to federal court. Is the removal proper? What if the California defendant removes three days after the complaint is filed? Or one day? Or 10 minutes?

In the relentless battle over forum selection, plaintiffs have long employed a variety of tactics to remain in a forum that provides the most favorable procedural rules and substantive law, often a state court. One frequent tactic is the inclusion of a “forum defendant,” a citizen of the state in which the action was filed. Sometimes this defendant is never served, but more often the plaintiff serves the forum defendant and fails to pursue—or only nominally pursues—the action against that defendant. Following advances in technology, telling congressional silence on the forum defendant rule, and a recent surge in appellate authority, the practice of pre-service removal (also known as “snap removal” or “wrinkle removal”) has emerged as an increasingly viable counter-tactic. 

The Basics

In addition to federal question jurisdiction, federal courts have original jurisdiction over all civil actions in which the (1) amount in controversy exceeds $75,000 and (2) there is complete diversity of citizenship. 28 U.S.C. § 1332(a). In allowing for diversity jurisdiction, the framers sought to protect out-of-state defendants from local bias in favor of “home state” parties. Lumbermen’s Mut. Cas. Co. v. Elbert, 348 U.S. 48, 54 (1954) (Frankfurter, J., concurring). One limitation on the right to remove is the “forum defendant rule,” embodied in 28 U.S.C. § 1441(b)(2), providing that an action “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.” If the defendant is a citizen of the forum state, the rationale is that the need for protection from local bias is eliminated. 

“Properly Joined and Served

In 1948, Congress amended the removal statute and revised the forum defendant rule to add the “properly joined and served” language. Although the legislative history of the removal statute is silent on the purpose of the language, some courts surmised that the rationale for the additional language was “to bring into the statute the ‘fraudulent joinder’ doctrine and to restrict other tactics, like failing to serve a properly joined in-state defendant which might otherwise be used to prevent removals which Congress had authorized.” Champion Chrysler Plymouth v. Dimension Serv. Corp., 2017 WL 726943, at *2 (S.D. Ohio Feb. 24, 2017).

Thus, based on the plain language of the statute, the forum defendant rule applies only when the in-state defendant has been properly served. See, e.g., Allen v. Eli Lilly & Co., 2010 WL 3489366, at *2 (S.D. Cal. Sept. 2, 2010) (“[t]he forum defendant rule is inapplicable if the removal is effected by an out-of-state defendant before any local defendant is served”). Yet, some courts refused to apply the plain language of the statute. See, e.g., Fields v. Organon USA Inc., 2007 WL 4365312, at *4–5 (D.N.J. Dec. 12, 2007) (concluding that “[t]he result of blindly applying the plain ‘properly joined and served’ language of § 1441(b) is to eviscerate the purpose of the forum defendant rule”).

In 2011, Congress passed the Federal Courts Jurisdiction and Venue Clarification Act of 2011. Although Congress rewrote portions of the removal statute, it left intact the “properly joined and served” language. Defendants had, for better or worse, made it abundantly clear that they were relying on the language to practice pre-service removal. Nonetheless, by leaving the statutory language intact, Congress enabled the continued reliance on pre-service removal.

The Turning Tide

Yet, even with this tacit endorsement, the dearth of appellate authority construing “properly joined and served” led to conflicting decisions in district courts across the country. Indeed, courts within the same district were—and continue to be—divided on this topic. Compare Tourigny v. Symantec Corp., 110 F. Supp. 3d 961 (N.D. Cal. 2015) (granting remand), with Sherman v. Hayes & Boone, 2014 WL 4211118 (N.D. Cal. Aug. 22, 2014) (denying remand). The success of a snap removal argument largely depended on the judicial draw. Some courts still reasoned that a literal interpretation of the statute would circumvent Congress’s intent and cautioned that it would eviscerate the forum defendant rule and encourage defendants to engage in gamesmanship. See, e.g., Vallejo v. Amgen, Inc., 2013 WL 12147584, at *3 (C.D. Cal. Aug. 30, 2013) (holding snap removals “would effectively circumvent Congress’s entire statutory scheme and render § 1441(b)(2) superfluous. Such an application could not have been intended by Congress.”).

The Sixth Circuit briefly touched on the issue of pre-service removal—seemingly in favor—in a footnote in 2001. See McCall v. Scott, 239 F.3d 808, 813 n. 2 (6th Cir.2001) (“Where there is complete diversity of citizenship . . . , the inclusion of an unserved resident defendant in the action does not defeat removal under 28 U.S.C. § 1441(b).” (citations omitted)). But the lack of appellate precedent was unsurprising given the lack of reviewability on appeal for these remand decisions. See Quackenbush v. Allstate Ins. Co.517 U.S. 706, 711–12, (1996) (section 1447(d) bars appellate review of remand orders based on procedural defects and lack of subject matter jurisdiction).

But the drought ended in 2018 when the Third Circuit unequivocally endorsed snap removals in Encompass Insurance Co. v. Stone Mansion Restaurant, Inc., 902 F.3d 147 (3d Cir. 2018). For the first time, a circuit court upheld the denial of remand where the defendant removed the action prior to service. In fact, the forum defendant in Encompass had agreed to accept electronic service and then held off accepting service until after removing the case. The court found that though the “result may be peculiar in that it allows [the defendant] to use pre-service machinations to remove a case that it otherwise could not,” it “is not so outlandish as to constitute an absurd or bizarre result.” Id. at 153–54. Then in 2019, the Second Circuit joined the Third, confirming that the fact “that a home-state defendant may in limited circumstances remove actions filed in state court on the basis of diversity of citizenship [] is authorized by the text of Section 1441(b)(2) and is neither absurd nor fundamentally unfair.” Gibbons v. Bristol-Myers Squibb Co.919 F.3d 699, 707 (2d Cir. 2019). Then, for the third time in as many years, the Fifth Circuit joined the Second and Third Circuits in confirming that the plain meaning of the statute was unambiguous and must be applied. Tex. Brine Co., L.L.C. v. Am. Arbitration Ass’n, Inc., 955 F. 3d 482 (5th Cir. 2020).

The Contours of Snap Removal

“When the statute’s language is plain, the sole function of the courts—at least where the disposition required by the text is not absurd—is to enforce it according to its terms.” Lamie v. Unites States Tr., 540 U.S. 526, 534 (2004).

Plaintiffs have long argued—and some district courts have agreed—that a literal interpretation of section 1441(b)(2) produces absurd results. See, e.g., Sullivan v. Novartis Pharm. Corp., 575 F. Supp. 2d 640, 646 (D.N.J. 2008) (“Congress did not add the ‘properly joined and served’ language in order to reward defendants for conducting and winning a race, which serves no conceivable public policy goal, to file a notice of removal before the plaintiffs can serve process.”). As the Second Circuit held in Gibbons, however, “[a] statute is not ‘absurd’ merely because it produces results that a court or litigant finds anomalous or perhaps unwise.” Gibbons, 919 F.3d at 705. And as the Fifth Circuit in Texas Brine added, “[i]n statutory interpretation, an absurdity is not mere oddity. The absurdity bar is high, as it should be. The result must be preposterous, one that no reasonable person could intend. In our view of reasonableness, snap removal is at least rational.” Texas Brine, 955 F. 3d at 486 (internal quotation marks and citations omitted).

While the district courts of nine states are now bound by precedent and courts outside the Second, Third, and Fifth Circuits have persuasive appellate authority to rely on, some courts still refuse to apply the plain meaning of the statute. Others are establishing ground rules based on the holdings of Encompass, Gibbons, and Texas Brine.

Below are some considerations to keep in mind when assessing the removability of your case.

What if only forum defendants are named? While some courts considered snap removals where only forum defendants are sued to directly contravene the forum defendant rule, courts following the bright-line rule enumerated in Encompass have refused to carve out an exception. Compare Reimold v. Gokaslan, 110 F. Supp. 3d 641, 643 (D. Md. 2015) (“[A]pplication 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. The court will not condone such an absurdity here.”), with Glob. Indus. Inv. Ltd v. Chung, 2020 WL 2027374, at *4 (N.D. Cal. Apr. 28, 2020) (relying on Encompass and denying remand where the single, in-state defendant removed before service).

What if no defendant has been served? Courts subscribing to the statute’s plain meaning do not carve out an exception where no defendant has been served. See Zirkin v. Shandy Media, Inc., 2019 WL 626138, at *3 (C.D. Cal. Feb. 14, 2019) (denying remand where no defendant was served at the time of removal); Leech v. 3M Co., 278 F. Supp. 3d 933, 942 (E.D. La. 2017) (denying remand where non-forum defendant removed before service on any defendant). Other courts, however, have reinterpreted section 1441(b)(2) to require at least one defendant to have been properly joined and served before removal. See, e.g., Bowman v. PHH Mortg. Corp., 423 F. Supp. 3d 1286, 1293 (N.D. Ala. 2019) (“when an in-state defendant is involved, a case cannot be removed until at least one defendant has been properly joined and served”).

Does the plaintiff need a meaningful opportunity to serve? Plaintiffs often argue that they must be afforded a meaningful opportunity to serve, especially in states that impose intermediate steps or restrictions on the issuance and service of a summons, and some courts oblige. See Morris v. Alza Corp., 2010 WL 2652473, at *2 (E.D. Cal. July 1, 2010) (a plaintiff must have “a sufficient opportunity to serve the forum defendant” because removal would otherwise be “at odds with the underlying purpose of the statute”). But to argue that plaintiffs must have a “meaningful opportunity” to serve—however that is defined—is really “nothing more than an attempt to impose an additional requirement that has no basis in the statutory text.” Global Industrial, 2020 WL 2027374, at *4.

Can a defendant monitor state court dockets to facilitate snap removals? Plaintiffs often suggest that defendants’ use of technology to monitor state court dockets to attempt snap removals immediately after filing is somehow improper. But courts disagree: “[T]he rule [28 U.S.C. § 1441(b)(2)] does nothing to prevent a party from dutifully reviewing a court’s docket, and promptly filing a notice of removal the moment a complaint is properly filed in order to dodge a state tribunal.” Jacob v. Mentor Worldwide LLC, 393 F. Supp. 3d 912, 920–21 & n.3 (C.D. Cal. 2019) (denying motion to remand). But see In re Testosterone Replacement Therapy Prods. Liab. Litig., 67 F. Supp. 3d 952, 961 (N.D. Ill. 2014).

What if the plaintiff serves the forum defendant after the removal is filed? Even in districts courts within the Second, Third, and Fifth Circuits, simply filing a notice of removal before a plaintiff effectuates service is insufficient. The removal statute requires three steps to properly remove an action from state to federal court: (1) file a notice of removal; (2) give written notice to all adverse parties; and (3) file a copy of the notice with the clerk of the state court. 28 U.S.C. § 1446(d). If these three tasks are completed before the plaintiff perfects service, adoption of the plain meaning of the rule dictates that the removal is proper. See, e.g., Trias v. QVC, Inc., 2020 WL 1625601 (E.D. Pa. Apr. 2, 2020) (denying remand where defendant completed all removal steps five minutes before the sheriff conducted in-person service). If, however, the removing defendant fails to complete the requisite steps, remand may granted. See, e.g., Brown v. Teva Pharm., Inc., 2019 WL 5406218 (E.D. Pa. Oct. 23, 2019) (granting remand where defendants removed the case at 1:55 p.m., plaintiffs served all defendants at 2:15 p.m., and defendants filed their state court notice at 4:11 p.m.); Dutton v. Ethicon, Inc., 423 F. Supp. 3d 81 (D.N.J. Oct. 18, 2019) (remanding where plaintiff filed complaint at 9:35 a.m., defendants removed at 10:14 a.m., plaintiff personally served the complaint at 10:15 a.m., but defendant served state court notice at 11:17 a.m.).

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Snap Removals in the COVID Era

With court closures, skeleton court staffs, and business closures, the filing of complaints and service on defendants has become complicated. But in the circuits that have explicitly endorsed snap removals, plaintiffs should not assume that courts will make any exceptions. See, e.g.Ellis v. Miss. Farm Bureau Cas. Ins. Co., 2020 WL 2466247, at *4 (E.D. La. May 13, 2020) (“While the Court recognizes the difficulty that COVID-19 may impose on perfecting service,” Texas Brine made clear that exceptions should not be read into the plain language of the statute).

The Future of Snap Removals

“[O]ne person’s ‘gamesmanship’ is strategy to another.” Francis v. Great W. Cas. Co., 2018 WL 999679, at *2 (M.D. Ga. Feb. 21, 2018) (denying motion to remand).

Now that the practice of snap removals has been cemented in three circuits and continues to gain acceptance, congressional amendment of the statute may be the only action to stem the tide. On November 14, 2019, a subcommittee of the House Judiciary Committee held a hearing on the practice of snap removals. Of the four witnesses who testified, three agreed that snap removals are contrary to the intent of Congress and that congressional action is needed. Examining the Use of “Snap” Removals to Circumvent the Forum Defendant Rule: Hearing Before the Subcomm. on Courts, Intellectual Property, and the Internet, of the H. Comm. on the Judiciary116th Cong. (Nov. 14, 2019).

At the same hearing, the ranking member of the subcommittee, Rep. Martha Roby, offered a different view, saying snap removals have “served to return some balance in determining forum location.” Reasoning that plaintiffs are also guilty of forum gamesmanship, Roby stated that “[p]laintiffs sometimes use their ability to join non-diverse parties to limit defendants’ ability to remove to federal court. Often these non-diverse parties are not necessary to the litigation and at times are only included to keep it a case in a state court that maybe seems favorable to the plaintiff.” On February 7, 2020, Rep. Henry C. “Hank” Johnson, Jr., chairman of the subcommittee, introduced H.R. 5801, the Removal Jurisdiction Clarification Act of 2020. That bill provides that if a case is removed on the grounds of diversity jurisdiction alone, and any properly joined party is a forum defendant, the action may be remanded—even if the forum defendant was not yet properly served. Plaintiffs would only need to serve the forum defendant within 30 days or the time required by state law, whichever is shorter, and timely move for remand. Snap removals could be attempted, but plaintiffs could easily nullify them.

It remains to be seen whether the proposed legislation will gain any traction. It is clear, however, that the modern manipulation of the forum defendant rule has inevitably led to litigation tourism and eroded its initial purpose. Despite the opposition’s cries that defendants are exploiting a loophole or engaging in gamesmanship, the burgeoning adoption of “properly joined and served”—the plain language—has served as a bright-line rule to level the playing field. 

Monee Takla Hanna is counsel in Tucker Ellis’s Los Angeles, California, office, and Dustin B. Rawlin is a partner in the firm’s Cleveland, Ohio, office.

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