A U.S. court of appeals affirmed the use of “snap removal” by an out-of-state defendant to remove a state court case to federal court before service on two in-state defendants. Normally, under the local defendant rule, removal to federal court is not permitted where a defendant is a citizen of the forum state. Relying on the plain language of 28 U.S.C. § 1441(b)(2), which limits the forum defendant rule to parties “properly joined and served,” the U.S. Court of Appeals for the Fifth Circuit in Texas Brine Company, L.L.C. v. American Arbitration Association, Inc. held that an out-of-state defendant served with process can immediately remove to federal court before in-state defendants are served.
In the Texas Brine Co. case, one of the parties to an arbitration claimed that two arbitrators hid conflicts of interest. As a result, a Louisiana state court vacated the arbitration award. The losing party then filed suit in Louisiana state court seeking damages against one out-of-state defendant and two in-state defendants. The out-of-state defendant was served first, and immediately removed to federal court before service on in-state defendants. The plaintiff moved to remand. The district court denied remand and the court of appeals affirmed.
The appellate court noted that “[w]hen the plain language of a statute is unambiguous and does not lead to an absurd result, our inquiry begins and ends with the plain meaning of that language.” Turning to the text of the statute, the court held that “[b]y its text, then, Section 1441(b)(2) is inapplicable until a home-state defendant has been served in accordance with state law; until then, a state court lawsuit is removable under Section 1441(a) so long as a federal district court can assume jurisdiction over the action.”
“The court got it right,” agrees Bradford S. Babbitt, Hartford, CT, cochair of the ABA Section of Litigation’s Commercial & Business Litigation Committee. “The statute clearly states, ‘properly joined and served.’ Once a case is removed, Section 1441(b)(2) is not in play anymore,” he states. Noting that “snap removal” may cause counsel to pay more attention to state court dockets and instigate more races to the courthouse, Babbit adds, “An out-of-state defendant who learns of a state court lawsuit potentially might even try to quickly remove the case to federal court even before service, simply waiving service by appearance and removing the case to federal court to get a jump on service on in-state defendants.”
At least one federal district court has rejected this idea, Babbitt observes. The U.S. District Court for the Northern District of Alabama in Bowman v. PHH Mortgage Co. refused to permit an out-of-state defendant to snap remove a state-court case to federal court where none of the defendants were properly served. In remanding to state court, the district court noted that “[i]n its original form, the rule created potential for abuse by plaintiffs. A crafty plaintiff could name an in-state defendant to the suit, without ever intending to prosecute the case against that defendant, purely to frustrate removal.” The district court also recognized, however, that “[i]f the plaintiff serves an out-of-state defendant before an in-state defendant, the out-of-state defendant is free to remove the case.” To balance these competing interests, the Bowman court held that for snap removal to exist, at least one defendant must be properly served and joined.
Tracy A. DiFillippo, Las Vegas, NV, cochair of the Section of Litigation’s Pretrial Practice & Discovery Committee, agrees that snap removal creates opportunities for gamesmanship. “Prior to snap removal,” she observes, “plaintiffs could name forum defendants and not serve them, simply to prevent removal. Now, defendants can use snap removal if an out-of-state defendant is first served,” contines DiFillippo. “Snap removal thus might prevent naming local defendants who are never served to prevent removal to federal court, now that an out-of-state defendant can snap remove before service on an in-state defendant,” predicts DiFillippo. “The obvious take-away is don’t add local defendants to defeat removal who you are not going to actually serve, and diligently serve local defendants before serving out-of-state defendants.”
Other Section leaders agree. “I recognize that this court of appeals expressed concerns that the decision might have some tactical consequences,” opines Ethan T. Tidmore, Birmingham, AL, cochair of the Section’s Pretrial Practice & Discovery Committee, “but nevertheless, the court properly found snap removal permissible under the plain language of the statute. While removal jurisdiction grows out of the need to prevent a hometown advantage, the specific statutory language about service seems clear and specific about when the local forum defendant rule applies,” he adds.
Ultimately, Babbitt wonders if removal jurisprudence should be revisited. “We live in a different time than when the concept of removal was developed, and removal jurisdiction has its roots in concerns about being ‘hometowned,’” muses Babbitt. “Removal is an anachronism of a different time. The concept raises interesting questions in the digital age, and we might want to think about its application in today’s electronic world,” he concludes.
