LIT COMMENTARY

Everyone needs this bill below to pass that is looking to stop the snake lawyers from using this dirty tactic, called “snap removal”. It’s just wrong at every level.

Chairman Nadler Statement for Subcommittee Hearing on “Examining the Use of ‘Snap’ Removals to Circumvent the Forum Defendant Rule”

Washington, DC, November 14, 2019

Today, House Judiciary Committee Chairman Jerrold Nadler (D-NY) delivered the following opening statement for the Subcommittee on Courts, Intellectual Property, and the Internet hearing on “Examining the Use of ‘Snap’ Removals to Circumvent the Forum Defendant Rule”:

“Thank you, Mr. Chairman. Corporate defendants have long sought to remove cases based on state law to federal court, believing that the expense and complexity of federal court offers those businesses advantages over less sophisticated plaintiffs with fewer resources.

“‘Snap’ removals—in which defendants exploit modern technology and a supposed statutory loophole to remove cases that should properly be heard in state court—represent the latest effort to game the system in favor of the wealthy and powerful at the expense of the average citizen and our overloaded federal court system.

“Under well-established law, known as diversity jurisdiction, when a plaintiff sues a defendant who is a resident of another state in state court, that defendant may remove the case to federal court. This provision is intended to protect against possible bias that may occur against an out-of-state defendant. When the defendant is sued in his or her own state, however, removal is not permitted because the concern for bias no longer exists. This is referred to as the forum defendant rule.

“Unfortunately, a combination of modern technology, a desire by some corporations to avoid state courts seemingly at any cost, and a supposed loophole in the removal statute has engendered a new tactic. Some courts have read the forum defendant rule, which requires that a defendant be a citizen of the state where the case is filed, and that it be properly served, to mean that removal to federal court may occur before service of process is completed.

“Many companies, therefore, now use computer programs to monitor court filings in real time and to remove any case against them in their own state by an out-of-state plaintiff before the plaintiff has time to effect service—sometimes in a matter of mere minutes—in an attempt to thwart the forum defendant rule.

“Although this sort of gamesmanship is clearly contrary to the spirit and the intent of the federal removal statute, some courts have ruled that such snap removals are permitted by a plain reading of the text. It is important, therefore, that Congress clarify the statute to put an end to this dubious maneuver.

“Not only do snap removals tilt the legal playing field in favor of large corporations, they also drain judicial resources, impose needless costs on the parties, and delay justice for plaintiffs seeking to hold wrongdoers accountable for the injuries they cause.

“This evasion of the well-established forum defendant rule also threatens state sovereignty and violates federalism principles by denying state courts the ability to shape state law. State courts should be the final arbiters of state law, but snap removals are increasingly putting new state-law questions into federal court.

“Snap removals also increase the complexity, duration, and cost of civil litigation, placing further burdens on plaintiffs, who tend to have fewer resources than comparatively well-funded corporate defendants.

“This issue may seem obscure, but it is a growing problem, and it has a very real impact on the lives of people seeking redress in their state courts. In an era where the courthouse doors are increasingly closed to ordinary Americans, snap removal can seem like just another turn of the deadbolt.

“I look forward to the witnesses’ testimony, and particularly their thoughts on how Congress can fix this important and growing problem. I yield back the balance of my time.”

Moonightin’

Aw, Snap! Fifth Circuit OKs ‘Snap’ Removal by Non-Forum Defendants

Originally Published; Apr. 22, 2020

SOUTHWICK, LESLIE H.

WILLETT, DON R.

OLDHAM, ANDREW “ANDY” S.

Fifth Circuit Court of Appeals rules that the “forum defendant rule” does not stop a non-forum defendant from removing a case to federal court, as long as it is removed before a forum defendant is served.1

This is the first time the Fifth Circuit has expressly approved of the procedural practice – often called “snap” removal. The Second, Third, and Sixth Circuits have recently issued similar rulings.2

The Fifth Circuit Decision: Texas Brine v. AAA, et al.

Texas Brine filed a $12 million+ lawsuit on July 6, 2018 against the American Arbitration Association (a New York corporation), arbitrator Anthony DiLeo (a Louisiana resident) and arbitrator Charles Minyard (also a Louisiana resident) in Louisiana state court.3 Just five days later, and before Plaintiff served the two in-state defendants, AAA removed the case to the U.S. District Court for the Eastern District of Louisiana.4 All defendants then filed answers and a Rule 12(c) Motion to Dismiss.5

Texas Brine moved to remand, arguing AAA’s removal was improper based on 28 U.S.C.  § 1441(b)(2), the “forum defendant rule”:

A civil action otherwise removable solely on the basis of [diversity jurisdiction under 28 U.S.C. § 1332(a)] 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.

Removal based on diversity jurisdiction “protect[s] out-of-state defendants from possible prejudices in state court.” Gorman v. Schiele, 2016 WL 3583645, at *2 (M.D. La. June 8, 2016). The theory of the forum defendant rule is that a defendant sued in his own state will not be disadvantaged by in-state prejudices; after all, it’s the defendant’s home turf.6

Thus, the rule prevents in-state defendants from removing where: (1) the lawsuit is removable solely on the basis of diversity (i.e. there is no plaintiff from the same state as any defendant and the amount in controversy exceed $75,000) and (2) any defendant “properly joined and served” is a resident of the state where the lawsuit was filed.

The question arises, then: before a resident defendant is “properly joined and served,” can a non-resident defendant remove?

In Texas Brine, the Fifth Circuit said, “Yes.”

The court applied a plain language interpretation to the forum defendant rule, finding the statute unambiguous: “By its text … Section1441(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.”7

The court also considered – but rejected – the plaintiff’s arguments on legislative intent and found that a plain reading of the statute did not amount to an absurd result (as required to go beyond the plain reading of an unambiguous statute).8

The court did not squarely decide a closely-related issue, which is whether it is acceptable for a forum defendant to remove before being served: “Of some importance, the removing party is not a forum defendant.

Diversity jurisdiction and removal exist to protect out-of-state defendants from in-state prejudices.”9

Snap Removal: Practice Pointers

Plaintiffs have long-relied on the forum defendant rule by suing one or more – often tangentially related – resident defendants, in addition to non-resident defendants, in an attempt to anchor actions in state court.

Snap removal provides a potential avenue to federal court even where resident defendants are named. Litigants considering snap removal should be mindful of the following considerations.

Know the law in your circuit or district court. Counsel considering snap removal must first determine the law in the subject jurisdiction. Courts allowing pre-service removal have applied a plain-language reading of the statute.^[10]

Courts rejecting snap removal have generally concluded the practice is the result of an unintended “loophole,” and is inconsistent with the legislative purpose of the forum defendant rule.^[11]

Also note whether case law addresses the sub-issue of whether snap removals are allowed by any defendant, or only by a non-resident defendant.

Be prepared. Snap removal is a race to remove prior to service on the in-state defendant, and requires early and organized coordination.

Close attention must be given to the removal procedure outlined in 28 U.S.C. § 1441 et seq. Generally, the removing party must file a notice of removal, along with a copy of everything served upon the removing party in the action,12 and must provide notice to the adverse parties and the state court.13

In at least some courts, removal is not procedurally complete until the state court receives notice of the removal.14

Thus, the state court notice should be filed immediately upon the federal notice of removal to ensure the forum defendant is not served in the interim.

Get all co-defendants on board. Pursuant to 28 U.S.C. § 1446(b)(2)(A), all “properly joined and served” defendants must either join in or consent to removal.

While a snap removal obviously concerns circumstances where at least one defendant has not yet been served, it is a good “belt and suspenders” strategy to obtain all defendants’ consent to or joinder in the removal.

File a responsive pleading ASAP. The removing party should also consider immediately (or better yet, concurrently) filing an answer or dispositive motion upon removal.

Under FRCP 41(a)(1)(A)(i), a plaintiff may voluntarily dismiss an action before the opposing party serves an answer or motion for summary judgment.

Thus, if a defendant removes, but does not file a responsive pleading, a plaintiff may voluntarily dismiss under Rule 41 and refile, affording the plaintiff another shot to litigate in state court.[15]

Judge Catharina Haynes (5th Cir.) Sitting on Certain 3-Panel or En Banc Oil & Gas Cases is Ethically Wrong. Here’s Why.

The Fifth Circuit’s Dismissal of the Burkes 2019 Judicial Complaint Has Now Been Proven to Be Error, in Law

House Dems introduce bill to combat defense tactic of ‘snap removals’

Originally Published; Feb 12, 2020

(Reuters) – Representatives Jerrold Nadler (Democrat, N.Y.) and Hank Johnson (Democrat, Georgia) of the House Judiciary Committee introduced a bill last week to counter what Nadler has called the “important and growing problem” of jurisdictional gamesmanship by defendants using so-called “snap removal” to evade state court. Ten other House Democrats have signed onto the bill. And though the proposed legislation seems unlikely to become law in this Congress – given how few House bills have received Senate approval – it’s notable that what had been an obscure quirk of the Federal Rules of Civil Procedure has become an issue that congressional Democrats now deem worthy of legislative attention.

Snap removals, as I’ve reported, are rooted in a 1948 revision of the Forum Defendant Rule that was intended to block plaintiffs from improperly naming local defendants solely to defeat federal court diversity jurisdiction. Under the 1948 rule change, if plaintiffs fail to serve their complaints on in-state defendants, the other named defendants can remove the case to federal court. That’s straightforward enough. But when state court dockets began to go online, savvy defendants realized that complaints often showed up on dockets before plaintiffs could serve their suits. So as soon as a suit hit state-court dockets, defendants would file “snap removals” based on the failure to effect instantaneous service on the local defendant.

Trial lawyers have been complaining about snap removals for at least five years, but the tactic has recently been blessed by two federal circuits: the 3rd U.S. Circuit Court of Appeals in 2018’s Encompass Insurance v. Stone Mansion and the 2nd Circuit in 2018’s Gibbons v. Bristol-Myers.

The new bill, which followed a House Judiciary hearing last November on snap removals, adopts a “snap back” fix: Federal courts would be required to remand cases that were removed for failure to serve the forum defendant if plaintiffs properly served that defendant within 30 days or within the time specified in state service process rules. The snap back solution has been advocated by University of Pittsburgh law professor Arthur Hellman, who was among the first scholars to identify the snap removal maneuver. The congressional proposal stopped short of a rule change suggested by Northwestern law professor James Pfander, who urged the Judiciary Committee to eliminate the requirement in the 1948 rule that in-forum defendants be served to defeat federal court jurisdiction.

I talked about the new bill to the two practitioners who testified at the hearing in November, Ellen Relkin of Weitz & Luxenberg and Kaspar Stoffelmayr of Bartlit Beck. As they did at the hearing, Relkin and Stoffelmayr offered sharply contrasting views on the frequency of snap removals and the need for congressional reform.

“The bill seems to be a solution in search of a problem and would, more than anything, just assist the litigation strategy of a few plaintiffs’ lawyers in a handful of cases,” Stoffelmayr said in an email. He pointed to the only empirical study of snap removals, the 2018 paper Closing the Snap Removal Loophole, by then-Supreme Court fellow Valerie Nannery. By Stoffelmayr’s calculation, Nannery’s data on pre-service removals to federal court between 2012 and 2014 suggest that defendants used the snap removal tactic in only about 150 cases a year – a tiny fraction of the federal civil docket. “In my experience and the experience of everyone I’ve talked to, pre-service removal remains uncommon and very much the exception rather than the rule,” Stoffelmayr said by email.

And the bill’s proposed solution, he said, would create problems of its own, injecting uncertainty and complexity into the removal process. Because the House Judiciary’s proposal would give plaintiffs up to 30 days to serve in-forum defendants, other defendants would not know, when they file removal motions, if cases will actually be removable. Their motions could turn out just to be costly alarm clocks, reminding plaintiffs to serve other defendants. “There’s no justification for introducing this additional uncertainty and inefficiency into an already complex area of the law,” Stoffelmayr said.

But plaintiffs’ lawyer Relkin – who specializes in products liability suits against drug and medical device makers – told me defendants have become increasingly creative about exploiting the snap removal loophole to keep suits out of state court. Companies aren’t simply patrolling electronic state court dockets, she said. They’re evading service to give their lawyers time to file snap removal motions. Weitz & Luxenberg argued in a brief in consolidated remand litigation before U.S. Magistrate Judge James Clark of Newark, N.J. that defendants in hip implant suits filed in state court refused to accept service via their registered agent, CT Corporation, and, when plaintiffs attempted service at their corporate headquarters, “purposely (made) agents unavailable.”

Relkin said that her firm has actually stationed process servers in corporate parking lots with mobile printers so they can attempt to serve lawsuits as soon as complaints hit electronic dockets, but that process servers are increasingly likely to face stall tactics. “It’s preposterous,” said Relkin, who argues that the data underlying the 2018 snap removal study is now obsolete. “Snap removal has become ubiquitous in the 3rd Circuit,” she said.

Relkin said the House Judiciary Committee was smart to tailor its bill to solve the discrete problem. “We’re optimistic,” she said. “This is really a states’ rights issue. If snap removals aren’t stopped, there’s not going to be state-made law anymore.”

Former Magistrate Judge for the S.D. Tex Federal Court Admits Judge Shopping by Prosecutors

Federal Appellate Courts Provide Long-Overdue Guidance on Removal to Federal Court by Home-State Defendants

Tuesday, June 2, 2020

A civil action brought in state court over which a federal district court would have jurisdiction may generally be removed by a defendant to the district court where the state action is pending. 28 U.S.C. § 1441(a). However, when the only basis for federal jurisdiction is diversity of citizenship, removal is not permitted “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.” 28 U.S.C. § 1441(b)(2). This is the “forum defendant rule,” which has been understood to prevent a home-state defendant from removing to federal court based solely on diversity.

Although diversity jurisdiction is commonly understood to protect out-of-state parties from local bias of state courts, home-state defendants may prefer to litigate in a federal forum for any number of reasons, including familiarity with federal judges or federal rules, favorable federal precedent, geographic convenience, or simply gamesmanship. By its terms, the forum defendant rule only applies to defendants who are “properly joined and served,” raising the question of whether a home-state defendant who has not yet been served—whether due to the plaintiff’s delay, unique state law service requirements or other reasons—is permitted to remove. This question has pitted the plain language of the statute against myriad policy concerns, including avoiding a potentially unseemly race by home-state defendants to remove before service, sometimes only a few hours after filing—a tactic referred to as “snap” removal. Lacking guidance from the circuit courts, federal district courts have split on this question for years—even within individual districts.

Although the forum defendant rule has been on the books since 1948, until relatively recently no federal appellate court had definitively ruled on whether removal to federal court is permissible if the forum defendant has not been served. However, in the last two years, the Second, Third and Fifth Circuit Courts of Appeal have reached this issue and all three have adopted the literal interpretation of the statute, allowing removal if the forum defendant has not yet been served. This procedural quirk also now has garnered Congressional attention.

The following explores courts’ divergent interpretations of the forum defendant rule, the rationale of the recent appellate decisions permitting removal before service based on the plain language of the statute, an overview of proposed federal legislation to amend the removal statute and practice considerations for counsel in light of these recent developments.

Federal district courts are 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 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.

Further, 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 “absurd,” and 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 adopt 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.[1] Since 2018, three federal circuit courts have all adopted the plain language interpretation of the removal statute.

In Encompass Insurance Co. v. Stone Mansion Restaurant Inc., 902 F.3d 147 (3d Cir. 2018) and Gibbons v. Bristol-Myers Squibb Co., 919 F.3d 699 (2d Cir. 2019), the Third and Second Circuits affirmed decisions denying remand following removal by unserved forum defendants. 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 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. Likewise, 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 non-uniform 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 added, if the statute needed revision, “it is Congress—not the Judiciary—that must act.”

The Fifth Circuit recently joined the Second and Third Circuits in Texas Brine Co. v. American Arbitration Ass’n, — F.3d –, No. 18-31184, 2020 WL 1682777 (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 non-forum 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.” 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.” The court also rejected plaintiff’s absurdity argument because “snap removal is at least rational.” The court further found the rule of strictly construing the removal statute inapplicable because “the text is unambiguous.”

Congress considers snap removal
In the wake of recent court decisions upholding the practice of snap removal, Congress also now is paying attention. On Nov.ember 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.[2]

Then, in February 2020, Representative Nadler co-sponsored 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) thirty days from removal.[3] The bill remains in subcommittee, so whether Congress will overrule the circuit courts by amending the removal statute is yet to be seen.

Practice considerations
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 wish to guard their intention to file suit rather than threatening litigation through pre-suit 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, unless the case was filed within the Second, Third or Fifth Circuits, there is ample authority in most districts to marshal in support of a motion to remand.

Individuals or businesses on notice that a lawsuit is imminent likewise should consider whether, assuming 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.

Updated from an article entitled “Removal to Federal Court by Home-State Defendants” that originally appeared in Wisconsin Lawyer (Jan. 2020), the official publication of the State Bar of Wisconsin, 93 Wis. Law. 32.

[1] In 2001, the Sixth Circuit appeared to adopt the view that an unserved forum defendant could remove, but it did so with little reasoning and its statement arguably was dicta. See McCall v. Scott, 239 F.3d 808, 813 n.2 (6th Cir. 2001).

[2] Examining the Use of ‘Snap’ Removals to Circumvent the Forum Defendant Rule Before the Subcomm. on Courts, Intellectual Property, and the Internet, 116th Cong. (statement of Rep. Jerrold Nadler).

[3] See H.R. 5801, 116th Cong. (2d Sess. 2020).