United States: The Latest On Removal Before Service

Last Updated: March 12 2019
Article by James Beck

Our recent post on "wrinkle removal" – that is, removal before service – case got us thinking. The opinion discussed in that post, Dechow v. Gilead Sciences, Inc., ___ F. Supp.3d ___, 2019 WL 5176243 (C.D. Cal. Feb. 8, 2019), was out of California, in the Ninth Circuit. That didn't keep Dechow from citing the Third Circuit case we blogged about last August, Encompass Insurance Co. v. Stone Mansion Restaurant, Inc., 902 F.3d 147 (3d Cir. 2018). As we discussed last year, Encompass Insurance was the first appellate decision to address removal before service, and it was a resounding victory for the defense position that such removal is expressly allowed by statute and is a perfectly rational (and hardly absurd) response to the repeated gamesmanship that forum-shopping plaintiffs have resorted to, literally for decades.

So, how has removal before service fared since Encompass Insurance has been in the books? Previously, we thought the defense "plain language" approach was the majority position, but the split was anything but overwhelming. We're pleased to report that the Third Circuit's reasoning appears to have tipped the balance towards "overwhelming." First of all, we can run through new decisions by district courts (in Pennsylvania, New Jersey, Delaware, and the Virgin Islands) that are precedentially bound to follow Encompass Insurance. These are: Anderson v. Merck & Co., 2019 WL 161512, at *1-2 (D.N.J. Jan. 10, 2019) (denying remand in 104 cases) (mentioned in this post), and Mendoza v. Ferro, 2019 WL 316727, at *2 (E.D. Pa. Jan. 24, 2019) (second removal, within 30 days of Encompass Insurance decision). We can also, of course, subtract any adverse decisions (there were more than a handful) previously issued from district courts in the Third Circuit.

Outside the Third Circuit, courts have mostly found Encompass Insurance persuasive. A second case from the Central District of California held:

[W]hen a natural reading of the statute leads to a rational, common-sense result, an alteration of meaning is not only unnecessary, but also extrajudicial. As the Third Circuit explained, a plain meaning interpretation of the language "properly joined and served" in the Forum Defendant Rule "envisions a broader right of removal only in the narrow circumstances where a defendant is aware of an action prior to service of process with sufficient time to initiate removal." Stone Mansion, 902 F.3d at 153. . . . While it is clear that courts in this district have found that permitting pre-service removal absurd, others have not, concluding that the plain language of Section 1441(b)(2) states that it only applies when the local defendants have been "properly joined and served." Finally, and arguably most importantly − a Plaintiff in this very district, in a similar removal action unsuccessfully invoked [the absurd results argument] to support remand. [Citing Dechow]

Zirkin v. Shandy Media, Inc., 2019 WL 626138, at *3 (C.D. Cal. Feb. 14, 2019) (other citations and quotation marks omitted). We are particularly gratified to see these two cases out of the Central District of California. Our last research post on removal before service tallied up all the favorable decisions between 2011 and mid-2018 (it was written about a week before Encompass Insurance was decided). It found twelve cases out of California, but only two from the Central District. Encompass Insurance seems to have convinced the judges in that previously rather refractory district to be less refractory.

Another California decision, Monfort v. Adomani, Inc., 2019 WL 131842 (N.D. Cal. Jan. 8, 2019), expressly "agree[d] with the Third Circuit" and permitted removal before service. Id. at *4.

[T]he more precise question is whether pre-service removal frustrates the purpose behind §1441(b)(2)'s "joined and served" language. As the Third Circuit explained, the "joined and served" language reflects Congress's intent to prevent a plaintiff from fraudulently joining a resident party in order to avoid removal to federal court. Encompass, 902 F.3d at 153. Interpreting "joined and served" to permit pre-service removal by an in-state defendant does not impair the provision's anti-fraudulent joinder purpose, which focuses on what a plaintiff may or may not do to defeat diversity jurisdiction. Id. (noting that a plain language interpretation of joined and served "protects the statute's goal without rendering any of the language unnecessary"). Moreover, . . . Congress amended the removal statute after decisions permitting pre-service removal, but did not alter the "joined and served" language.

Id. (non-Encompass Insurance citations omitted). Encompass Insurance also proved persuasive in Texas Brine Co., LLC v. American Arbitration Ass'n, 2018 WL 4927640 (E.D. La. Oct. 11, 2018), which cited it for the propositions that "defendants may remove despite unserved resident defendants," and that "[n]o exception for gamesmanship exists." Id. at *2.

Still, while there's been a shift since Encompass Insurance, there remain courts that find gamesmanship by plaintiffs somehow less bothersome than gamesmanship by defendants, and still refuse to recognize removal before service as permitted by the express terms of the removal statute. Such a case is Delaughder v. Colonial Pipeline Co., ___ F. Supp.3d ___, 2018 WL 6716047 (N.D. Ga. Dec. 21, 2018), which refused to follow Encompass Insurance on a record that revealed both sides engaging in procedural machinations – with plaintiffs determined to keep a personal injury suit in a plaintiff-friendly court, and a diverse defendant just as determined to be in federal court instead.

Here's what happened in Delaughder. Two out-of-state litigation tourists sued the target defendant (a Delaware corporation) in Atlanta over an Alabama accident, also joining a Georgia "forum defendant" that would have prevented removal. Id. at *1-2 & nn 1-2. The Delaware defendant successfully snap removed. In response, plaintiffs moved for voluntary dismissed, fully intending to win the race to the courthouse on their second try. Id. The defendant was just ready. On the same day the voluntary dismissal was effective, the defendant changed its Georgia registered agent. Id. Plaintiff refiled the next day and – loaded for bear – served the defendant's former agent less than half an hour after refiling. Id. But service was ineffective because of the change in agents, and the defendant snap removed again. Id.

Although non-residents suing in Georgia over an accident in Alabama seems, to us, a most blatant example of forum-shopping gamesmanship, the court in Delaughder focused solely on the defendant's actions. Although recognizing that "the Third Circuit has definitively come down on one side of the issue," 2018 WL 6716047, at *3, that court nonetheless went with the "absurd result" argument and remanded. "While [defendant] found a possible avenue to take away Plaintiffs' power to decide the forum for this litigation, the Court cannot overlook the clear gamesmanship present in this case." Id. at *6.

In the words of another Georgia court, "[o]ne person's 'gamesmanship' is strategy to another." Francis v. Great West Casualty Co., 2018 WL 999679, at *2 (M.D. Ga. Feb. 21, 2018). As for Delaughder itself, there are other words Bexis picked up while living in the Peach State:

Forget, hell.

Here's something we know about Georgia precedent:

Georgia's registration statute, Ga. Code §14-2-1501, provides no indication that registration affects jurisdiction one way or another; nor are there relevant state cases. However, in Orafol Americas, Inc. v. DBi Services, LLC, 2017 WL 3473217 (N.D. Ga. July 20, 2017), the court held:

Plaintiff notes that [defendant] is registered to do business in Georgia, and has a registered agent in the State. Additionally, [defendant] has actually engaged in business in Georgia. . . . But these contacts are woefully insufficient to render [defendant] "at home" in Georgia. Every company that does any business in Georgia must register with the State and maintain a registered agent. Just because a company does some small amount of business in Georgia does not mean that due process will allow that company to be sued in Georgia for acts that occurred outside the State.

Id. at *3.

Out of the frying pan, into the fire. Nothing in the Delaughder opinion gives us any reason to believe that there is any basis for personal jurisdiction in Georgia over the non-forum defendant. And not only that, once those plaintiffs lose on jurisdiction, they'll get no tolling of the statute of limitations in Alabama for their frolic and detour in the Georgia courts, since Alabama is one of "[s]ix states [with] no mechanism for preserving claims following a dismissal without prejudice."

Game on.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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