It's no secret that companies sued as defendants generally prefer to litigate in federal court, not state court. Federal courts are presumed to be more predictable, more transparent and less subject to local biases than state courts. So companies haled into state court ordinarily resort to their options to remove the case to federal court, including examining whether the parties are “diverse”—that is, whether all the plaintiffs are citizens of different states than the defendants. The problem with removal based on the parties' diversity is that it's typically unavailable for defendants sued in their “home” state by virtue of a federal statute, 28 U.S.C. Section 1441(b)(2), which provides that a civil action cannot be removed on the basis of diversity “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.”

Or so it was thought. But over the past decade or so, corporate defendants have seized upon a little-noticed clause in Section 1441(b)(2)'s so-called “forum defendant rule”—the requirement that a defendant be “properly joined and served.” Using this clause, defendants began to argue that so long as they had not yet been “served” with a state-court pleading, they could remove on diversity grounds even if a home-state defendant had been sued. Courts increasingly warmed to the argument, many finding that they were bound by the plain text of the clause. But others refused to go along, viewing the tactic as nothing but procedural gamesmanship that Congress could not have intended.

This article provides a brief overview of the case law that has developed on this “joined and served” exception to the “forum defendant rule” and a primer on how to put the exception into practice in everyday litigation management.

Statutory Framework for Pre-Service Removal

When a plaintiff files a suit in state court, 28 U.S.C. Section 1441(a) allows a defendant to remove the case to federal court if the case could have been filed there originally. Section 1441(b) then provides rules that are specific to removal based on diversity of citizenship, including the “forum defendant rule” in section 1441(b)(2). Section 1441(b)(2) states that a civil action cannot be removed on the basis of diversity jurisdiction “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.” Cases that are improperly removed can be remanded pursuant to the procedures specified in 28 U.S.C. Section 1447(c).

For example, assume a New Jersey plaintiff sues a Pennsylvania-based defendant in Pennsylvania state court. Because the Pennsylvania defendant is a “forum defendant,” it is not allowed to remove the case to a federal court in Pennsylvania under Section 1441(b)(2). And if the Pennsylvania defendant nonetheless removes to federal court, the New Jersey plaintiff could simply file a motion to remand based on improper removal.

But add some facts. This particular Pennsylvania defendant electronically monitors the Pennsylvania state court's docket, discovers the filing of the suit by the New Jersey plaintiff, and then files removal papers before being served. This sequence is entirely possible because under most state-court rules and procedures, there is a time difference built in—sometimes lengthy—between filing and service. See, e.g., Ethington v. General Electric, 575 F. Supp. 2d 855, 861-63 (N.D. Ohio 2008) (pointing out that New Jersey's rules of civil procedure ''mandate a delay between filing and service'' because they ''require that a plaintiff obtain a 'Track Assignment Notice' number from the clerk's office before serving process on a defendant,'' and that process can take up to 10 days from the date of the request (citing N.J. R. Civ. P. 4:5A–2)). The Pennsylvania defendant then argues that removal is proper because the “forum defendant rule” only applies to defendants who were “properly joined and served,” and since the Pennsylvania defendant removed before being served, the rule does not apply.

Numerous district courts have faced variations of this hypothetical in the real world, and they are deeply divided on whether such “pre-service removal” by forum defendants is allowed.

Surveying the Landscape of Case Law on Pre-Service Removal

At the outset, it should be noted that the propriety of pre-service removal has not been addressed by the Supreme Court, and while a few federal courts of appeals have touched on the issue, none have definitively resolved it, see, e.g., Goodwin v. Reynolds, 757 F.3d 1216, 1220-21, 1221 n.13 (11th Cir. 2014) (suggesting, but not holding, that “because the likely purpose of [the phrase 'properly joined and served'] is to prevent gamesmanship by plaintiffs, … we cannot believe that it constrains the district court's discretion under Rule 41(a)(2) to undo the defendants' gamesmanship in the circumstances at bar”); McCall v. Scott, 239 F.3d 808, 813 n.2 (6th Cir. 2001) (appearing to endorse pre-service removal in dicta by noting that “[w]here 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. Section1441(b)”). District courts have therefore had to consider the permissibility of pre-service removal largely without guidance from the appellate courts, and they have divided into three separate camps.

Pre-service removal permitted. The first camp has analyzed the plain meaning of the statute and determined that pre-service removal is permitted because Section 1441(b)(2) only applies to defendants who have been served. A recent example of this analysis is found in Cheung v. Bristol-Myers Squibb, Case No. 17cv6223(DLC), (S.D.N.Y. Oct. 12, 2017), in the Southern District of New York. In Cheung, the district court analyzed the words of Section 1441(b)(2) and concluded that it was bound by the plain meaning of those words, which allow pre-service removal by forum defendants, see also Hwang v. Gladden, Case No. 3:16-cv-502-SRW, at *5-7 (M.D. Ala. Dec. 21, 2016) (“The language of the statute is clear, and this court must apply it as written—not as plaintiffs argue it is intended.”). The Cheung court recognized that such pre-service removal could lead to gamesmanship, but it nonetheless found that the court could only look beyond the plain meaning of a statute when a statute is either “ambiguous” or the application of the statute would lead to an “absurd result.” Neither of those situations applied here, it found. The court also noted that Congress had revisited the relevant statute as recently as 2011, but nonetheless left the “joined and served” language untouched.

Furthermore, the court recognized that defendants were not the only parties engaged in gamesmanship. Plaintiffs in this case had originally filed their lawsuits in a federal district court, but after the federal district court issued a ruling that was unfavorable for the plaintiffs, the plaintiffs voluntarily dismissed their lawsuits without prejudice and then refiled them in Delaware state court. The court in Cheung then detailed the plaintiffs' other procedural hijinks and concluded that “if the plaintiffs, then, urge an interpretation of the removal statue that takes the litigants' strategies into account, theirs may not be ignored.” see also Breitweiser v. Chesapeake Energy, Case No. 3:15-CV-2043-B, (N.D. Tex. Oct. 20, 2015), (allowing pre-service removal because “even if the result reached is … the product of gamesmanship, it is neither absurd nor plainly at odds with the policy of the legislation”).

Pre-service removal not permitted. The second camp focuses on the purposes of the “forum defendant rule” and finds that pre-service removal by forum defendants was not within Congress's intent when it enacted the phrase “properly joined and served.” A recent example of one such case is Little v. Wyndham Worldwide Operations, 251 F. Supp. 3d 1215 (M.D. Tenn. 2017), in the Middle District of Tennessee. In Little, the district court found that the purpose of the “forum defendant rule,” and diversity jurisdiction in general, is “protecting out-of-state defendants from homegrown, local juries.” Because a forum defendant is from the forum state, no such bias was present, and removal was not needed. The court further found that the phrase “properly joined and served” was included in the statute, not to create pre-service removal, but to prevent plaintiffs from engaging in gamesmanship by adding unnecessary defendants to defeat diversity jurisdiction, and then never actually joining or serving those defendants in the litigation. Based upon its “holistic” analysis, the Little court found that pre-service removal by a forum defendant was not allowed; see also Reimold v. Gokaslan, 110 F. Supp. 3d 641, 643 (D. Md. 2015) (“Application 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.”); Phillips Construction v. Daniels Law Firm, 93 F. Supp. 3d 544, 554 (S.D. W. Va. 2015) (“A literal reading of Section 1441(b)(2) that permits pre-service removal by forum defendants is clearly contrary to the purpose of the 'properly joined and served' language.”).

Pre-service removal permitted, but only if at least one nonforum defendant has been served. The third camp falls between the two extremes, interpreting Section 1441(b) to require service upon at least one defendant before removal is allowed. This view is only adopted by a minority of cases, but it was recently expressed in Adams v. Beacon Hill Staffing Group, Case No. 15-cv-11827-ADB, 2015 WL 6182468 (D. Mass. Oct. 21, 2015), in the District of Massachusetts. In Adams, the court found that “in cases where the parties are diverse and one defendant is a citizen of the forum state, removal based on diversity is prohibited until at least one defendant has been served.” However, “if the nonforum defendant is served before the forum defendant, the non-forum defendant may remove,” see also Gentile v. Biogen Idec, 934 F. Supp. 2d 313, 314 (D. Mass. 2013) (“Removal is improper until at least one defendant has been served. A plaintiff thus may preserve its choice of state forum by serving the forum defendant before any others.”); Hawkins v. Cottrell, 785 F. Supp. 2d 1361, 1369 (N.D. Ga. 2011) (adopting reading of removal “that statute necessarily restricts removal to cases where at least one defendant has been served”).

Accentuating the division among district courts is that many are split even within the same district. For example, in Valido-Shade v. Wyeth, 875 F. Supp. 2d 474, 478 (E.D. Pa. 2012), in the Eastern District of Pennsylvania, the district court judge ruled that the plain meaning of Section 1441(b) authorized pre-service removal by a forum defendant. The judge held that if this application of the rule resulted in bad public policy, Congress—not the courts—had the responsibility to fix it. However, in Swindell-Filiaggi v. CSX, 922 F. Supp. 2d 514, 521 (E.D. Pa. 2013). in the Eastern District of Pennsylvania, a different judge explicitly declined to enforce the plain meaning of Section 1441(b) because “doing so produces a result that is at clear odds with congressional intent.”

Implementing a Pre-Service Removal Strategy

District courts therefore remain deeply divided on the propriety of pre-service removal by forum defendants. More than anything, though, the state of the case law opens opportunities for corporate defendants to pursue a pre-service removal strategy when sued in state courts. Even in districts where the only case law rejects the practice, that case law is not binding precedent, and defendants are free to attempt pre-service removal, see Camreta v. Greene, 563 U.S. 692, 709 n.7 (2011) (“A decision of a federal district court judge is not binding precedent in either a different judicial district, the same judicial district, or even upon the same judge in a different case.” And, since there do not appear to be any binding appellate precedents on the issue anywhere in the country, defendants presently can feel confident that they have at least a colorable argument in favor of removal.

Carrying out pre-service removal is not complicated but it requires careful planning and attention. First, companies should identify the state courts in which they are likely to be sued as a home-state defendant. This determination can be based on past litigation, or perhaps information from prospective plaintiffs. For example, Pfizer successfully used pre-service removal in 2012 after reading a plaintiff's press release about the lawsuit. Boyer v. Wyeth Pharmaceuticals, Case No. 12-739 (E.D. Pa.) Defendant Pfizer, Inc.'s Opposition To Plaintiff's Motion To Remand, Doc No. 11, at 2, and Ex. A (Press Release). Next, companies should find ways to monitor the relevant dockets. While this would have been a difficult task twenty years ago, electronic services make this possible today. Many states now have electronic dockets that can be monitored on a routine basis. Finally, companies should prepare draft removal papers and be prepared to quickly revise and file them.

Conclusion

Pre-service removal remains a tool that corporate defendants may have at their disposal if they expect to be sued in their home-state court by an out-of-state plaintiff. Defendants will have to be diligent and plan ahead: they will need to identify and monitor state-court dockets where a plaintiff may sue them, and they will have to be prepared to promptly file the removal papers before they are served. That said, pre-service removal is not guaranteed. Forum defendants may land in front of a federal judge who does not allow pre-service removal or Congress may act to remove this option. But for the foreseeable future, corporate defendants and their counsel should at least be aware of this potential strategy and consider employing it when they find themselves sued in their home-state court.

Colin E. Wrabley is a partner in Reed Smith's appellate group. He has extensive counseling, litigation and appellate experience spanning a broad range of substantive legal issues in state and federal courts across the country. He can be reached at [email protected]

Joshua T. Newborn is an associate in the firm's appellate group. He has drafted briefs in federal and state appellate courts, and has also participated in trial court litigation to develop trial strategy in anticipation of an appeal and to petition for discretionary appellate review. He can be reached at [email protected]