lITIGATION uPDATE - jANUARY 5, 2012

New Law Provides Additional Support for Removal Despite Presence of Unserved Forum Defendants

The Federal Courts Jurisdiction and Venue Clarification Act of 2011 (the “Act”) officially takes effect tomorrow, January 6, 2012. The Act was designed primarily to clarify a number of judicially created splits of authority interpreting the rules of removal. Among the highlights of the Act are changes to the statutory language that clarify long-running judicial disagreements regarding the time period in which a defendant may remove a case to federal court, determinations of the amount in controversy for purposes of removal, and the proper way for federal courts to deal with removed cases that include both federal and unrelated state claims.

But an equally important part of the Act is the language that went unchanged. While Congress amended and rewrote several statutory provisions dealing with removal, it notably left undisturbed the “properly joined and served as defendants” language of 28 U.S.C. §1441(b).

The “properly joined and served” language is at the center of the federal district court split of authority regarding the propriety of defendants preemptively removing cases to federal court before an in-state defendant has been served to avoid application of the so-called “forum defendant rule.” The forum defendant rule prohibits removal based on diversity jurisdiction – even if all the parties are diverse and the amount in controversy requirement is met – if any of the “properly joined and served defendants” is a citizen of the State in which the case is brought.

But what happens to the right of removal where there is a properly joined but unserved forum defendant? The body of law that has developed around this topic centers on the issue of Congressional intent. There is little dispute that under the plain language of the statute the presence of an unserved forum defendant does not prevent the removal of an otherwise removable case. Nor is there any dispute that adherence to the plain language of a statute is required except in very rare circumstances. Thus, the majority of courts have denied motions to remand and allowed cases with forum defendants who are unserved at the time of removal to proceed in federal court based upon the plain language §1441(b). But a significant minority of courts counter that the plain language must be ignored because it produces an absurd result that is contrary to Congress’ intent in drafting the forum defendant rule (i.e., limiting diversity jurisdiction to out-of-state defendants seeking to avoid being “hometowned” in a state court).

Congress’ decision to leave the “properly joined and served” language unchanged in the Act significantly undercuts the minority view about Congressional intent. Congress did nothing to indicate that its intent with regard to the forum defendant rule was anything other than the plain language of §1441(b). In fact, by leaving that language unchanged – especially in the context of a complete overhaul of the code sections regarding removal – Congress made a clear statement that it meant what it said (and continues to say) in the plain language of §1441(b). Thus, the Act provides defendants who remove cases based on diversity jurisdiction with persuasive additional support for keeping cases in federal court despite the presence of an unserved forum defendant.

 

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