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ALERT: Snap Removals by Forum Defendants

November 6, 2018

In a precedential decision filed on August 22, 2018, the United States Court of Appeals for the Third Circuit provided some clarity on the practice which has become known in recent years as the “Snap Removal.”  As a matter of background, it is common knowledge and practice to remove cases to federal court which are originally filed in state court and involve claims exceeding $75,000 where the parties are fully diverse in citizenship.  Simply put, where a plaintiff and a defendant are citizens of different states, the federal courts have diversity jurisdiction to hear the case when the matter in controversy exceeds that threshold.  The exception to this rule is the “forum defendant” prohibition upon diversity jurisdiction codified by 28 U.S.C. §1441. 

That portion of the US code states “if any of the parties in interest properly joined and served as defendants are a citizen of the State in which [the] action is brought” the case may not be removed.  The rationale for the forum defendant rule is that a citizen of the state in which the case is brought will not be prejudiced by the courts of his home state hearing the case. 

In recent years, the Courts have seen a new strategy employed by forum defendants to remove cases notwithstanding the “forum defendant” rule.  Seizing upon the language of the statute that the forum defendant rule applies to “properly joined and served” defendants, forum defendants having engaged in pre-service removal of cases to federal court.  This practice has received mixed results nationally.  The recent case of Encompass Insurance Company v. Stone Mansion Restaurant Incorporated (Third Circuit) (2-17-CV-00125) (August 22, 2018), is the first precedential decision by a Circuit Court on the issue.  In Encompass, the Third Circuit condoned the practice, conducting an analysis of the Congressional intent of the “properly joined and served” language.  The Court observed that commentators have determined that Congress enacted the rule “to prevent a plaintiff from blocking removal by joining as a defendant a resident party against whom it does not intend to proceed, and whom it does not even serve.”  (Encompass, p. 11, quoting Neutralizing the Strategem of “Snap Removal”: A Proposed Amendment to the Judicial Code, (A. Hellman), 9 Fed. Cts. L. Rev. 103, 108 (2016) (quoting Sullivan v. Novartis Pharms. Corp., 575 F. Supp. 2d 640, 645 (D.N.J. 2009)).  The Encompass Court considered this intent and determined that the removal of a case under these circumstances does not frustrate the stated Congressional intent, nor does it contravene the apparent purpose to prohibit these particular tactics.  Applying the plain meaning of the statute requires upholding removal, even where the removing defendant is also a forum defendant.

Applying this bright line rule to the real world, the implication is that a non-served Defendant can remove the case to more favorable federal courts, notwithstanding that he resides in the forum.  This presents an interesting and valuable opportunity where clients or their insurance carrier are aware of potential claims which could be asserted.  This arises most often with subrogation matters which would be brought by out of state insurance carriers against forum defendants.  In those instances, it would be imperative for potential defendants to retain counsel and monitor electronic dockets so that when a complaint is filed, the notice of removal could then be lodged immediately so as to pre-date service of the complaint.  Where Pennsylvania courts have moved entirely to electronic filing, this provides the defense with an incredible advantage as the procedure for perfecting service will always lag behind the ability of a properly informed and reactive defendant to electronically file its notice of removal.  This is not to say, however, that this tactic will always be available because there are already efforts underway proposing litigation which would close this apparent loophole and express a clear intent in §1441 that forum defendants can never remove the matter to federal court absent a showing of fraudulent joinder. 

For the time being, this is certainly a strategy which should be considered in cases where a party is aware a non-resident plaintiff may be filing a claim.

For additional information, please contact Bryan Werley at bpwerley@zarwin.com


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